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Sezzle's 2023 profitability hopes could buoy share price

Australian buy-now-pay-later company Sezzle is optimistic about achieving profitability in 2023 following the release of strong income and earnings results for the month of February.

Source: Bloomberg

Improvements to the financial performance of ASX-listed buy-now-pay-later company Sezzle in February could have a positive impact on the company's share price.

The company saw a sharp rise in income levels in February in year-on-year (YoY) terms, leading to strong gains in adjusted earnings metrics.

Sezzle's management says the company is now on track to achieve profitability in 2023.

The release of strong results for February arrives just following gains in Sezzle's share price on the back of plans to list on the Nasdaq Stock Exchange.

The company's share price is currently up over 34% year-to-date, after declining more than 60% over the past year-long period.

Sezzle forecasts 2023 profitability following strong February results

Sezzle unveiled impressive results for February 2023, with a 29.1% leap in full group income compared to the same period last year to reach AU$15.8 million.

According to a business update released on 19 March, Sezzle's total income as a percentage of underlying merchant sales (UMS) also remained strong, standing at 9% in February for an increase of 320 basis points in year-on-year (YoY) terms.

The fintech company has seen a healthy increase in average daily UMS, up 12% in February compared to the previous month of January.

The company's net income of US$0.8 million in February marked an increase of US$9.8 million compared to the same period last year and US$0.9 million compared to the previous month.

Sezzle imputed this improvement to the outperformance of the Provision for Uncollectible Accounts – an estimation of the volume of doubtful debt that needs to be written off during a given period.

Sezzle's adjusted EBTDA and adjusted EBITDA moved into positive territory in February, at US$1.4 million and US$2.6 million respectively. Compared to January, adjusted EBTDA and adjusted EBITDA for February saw increases of 40.2% and 27.8% respectively.

As of the end of last week, Sezzle reported 138,000 active subscribers for its premium service, providing a further boost to group revenue.

Additionally, the group's capital and liquidity stood at an impressive US$68 million cash on hand, with US$53.3 million drawn on its US$100 million credit facility as of the end of February.

Sezzle's management says the strong performance results for February show that the company is well-positioned to achieve profitability this year.

'Although it has only been two months, we are on schedule to deliver profitability in 2023,' said Charlie Youakim, Sezzle's Chairman and CEO.

'Year-to-date we have delivered Net Income of US$0.6M, Adjusted EBTDA of US$2.4M, and Adjusted EBITDA of US$4.6M.

'As mentioned in our 4Q22 update, we have yet to see the impact of the next round of initiatives, which we estimate will bring at least another US$10.0M in revenue and cost benefits.'

Sezzle says Nasdaq listing not for raising capital

The release of Sezzle's strong performance results for February arrives just after the BNPL player unveiled plans to list in the US, providing American investors with the opportunity to take equity stakes in the company.

According to an announcement made by Sezzle on 13 March, the company plans to list common stock for trading on the Nasdaq Global Market using Chess Depositary Interests (CDIs). Following the listing, Sezzle's common stock will continue to trade on the Australian Securities Exchange (ASX).

Sezzle said in its latest update that while the move will '[expand] the universe of potential investors to the United States,' it still 'does not plan to seek funding from market participants as part of the listing and will continue to trade on the Australian Securities Exchange.'

'Management does not foresee any near-term capital needs due to the Company's strong liquidity position and operational performance reflected in positive Net Income and Adjusted EBTDA,' Sezzle said in the update.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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