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Sezzle Profit Jumps 79% as Credit Costs Ease: Rapid Earnings Reaction
Key Points
Sezzle's third-quarter profit grew more than twice as fast as the money moving through its platform.
Credit losses fell as a share of volume while subscribers kept shopping more often.
Management raised its full-year outlook again and gave a first look at 2027.
Sezzle (NASDAQ:SEZL) grew third-quarter net income 79% to $47.8 million, or $1.38 per diluted share. Shares rose about 10% in after-hours trading. The bigger story is cost: Sezzle now earns far more on each dollar it handles, because revenue is growing faster than volume while the costs tied to each loan barely grow.
Key Numbers
- Total transaction volume: $1.4 billion, up 34.9% year over year.
- Revenue: $166.5 million, up 42.6%.
- Active subscribers: 955,000, up 68.1%.
- Provision for credit losses: 2.7% of volume, down from 3.1%.
What It Means
Subscribers drive the model. They pay a monthly fee on top of the merchant fees Sezzle collects on each purchase, and they shop with it more often. Average transaction frequency hit a company high of 7.8 per quarter.
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The cost side did the heavy lifting. Credit losses, processing fees, and interest rose just 9.8% combined, far slower than volume. Repeat subscribers with a payment record are easier to judge, which helps keep losses down. But part of the processing savings came from a payment network incentive, and that may not recur.
Management raised its full-year outlook for the fourth time and set a first 2027 target of $7.20 in adjusted earnings per share. The release notes that older guidance wasn't recast for a change in tax treatment, so the raises aren't directly comparable.
What to Watch Next
Watch whether credit losses hold near the new target of about 2.5% of volume through the holiday quarter. SezzleCash cash advances are a newer, less proven product, and their growth will test that number.
David Kretzmann has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sezzle. The Motley Fool has a disclosure policy.