Sezzle share price: what’s the outlook following FY19 results

We examine some of the key growth figures from Sezzle's full-year earnings report, released after the market close today, 27 February.

A triple-digit year

Sezzle (ASX: SZL) quietly released an explosive set of FY19 results after the market close today.

Specifically, the young buy now pay later (BNPL) company revealed that it had notched up triple (yes, triple) digit growth across all of its key operational metrics in the 2019 fiscal year.

For the period ending December 31, 2019; active customers hit 914,886 (+489%), active merchants climbed to 10,010 (+349%) and underlying merchant sales reached US$244.1 million – representing a 685% increase from the year prior.

For the record, since December 31, Sezzle's active customers have actually surpassed the 1 million mark.

Maybe more impressively, the young company looks to be fostering a deeply engaged user-base – suggesting that Sezzle’s product offering is highly ‘sticky’.

‘Repeat Usage, defined as the percentage of orders made by returning End-customers to date relative to total cumulative orders to date, increased to 83.7% from 69.7% as of the prior year,’ the company noted.

As a consequence of all this, Sezzle has seen its merchant fees rise dramatically: recording FY19 merchant fees of US$13.0 million (+775%). Overall, total income rose even faster, climbing 884% to US$16.06 million.

Better still, Sezzle saw its net transaction losses as a percentage of merchant sales decline to 1.5% – down from 2.3% in FY18. The company attributed this improvement to 'disciplined credit risk management and increased repeat usage by End-customers.'

Sezzle also remains well capitalised – ending out the financial year with cash on hand of US$36.6 million and access to a US$100 million funding facility.

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The philosophy of BNPL

Speaking on a more philosophical level and on the company’s branding overhaul, Sezzle’s CEO, Charlie Youakim today said:

‘We at Sezzle are fundamentally changing how consumers think about payments and their financial futures. With our mission to financially empower the next generation, we are committed to building a company that reinforces this mission, and a big part of that is how we communicate with our consumers, brands, and partners.’

This is essentially the same line of thinking employed by the likes of Afterpay (ASX: APT) and some other BNPL players. That is, consumers, particularly the younger generation hate credit; and ultimately, the success of BNPL companies has as much to do with savvy marketing and well-designed apps, as it does with a culture shift away from conventional credit.

Sezzle share price in focus: where next?

The market already seems to have been bracing for big things from the small company: with investors bidding Sezzle’s share price ~8% higher during today’s trading session.

Indeed, the stock closed out Thursday’s session at $1.850 per share.

Looking towards the future, Sezzle also made a number of key comments regarding its 2020 and beyond ambitions in its FY19 report.

For one, and maybe most interestingly, it was noted that Sezzle:

‘Is actively exploring opportunities across Asia, Europe, and Latin America, where we believe Sezzle can play and important role in supporting consumers and offering a valuable alternative payment solution to local in-country merchants.'

Finally, and though the company provided no specific FY20 earnings or revenue guidance, it was flagged that:

'We believe that we can continue to deliver high growth performance metrics in a responsible, sustainable manner throughout 2020 and well beyond.'

Ultimately, it will be interesting to see how investors respond to these growthy FY19 results and forward-facing ambitions when the markets open tomorrow.

Watch this space.

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