Sezzle (US:SEZL)2025-05-07 21:44PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Q1 2025, including Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, detailing significant accounting policies and notes, and highlighting a 6-for-1 stock split and substantial growth in revenue and net income Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands of dollars) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $88,893 | $73,185 | | Notes receivable, net | $146,628 | $164,562 | | Total Assets | $298,074 | $298,372 | | Liabilities & Equity | | | | Line of credit, net | $69,890 | $103,992 | | Total Liabilities | $172,312 | $210,537 | | Total Stockholders' Equity | $125,762 | $87,835 | - A 6-for-1 stock split was affected through a stock dividend, effective March 28, 2025, with all share and per-share amounts retroactively adjusted15 Consolidated Statements of Operations and Comprehensive Income Statement of Operations Highlights (in thousands of dollars, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenue | $104,912 | $46,979 | | Operating Income | $49,895 | $13,835 | | Net Income | $36,164 | $8,007 | | Diluted EPS | $1.00 | $0.22 | Consolidated Statements of Stockholders' Equity - Total stockholders' equity increased from $87.8 million at the beginning of 2025 to $125.8 million as of March 31, 2025, primarily driven by a net income of $36.2 million19 - The company repurchased common stock for $2.4 million during the first quarter of 202519 Consolidated Statements of Cash Flows Cash Flow Highlights (in thousands of dollars) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Provided from Operating Activities | $58,837 | $38,613 | | Net Cash Used for Investing Activities | ($308) | ($340) | | Net Cash Used for Financing Activities | ($36,114) | ($26,761) | | Net increase in cash, cash equivalents, and restricted cash | $22,415 | $11,512 | - Financing activities in Q1 2025 were primarily driven by net payments of $34.2 million on the line of credit and $2.4 million in common stock repurchases21130 Notes to the Consolidated Financial Statements - The company's Board of Directors approved a 6-for-1 stock split, effective March 28, 2025, with all share and per-share amounts in the financial statements retroactively adjusted31 Disaggregation of Total Revenue - Q1 2025 vs Q1 2024 (in thousands of dollars) | Revenue Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Transaction income | $58,166 | $26,618 | | Subscription revenue | $23,428 | $14,673 | | Income from other sources | $23,318 | $5,688 | | Total revenue | $104,912 | $46,979 | - The allowance for credit losses on notes receivable was $20.5 million as of March 31, 2025, with a provision of $12.8 million recorded for the quarter52 - As of March 31, 2025, the company had an outstanding principal of $70.8 million on its line of credit and an unused borrowing capacity of $52.2 million62 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting significant growth in key metrics such as 64.1% YoY GMV increase to $808.7 million and 123.3% total revenue growth to $104.9 million, driven by diverse income sources, and confirms strong liquidity Key Operating Metrics Key Metrics Comparison | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Gross Merchandise Volume (GMV) | $808.7M | $492.7M | +64.1% | | Active Consumers (as of period end) | 2.73M | N/A | +0.3% (vs Q4'24) | - The increase in GMV was driven by growth in subscription products and On-Demand services, as well as changes to consumer underwriting to promote acquisition84 - Monthly On-Demand Users and Subscribers (MODS) decreased to 658,000 from 707,000 at the end of Q4 2024, attributed to seasonality following the holiday season8586 Results of Operations Revenue Breakdown - Q1 2025 vs Q1 2024 (in thousands of dollars) | Revenue Category | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Transaction income | $58,166 | $26,618 | +118.5% | | Subscription revenue | $23,428 | $14,673 | +59.7% | | Income from other sources | $23,318 | $5,688 | +310.0% | | Total revenue | $104,912 | $46,979 | +123.3% | - The increase in 'Income from other sources' was primarily driven by consumer late payment fees, which rose to $16.8 million in Q1 2025 from $2.7 million in Q1 2024107 - Provision for credit losses increased by 149.0% to $12.8 million, attributed to higher GMV and changes in consumer underwriting to promote growth115 - Net interest expense decreased by 28.6% to $2.9 million due to a lower interest rate on a new line of credit, despite higher outstanding borrowings116 Liquidity and Capital Resources Liquidity Position (in millions of dollars) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $88.9 | $73.2 | | Restricted cash | $32.0 | $25.1 | | Working capital | $164.3 | $151.9 | | Unused line of credit capacity | $52.2 | $39.0 | - The company believes its existing cash, unused borrowing capacity, and cash flows from operations will be sufficient to meet working capital and investment needs for more than the next twelve months122 - Net cash provided by operating activities increased to $58.8 million in Q1 2025 from $38.6 million in Q1 2024, driven by increased profitability124128 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies interest rate risk from its floating-rate line of credit and foreign currency risk from Canadian dollar transactions, concluding that hypothetical adverse changes would not materially impact financial results, and does not employ hedging instruments - The company is exposed to interest rate risk on its line of credit, which had a balance of $70.8 million as of March 31, 2025, where a hypothetical 100 basis point adverse change in SOFR would have resulted in an additional $0.2 million of interest expense for the quarter139 - Foreign currency risk from transactions in Canadian dollars is considered immaterial, and the company does not currently use derivatives to hedge this exposure141 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of March 31, 2025144 - No changes in internal control over financial reporting occurred during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting145 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings expected to have a material adverse effect on its financial condition or operations, beyond routine litigation incidental to its business - Sezzle is not involved in any material legal proceedings that would have a material adverse effect on its consolidated balance sheets, operations, or cash flows147 Item 1A. Risk Factors As a smaller reporting company, Sezzle is not required to provide this information and confirms no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors described in the company's 2024 Annual Report on Form 10-K148 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchase of 56,778 shares at an average price of $43.04 per share during the quarter, primarily for employee tax obligations, and notes the authorization of a new $50 million stock repurchase program commencing in April 2025 - During Q1 2025, the company repurchased 56,778 shares at an average price of $43.04 per share, which were surrendered by employees to satisfy minimum statutory tax obligations for vested stock units149151152 - On March 10, 2025, the Board of Directors authorized a new stock repurchase program for up to $50 million of outstanding shares, which commenced on April 7, 2025152 Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None153 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable154 Item 5. Other Information The company reports that no officers or directors adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025 - During the quarter ended March 31, 2025, no officers or directors adopted or terminated a Rule 10b5-1 trading arrangement155 Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including management compensation plan forms, CEO and CFO certifications, and Inline XBRL financial data files - The report includes a list of filed exhibits, such as CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002156