Sezzle Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon, everyone, and welcome to Sezzle's second quarter 2026 earnings call. I'm Charlie Youakim, CEO and Executive Chairman of Sezzle. I'm joined today by our CFO, Lee Brading, my co-founder and Company President, Paul Paradis, and Head of IR and Corporate Development, Jack Fagan. In conjunction with this conference call, we filed our earnings announcement with the SEC and have posted it along with our earnings presentation on our investor website at sezzle.com. To retrieve the documents, please go to the investor relations section of our website. Please be advised of the cautionary note on forward-looking statements and the reconciliation of GAAP to non-GAAP measures included in the presentation, which also covers our statements on today's call. Okay, with the boilerplate completed, let's get started. We know you can now see that 2026 is off to a great start.

I was remarking to our leadership team earlier this past quarter that our volume growth curves look a lot like they did back in 2020 and 2021, which was an amazing growth period for the company. My tip-off to that was our May GMV surpassing our December holiday GMV. In recent years, it had taken until August for the same sort of event to occur. As many of you know, volume isn't our North Star, but it's a nice secondary indicator that our solutions are taking hold. In the second quarter, we made more strides towards improving those solutions and executing on their growth. We brought more consumers onto the subscription platform in the quarter than we have ever done before. We improved the subscription offering, deepening the relationship with the customer once they've joined.

SezzleCash is a new offering only available to subscribers that allows them to smooth their cash flow needs with a product that feels familiar, with a Pay-in-Four or Pay-in-Five payback period. Now the customer can access funds at an extremely low cost relative to alternatives and budget for the payback. As we're supporting our customers with products like SezzleCash, they become more loyal to our brand because we keep nailing the offering. In layman's terms, our products get stickier, which is a damn good thing. We're also winning outside the product ecosystem. On slide three, you'll see we continue to receive accolades by outlets that have recognized us before. CNBC named us one of the world's top fintech companies for 2026. Newsweek included us on its America's Best Online Platforms. U.S. News recognized us as one of the Best Companies to Work For in 2026.

We don't do this for the awards, but when the same outlets keep coming back, it tells us the product is working for our consumers and the culture is working for our team. Both of those matter. Now to the results. Second quarter GMV grew 37.9% year-over-year to a record $1.3 billion, and total revenue grew 51.7% to $149.7 million. Net income was $40.8 million, a 27.2% profit margin, and adjusted EBITDA was $58 million, a 38.8% margin. Total revenue, less transaction-related costs came in at 63.5% of total revenue, right in the upper half of the 55%-65% range that we target.

Given the strength in the first half and the momentum we're seeing across the platform, we are raising full year guidance again. We now expect total revenue growth of 35%, targeting the upper bound of our prior 30%-35% range. We are raising adjusted net income guidance to $185 million from $180 million, and adjusted net income per diluted share to $5.25 from $5.10. Lee will give you more detail later in the call. The engagement story behind those numbers is in the bottom right of the slide. Active subscribers reached 854,000, up an incredible 76.4% year-over-year. Average quarterly purchase frequency hit a record 7.2 times, compared to 6.1 times in the second quarter of last year.

Subscribers are our highest lifetime value users, and frequency is the metric that tells us whether the ecosystem is actually working. Both are moving in the right direction. Turning to slide four. We added 140,000 net new subscribers in the quarter. That's the largest quarter-over-quarter and year-over-year subscriber gain we've had since we launched the subscription program. That didn't happen by accident. As you can see on the chart, marketing spend was $19.4 million in the quarter. We have said before that we would push marketing as far as we can while staying inside a six-month payback period, and the second quarter is us doing exactly that. Based on the core data we have so far, payback is still under six months. That tells us something important about the virality and the value of the subscription suite.

When we put more dollars to work, consumers convert and they stick. I'd like to note that this was a deliberate step-up to test out higher levels of marketing spend and not a new run rate. We tested to see how far channels could stretch until we became less comfortable with the ROI. We found that we could push levels of spend higher and still stay at the sub six-month payback. Even with that, we feel more comfortable with better ROIs on marketing spend. I have always had a strong feeling that business is a bit art and a bit science, and while the science says, "Yes, you can do this," or even, "Yes, you should do this," perhaps, our gut is telling us that we feel more comfortable with strong return curves at lower levels of marketing spend.

You can expect a lower level of spend in Q3, all things being equal. For us, it's never that simple, as we have just recently launched SezzleCash and are about to launch Sezzle Send. The mandate to the team hasn't changed. If they find places to put dollars to work that stay within our payback threshold, we're going to test them. Even with that step up in spend in this quarter, we're still raising our bottom-line guidance because the consumers we added this quarter begin paying back in the third and fourth quarters. The other half of the equation is making the subscription itself worth more every quarter. On last quarter's call, we announced the Sezzle Mobile plan, giving Sezzle Anywhere subscribers an unlimited 5G plan on AT&T's network starting at $29.99.

At the end of the second quarter, we added another benefit, access to SezzleCash, a new cash advance product that gives Anywhere subscribers a way to cover short-term liquidity needs through Pay-in-Four or Pay-in-Five with no down payment required. Add in card-linked offers, more points and rewards, the subscription keeps getting harder to walk away from. As an added benefit, in the coming quarter, Anywhere consumers will enjoy no service fees on Sezzle Send. However, we aren't only building value for subscribers. We're expanding what every consumer gets because retention and engagement matter across the whole base. A lot of this we're doing through partnerships, which lets us bring benefits to everyday shoppers quickly rather than building everything ourselves, as seen on slide five.

That includes card-linked offers that reward virtual card spending at partner merchants, an expansion of cashback across more merchants, daily actions like gamified surveys, trivia, and giveaways that give consumers a reason to open the app even when they aren't shopping. On the monetization side, we're converting engagement we already have into revenue without changing the user experience. The more value our consumers get from Sezzle, the more valuable they become to us. Consumer value and shareholder value move together here, that's the test we apply to every product decision. You'll also see the merchant side of this. When we launched On-Demand, we said it would help us win enterprise merchants because it lets us offer more competitive pricing to merchants with thinner margins. Enterprise sales cycles are long, so this takes time, but the strategy is starting to bear fruit.

Recent enterprise wins include Poshmark, Gymshark, Debenhams, and several others. Acquiring users and driving engagement matters in any consumer business. What matters just as much to us is the pace at which we ship. As you'll see on slide six, the second quarter was another busy one for our product and engineering teams. We rolled out SezzleCash in June through a phased launch, reaching the full population of eligible Sezzle Anywhere subscribers by the end of the quarter. Coming in August, we plan to launch Sezzle Send, a peer-to-peer money transfer product that lets consumers send money by phone number in either Pay in Full or use Pay-in-Five. The recipient receives the full amount upfront and doesn't need to be a Sezzle consumer to get the money. Every send is a potential introduction to the platform. Slide seven goes deeper on both.

Up to this point, almost everything we've built has been anchored to a purchase. Sezzle Cash and Sezzle Send aren't. They're about liquidity and moving money, everyday financial needs that have nothing to do with a checkout page. We are continually expanding beyond our original point-of-sale offering in our never-ending race to increase the value of our platform to our stakeholders. Sezzle Cash and Sezzle Send do three things for us, drive virality, increase attraction to the platform, and improve retention to the platform by bringing consumers back into Sezzle for reasons other than shopping and by offering more value to them. As we continue to increase our value to consumer, we'll continue to earn more share in their wallet. Although Sezzle Cash just launched, the initial signal is encouraging.

The average advance size is approximately $165, and nearly 10% of eligible new subscribers are requesting an advance as their first transaction in the Sezzle Anywhere ecosystem. That tells us the product is pulling in consumers we might not have reached through our traditional offering alone. On Sezzle Send, I think most of us on this call use a money transfer product, so we all understand the virality of these platforms. Our twist is to take the burden off the transfer. A consumer can send 100% of the money to their friend upfront and repay us through Pay-in-Five. Because the recipient doesn't need a Sezzle account to get the money, every send is a potential low-cost acquisition in a new acquisition channel our consumers drive for us.