Sezzle Fourth-Quarter and Fiscal Year 2023 Results

"There were a number of watershed moments in 2023 - launching Sezzle Anywhere, listing on the NASDAQ, achieving Net Income every quarter, and creating a culture and operating framework that we can leverage," stated Charlie Youakim, Sezzle's Executive Chairman and CEO. "Our success did not happen overnight, nor was it easy, but it occurred through creativity, dedication, and hard work from each person at Sezzle. We will continue to innovate with a hyperfocus on profitability, as we expect to more than double Net Income in 2024 to $20.0 million."

Fourth-Quarter 2023 Highlights

• Underlying Merchant Sales (UMS) increased by 33.1% YoY to set a new quarterly high of $601.9 million, driven by robust engagement from our Consumers and Subscribers during the holiday period.  
• Total Income of $48.9 million in the quarter, also a new quarterly high, rose 27.8% YoY. When measured against Underlying Merchant Sales, Total Income reached 8.1%.
• Representing the sixth straight quarter of profitability, GAAP Net Income reached $2.9 million in 4Q23.
• The Company posted Adjusted EBTDA and Adjusted EBITDA (non-GAAP financial measures) of $3.2 million and $7.8 million, respectively, for the quarter ended December 31, 2023.
• As of December 31, 2023, Sezzle had $70.7 million of cash on hand ($3.1 million restricted) and $95.0 million drawn on its $100.0 million credit facility.
• Total Stockholders' Equity for 4Q23 stood at $22.1 million, an increase of 149.8% YoY and 22.9 % QoQ.

Full Year 2023 Highlights

• UMS reached a new annual high of $1.8 billion, representing a 4.6% increase from the year prior.
• In FY23, Total Income increased by 26.9% YoY to $159.4 million and represented 8.7% of UMS.
• Total Income less Transaction Related Costs significantly improved by 72.1% YoY to $81.0 million, or 4.4% of UMS, a 174bps YoY improvement as a percentage of UMS.     
• Driven by product innovation and monetization initiatives launched in 2023 as well as the carryover of revenue and cost initiatives launched in 2022, GAAP Net Income in FY23 totaled $7.1 million, representing a $45.2 million turnaround compared to FY22. Net Income as a percentage of Total Income in FY23 was 4.5%.
  • The Provision for Credit Losses as a percentage of UMS in FY23 reached a new low of 1.3% compared to 1.7% in FY22. 
• The Company's Non-GAAP Adjusted EBITDA rose by $51.4 million to $30.0 million in FY23. Adjusted EBITDA as a percentage of Total Income in FY23 was 18.8%.

Full Year 2024 Guidance

• Net Income: $20.0 million
• Total Income YoY Growth: 20%
• Total Income less Transaction Related Costs: 50% of Total Income

Quarterly Conference Call and Presentation

The Company will host its fourth quarter earnings conference call on February 26, 2024, at 4:30pm ET.

To register for the call, please navigate to: https://dpregister.com/sreg/10186292/fb8c2f1a0c

Upon registration, participants will receive the dial in number. Those without internet access or unable to pre-register may dial in by calling: 1-866-777-2509 (US toll free), 1-412-317-5413 (international toll), or 1-800-822-994 (Australia toll free). A replay will be available until March 4, 2024. To access the replay dial 1-877-344-7529 (US toll free), 1-412-317-0088 (International toll), or 1-800-984-354 (Australia toll free). Replay access code: 4267222.

In conjunction with the earnings call, the Company will release its presentation on the Sezzle Investor Relations website before the call. Please navigate to the Sezzle Investor Relations website for the presentation that management will review on the call.

Investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when we establish reserves for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

This 4Q23 business update has been approved by the Company's Executive Chairman and CEO, Charlie Youakim, on behalf of the Sezzle Inc. Board.

Contact Information

About Sezzle Inc.

Sezzle is a fintech company on a mission to financially empower the next generation. Sezzle's payment platform increases the purchasing power for millions of consumers by offering interest-free installment plans at online stores and select in-store locations. Sezzle's transparent, inclusive, and seamless payment option allows consumers to take control over their spending, be more responsible, and gain access to financial freedom.

For more information visit sezzle.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements include our expectations, whether stated or implied, regarding our financing plans and other future events.

Forward-looking statements generally can be identified by the use of words such as "anticipate," "expect," "plan," "could," "may," "will," "believe," "estimate," "forecast," "goal," "project," other words or expressions of similar meaning (or the negative versions of such words or expressions). These forward-looking statements address various matters including statements regarding the timing or nature of future operating or financial performance or other events. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others: impact of the "buy-now, pay-later" ("BNPL") industry becoming subject to increased regulatory scrutiny; impact of operating in a highly competitive industry; impact of macro-economic conditions on consumer spending; our ability to increase our merchant network, our base of consumers and underlying merchant sales (UMS); our ability to effectively manage growth, sustain our growth rate and maintain our market share; our ability to maintain adequate access to capital in order to meet the capital requirements of our business; impact of exposure to consumer bad debts and insolvency of merchants; impact of the integration, support and prominent presentation of our platform by our merchants; impact of any data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions; impact of key vendors or merchants failing to comply with legal or regulatory requirements or to provide various services that are important to our operations; impact of the loss of key partners and merchant relationships; impact of exchange rate fluctuations in the international markets in which we operate; impact of our delisting from the Australian Securities Exchange and trading on Nasdaq Capital Market as our sole trading exchange; our ability to protect our intellectual property rights and third party allegations of the misappropriation of intellectual property rights; our ability to retain employees and recruit additional employees; impact of the costs of complying with various laws and regulations applicable to the BNPL industry in the United States and Canada; and our ability to achieve our public benefit purpose and maintain our B Corporation certification. The Company cautions investors not to place considerable reliance on the forward-looking statements contained in this press release. You are encouraged to read the Company's filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements. The Company's business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

Non-GAAP Financial Measures

To supplement our operating results prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we present the following non-GAAP financial measures: Total income less transaction related costs; non-transaction related operating expenses; adjusted earnings before taxes, depreciation, and amortization ("Adjusted EBTDA"); adjusted operating expenses; adjusted earnings before interest, taxes, depreciation, and amortization ("Adjusted EBITDA"); and Adjusted EBITDA margin. Definitions of these non-GAAP financial measures and summaries of the reasons why management believes that the presentation of these non-GAAP financial measures provide useful information to the company and investors are as follows:

• Total income less transaction related costs is defined as GAAP total income less transaction related costs. Transaction related costs is the sum of GAAP transaction expense, provision for credit losses, and net interest expense less non-recurring charges as detailed in the reconciliation table of GAAP operating income (loss) to non-GAAP total income less transaction related costs above. We believe that total income less transaction related costs is a useful financial measure to both management and investors for evaluating the economic value of orders processed on the Sezzle Platform;
• Non-transaction related operating expenses is defined as the sum of GAAP personnel; third-party technology and data; marketing, advertising, and tradeshows; and general and administrative operating expenses. We believe that non-transaction related operating expenses is a useful financial measure to both management and investors for evaluating our management of operating expenses not directly attributable to orders processed on the Sezzle Platform.
• Adjusted operating expenses is defined as operating expenses adjusted for certain non-cash and non-recurring charges including depreciation, amortization, equity and incentive–based compensation, and merger-related costs as detailed in the reconciliation table of GAAP operating expenses to non-GAAP adjusted operating expenses above. We believe that this financial measure is a useful measure for period-to-period comparison of our business by removing the effect of certain non-cash and non-recurring charges that may not directly correlate to the underlying performance of our business.
• Adjusted EBTDA is defined as GAAP net income (loss), adjusted for certain non-cash and non-recurring charges including depreciation, amortization, equity and incentive–based compensation, and merger-related costs as detailed in the reconciliation table of GAAP net income (loss) to adjusted EBTDA. We believe that this financial measure is a useful measure for period-to-period comparison of our business by removing the effect of certain non-cash and non-recurring charges that may not directly correlate to the underlying performance of our business.
• Adjusted EBITDA is defined as GAAP net income (loss), adjusted for certain non-cash and non-recurring charges including depreciation, amortization, equity and incentive–based compensation, and merger-related costs, as well as net interest expense as detailed in the reconciliation table of GAAP net income (loss) to adjusted EBITDA. We believe that this financial measure is a useful measure for period-to-period comparison of our business by removing the effect of certain non-cash and non-recurring charges, as well as funding costs, that may not directly correlate to the underlying performance of our business.
• Adjusted EBITDA margin is defined as Adjusted EBITDA divided by GAAP total income. We believe that this financial measure is a useful measure for period-to-period comparison of our business' unit economics by removing the effect of certain non-cash and non-recurring charges, as well as funding costs, that may not directly correlate to the underlying performance of our business.

Additionally, we have included these non-GAAP measures because they are key measures used by our management to evaluate our operating performance, guide future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of resources. Therefore, we believe these measures provide useful information to investors and other users of this press release to understand and evaluate our operating results in the same manner as our management and board of directors. However, non-GAAP financial measures have limitations, should be considered supplemental in nature, and are not meant as a substitute for the related financial information prepared in accordance with U.S. GAAP. These limitations include the following:

• Total income less transaction-related costs is not intended to be measures of operating profit or cash flow profitability as they exclude key operating expenses such as personnel, general and administrative, and third-party technology and data, which have been, and will continue to be for the foreseeable future, significant recurring GAAP expenses.
• Non-transaction related operating expenses exclude significant expenses, including transaction expense and provision for credit losses, which have been, and will continue to be for the foreseeable future, significant recurring GAAP expenses.
• Adjusted operating expenses, adjusted EBTDA, adjusted EBITDA, and adjusted EBITDA margin exclude certain recurring, non-cash charges such as depreciation, amortization, and equity and incentive–based compensation, which have been, and will continue to be for the foreseeable future, recurring GAAP expenses. Further, these non-GAAP financial measures exclude certain significant cash inflows and outflows, such as merger-related costs (which are comprised of legal fees in connection with our terminated proposed merger with Zip Co Limited) and reimbursements for such merger-related costs, which have a significant impact on our working capital and cash.
• Adjusted EBITDA excludes net interest expense, which has a significant impact on our GAAP net income (loss), working capital, and cash.
• Long-lived assets being depreciated or amortized may need to be replaced in the future, and these non-GAAP financial measures do not reflect the capital expenditures needed for such replacements, or for any new capital expenditures or commitments.
• These non-GAAP financial measures do not reflect income taxes that may represent a reduction in cash available to us.
• Non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs.
• Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Because of these limitations, you should not consider these non-GAAP financial measures in isolation or as substitutes for analysis of our financial results as reported under GAAP, and these non-GAAP financial measures should be considered alongside other financial performance measures, including net income (loss) and other financial results presented in accordance with GAAP. We encourage you to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

[1] Results are unaudited preliminary financial results. All metrics are reported in U.S. Dollars.

[2] For the reconciliation of GAAP measures to non-GAAP measures, see Appendix.

Attachments

• 4Q23 Announcement Supplements
• Appendix - Reconciliation of GAAP to Non-GAAP Measures

Erin Foran
Sezzle
6514032184
[email protected]