UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
	WASHINGTON, D.C. 20549
	FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-41781

SEZZLE INC.

(Exact name of registrant as specified in its charter)

Delaware	81-0971660
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
700 Nicollet Mall, Suite 640, Minneapolis, Minnesota	55402
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: +1 651 240 6001

Not Applicable

(Former address)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.00001 per share	SEZL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth

company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒

Smaller reporting company ☒ Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The total shares of common stock, par value $0.00001 per share, outstanding at November 1, 2024 were 5,607,034.

Table of Contents

SEZZLE INC.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations and Comprehensive Income	5
	Consolidated Statements of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	8
	Notes to the Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	35
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	36
Item 1A	Risk Factors	36
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3	Defaults Upon Senior Securities	36
Item 4	Mine Safety Disclosures	36
Item 5	Other Information	37
Item 6	Exhibits	38
	Signature	39

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FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-Q (“Form 10-Q”) includes “forward-looking statements” under Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management included in this Form 10-Q are forward-looking statements. When used in this Form 10-Q, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” and similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) and in any subsequent reports we file with the U.S. Securities and Exchange Commission. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. There is a risk that such predictions, estimates, projections, and other forward-looking statements will not be achieved. Nevertheless, and despite the fact that management’s expectations and estimates are based on assumptions management believes to be reasonable and data management believes to be reliable, our actual results, performance, or achievements are subject to future risks and uncertainties, any of which could materially affect our actual performance. Risks and uncertainties that could affect such performance include, but are not limited to:

•impact of the “buy-now, pay-later” (“BNPL”) industry becoming subject to increased regulatory scrutiny;

•impact of operating in a highly competitive industry;

•impact of macro-economic conditions on consumer spending;

•our ability to increase our merchant network, our base of consumers and underlying merchant sales (“UMS”);

•our ability to effectively manage growth, sustain our growth rate and maintain our market share;

•our ability to maintain adequate access to capital in order to meet the capital requirements of our business;

•impact of exposure to consumer bad debts and insolvency of merchants;

•impact of the integration, support and prominent presentation of our platform by our merchants;

•impact of any data security breaches, cyberattacks, employee or other internal misconduct, malware, phishing or ransomware, physical security breaches, natural disasters, or similar disruptions;

•impact of key vendors or merchants failing to comply with legal or regulatory requirements or to provide various services that are important to our operations;

•impact of the loss of key partners and merchant relationships;

•impact of exchange rate fluctuations in the international markets in which we operate;

•impact of our delisting from the Australian Securities Exchange (“ASX”) and trading on the Nasdaq Capital Market as our sole trading exchange;

•our ability to protect our intellectual property rights and third party allegations of the misappropriation of intellectual property rights;

•our ability to retain employees and recruit additional employees;

•impact of the costs of complying with various laws and regulations applicable to the BNPL industry in the United States and Canada; and

•our ability to achieve our public benefit purpose and maintain our B Corporation certification.

We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under “Risk Factors” in our 2023 Form 10-K. Should one or more of the risks or uncertainties described in the 2023 Form 10-K occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Form 10-Q are expressly qualified in their entirety by these cautionary statements. These cautionary statements should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the cautionary statements in this section, to reflect events or circumstances after the date of this Form 10-Q.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets

	As of
	September 30, 2024		December 31, 2023
	(unaudited)		(audited)
Assets
Current Assets
Cash and cash equivalents	$	80,062,505	$	67,624,212
Restricted cash, current	7,173,326		2,993,011
Notes receivable	151,413,490		142,885,682
Allowance for credit losses	(18,626,222)		(12,253,041)
Notes receivable, net	132,787,268		130,632,641
Other receivables, net	3,823,280		1,571,728
Prepaid expenses and other current assets	8,580,986		6,223,274
Total current assets	232,427,365		209,044,866
Non-Current Assets
Internally developed intangible assets, net	2,289,227		1,898,470
Operating right-of-use assets	834,117		994,476
Restricted cash, non-current	1,107,298		82,000
Deferred tax asset, net of $8,349,879 and $32,478,033 valuation allowance, respectively	15,863,790		—
Other assets	347,475		625,471
Total Assets	$	252,869,272	$	212,645,283
Liabilities and Stockholders' Equity
Current Liabilities
Merchant accounts payable	$	70,449,314	$	74,135,491
Operating lease liabilities	83,222		57,316
Accrued liabilities	11,475,162		10,790,308
Other payables	10,498,376		5,261,436
Deferred revenue	4,373,270		2,643,230
Line of credit, net of unamortized debt issuance costs of $619,094	—		94,380,906
Total current liabilities	96,879,344		187,268,687
Long Term Liabilities
Long term debt	—		250,000
Operating lease liabilities	854,509		981,692
Line of credit, net of unamortized debt issuance costs of $1,062,276	93,937,724		—
Warrant liabilities	—		967,257
Other non-current liabilities	59,681		1,083,323
Total Liabilities	191,731,258		190,550,959
Commitments and Contingencies (see Note 8)
Stockholders' Equity
Common stock, $0.00001 par value; 750,000,000 shares authorized; 5,747,907 and 5,826,206 shares issued, respectively; 5,580,093 and 5,697,517 shares outstanding, respectively	2,084		2,085
Additional paid-in capital	184,865,379		186,015,079
Treasury stock, at cost: 167,814 and 128,689 shares, respectively	(7,938,255)		(5,755,961)
Accumulated other comprehensive loss	(649,352)		(646,999)
Accumulated deficit	(115,141,842)		(157,519,880)
Total Stockholders' Equity	61,138,014		22,094,324
Total Liabilities and Stockholders' Equity	$	252,869,272	$	212,645,283

See the accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Operations and Comprehensive Income (unaudited)

	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Total revenue	$	69,957,691	$	40,844,201	$	172,904,830	$	110,455,297
Operating Expenses
Personnel	13,423,723		11,079,174		37,185,286		34,670,235
Transaction expense	12,761,438		9,936,804		35,290,202		26,121,338
Third-party technology and data	2,386,490		2,002,515		6,723,895		5,655,321
Marketing, advertising, and tradeshows	2,725,615		3,615,339		4,375,579		10,128,175
General and administrative	2,416,951		2,184,076		7,318,511		6,679,915
Provision for credit losses	15,402,303		6,676,548		30,636,149		12,667,346
Total operating expenses	49,116,520		35,494,456		121,529,622		95,922,330
Operating Income	20,841,171		5,349,745		51,375,208		14,532,967
Other Income (Expense)
Net interest expense	(3,327,998)		(4,143,258)		(10,320,573)		(11,453,751)
Other income (expense), net	96,057		14,560		54,624		1,206,800
Fair value adjustment on warrants	—		89,227		(1,261,556)		(79,268)
Loss on extinguishment of line of credit	—		—		(259,706)		—
Income before taxes	17,609,230		1,310,274		39,587,997		4,206,748
Income tax expense (benefit)	2,162,989		15,874		(13,567,130)		48,024
Net Income	15,446,241		1,294,400		53,155,127		4,158,724
Other Comprehensive Income (Loss)
Foreign currency translation adjustment	71,598		(358,465)		(2,353)		(199,586)
Total Comprehensive Income	$	15,517,839	$	935,935	$	53,152,774	$	3,959,138
Net income per share*:
Basic	$	2.79	$	0.23	$	9.46	$	0.75
Diluted	$	2.62	$	0.23	$	8.94	$	0.74
Weighted-average shares outstanding*:
Basic	5,545,353		5,667,430		5,620,754		5,576,233
Diluted	5,905,833		5,729,665		5,948,131		5,651,221

*Effective May 11, 2023, we performed a 1-for-38 reverse stock split. Share and per-share amounts have been retroactively restated.

See the accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Stockholders’ Equity (unaudited)

	Common Stock			Additional Paid-in Capital		Stock Subscriptions		Treasury Stock, At Cost		Accumulated Other Comprehensive Loss		Accumulated Deficit
	Shares*	Amount												Total
Balance at January 1, 2023	5,478,470	$	2,083	$	179,054,368	$	—	$	(4,072,752)	$	(643,974)	$	(165,496,479)	$	8,843,246
Adoption of Accounting Standards Update No. 2016-13	—	—		—		—		—		—		878,577		878,577
Equity based compensation	—	—		2,639,574		—		—		—		—		2,639,574
Stock option exercises	13,784	—		26,996		—		—		—		—		26,996
Restricted stock issuances and vesting of awards	288,894	3		3,272,438		—		—		—		—		3,272,441
Issuance of additional shares related to reverse stock split	6,245	—		—		—		—		—		—		—
Repurchase of common stock	(97,306)	(1)		—		—		(1,645,916)		—		—		(1,645,917)
Foreign currency translation adjustment	—	—		—		—		—		(199,586)		—		(199,586)
Net income	—	—		—		—		—		—		4,158,724		4,158,724
Balance at September 30, 2023	5,690,087	$	2,085	$	184,993,376	$	—	$	(5,718,668)	$	(843,560)	$	(160,459,178)	$	17,974,055

	Common Stock			Additional Paid-in Capital		Stock Subscriptions		Treasury Stock, At Cost		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balance at January 1, 2024	5,697,517	$	2,085	$	186,015,079	$	—	$	(5,755,961)	$	(646,999)	$	(157,519,880)	$	22,094,324
Equity based compensation	—	—		2,532,644		—		—		—		—		2,532,644
Stock option exercises	48,472	—		1,566,243		—		—		—		—		1,566,243
Warrant exercises	50,198	1		400,740		—		—		—		—		400,741
Restricted stock issuances and vesting of awards	117,332	1		1,290,867		—		—		—		—		1,290,868
Stock subscriptions receivable related to stock option exercises	658	—		38,848		(38,848)		—		—		—		—
Stock subscriptions collected related to stock option exercises	—	—		—		38,848		—		—		—		38,848
Conversion of warrant liabilities to stockholders' equity	—	—		2,228,813		—		—		—		—		2,228,813
Repurchase and retirement of common stock	(294,959)	(3)		(9,207,855)		—		—		—		(10,777,089)		(19,984,947)
Repurchase of common stock	(39,125)	—		—		—		(2,182,294)		—		—		(2,182,294)
Foreign currency translation adjustment	—	—		—		—		—		(2,353)		—		(2,353)
Net income	—	—		—		—		—		—		53,155,127		53,155,127
Balance at September 30, 2024	5,580,093	$	2,084	$	184,865,379	$	—	$	(7,938,255)	$	(649,352)	$	(115,141,842)	$	61,138,014

*Effective May 11, 2023, we performed a 1-for-38 reverse stock split. Share amounts have been retroactively restated.

See the accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Stockholders’ Equity (unaudited)

	Common Stock			Additional Paid-in Capital		Stock Subscriptions		Treasury Stock, At Cost		Accumulated Other Comprehensive Loss		Accumulated Deficit
	Shares*	Amount												Total
Balance at July 1, 2023	5,635,084	$	2,084	$	183,892,873	$	—	$	(5,378,140)	$	(485,095)	$	(161,753,578)	$	16,278,144
Equity based compensation	—	—		(57,582)		—		—		—		—		(57,582)
Stock option exercises	7,273	—		14,527		—		—		—		—		14,527
Restricted stock issuances and vesting of awards	71,105	1		1,143,558		—		—		—		—		1,143,559
Issuance of additional shares related to reverse stock split	—	—		—		—		—		—		—		—
Repurchase of common stock	(23,375)	—		—		—		(340,528)		—		—		(340,528)
Foreign currency translation adjustment	—	—		—		—		—		(358,465)		—		(358,465)
Net income	—	—		—		—		—		—		1,294,400		1,294,400
Balance at September 30, 2023	5,690,087	$	2,085	$	184,993,376	$	—	$	(5,718,668)	$	(843,560)	$	(160,459,178)	$	17,974,055

	Common Stock			Additional Paid-in Capital		Stock Subscriptions		Treasury Stock, At Cost		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares*	Amount
Balance at July 1, 2024	5,584,986	$	2,084	$	184,228,378	$	—	$	(7,258,600)	$	(720,950)	$	(125,961,197)	$	50,289,715
Equity based compensation	—	—		905,524		—		—		—		—		905,524
Stock option exercises	30,684	—		1,328,724		—		—		—		—		1,328,724
Warrant exercises	30,036	1		367,340		—		—		—		—		367,341
Restricted stock issuances and vesting of awards	22,068	—		550,735		—		—		—		—		550,735
Stock subscriptions collected related to stock option exercises	—	—		—		—		—		—		—		—
Repurchase and retirement of common stock	(80,546)	(1)		(2,515,322)		—		—		—		(4,626,886)		(7,142,209)
Repurchase of common stock	(7,135)	—		—		—		(679,655)		—		—		(679,655)
Foreign currency translation adjustment	—	—		—		—		—		71,598		—		71,598
Net income	—	—		—		—		—		—		15,446,241		15,446,241
Balance at September 30, 2024	5,580,093	$	2,084	$	184,865,379	$	—	$	(7,938,255)	$	(649,352)	$	(115,141,842)	$	61,138,014

*Effective May 11, 2023, we performed a 1-for-38 reverse stock split. Share amounts have been retroactively restated.

See the accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Cash Flows (unaudited)

	For the nine months ended September 30,
	2024		2023
Operating Activities:
Net income	$	53,155,127	$	4,158,724
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization	707,450		624,608
Provision for credit losses	30,636,149		12,667,346
Provision for other credit losses	4,939,580		2,067,268
Equity based compensation and restricted stock vested	3,823,512		5,912,015
Amortization of debt issuance costs	417,207		534,638
Fair value adjustment on warrants	1,261,556		79,268
Impairment losses on long-lived assets	47,962		42,248
(Gain) loss on sale of fixed assets	(37,735)		17,644
Loss on extinguishment of line of credit	259,706		—
Deferred income taxes	(14,941,204)		—
Changes in operating assets and liabilities:
Notes receivable	(32,993,867)		(20,945,172)
Other receivables	(7,191,657)		(1,590,055)
Prepaid expenses and other assets	(3,122,311)		(23,191)
Merchant accounts payable	(3,473,648)		(14,869,007)
Other payables	4,985,620		1,166,248
Accrued liabilities	(333,592)		(1,101,420)
Deferred revenue	1,729,684		554,005
Operating leases	59,086		29,667
Net Cash Provided from (Used for) Operating Activities	39,928,625		(10,675,166)
Investing Activities:
Purchase of property and equipment	(36,063)		(53,533)
Internally developed intangible asset additions	(1,022,087)		(984,176)
Net Cash Used for Investing Activities	(1,058,150)		(1,037,709)
Financing Activities:
Proceeds from line of credit	74,726,901		28,900,000
Payments to line of credit	(74,726,901)		(18,000,000)
Payments of debt issuance costs	(1,051,707)		(75,475)
Proceeds from stock option exercises	1,566,243		26,996
Stock subscriptions collected related to stock option exercises	38,848		—
Proceeds from warrant exercises	400,741		—
Repurchase of common stock	(22,167,241)		(1,645,917)
Net Cash (Used for) Provided from Financing Activities	(21,213,116)		9,205,604
Effect of exchange rate changes on cash	(13,453)		(202,689)
Net increase (decrease) in cash, cash equivalents, and restricted cash	17,657,359		(2,507,271)
Cash, cash equivalents, and restricted cash, beginning of period	70,699,223		69,522,658
Cash, cash equivalents, and restricted cash, end of period	$	88,343,129	$	66,812,698
Noncash investing and financing activities:
Lease liabilities arising from obtaining right-of-use assets	—		1,059,263
Conversion of warrant liabilities to stockholders' equity	$	2,228,813	$	—
Supplementary disclosures:
Interest paid	$	10,476,571	$	11,859,913
Income taxes paid	3,544,746		72,600

See the accompanying Notes to the Consolidated Financial Statements.

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Notes to Consolidated Financial Statements (unaudited)

Note 1. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

These unaudited consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. While these consolidated financial statements and the accompanying notes thereof reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. These consolidated financial statements and their accompanying notes should be read in conjunction with the consolidated financial statement disclosures in our 2023 annual consolidated financial statements.

Operating results reported for the three and nine months ended September 30, 2024 might not be indicative of the results for any subsequent period or the entire year ending December 31, 2024.

Sezzle Inc. (the “Company”, “Sezzle”, “we”, “us”, or “our”) uses the same accounting policies in preparing quarterly and annual consolidated financial statements. We consolidate the accounts of subsidiaries for which we have a controlling financial interest. The accompanying consolidated financial statements include all the accounts and activity of Sezzle Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation.

Fair Value

Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

•Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;

•Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

•Level 3 — Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

We measure the value of our money market securities based on Level 1 inputs. Our warrant liabilities were valued using a Black-Scholes valuation model, which was calculated using Level 3 inputs. The primary unobservable input used in determining the fair value of the warrant liabilities was the expected volatility of our common stock. During the nine months ended September 30, 2024, we reclassified our warrant liabilities to stockholders’ equity in connection with our delisting from the Australian Securities Exchange and amending the outstanding warrant agreements to reference our common stock price on the Nasdaq Capital Market, which is stated in U.S. Dollars. Refer to Note 7. Warrant Liabilities for more information.

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Our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 are as follows:

	September 30, 2024								December 31, 2023
	Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash and cash equivalents:
Money market securities	$	14,241	$	—	$	—	$	14,241	$	14,432	$	—	$	—	$	14,432
Liabilities:
Warrant liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	967,257	$	967,257

The fair value and its classification within the fair value hierarchy for financial assets and liabilities not reported at fair value within the consolidated balance sheets as of September 30, 2024 and December 31, 2023 are as follows:

	September 30, 2024
	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets:
Cash and cash equivalents(1)	$	80,048,264	$	80,048,264	$	—	$	—	$	80,048,264
Restricted cash(2)	8,280,624		8,280,624		—		—		8,280,624
Notes receivable, net	132,787,268		—		—		132,787,268		132,787,268
Total assets	$	221,116,156	$	88,328,888	$	—	$	132,787,268	$	221,116,156
Liabilities:
Line of credit, net	93,937,724		—		93,937,724		—		93,937,724
Total liabilities	$	93,937,724	$	—	$	93,937,724	$	—	$	93,937,724

	December 31, 2023
	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets:
Cash and cash equivalents(1)	$	67,609,780	$	67,609,780	$	—	$	—	$	67,609,780
Restricted cash(2)	3,075,011		3,075,011		—		—		3,075,011
Notes receivable, net	130,632,641		—		—		130,632,641		130,632,641
Total assets	$	201,317,432	$	70,684,791	$	—	$	130,632,641	$	201,317,432
Liabilities:
Long term debt	$	250,000	$	—	$	250,000	$	—	$	250,000
Line of credit, net	94,380,906		—		94,380,906		—		94,380,906
Total liabilities	$	94,630,906	$	—	$	94,630,906	$	—	$	94,630,906

(1)Excludes $14,241 and $14,432 as of September 30, 2024 and December 31, 2023, respectively, relating to money market securities that are reported at fair value.

(2)Includes both restricted cash, current and restricted cash, non-current as disclosed on the consolidated balance sheets.

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Segments

We conduct our operations through a single operating segment and, therefore, one reportable segment. There are no significant concentrations by state or geographical location.

Reclassifications

Certain prior period amounts have been reclassified to conform with the current period presentation format. These reclassifications had no effect on our total assets, net income, or total comprehensive income.

Recent Accounting Pronouncements

Recently Issued Accounting Guidance, Not Yet Adopted Within Our Consolidated Financial Statements

Standard	Description	Date of Planned Adoption	Effect on Consolidated Financial Statements
ASU 2023-07, Segment Reporting Improvements to Reportable Segment Disclosures	This ASU requires disclosure of incremental segment information on an annual basis (and interim basis beginning January 1, 2025) for all public entities, including entities with one reportable segment. Such incremental disclosures include information about significant segment expenses, how chief operating decision makers measure a segment’s profit or loss, and qualitative information about how a chief operating decision maker assesses segment performance.	January 1, 2024 (On an annual basis) January 1, 2025 (On an interim basis)	We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements. We will disclose information about significant segment expenses, how management assesses our single segment’s performance, and other required disclosures in our 2024 annual consolidated financial statements on a retrospective basis.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures	This ASU requires enhanced disclosures on the income tax rate reconciliation, income taxes paid, and other income tax-related disclosures. Such disclosures include specific categories in the rate reconciliation, qualitative information about significant components of income tax, and disaggregation of income taxes paid by federal, state, and local jurisdiction.	January 1, 2025	We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements. We will include the enhanced disclosure requirements in our 2025 annual consolidated financial statements on a prospective basis.

There are additional new accounting pronouncements issued by the FASB that we have not yet adopted. We do not believe any of these additional accounting pronouncements will have a material impact on the consolidated financial statements or disclosures.

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Note 2. Total Revenue

Total revenue for the three months ended September 30, 2024 and 2023 was $69,957,691 and $40,844,201, respectively, and $172,904,830 and $110,455,297 for the nine months ended September 30, 2024 and 2023, respectively. Total revenue in the fourth quarter has historically been strongest for us, in line with consumer spending habits during the holiday shopping season. Our total revenue is classified into three categories: transaction income, subscription revenue, 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 processing orders and payments on the Sezzle Platform. This primarily includes merchant processing fees, partner income, and consumer fees.

We earn income from fees paid by merchants in exchange for our payment processing services. These merchant processing fees are applied to the underlying sales of consumers passing through our platform and are predominantly based on a percentage of the consumer order value plus a fixed fee per transaction. For orders that result in a financing receivable, merchant processing fees are recognized over the duration of the underlying order using the effective interest method. For orders that do not result in a financing receivable, merchant processing fees are recognized at the time the sale is completed. Merchant processing fees totaled $14,843,752 and $17,814,082 for the three months ended September 30, 2024 and 2023, respectively, and $42,937,048 and $57,246,226 for the nine months ended September 30, 2024 and 2023, respectively.

We also earn income from partners on consumer transactions. This income includes interchange fees earned through our virtual card solution and promotional incentives with third parties. Virtual card interchange income is recognized over the duration of the underlying order using the effective interest method and promotional incentives are recognized as they are earned during the promotional period. Partner income totaled $7,048,498 and $4,445,823 for the three months ended September 30, 2024 and 2023, respectively, and $17,009,956 and $9,355,137 for the nine months ended September 30, 2024 and 2023, respectively.

Transaction income also includes income from consumer fees that are related to processing orders and payments. Such fees are assessed when consumers choose to make an installment payment, excluding the first installment, using a card pursuant to state law, or when a payment method fails when attempting to make an installment payment. These fees are recognized at the time the fee is assessed to the extent the fee is reasonably collectible and totaled $14,505,044 and $4,786,304 for the three months ended September 30, 2024 and 2023, respectively, and $32,149,318 and $12,269,101 for the nine months ended September 30, 2024 and 2023, respectively.

Subscription Revenue

We offer our consumers the ability to subscribe to two paid services: Sezzle Premium and Sezzle Anywhere. Sezzle Premium allows consumers to shop at select large, non-integrated premium merchants, along with other benefits, for a recurring fee. Sezzle Anywhere allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee. Subscription fees are recognized straight-line over the subscription period.

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 or subscription revenue. This includes late payment fees, gateway fees, and marketing revenue earned from affiliates. Late payment fees are assessed to consumers who fail to make a timely principal payment. Late payment fees are recognized at the time the fee is charged to the consumer to the extent the fee is reasonably collectible. Late payment fees totaled $6,844,629 and $2,557,529 for the three months ended September 30, 2024 and 2023, respectively, and $13,528,076 and $7,018,990 for the nine months ended September 30, 2024 and 2023, respectively.

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Disaggregation of Total Revenue

Our total revenue by category and Accounting Standards Codification (“ASC”) recognition criteria for the three and nine months ended September 30, 2024 and 2023 was as follows:

	For the three months ended September 30,
	2024						2023
	Topic 310		Topic 606		Total		Topic 310		Topic 606		Total
Transaction income	$	26,951,377	$	9,445,917	$	36,397,294	$	21,571,303	$	5,474,906	$	27,046,209
Subscription revenue	—		22,857,165		22,857,165		—		8,554,947		8,554,947
Income from other services	7,451,481		3,251,751		10,703,232		3,091,928		2,151,117		5,243,045
Total revenue	$	34,402,858	$	35,554,833	$	69,957,691	$	24,663,231	$	16,180,970	$	40,844,201

	For the nine months ended September 30,
	2024						2023
	Topic 310		Topic 606		Total		Topic 310		Topic 606		Total
Transaction income	$	66,678,124	$	25,418,198	$	92,096,322	$	64,131,154	$	14,739,309	$	78,870,463
Subscription revenue	—		57,377,021		57,377,021		—		17,768,953		17,768,953
Income from other services	15,236,772		8,194,715		23,431,487		8,232,335		5,583,546		13,815,881
Total revenue	$	81,914,896	$	90,989,934	$	172,904,830	$	72,363,489	$	38,091,808	$	110,455,297

Transaction income that falls under the scope of ASC Topic 310, Receivables, relates to transactions that result in a note receivable being recognized. Such income 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. Transaction income to be recognized over the duration of existing notes receivable outstanding was $3,659,424 and $3,340,150 as of September 30, 2024 and December 31, 2023, respectively.

Transaction income that falls under the scope of ASC Topic 606, Revenue from Contracts with Customers, relates to transactions that do not result in a note receivable being recognized. Such revenue comprises a single performance obligation which is satisfied at the time the transaction occurs, at which point we recognize revenue.

Subscription revenue entirely falls under the scope of ASC Topic 606. Such revenue comprises a single performance obligation which is satisfied evenly over the underlying subscription period. Revenue is recognized ratably over the duration of the performance obligation. All performance obligations are fully satisfied within one year or less of receiving payment. Payment received for performance obligations not yet satisfied are recorded as deferred revenue on the consolidated balance sheets until such performance obligations are satisfied. Subscription revenue to be recognized over the remaining duration of outstanding performance obligations was $4,373,270 and $2,643,230 as of September 30, 2024 and December 31, 2023, respectively. Of the deferred revenue as of December 31, 2023, $2,602,536 was recognized during the nine months ended September 30, 2024.

Income from other services that falls under the scope of ASC Topic 310 primarily relates to late payment fees. Such fees are recognized at the time the fee is charged to the consumer to the extent they are reasonably collectible. Income from other services that fall under the scope of ASC 606 comprises a single performance obligation which is satisfied immediately and not deferred.

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Note 3. Notes Receivable and Allowance for Credit Losses

We offer consumer installment payment plans on our platform. Consumer installment payment plans are generally interest-free and consist of four installments, with the first payment made at the time of purchase and subsequent payments due every two weeks thereafter. We purchase certain receivables related to installment payment plans extended to consumers in the United States by an independent chartered financial institution (“originating partner”) and are responsible for servicing such receivables. All other consumer installment payment plans are originated by us. Our notes receivable represents amounts due from consumers primarily for outstanding principal on installment payment plans made on our platform that we have either originated or purchased from our originating partner. Our notes receivable are generally due within 42 days.

We classify all of our notes receivable as held for investment, as we have the intent and ability to hold these investments for the foreseeable future or until maturity or payoff. Since our portfolio is comprised of one product segment, point-of-sale unsecured installment loans, we evaluate our notes receivable as a single, homogenous portfolio and make merchant-specific or other adjustments as necessary. Our notes receivable are reported at amortized cost, which primarily includes unpaid principal, adjusted for unearned transaction income, direct loan origination costs, and charge-offs. The amortized cost basis is adjusted for the allowance for credit losses within notes receivable, net.

As of September 30, 2024 and December 31, 2023, our notes receivable at amortized cost was comprised of the following:

	September 30, 2024		December 31, 2023
Notes receivable, gross	$	155,072,914	$	146,225,832
Deferred transaction income	(3,659,424)		(3,340,150)
Notes receivable, amortized cost	$	151,413,490	$	142,885,682

Deferred transaction income is primarily comprised of unrecognized merchant fees, which are recognized over the duration of the note with the consumer and are recorded as an offset to transaction income on the consolidated statements of operations and comprehensive income. Our notes receivable had a weighted average days outstanding of 34 days.

We closely monitor credit quality for our notes receivable to manage and evaluate our related exposure to credit risk. When assessing the credit quality and risk of our portfolio, we monitor a variety of internal risk indicators and consumer attributes that are shown to be predictive of ability and willingness to repay, and combine these factors to establish an internal, proprietary score as a credit quality indicator (the “Prophet Score”). We evaluate the credit risk of our portfolio by grouping Prophet Scores into three buckets that range from A to C, with receivables having an “A” rating representing the highest credit quality and lowest likelihood of loss. Our risk and fraud team closely monitors the distribution of Prophet Scores for signs of changes in credit risk exposure and portfolio performance. The risk and fraud team also regularly evaluates the integrity of the Prophet Score machine learning model and updates it as necessary, but at least annually. We last updated the Prophet Score model in October 2023.

The amortized cost basis of our notes receivable by Prophet Score and year of origination as of September 30, 2024 and December 31, 2023 was as follows:

	September 30, 2024						December 31, 2023
	Amortized cost basis by year of origination
	2024		2023		Total		2023		2022		Total
A	$	50,070,705	$	—	$	50,070,705	$	47,752,196	$	—	$	47,752,196
B	57,354,419		1,000		57,355,419		58,815,920		257		58,816,177
C	43,858,876		8,714		43,867,590		35,832,476		2,708		35,835,184
No score	119,776		—		119,776		482,125		—		482,125
Total amortized cost	$	151,403,776	$	9,714	$	151,413,490	$	142,882,717	$	2,965	$	142,885,682

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Our notes receivable are considered past due when the principal has not been received within one calendar day of when they are due in accordance with the agreed upon contractual terms. Any amounts delinquent after 90 days are charged off with an offsetting reversal to the allowance for credit losses through the provision for credit losses on our consolidated statements of operations and comprehensive income. Charged-off principal payments recovered after 90 days are recognized as a reduction to the allowance for credit losses in the period the receivable is recovered. The amortized cost basis of our notes receivable by delinquency status as of September 30, 2024 and December 31, 2023 was as follows:

	September 30, 2024		December 31, 2023
Current	$	126,225,572	$	129,681,699
1–28 days past due	13,817,258		6,808,467
29–56 days past due	6,204,170		3,015,612
57–90 days past due	5,166,490		3,379,904
Total amortized cost	$	151,413,490	$	142,885,682

We maintain an allowance for credit losses at a level necessary to primarily absorb expected credit losses on principal receivables from consumers. The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term and incorporates evaluations of known and inherent risks in our portfolio, historical credit losses, consumer payment trends, estimates of recoveries, current economic conditions, and reasonable and supportable forecasts. We regularly assess the adequacy of our allowance for credit losses and adjust the allowance as necessary to reflect changes in the credit risk of our notes receivable. Any adjustment to the allowance for credit losses is recognized in net income through the provision for credit losses on our consolidated statements of operations and comprehensive income. While we believe our allowance for credit losses is appropriate based on the information available, actual losses could differ from the estimate.

In estimating the allowance for credit losses, we utilize a roll rate analysis of delinquent and current notes receivable. Roll rate analysis is a technique used to estimate the likelihood that a loan progresses through various stages of delinquency and eventually charges off. We segment our notes receivable into delinquency statuses and semi-monthly vintages for the purpose of evaluating historical performance and determining the future likelihood of default.

The activity in the allowance for credit losses, including the provision for credit losses, charge-offs, and recoveries for the three and nine months ended September 30, 2024 and 2023 was as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Balance at beginning of period	$	11,786,141	$	6,494,092	$	12,253,041	$	10,223,451
Adoption of Accounting Standards Update No. 2016-13	—		—		—		(878,577)
Provision for credit losses	15,402,303		6,676,548		30,636,149		12,667,346
Charge-offs	(9,167,620)		(5,239,171)		(26,394,129)		(16,416,612)
Recoveries of charged-off receivables	605,398		666,473		2,131,161		3,002,334
Balance at end of period	$	18,626,222	$	8,597,942	$	18,626,222	$	8,597,942

Net charge-offs by year of origination for the nine months ended September 30, 2024 was as follows:

	2024		2023		2022		2021		2020		Total
Current period gross charge-offs	$	(13,524,757)	$	(12,861,272)	$	(6,753)	$	(1,347)	$	—	$	(26,394,129)
Current period recoveries	197,490		1,195,333		350,355		295,203		92,780		2,131,161
Current period net charge-offs	$	(13,327,267)	$	(11,665,939)	$	343,602	$	293,856	$	92,780	$	(24,262,968)

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Note 4. Other Receivables

As of September 30, 2024 and December 31, 2023, the balance of other receivables, net, on the consolidated balance sheets was comprised of the following:

As of	September 30, 2024		December 31, 2023
Late payment fees receivable, net	$	1,362,289	$	548,649
Receivables from merchants, net	589,751		1,023,079
Receivables from originating partner	1,871,240		—
Other receivables, net	$	3,823,280	$	1,571,728

Late payment fees are applied to principal installments that are delinquent, subject to regulations within specific state jurisdictions. Any late payment fees associated with a delinquent payment are considered to be the same number of days delinquent as the principal payment. Late payment fees receivable, net, is comprised of outstanding late payment fees that we reasonably expect to collect from our consumers. As of September 30, 2024 and December 31, 2023, gross late payment fees receivable totaled $3,955,290 and $1,821,002, respectively.

We maintain an allowance for other credit losses at a level necessary to absorb expected credit losses on late payment fees receivable from our consumers. Any amounts delinquent after 90 days are charged off with an offsetting reversal to the allowance for other credit losses. Any adjustment to the allowance for other credit losses is recognized in net income through an offset to total revenue on our consolidated statements of operations and comprehensive income. Payments recovered after 90 days are recognized as a reduction to the allowance for other credit losses in the period the receivable is recovered.

The activity in the allowance for other credit losses related to late payment fees, including the provision for other credit losses, charge-offs, and recoveries for the three and nine months ended September 30, 2024 and 2023 was as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Balance at beginning of period	$	1,525,889	$	768,602	$	1,272,353	$	980,713
Provision for other credit losses	2,340,716		917,226		4,939,580		2,067,268
Charge-offs	(1,381,418)		(783,784)		(3,994,062)		(2,539,804)
Recoveries of charged-off receivables	107,814		114,396		375,130		508,263
Balance at end of period	$	2,593,001	$	1,016,440	$	2,593,001	$	1,016,440

Receivables from merchants primarily represent amounts due to us from our long-term lending partners for processing applications and referring potential consumers to them. Such transactions are settled with the merchant for the full purchase price at the point of sale and we separately invoice our long-term lending partners for the fees due to us. Expected losses on merchant fees receivable are minimal, therefore, there is no allowance for credit losses recorded.

Receivables from originating partner represents amounts due to us from our originating partner that will be used to settle outstanding merchant accounts payable on orders originated by them.

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Note 5. Merchant Accounts Payable

Merchant accounts payable represents amounts owed to merchants related to orders placed on the Sezzle Platform.

Merchants have the ability to enroll, subject to our approval, into the Delayed Settlement Incentive Program (“DSIP”), which allows merchants to defer payment from us in exchange for daily incentive payments. Within merchant accounts payable, $51,907,543 and $53,616,718 were recorded within the DSIP balance as of September 30, 2024 and December 31, 2023, respectively.

During the three and nine months ended September 30, 2024, all deferred payments retained in the program bore daily incentive payments at a fixed rate of 5.20% on an annual basis, compounding daily. The average annual percentage yield and related expense was 4.95% and $632,607, and 5.21% and $679,012 for the three months ended September 30, 2024 and 2023, respectively. The average annual percentage yield and related expense was 4.77% and $1,887,632, and 4.32% and $1,917,378 for the nine months ended September 30, 2024 and 2023, respectively. Expense related to the DSIP is recorded within net interest expense on the consolidated statements of operations and comprehensive income.

Deferred payments are due on demand, up to $250,000 during any seven day period, at the request of the merchant. Any request larger than $250,000 is processed within seven to ten days. We reserve the right to impose additional limits on the program and make changes to the program without notice or limits. These limits and changes to the program can include but are not limited to maximum balances, withdrawal amount limits, and withdrawal frequency.

Note 6. Line of Credit

We fund our consumer receivables through the use of a secured line of credit. We had an outstanding principal balance on our line of credit totaling $95,000,000 as of September 30, 2024 and December 31, 2023. Our revolving credit facilities are secured by a pool of pledged, eligible notes receivable. As of September 30, 2024 and December 31, 2023, we had pledged $132,032,578 and $131,379,797 of eligible gross notes receivable, respectively. We had an unused borrowing capacity of $17,887,829 and $3,534,848 as of September 30, 2024 and December 31, 2023, respectively.

Expenses related to our line of credit for the three and nine months ended September 30, 2024 and 2023 were as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Interest expense on utilization	$	2,608,239	$	3,471,806	$	8,373,286	$	9,611,867
Interest expense on unused daily amounts	82,361		25,555		199,874		90,639
Amortization of debt issuance costs	102,280		183,073		417,207		534,638

For the three months ended September 30, 2024 and 2023, our line of credit carried an effective annual interest rate of 12.65% and 20.70%, respectively. For the nine months ended September 30, 2024 and 2023, our line of credit carried an effective annual interest rate of 11.75% and 18.19%, respectively.

2024 Credit Agreement

On April 19, 2024, we entered into a secured revolving credit facility (the “2024 Credit Agreement”) with Bastion Funding VI LP. The 2024 Credit Agreement has a borrowing capacity of up to $150,000,000 and a maturity date of April 19, 2027. The borrowing base is 85% of pledged, eligible notes receivable, increased to 90% based on the loss rates of the underlying collateral. Eligible notes receivable are defined as notes receivable from consumers from the United States or Canada that are less than 30 days past due and fall within certain term and principal criteria.

Our 2024 Credit Agreement carries an interest rate of 3-month Term U.S. Federal Reserve Secured Overnight Financing Rate (“SOFR”) plus 6.75%, with a SOFR floor rate of 2.0%. Interest on borrowings is due on collection dates as specified in the loan agreement, typically monthly. We incur an unused facility fee of 0.5% per annum on the difference between the maximum borrowing capacity and the amount of principal outstanding. We are also required to maintain a minimum outstanding balance of $60,000,000.

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The 2024 Credit Agreement contains customary representations, warranties, affirmative and negative covenants, events of default (including upon change of control or collateral loss rates exceeding pre-determined levels), and indemnification provisions in favor of the lenders. The negative covenants limit our ability to incur or guarantee additional indebtedness; make investments or other restricted payments; acquire assets or form or acquire subsidiaries; create liens; sell assets; pay dividends or make other distributions or repurchase or redeem capital stock; engage in certain transactions with affiliates; enter into agreements that restrict the creation or incurrence of liens other than liens securing the new 2024 Credit Agreement and related documents; engage in liquidations, mergers, or consolidations; and make any material amendment, modification, or supplement to our credit guidelines or servicing guide, in each case subject to certain exceptions and qualifications. We are also subject to financial covenants, which require us to meet financial tests related to collection rates, default rates, leverage, tangible net worth, and liquidity.

In connection with entering into the 2024 Credit Agreement, we recognized a $259,706 loss on the extinguishment of our previous line of credit primarily related to unamortized debt issuance costs.

Note 7. Warrants

On February 23, 2024, in connection with our delisting from the ASX, we amended the strike price of all outstanding warrants originally denominated in Australian dollars to US dollars. As a result of the amendment, the warrants were no longer subject to foreign currency fluctuations and became considered indexed directly to our stock price and, on the date of amendment, we converted the warrants from a liability to stockholders’ equity within the consolidated balance sheets. The amount converted totaled $2,228,813.

Prior to converting our warrant liabilities, we revalued them to their fair value as of each reporting date using a Black-Scholes valuation model, which is calculated using Level 3 inputs. The primary unobservable input used in determining the fair value of the warrant liabilities is the expected volatility of our common stock. On the conversion date, we revalued the warrants using the Black-Scholes valuation model using a risk-free interest rate of 4.2%, expected volatility of 139.1%, and an expected life of 5.6 years, resulting in an estimated fair value of $40.81 per warrant. The activity related to our warrant liabilities during the nine months ended September 30, 2024 and 2023 was as follows:

	For the nine months ended September 30,
	2024		2023
Balance at beginning of period	$	967,257	$	511,295
Fair value remeasurement loss	1,261,556		79,268
Conversion of warrant liabilities to stockholders’ equity	(2,228,813)		—
Balance at end of period	$	—	$	590,563

The fair value remeasurement loss was recognized within other income (expense) on the consolidated statements of operations and comprehensive income.

During the nine months ended September 30, 2024, 54,610 warrants were exercised into 50,198 shares of common stock, with 4,412 shares withheld to cover the exercise price on certain exercises during the period. As of September 30, 2024, we had no warrants outstanding. No warrants were cancelled during the nine months ended September 30, 2024.

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Note 8. Commitments and Contingencies

Loan Commitments

Our originating partner entered into a five-year strategic partnership program with us by executing a Loan and Receivables Sale Agreement and Marketing and Servicing Agreement, effective September 27, 2024. We have a direct obligation to purchase receivables extended to consumers by our originating partner. As of September 30, 2024, we had an obligation to purchase $17,711,358 of receivables from our originating partner.

Note 9. Income Taxes

Income tax expense (benefit) was $2,162,989 and $15,874 for the three months ended September 30, 2024 and 2023, respectively, and ($13,567,130) and $48,024 for the nine months ended September 30, 2024 and 2023, respectively. We assess all relevant positive and negative evidence to determine if our existing deferred tax assets can be realized at each reporting date. As of September 30, 2024, significant pieces of positive evidence include our cumulative taxable income earned over a two-year period, which is objective and verifiable, and consideration of our expected future taxable earnings. Based on our assessment, we concluded that it is more likely than not that our U.S. federal and state deferred tax assets are realizable. As a result, we recorded a discrete tax benefit of $14,941,204 for the release of our valuation allowance during the nine months ended September 30, 2024. As of September 30, 2024 and December 31, 2023, we had a $8,349,879 and $32,478,033 valuation allowance recorded against our net deferred tax assets, respectively. Additionally, during the three months ended September 30, 2024 we recognized discrete tax benefits primarily related to excess tax benefits on equity based compensation totaling approximately $0.7 million.

Note 10. Net Income Per Share

Basic net income per share is computed by dividing net income for the period by the weighted-average number of shares outstanding during the period, including repurchases carried as treasury stock. Diluted net income per share is computed by dividing net income by the weighted-average number of shares outstanding adjusted for the dilutive effect of all potential shares of stock, including the exercise of employee stock options and assumed vesting of restricted stock units (if dilutive). Diluted net income per share was computed using the treasury stock method for warrants, stock options, and restricted stock units.

The following table presents the calculation of basic and diluted net income per share:

	For the three months ended September 30,				For the nine months ended September 30,
	2024		2023		2024		2023
Numerator:
Net income	$	15,446,241	$	1,294,400	$	53,155,127	$	4,158,724
Denominator*:
Basic shares:
Weighted-average shares outstanding	5,545,353		5,667,430		5,620,754		5,576,233
Diluted shares:
Stock options	120,886		60,299		95,696		67,351
Restricted stock units	239,594		—		231,681		—
Warrants	—		1,936		—		7,637
Weighted-average shares outstanding	5,905,833		5,729,665		5,948,131		5,651,221
Net income per share:
Basic	$	2.79	$	0.23	$	9.46	$	0.75
Diluted	$	2.62	$	0.23	$	8.94	$	0.74

*Effective May 11, 2023, we performed a 1-for-38 reverse stock split. Share amounts have been retroactively restated.

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Because their effect would have been anti-dilutive, 42,033 and 564,802 shares were excluded from the denominator of diluted net income per share for the three months ended September 30, 2024 and 2023, respectively, and 43,739 and 442,847 shares for the nine months ended September 30, 2024 and 2023, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Forward-Looking Statements”, “Factors Affecting Results from Operations”, and “Risk Factors” sections of this Form 10-Q, and the “Risk Factors” sections on this Form 10-Q and the 2023 Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

Overview

We are a purpose-driven payments company on a mission to financially empower the next generation. Launched in 2017, we built a digital payments platform that allows merchants to offer their consumers a flexible alternative to traditional credit. As of September 30, 2024, our platform has supported the business growth of 23 thousand Active Merchants while serving 2.7 million Active Consumers. Through our products we aim to enable consumers to take control of their spending, be more responsible, and gain access to financial freedom. Our vision is to create a digital ecosystem benefiting all of our stakeholders—including consumers, merchants, employees, communities, and investors—while continuing to drive ethical growth.

The Sezzle Platform offers a payments solution for consumers that instantly extends credit at the point-of-sale, allowing consumers to purchase and receive the ordered merchandise at the time of sale while paying in installments over time. The Sezzle Platform flagship product, “pay-in-four,” allows consumers to pay a fourth of the purchase price up front, and then another fourth of the purchase price every two weeks thereafter over a total of six weeks. We also offer alternative payment options on the Sezzle Platform, including “pay-in-two” and “pay-in-full,” to certain consumers. We realize high repeat usage rates by many of our consumers, with the top 10% of our consumers measured by Underlying Merchant Sales (“UMS,” as defined below) transacting an average of 77 times per year based on the transaction activity during the rolling twelve months ended September 30, 2024, although historical transaction activity is not an indication of future results.

Our product is generally free to consumers who pay on time and use a bank account to make their installment payments, excluding their first payment, unless they choose to pay for one of our two subscription products or enter into an interest-bearing loan with our third-party partners. We make most of our revenue by charging our merchants fees in the form of a merchant processing fee and through our two paid versions of the core Sezzle experience: Sezzle Premium and Sezzle Anywhere. Sezzle Premium is a paid subscription service for consumers to access large, non-integrated premium merchants, along with other benefits, for a recurring fee. Sezzle Anywhere is a paid subscription service that allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee. Additionally, through collaboration with third-party partners we enable our consumers at participating merchants access to interest-bearing monthly fixed-rate installment-loan products for larger-ticket items (up to $15,000), which extend up to 60 months.

We primarily operate in the United States and Canada, and are currently winding down and exiting operations in India and certain countries in Europe.

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Factors Affecting Results of Operations

We have set out below a discussion of the key factors that have affected our financial performance and that are expected to impact our performance going forward.

Sustainable Business Model

Our ability to profitably scale our business long-term is reliant on creating a transparent and sustainable ecosystem of products and services that add value for all of our stakeholders, including our consumers and merchants. Our product is generally free for consumers who pay on time and use a bank account to make their installment payments, excluding their first payment, unless they choose to pay for one of our two optional subscription products or enter into an interest-bearing loan with our long-term lending partners. Subscription revenue comprised approximately 33% and 16% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively.

We earn fees from our merchants predominately based on a percentage of the UMS value plus a fixed fee per transaction, collectively called a “merchant processing fee.” We generally pay our merchants the full transaction value upfront, net of the merchant fees owed to us, and assume all costs associated with the consumer payment processing, fraud, and payment default. Merchant and partner-related income comprised approximately 39% and 65% of our total revenue for the nine months ended September 30, 2024 and 2023, respectively. Our merchants have access to a toolkit we provide that can assist in the growth of their businesses. This toolkit includes marketing placements, co-branded marketing, exclusive promotions for consumers using Sezzle, and Sezzle Capital which facilitates access to small business loans issued by third-party lenders.

Acquisition and Retention of Consumers and Merchants

Our ability to profitably scale our business is reliant on the acquisition and retention of both consumers and merchants on the Sezzle Platform. Changes in our merchant and consumer bases have had, and will continue to have, an impact on our results of operations. It is costly for us to acquire (and in some cases retain) merchants and consumers. As such, high turnover in our merchant and consumer bases could result in higher than anticipated overhead costs.

We rely heavily on our merchant base to offer our product to new consumers at the point of sale. As of September 30, 2024, we had approximately 23 thousand Active Merchants (defined as directly integrated merchants who have had at least one order on the Sezzle Platform in the last twelve months) on our platform. Our integration into scaled e-commerce platforms is expected to give more merchants the opportunity to offer Sezzle as a payment option at checkout, and we expect that our partnerships with larger retailers will familiarize more consumers with the Sezzle Platform. Onboarding and retaining merchants, as well as growing merchant utilization of the Sezzle Platform, requires investment in sales, co-marketing, and competitively priced merchant fee rates and incentives. In order to stay competitive, we have and may continue to adjust our pricing or offer incentives to larger merchants in order to increase UMS. These pricing structures with merchants may include up-front cash payments, fee discounts, rebates, credits, performance-based incentives, marketing, and other support payments that impact our revenues and profitability, and therefore, could incur substantial costs to acquire and retain these larger merchants. Certain agreements contain provisions that may require us to make payments to certain merchants and are contingent on us and/or the merchants meeting specified criteria, such as achieving implementation benchmarks.

There is a risk that we may lose merchants for a variety of reasons, including a failure to meet key contractual or commercial requirements, or merchants shifting to other service providers, including competitors or in-house offerings. We also face the risk that our key partners could become competitors of our business if such partners are able to determine how we have designed and implemented our model to provide our services. We continue to prioritize our focus on merchant profitability, which has resulted in a decline in our directly-integrated merchant base.

The success of our business is also dependent on a consumer base that actively uses our products. As of September 30, 2024, we had approximately 2.7 million Active Consumers on the platform. We aim to provide offerings to our consumers that keep them engaged within our ecosystem, such as Sezzle Up, our tap-to-pay Sezzle Virtual Card, and our paid subscription services Sezzle Premium and Sezzle Anywhere. There is a risk that we may lose consumers for a variety of reasons, including consumers shifting to competitors or other payment options, changes in the general macroeconomic climate, or changes in our underwriting.

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Product Innovation

Our expanding product suite enables us to further promote our mission of financially empowering the next generation, and the adoption of these products by our consumers is expected to drive operating and financial performance. In 2023, we launched Sezzle Anywhere, a paid subscription service that allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee. In 2023, we also began offering a “pay-in-two” option to certain consumers who are not qualified for our “pay-in-four” product. In “pay-in-two,” a consumer pays half of the value of their order up-front and the second half in two weeks. In 2024, we launched Payment Streaks, a new feature designed to reward consumers for consistent and timely payments. Our free Payment Streaks program enables consumers to ascend through loyalty tiers by consistently making on-time payments, with each tier providing additional benefits to consumers. We continue to seek out new partners to adopt our existing products and strategize on new products to complement our platform and core products, which we believe will have an impact on the continued growth of our business.

Credit Risk Management

A critical component of our business model is the ability to effectively manage the repayment risk inherent in allowing consumers to pay over time, as we absorb the costs of all credit losses on the credit we extend to our consumers. The provision for credit losses is a significant component of our operating expenses, and excessive exposure to consumer repayment failure may impact our results of operations. To that end, a team of Sezzle engineers and risk specialists oversee our proprietary systems, identify transactions with an elevated risk of fraud, assess the credit risk of the consumer, assign spending limits, and manage the ultimate receipt of funds. Because consumers typically settle 25% of the purchase value upfront at the point of sale, we believe repayment risk is more limited relative to other traditional forms of unsecured consumer credit.

We believe our systems and processes are highly effective and allow for predominantly accurate, real-time decisions in connection with the consumer transaction approval process. As our consumer base grows, the availability of data on consumer repayment behavior will better optimize our systems and ability to make real-time consumer repayment capability decisions over time. Optimizing repayment capacity decisions of our current and future consumer base may reduce our provision for credit losses and related charge-offs by providing optimal limitations on spending power to qualified consumers. We also utilize third-party collection agencies in addition to our internal collections process, which further helps us lower our loss rates and manage credit risk.

Maintaining our Capital-Efficient Strategy

Maintaining our funding strategy and efficient use of capital is important for the ability to grow our business. We have designed a funding strategy that we believe allows us to scale our business and drive rapid growth. Due to the short-term nature of our products, we are able to recycle capital quickly and create a multiplier effect on our committed capital. We primarily rely on revolving credit facilities to fund our receivables over time, and do not currently require additional equity contributions to directly fund product growth.

General Economic Conditions and Regulatory Climate

Our business depends on consumers transacting with merchants, which is affected by changes in general economic conditions. For example, the retail sector is affected by macroeconomic conditions such as unemployment, interest rates, consumer confidence, economic recessions, public health crises, or extended periods of uncertainty or volatility—all of which may influence consumer spending, and suppliers’ and retailers’ focus and investment in outsourcing solutions. This may subsequently impact our ability to generate income. Additionally, in weaker economic environments, consumers may have less disposable income to spend, and may be less likely to purchase products by utilizing our services. This could also cause our credit losses to increase due to consumers’ failure to repay the loans originated on the Sezzle Platform. Our industry is further impacted by numerous consumer finance and protection regulations, both domestic and international, and the prospects of new regulations, including the cost to comply with such regulations, have an ongoing impact on our results of operations and financial performance.

Seasonality

We experience seasonality as a result of the spending patterns of our consumers. Total revenue and UMS in the fourth quarter have historically been strongest for us, in line with consumer spending habits during the holiday shopping season, which has typically been accompanied by increased charge-offs when compared to the prior three quarters.

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Key Operating Metrics

Underlying Merchant Sales

	For the three months ended September 30,				Change				For the nine months ended September 30,				Change
	2024		2023		$		%		2024		2023		$		%
	(in thousands, except percentages)
Underlying Merchant Sales ("UMS")	$	659,889	$	469,500	$	190,389	40.6	%	$	1,684,797	$	1,222,392	$	462,405	37.8	%

UMS is defined as the total value of sales made by merchants based on the purchase price of each confirmed sale where a consumer has selected the Sezzle Platform as the applicable payment option. UMS does not represent revenue earned by us, is not a component of our income, nor is included within our financial results prepared in accordance with U.S. GAAP. However, we believe that UMS is a useful operating metric to both us and our investors in assessing the volume of transactions that take place on the Sezzle Platform, including our Sezzle Premium and Sezzle Anywhere products, which is an indicator of the strength of the Sezzle Platform.

For the three months ended September 30, 2024 and 2023, UMS totaled $659.9 million and $469.5 million, respectively, which was an increase of 40.6%. For the nine months ended September 30, 2024 and 2023, UMS totaled $1,684.8 million and $1,222.4 million, respectively, which was a increase of 37.8%. The increases in both periods were primarily from the expansion of our Sezzle Anywhere subscription product, which launched in June 2023, as well as changes to consumer underwriting to further promote profitable top-line growth.

Active Consumers and Active Subscribers

	As of		Change
	September 30, 2024	December 31, 2023	#	%
	(in thousands, except percentages)
Active Consumers	2,667	2,601	66	2.6	%
Active Subscribers	529	307	222	72.0	%

Active Consumers is defined as unique consumers who have placed an order with us within the last twelve months. As of September 30, 2024 we had 2.7 million Active Consumers, an increase of 2.6% when compared to our 2.6 million Active Consumers as of December 31, 2023. The increase in Active Consumers was driven by our marketing efforts and changes to our underwriting.

Active Subscribers is defined as unique consumers who have an active subscription for either Sezzle Premium or Sezzle Anywhere. As of September 30, 2024, we had 0.5 million Active Subscribers, an increase of 72.0% when compared to our 0.3 million Active Subscribers as of December 31, 2023. The increase in Active Subscribers was driven by the continued marketing and adoption of our subscription products.

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Components of Results of Operations

Total Revenue

Our total revenue is classified into three categories: transaction income, subscription revenue, 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 includes merchant processing fees, partner income, and consumer fees.

We earn income from fees paid by merchants in exchange for our payment processing services. These merchant processing fees are applied to the underlying sales of consumers passing through our platform and are predominantly based on a percentage of the consumer order value plus a fixed fee per transaction. For orders that result in a financing receivable, merchant processing fees are recognized over the underlying order’s duration using the effective interest method. For orders that do not result in a financing receivable, merchant processing fees are recognized at the time the sale is completed.

We also earn income from partners on consumer transactions. This income includes interchange fees through our virtual card solution and promotional incentives with third parties. Virtual card interchange income is recognized over the underlying order’s duration using the effective interest method and promotional incentives are recognized as they are earned during the promotional period.

Transaction income also includes income from consumers when they choose to make an installment payment, excluding the first installment, using a card pursuant to state law. These fees are recognized at the time a payment is processed.

Subscription Revenue

We offer our consumers the ability to subscribe to two paid services: Sezzle Premium and Sezzle Anywhere. Sezzle Premium allows consumers to shop at select large, non-integrated premium merchants, along with other benefits, for a recurring fee. Sezzle Anywhere allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee. Subscription fees are recognized straight-line over the subscription period.

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 or subscription revenue. This includes late payment fees, gateway fees, and marketing revenue earned from affiliates. Late payment fees are applied to principal installments that are delinquent, subject to regulations within specific state jurisdictions. Late payment fees are recognized at the time the fee is charged to the consumer to the extent the fee is reasonably collectible.

Personnel

Personnel primarily comprises all compensation paid to employees, contractor payments, employer-paid payroll taxes and employee benefits, equity and incentive-based compensation, and other employee-related expenses.

Transaction Expense

Transaction expense primarily comprises processing fees paid to third parties to process debit, credit and ACH payments received from consumers, merchant affiliate program and partnership fees, and consumer communication costs. We incur merchant affiliate program and partnership fees when consumers make purchases with merchants who either were referred by another merchant or are associated with partner platforms with which we have a contractual agreement. We incur consumer communication costs when we notify the consumer about the transaction status and upcoming payments. Communications are primarily made via text message and email directly to the consumer.

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Third-Party Technology and Data

Third-party technology and data primarily includes cloud-based infrastructure, fraud prevention, obtaining underwriting data that resulted in failed loan applications, and consumer engagement. Underwriting costs incurred that result in successfully originated loans are an element of transaction income and recognized as a reduction of the overall income and, therefore, are not included in third-party technology and data.

Marketing, Advertising, and Tradeshows

Marketing, advertising, and tradeshows primarily comprises costs related to marketing, sponsorships, advertising, attending tradeshows, promotions, and co-marketing the Sezzle brand with our merchants.

General and Administrative

General and administrative expenses are primarily comprised of professional service fees, depreciation and amortization, insurance premiums, travel, meals, and entertainment costs. Professional service fees include legal, compliance, audit, tax, and consulting services to support the growth of our company.

Provision for Credit Losses

We maintain an allowance for credit losses at a level necessary to absorb expected credit losses on principal receivables from consumers. The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term and incorporates evaluations of known and inherent risks in our portfolio, historical credit losses, consumer payment trends, estimates of recoveries, current economic conditions, and reasonable and supportable forecasts. We regularly assess the adequacy of our allowance for credit losses and adjust the allowance as necessary to reflect changes in the credit risk of our notes receivable. Any adjustment to the allowance for credit losses is recognized through the provision for credit losses.

Net Interest Expense

We incur interest expense on a continuous basis as a result of draws on our revolving line of credit to fund consumer notes receivable as well as our Merchant Interest Program, whereby merchants may defer their payments owed by us in exchange for interest. The interest paid on borrowings under our line of credit is based on SOFR. Interest paid to merchants under the Delayed Settlement Incentive Program is based on a fixed interest rate.

Income Tax Expense (Benefit)

Income tax expense (benefit) consists of income taxes in various jurisdictions, primarily U.S. federal and state income taxes, and also the other foreign jurisdictions in which we operate. Tax effects of transactions reported in the consolidated financial statements consist of taxes currently due. Additionally, we record deferred taxes related primarily to differences between the basis of receivables, property and equipment, equity based compensation, and accrued liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Significant judgement is required in determining whether or not our net deferred tax assets are more likely than not to be realized. We assess the realizability of our deferred tax assets by taking into account all relevant positive and negative evidence at each reporting date, including our history of taxable income adjusted for permanent book-tax differences, volatility in our earnings, impacts of the timing and reversal of temporary book-tax differences, and our projected future earnings. Our valuation allowance assessment is based on our best estimate of future results considering all available, relevant evidence.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) is comprised of foreign currency translation adjustments.

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Results of Operations

Total Revenue

	For the three months ended September 30,				Change				For the nine months ended September 30,				Change
	2024		2023		$		%		2024		2023		$		%
	(in thousands, except percentages)
Transaction income	$	36,398	$	27,046	$	9,352	34.6	%	$	92,096	$	78,870	$	13,226	16.8	%
Subscription revenue	22,857		8,555		14,302		167.2	%	57,377		17,769		39,608		222.9	%
Income from other services	10,703		5,243		5,460		104.1	%	23,432		13,816		9,616		69.6	%
Total revenue	$	69,958	$	40,844	$	29,114	71.3	%	$	172,905	$	110,455	$	62,450	56.5	%

Transaction income totaled $36.4 million and $27.0 million for the three months ended September 30, 2024 and 2023, respectively. Transaction income totaled $92.1 million and $78.9 million for the nine months ended September 30, 2024 and 2023, respectively. Within transaction income, merchant processing fees totaled $14.8 million and $17.8 million for the three months ended September 30, 2024 and 2023, respectively, and $42.9 million and $57.2 million for the nine months ended September 30, 2024 and 2023, respectively. Merchant processing fees decreased due to the higher concentration of UMS volume transacted with our subscription products. Despite the decrease in merchant processing fees, transaction income grew year-over-year overall due to increases in both partner income and consumer fees.

Subscription revenue totaled $22.9 million and $8.6 million for the three months ended September 30, 2024 and 2023, respectively. Subscription revenue totaled $57.4 million and $17.8 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily driven by the overall growth in our Active Subscribers.

Income from other services totaled $10.7 million and $5.2 million for the three months ended September 30, 2024 and 2023, respectively. Income from other services totaled $23.4 million and $13.8 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was driven by higher consumer fee income and increased marketing revenue generated from merchants. Consumer late payment fees totaled $6.8 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively, and $13.5 million and $7.0 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in late payment fees was primarily driven by a higher number of orders becoming past due.

Personnel

	For the three months ended September 30,				Change				For the nine months ended September 30,				Change
	2024		2023		$		%		2024		2023		$		%
	(in thousands, except percentages)
Personnel	$	13,424	$	11,079	$	2,345	21.2	%	$	37,185	$	34,670	$	2,515	7.3	%

Personnel costs for the three months ended September 30, 2024 and 2023 totaled $13.4 million and $11.1 million, respectively. Personnel costs for the nine months ended September 30, 2024 and 2023 totaled $37.2 million and $34.7 million, respectively. Recorded within personnel, equity based compensation totaled $1.5 million and $2.0 million for the three months ended September 30, 2024 and 2023, respectively, and $3.8 million and $7.1 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in personnel costs was driven by increased headcount and accrued bonuses in the current period, offset against lower equity based compensation when compared to the prior period.

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Transaction Expense

	For the three months ended September 30,				Change				For the nine months ended September 30,				Change
	2024		2023		$		%		2024		2023		$		%
	(in thousands, except percentages)
Payment processing costs	$	11,230	$	7,972	$	3,258	40.9	%	$	30,483	$	20,880	$	9,603	46.0	%
Affiliate and partner fees	1,233		1,143		90		7.9	%	3,774		3,594		180		5.0	%
Other transaction expense	298		822		(524)		(63.7)	%	1,033		1,647		(614)		(37.3)	%
Transaction expense	$	12,761	$	9,937	$	2,824	28.4	%	$	35,290	$	26,121	$	9,169	35.1	%

Transaction expenses were $12.8 million and $9.9 million for the three months ended September 30, 2024 and 2023, respectively, and $35.3 million and $26.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Payment processing costs were $11.2 million and $8.0 million for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, payment processing costs were $30.5 million and $20.9 million, respectively. The increase was primarily driven by higher UMS during the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

Merchant affiliate program and partnership fees are incurred by us when consumers make purchases with merchants who either were referred by another merchant, or are associated with partner platforms with which we have contractual agreements. Such costs were $1.2 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively, and $3.8 million and $3.6 million for the nine months ended September 30, 2024 and 2023, respectively.

Other transaction expense was $0.3 million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $1.0 million and $1.6 million for the nine months ended September 30, 2024 and 2023, respectively. Such costs are comprised of consumer communication costs and consumer and merchant support–related costs. The decrease was a result of fewer consumer and merchant support-related costs during the three and nine months ended September 30, 2024 when compared to the three and nine months ended September 30, 2023.

Third-Party Technology and Data

	For the three months ended September 30,				Change		For the nine months ended September 30,		Change
	2024		2023		$	%	2024	2023	$	%
	(in thousands, except percentages)
Third-party technology and data	$	2,386	$	2,003