Sezzle share price tumbles 11% as losses deepen

The BNPL stock posted a deeper first half loss despite rising revenue and sales.

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Key points

  • The Sezzle share price is cratering on Tuesday, sliding 11% to trade at 73 cents 
  • Its downfall comes after the release of the company's first half results
  • Sezzle's loss deepened to US$43 million over the six months to 30 June while its credit quality improved

The Sezzle Inc (ASX: SZL) share price is suffering on Tuesday following the release of the company's half year earnings.

The ASX buy now, pay later (BNPL) share is currently trading at 73 cents, 10.98% lower than its previous close.

It opened at its intraday high of 80 cents – marking a 2.4% fall – and hit an intraday low of 67.5 cents shortly afterwards.

Sezzle share price plummets on half year results

Here are the highlights from the BNPL provider's first half report:

  • Net after tax loss of US$43.1 million – down from a US$30.4 million loss in the prior comparative period (pcp)
  • Total income came to around US$56.9 million – up 6.5%
  • US$869.6 million of underlying merchant sales – a 10.6% improvement
  • 47,642 active merchants, up 18.1%
  • 3.4 million active customers, up 18.2%
  • Repeat usage lifted to 93.5%

In terms of credit quality, the company's provision for uncollectable accounts fell 18.1% last half to US$18.4 million after it implemented a strategic shift to focus on profitability over top-line growth.

As a percentage of income, the provision for uncollectible accounts was 36.8% last half compared to 48.8% for the pcp.

Sezzle ended the period with around US$63.3 million in cash, cash equivalents, and restricted cash.

What else happened in the first half?

The major news from the BNPL favourite last half was of its proposed merger with Zip Co Ltd (ASX: ZIP).

The pair announced their plan to join forces in February, causing the Sezzle share price to jump 10%.

The companies ultimately ditched their merger plan following the half year's end. Sezzle will receive a US$11 million payout from Zip following the deal's abandonment.

What's next?

Sezzle didn't provide earnings guidance in today's release. Though, it did make note of a number of cost-saving measures.

Sezzle undertook a workforce reduction in March with the aim to create annualised cost savings of approximately US$10 million. It also scaled back its international operations, which is expected to provide additional annualised cost savings of around US$7 million.

Finally, it restructured contracts with certain merchants and partners and phased-in Sezzle Premium – a subscription service for users to access large, non-integrated merchants for a fee.

The company believes such activities, along with its cash position, borrowing capacity, and certain cash flows, will allow it to meet its working capital and investment requirements beyond the next 12 months.

Sezzle share price snapshot

The Sezzle share price has joined most ASX BNPL providers in the red in 2022.

In fact, the stock has plummeted 76% since the start of this year. It's also trading 91% lower than it was this time last year.

The comparison, the All Ordinaries Index (ASX: XAO) has fallen 7% in 2022 and 6% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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