Total Income

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Total income for the three months ended September 30, 2022 and 2021 was $30,408,249 and $28,471,726, respectively, and $87,294,249 and $81,887,607 for the nine months ended September 30, 2022 and 2021, respectively. Total income in the fourth quarter has historically been strongest for the Company, in line with consumer spending habits during the holiday shopping season. Sezzle’s total income is classified into two categories: transaction income and income from other services.

Transaction Income

Transaction income is comprised of all income earned from merchants, consumers, and other third-parties that relate to placing and processing orders on the Sezzle Platform. This primarily includes merchant processing fees, virtual card interchange revenue, and convenience fee income.

Sezzle earns its income primarily from fees paid by merchants in exchange for Sezzle’s payment processing services. These merchant processing fees are applied to the underlying sales to consumers passing through the Company’s platform and are predominantly based on a percentage of the consumer order value plus a fixed fee per transaction.

Sezzle also earns income through interchange fees through the Sezzle Virtual Card solution. Virtual card interchange income is recognized at the time a transaction that uses a virtual card is processed. Additionally, Sezzle charges a convenience fee to consumers that choose to make installment payments (excluding the first installment) using a debit or credit card. Sezzle does not charge a fee for using ACH on subsequent installments. Sezzle recognizes convenience fee income at the time the transaction is processed.

Transaction income is reduced by direct loan origination fees. Such costs are comprised of costs paid to third-parties to obtain data for underwriting consumers which result in a successful transaction. Such costs which result in a declined order are recorded within third-party technology and data on the consolidated statements of operations and comprehensive income (loss).

Income from Other Services

Income from other services includes all other incomes earned from merchants, consumers, and other third-parties not included in transaction income. This primarily includes account reactivation fees, reschedule fees, and Sezzle Premium subscription revenue.

Sezzle earns income from consumers in the form of account reactivation fees. These fees are assessed to consumers who fail to make a timely payment. Sezzle allows, at a minimum and subject to state jurisdiction regulation, a 48-hour waiver period where fees are dismissed if the installment is paid by the consumer. Account reactivation fees are recognized at the time the fee is charged to the consumer to the extent they are reasonably collectible by Sezzle. Sezzle also earns income from consumers in the form of reschedule fees. Consumers are also allowed to reschedule their initial installment one time without incurring a reschedule fee and the principal of a rescheduled payment is not considered to be delinquent. If consumers reschedule a payment more than once in the same order cycle they are subject to a reschedule fee.

Additionally, Sezzle offers its consumers the ability to subscribe to its Sezzle Premium service which, along with other benefits, allows consumers to shop at select large, non-integrated “premium merchants” for a monthly or annual fee. Sezzle Premium subscription fees are recognized straight-line over the subscription period.

Disaggregation of Total Income

The following table breaks out the Company’s total income by category:


	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021
Transaction income	$	25,062,708	$	23,213,376	$	72,879,496	$	67,225,719
Income from other services	5,345,541		5,258,350		14,414,753		14,661,888
Total income	$	30,408,249	$	28,471,726	$	87,294,249	$	81,887,607

Within total income, $2,336,364 and $8,386 do not fall under the scope of the Accounting Standards Codification (“ASC”) Topic 310, Receivables, for the three months ended September 30, 2022 and 2021, respectively. $2,913,351 and $8,386 do not fall under ASC Topic 310, Receivables, for the nine months ended September 30, 2022 and 2021, respectively. Such income relates to revenue from contracts with customers and is within the scope of ASC 606.

Total income that falls under the scope of ASC Topic 310 (excluding account reactivation fees) is initially recorded as a reduction to notes receivable, net, within the consolidated balance sheets. The income is then recognized over the average duration of the note using the effective interest rate method. Total income to be recognized over the duration of existing notes receivable outstanding was $3,968,605 and $5,240,919 as of September 30, 2022 and December 31, 2021, respectively.

Total income that falls under the scope of ASC Topic 606, Revenue from Contracts with Customers, generally comprises a single performance obligation. For performance obligations that occur over a period of time (e.g. consumers’ ability to access the features of Sezzle Premium over the subscription term), Sezzle recognizes the total revenue straight-line over the duration of the performance obligation. Total income to be recognized over the remaining duration of outstanding performance obligations was $531,092 as of September 30, 2022. Sezzle had no deferred revenue related to ASC Topic 606 as of December 31, 2021.