Sezzle (ASX:SZL) share price goes nuts on June 20 update

The Sezzle (ASX: SZL) share price is going nuts, it’s up 17.7% after giving an update for the June 2020 quarter update.

What is Sezzle?

Sezzle is a US-based and incorporated business that provides an interest-free instalment payment solution. It has been operating since 2017 and is now in 12 countries.

Sezzle listed on the ASX with an initial public offering price of $1.22 per share/CDI. The business does not charge interest or initiation fees, however it does charge failed payment fees of US$10.

Sezzle’s impressive update

Sezzle said it expects its underlying merchant sales (UMS) is expected to reach an annualised pace of US$1 billion by the end of 2020.

The buy now, pay later business said UMS jumped 58% quarter on quarter to US$188 million. Compared to the same quarter a year ago, UMS grew by 349%.

Active customers increased by 28% quarter on quarter to 1.48 million with growth of 243% year on year. Active merchants rose by 27% quarter on quarter to 16,112 with growth of 219% year on year.

The company announced a number of pleasing statistics. Its customers are using the product more regularly. In the June 2020 quarter 87.5% of customers were repeat users compared to 77.2% a year ago and 85.7% in the March 2020 quarter.

Customers who have been with Sezzle longer are purchasing with more frequency. The 2020 cohort uses Sezzle an average of 5x per year, the 2019 cohort uses Sezzle 9x a year and the 2018 cohort uses Sezzle 15x a year.

Sezzle also said that its leading loss indicators continue to show improvement.

In terms of merchant fees growth, it grew 54.8% quarter on quarter to US$10.6 million, or 397% year on year. As a percentage of UMS, merchant fees improved 55 basis points year on year to 5.6%.

Sezzle Executive Chairman and CEO Charlie Youakim said: “Our strong performance in Q2 is reflective of an improving consumer profile combined with an accelerated adoption of eCommerce due to the pandemic. The undercurrent of organic growth that we are experiencing is exciting to see as our business matures. The gains in repeat customer usage and frequency of purchases by cohorts are key drivers to lower loss rates and greater net transaction margin (NTM).”

Summary

Sezzle is clearly experiencing very strong growth and it’s on a good trajectory. I’m not sure how many profitable buy now, pay later operators the economy can support. Maybe it will just be one or two like Sezzle and Afterpay (ASX: APT). I’m not sure I could invest in any of these BNPL players due to the hype (and lack of profit), but I’m watching with interest. Growth shares like Bubs (ASX: BUB) and Pushpay (ASX: PPH) are more attractive to me.

Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

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