With the buy-now-pay-later sector in a nosedive pattern amid market saturation and unsustainable losses, operator Sezzle (ASX: SZL) has confirmed that it will be laying off 20% of its American workforce with the intention of saving $13 million in staff salaries to reduce their haemorrhaging losses.
The decision, which Sezzle describes as a “difficult” one, is being attributed to its strategy to drive the Company towards profitability.
This is the same company which has reported net losses after tax of $23.7 million in 2019, $42.1 million in 2020 and $103.6 million in 2021.
For shareholders still holding Sezzle shares, those numbers should improve by $13.6m per annum (USD $10m) following these mass layoffs if all else in the business stays the same.
“Sezzle has experienced significant growth in its history and is now at an important juncture, as we look to take decisive steps toward profitability and free cash flow,” said Sezzle CEO and Executive Chairman, Charlie Youakim.
“Sezzle’s growth prospects remain unchanged, and these actions position the Company to maximize its long term success.”
“These decisions are not easily made as we greatly value our team members. We thank our team for their efforts during this process.”
The layoffs will take place across all business divisions to streamline reporting structures and increase the accountability of those fortunate enough to have retained their jobs.
Ever since market leader Afterpay penned the largest transaction in corporate history when being acquired by Block (ASX: SQ2) for $39 billion in August 2021, the BNPL sector has been in complete freefall.
Since that time, Sezzle shares have fallen from $8.20 to last close at $1.465.
Seeking to stem their losses via consolidation, Sezzle is set to merge with Zip Co (ASX: Z1P) in an all scrip deal that will give Sezzle shareholders 22% of the merged business. Operational efficiencies are likely to be realised post-merger which, realistically would have made a large chunk of the Sezzle workforce redundant anyway.
The combination of Zip and Sezzle is expected to result in pro forma 8.8 million customers and pro forma 60.5k merchants in the US.
Sezzle’s co-founders, Charlie Youakim and Paul Paradis (accounting for 48% of Sezzle’s outstanding shares) have already confirmed that they will vote in favour of the merger which is proposed to take place, pending a range of regulatory requirements, before the end of September 2022.