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.
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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.
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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.
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