Guess which ASX All Ords share is leaping 22% on 'significant progress towards profitability'

Your success is my success… Sezzle soars 22% and takes Zip higher with it.

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Key points

  • A positive business update from Sezzle has lifted the share prices of several buy now, pay later stocks today 
  • The Sezzle share price soared 22.22% to an intraday high of 66 cents earlier this afternoon 
  • The Sezzle CEO says the company should achieve profitability in 2023

The Sezzle Inc (ASX: SZL) share price is soaring by as much as 22% today after the buy now, pay later (BNPL) company released a positive business update.

At the time of writing, the ASX All Ords share is trading for 63 cents. This is just a tad beneath its intraday high of 66 cents, which reflects a 22.22% bump on yesterday's closing price of 54 cents.

Sezzle's good news is also pushing up other ASX BNPL shares today. At their intraday peaks, the Zip Co Ltd (ASX: ZIP) share price was 21.4% higher and the Splitit Ltd (ASX: SPT) share price lifted by 14.3%.

By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.35% at the time of writing.

What news is rocketing this ASX All Ords share higher?

Sezzle's October business update released today revealed an 18% boost to income year over year.

In its statement, the company said "significant progress continues to be made towards profitability".

Sezzle reaffirmed that it was on track to successfully deliver US$60 million in annualised revenue and cost savings over 1Q FY23.

The company raked in US$11.5 million in October, up 8.7% on the month prior. That's a new high as a percentage of underlying merchant sales (UMS).

UMS is used as a measure of Sezzle's revenue because charging merchant fees is one way it makes money. UMS came in at 7.8% in October — a 190 basis points lift year over year.

The net loss for October was US$1.5 million, compared to an average monthly net loss of US$8.6 million over the fourth quarter of FY21.

The adjusted EBTDA for October was negative US$200,000, compared to an average monthly adjusted EBTDA of negative US$8.2 million in Q4 FY21.

What did management say?

Charlie Youakim, Sezzle chair and CEO, said:

Our path to profitability is not just about cost cutting, but also growing revenue. October was the Company's second-best performance ever, in terms of revenue.

We are looking forward to the upcoming holiday season and expect to reach new highs in top line performance.

We are even more excited about 2023, as we expect to turn the corner in profitability and launch additional revenue generating and cost savings initiatives beyond the US$60.0M announced in 2022.

Sezzle is targeting profitability in 2023. Chief competitor Zip has similar goals, aiming to be cash flow positive by the first half of FY24.

Sezzle and Zip mutually agreed to call off their proposed merger earlier this year.

Pending headwind for BNPL shares?

Some BNPL shares did not receive as much of a kick today. At the time of writing, Humm Group Ltd (ASX: HUM) shares are up 1.82% and Block Inc CDI (ASX: SQ2) shares are up 0.61%.

As we reported earlier, the BNPL sector is awaiting the release of a federal government options paper, which will propose three new models for tighter regulation of the fast-growing industry.

New regulations may present challenges for ASX All Ords shares in the BNPL space. This is because investors generally assume that greater regulation on any business will have a negative impact.

Motley Fool contributor Bronwyn Allen has positions in ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended Humm Group Limited. 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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