Sezzle Inc. (SEZL) Earnings

Management highlights

### Subscription Platform Growth & Product Innovation - The subscription platform added more new consumers in Q2 2026 than any prior quarter, and the offering has been expanded to deepen customer loyalty. Sezzle Cash, a new short-term liquidity product only for Sezzle Anywhere subscribers, launched in a phased rollout that reached all eligible subscribers by the end of Q2, with an average advance size of ~$165 and nearly 10% of eligible new subscribers using it as their first transaction. - Sezzle Send, an AI-built peer-to-peer money transfer product allowing senders to repay via Pay In 5 with recipients getting full upfront funds without requiring a Sezzle account, is scheduled to launch in August 2026 and already has over 100,000 users on the waitlist. - Additional subscription benefits added in Q2 include unlimited 5G mobile plans on AT&T's network, card-linked offers, extra rewards points, and early access to beta products, with no service fees on Fizzle Sense for subscribers launching in Q3. ### Merchant Acquisition Strategy - The On Demand merchant pricing program, designed to win enterprise merchants by offering more competitive pricing for thinner margin businesses, is starting to deliver results, with recent enterprise wins including Poshmark, Gymshark, and Debenhams. The enterprise sales funnel is stronger than 6-12 months ago, as Sezzle is now increasingly accepted alongside other BNPL providers after successful case studies proving incremental sales from adding a second/third BNPL option. ### AI Integration & Operational Efficiency - AI is fully embedded across Sezzle's platform and workflow: the AI consumer support chatbot deflects 68% of consumer inquiries and achieves higher CSAT scores than human agents, freeing staff for complex issues; the AI shopping assistant in the Discover tab drives a 3.6x higher product click-through rate than the non-AI control, and is live for 80% of Sezzle Anywhere users with plans for full deployment. AI allowed the small product team to build Sezzle Send from concept to launch-ready in one quarter instead of multiple months, enabling Sezzle to achieve speed, quality, and cost efficiency simultaneously.

Guidance

- Full-year 2026 total revenue guidance is raised to 35% year-over-year growth, targeting the upper bound of the prior 30%-35% range, with the lower bound of the revenue guidance range removed. - Adjusted net income guidance is raised to $185 million, up from the prior guidance of $180 million, and adjusted net income per diluted share is raised to $5.25 from $5.10. - Full-year provision for credit losses is still expected to fall in the 2.5% to 3% of GMV range, in line with prior guidance. - Full-year 2026 revenue yield is expected to be flat with 2025's 11.4% level, with sequential decline through the second half of the year (a seasonal pattern, with Q4 expected to be the seasonal low point). - Guidance does not assume any material revenue contribution from the newly launched Sezzle Cash, and assumes zero contribution from the upcoming Sezzle Send launch, for conservative positioning. - Marketing spend is expected to decrease from Q2 2026 levels in Q3 2026, all else equal, though additional targeted spend may occur to support the Sezzle Cash and Sezzle Send launches, with all spend held to a strict sub-6-month payback threshold.

Segment performance

Sezzle reports consolidated financial results for Q2 2026, with no separate product segment disclosures provided in the transcript. Core consolidated results: Q2 2026 GMV grew 37.9% YoY to a record $1.3 billion, with 15.1% sequential growth from Q1 2026 that exceeded the Q4 2025 holiday peak. Total revenue grew 51.7% YoY to $149.7 million. Net income was $40.8 million, with a 27.2% profit margin. Adjusted EBITDA was $58 million, with a 38.8% margin. Revenue less transaction-related costs hit 63.5% of total revenue, at the upper end of the company's 55%-65% target range. Revenue yield expanded 110 bps YoY to 11.7% for the quarter, with full-year 2026 revenue yield guided to be flat with 2025's 11.4% level. Active subscribers reached 854,000, up 76.4% YoY, with 140,000 net new subscribers added in the quarter (the largest net gain since the subscription program launched). Average quarterly purchase frequency hit a record 7.2 times, up from 6.1 times YoY. Average quarterly revenue per monetized user increased 16.2% YoY.

Risks & headwinds

- Newly launched lending products like Sezzle Cash are still in early stages, with underwriting currently being fine-tuned, and higher credit loss provisioning is expected as new users are added, since new consumers have inherently higher loss rates than existing customers. - The antitrust litigation against defendants is in the discovery phase, which is expected to continue through 2027, creating extended legal uncertainty and ongoing legal costs. - Marketing spend that hits the 6-month payback threshold carries higher risk the closer spend gets to that edge; if actual payback is slower than early data suggests, returns will be lower than projected, eroding profitability. - The national bank charter application process has an expected total timeline of 12 to 18 months, with multiple layers of regulatory approval required, creating uncertainty around the timing and final outcome of the application.

Analyst Q&A

• Q: What is the expected total timeline for Sezzle's national bank charter application process? /

  A: The OCC targets a 120-day timeline from application submission to conditional decision, but additional FDIC and Federal Reserve approvals are required after that step. Sezzle management uses a conservative 12 to 18 month total timeline for full approval from the time of application submission.

• Q: If Q2 marketing spend hit the sub-6-month payback target, why is management planning to pull back spend in Q3? /

  A: The Q2 spend increase was a test to see how far marketing channels could stretch while maintaining acceptable ROI. The 6-month payback is the company's maximum threshold, so operating closer to that edge increases business risk. Management wants to observe how the Q2 cohort cycles through to confirm actual payback before committing to a higher run rate of spend. Pulling back reflects a preference for stronger returns at lower spend levels, though additional spend for the new Sezzle Cash and Sezzle Send product launches may offset some of this pullback.

• Q: Why is 2026 full-year revenue yield guided to be flat despite Pay In 5 being accretive to take rates? /

  A: While Pay In 5 does boost take rates, newer partner arrangements (such as the Pagaya partnership for larger loans) and new products like Sezzle Cash have lower accounting take rates. These lower-take-rate new products offset the accretion from Pay In 5, leading to a flattish full-year revenue yield, without negatively impacting overall net transaction margins which remain on target.

• Q: Is the ongoing decline in On Demand users and growth in subscribers driven by conversion of former On Demand users to subscriptions? /

  A: While a portion of On Demand users do convert to subscriptions, the shift is primarily driven by a change in Sezzle's go-to-market strategy. Sezzle now leads with its subscription program for most customer acquisition, and On Demand is only primarily offered as a payment option at merchant checkouts for new consumers entering the platform via enterprise merchant partnerships.