The Sezzle Inc (ASX: SZL) share price is jumping after reporting large growth in its September 2020 quarter.
September 2020 update
Sezzle reported that its third quarter underlying merchant sales (UMS) increased by 231.5% year on year to US$228 million, which was up 21.4% quarter on quarter for the buy now, pay later company.
It boasted that its monthly UMS reached US$76.1 million in the third quarter compared to US$62.7 million in second quarter of FY20 and US$22.9 million in the third quarter of FY19.
Merchant fees as a percentage of UMS improved to 5.8% in the third quarter, up from 5.6% in the June 2020 quarter and 5.2% in the third quarter of FY19.
Active consumers increased 178.1% year on year to 1.79 million people, representing 21.5% growth quarter on quarter. This is an important metric, as new customers represent the future of the business.
Active merchants rose by 178.3% year on year in the third quarter to 20,890, which was growth of 29.7% quarter on quarter.
Sezzle also said that its consumer profile continued to improve as active consumer repeat usage grew to 89%. Repeat customers are great because they likely represent higher margins, lower losses and they require less marketing. Repeat usage has risen for 21 consecutive months.
The buy now, pay later business said it nearly attained its year-end run rate goal of US$1 billion of UMS, with an annualised US$985.9 million.
One recent highlight was the partnership with Ally. Another highlight from the quarter was a soft launch in India, which is one of the world’s largest economies. The initial feedback has been “positive”.
Sezzle Executive Chairman and CEO Charlie and Youakim said: “We are excited to produce another record quarter of results as our product offering continues to prove its resiliency as well as its necessity during these difficult times. Our strong performance in 3Q is reflective of an improving Sezzle consumer profile along with the continued acceleration of eCommerce in the marketplace.”
Summary
The Sezzle share price is currently up almost 30%. Higher repeat customers and a higher margin is a very good sign for longer term profitability. The expansion into India is also very promising. Sezzle could certainly be one buy now, pay later operator to watch.
The problem is, it’s hard to say whether $5, $10 or $20 is a fair price today. How do you value Sezzle or indeed any business from the sector when there’s so much competition? Will margins or growth rates start to slow soon? It’s a land grab at the moment, but there won’t always be fast growth – eventually profit will need to come.
As far as payment ASX growth shares go, I’d much rather invest in shares of profitable Pushpay Holdings Ltd (ASX: PPH).
