The installment payment platform Sezzle (ASX: SZL) appears to be bouncing back from near defeat just a year ago, with a first-quarter profit of $2.6 million in 2023 compared to a net loss of $42 million in the same period last year.
In the previous year, Sezzle was almost ready to throw in the towel and merge with FinTech company Zip in the face of growing losses. However, the deal fell through, leaving Sezzle with a $16.6k reimbursement bill for merger-related costs, increasing their losses. It was cushioned by Zip providing Sezzle with $16.6 million to cover various costs associated with the transaction, including legal and accounting expenses.
With the merger-related costs out of the way, Sezzle plans to use the money saved for future growth, but the likelihood of success is in question in the dwindling BNPL space. Plus, the Company is also grappling with the consequences of the Silicon Valley Bank collapse, with about $1.5 million held there uninsured.
Even so, Sezzle remains optimistic about its future, with a total income increase of 25.5% YoY to $51.9 million in the first quarter of 2023, with the total income as a percentage of Underlying Merchant Sales (UMS) reaching 9.4%, a significant 324bps YoY improvement.
“Driven by the outperformance of our credit losses, we are running ahead of our plan for profitability in 2023,” stated Charlie Youakim, Sezzle’s Executive Chairman and CEO.
Sezzle’s average daily UMS are down approximately 4.1% in April compared to March 2023, but its subscriber count has grown to over 149,000 active subscribers for Sezzle Premium. Meanwhile, the Company has $91.6 million of cash on hand and $90.4 million drawn on its $151 million credit facility, ensuring capital and liquidity are healthy.
Youakim added, “We believe the next round of initiatives will result in at least US$10.0M ($15 million) in revenue and cost benefits, and we expect to begin seeing these benefits in the second half of 2023.”
As of March 31, 2023, Sezzle’s net notes receivable and merchant accounts payable amounted to $128.2 million and $98.7 million, respectively. The Merchant Interest Program accounted for $77.6 million of the Merchant Accounts Payable balance. Sezzle’s March 2023 income alone rose by 29.8% to $18.4 million, with the total income as a percentage of UMS reaching 9.1%.
Recovering strong from the merger fallout, the Company also reported that the ASX Settlement has accepted its application to remove the Foreign Ownership Restricted United States (FORUS) person prohibited tag from the Company’s CHESS Depository Interests (CDIs), effective today. The removal is expected to take effect on or about May 8, 2023.
Youakim shared, “We are very pleased that ASX Settlement accepted our application to remove the FORUS restriction on the CDIs. The removal of the restriction will allow additional investors in the US to acquire our CDIs on the ASX, which up until now has been limited. We have a strong presence and high brand recognition in the US, and as such we are very excited to be able to expand our investor base there.”
With the gateway opening for US investors, is Sezzle set to witness a much-needed change of fortune?
Alinda is a Business Reporter for The Sentiment
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