The Sezzle Inc (ASX: SZL) share price is on the move again on Friday following the release of the company's second quarter update.
In morning trade, the buy now pay later (BNPL) provider's shares are up 46% to $1.49.
Sezzle share price higher on modest Q2 growth
- Underlying Merchant Sales (UMS) increased 1.9% year on year to US$419.1 million
- Total Income grew 6.8% to US$29.3 million
- Percentage of UMS labelled as uncollectible accounts receivable declined to 1.9%
- Transaction expense as a percentage of UMS improved 20bps quarter on quarter to 2.4%.
- Active merchants rose 19% year on year to 47,900
- Active consumers up 18.2% year on year to 3.4 million
What happened during the quarter?
For the three months ended 30 June, Sezzle delivered a 1.9% increase in UMS to US$419.1 million. Management advised that this reflects softer consumer spending in the United States in April and May before a rebound in June.
Things were more positive for its total income, which grew 6.8% to US$29.3 million. This reflects the company's recent initiatives on driving toward profitability, such as renegotiations with merchant partners and offboarding unprofitable merchants.
Speaking of profitability, Sezzle revealed that it has taken several actions representing over US$40 million in expected annualised revenue and cost savings to improve its free cash flow and accelerate its path to profitability.
As well as offboarding or renegotiating rates with merchants, it has improved its virtual card network revenue share, reduced its workforce, scaled back efforts in Europe and Brazil, ceased payment processing in India, reduced third-party spend, and launched its Sezzle Premium subscription product.
The latter provides consumers a number of additional features and benefits relative to the company's core pay in four product. As of 27 July 2022, total subscriptions were over 47,000.
Management commentary
Commenting on its cost-saving action, Sezzle's executive chairman and CEO, Charlie Youakim, said:
In the last few months, we have launched US$40.0 million worth of revenue and cost savings initiatives, as we move towards profitability and positive free cash flow generation, and we believe the results of those actions are starting to show.
We expect to see the full benefit of these initiatives on a run-rate basis by year end, and coupled with additional actions we are taking, we anticipate achieving positive monthly net operating income (excluding stock-based compensation and non-recurring charges) by year end. We recognize these initiatives may be at the expense of growth, but believe it is the prudent move for Sezzle at this time.
