0001662991-26-000065
SEC filingSezzle's Q1 2026 revenue grew 29.2% YoY to $135.5M, driven by subscription and other income, with net income rising to $51.3M.
Sezzle delivered strong results for Q1 2026, with total revenue of $135.5 million, a 29.2% increase from $104.9 million in Q1 2025. Revenue growth was broad-based: transaction income rose 13.0% to $65.7 million, subscription revenue surged 41.7% to $33.2 million, and income from other sources jumped 57.0% to $36.6 million. The mix shift toward higher-margin subscription and other income improved overall profitability.
Net income grew 41.7% to $51.3 million from $36.2 million, with net margin expanding to 37.8% from 34.5%. Operating expenses increased but at a slower pace than revenue. Personnel expense declined 2.5% to $14.7 million, reflecting lower bonus expense. Transaction expense increased 20.9% to $18.5 million, but payment processing costs grew slower than GMV due to more efficient strategies. Marketing expense more than doubled to $11.2 million, driven by initiatives to boost consumer acquisition and retention. Provision for credit losses rose 6.8% to $13.7 million, but as a percentage of revenue improved to 10.1% from 12.2%, indicating better credit performance. Net interest expense was flat at $3.0 million. Income tax expense increased to $14.7 million, with an effective rate of 22.3% (vs. 23.1% in prior year).
Sezzle does not report operating segments but discloses three revenue categories. Transaction income, the largest at 48.5% of total revenue, grew modestly as higher merchant and partner income from virtual card GMV was partly offset by a decline in consumer fee volume (due to fewer fees charged, though fee prices rose). Subscription revenue, now 24.5% of revenue, accelerated as the active subscriber base expanded. Income from other sources, 27.0% of revenue, saw the fastest growth, driven by a sharp increase in late payment fees (to $23.1 million from $16.8 million) and higher affiliate/advertising revenue. The revenue mix is shifting toward recurring and fee-based income, enhancing predictability and margins.
Management's outlook is embedded in the MD&A's forward-looking statements. Key drivers for future growth include continued consumer acquisition and retention via marketing and new product launches (e.g., Sezzle Mobile in 2026), expansion of subscription offerings, and effective credit risk management. The company expects GMV and revenue to grow, with credit losses rising in absolute terms but potentially improving as a percentage of revenue as underwriting optimizes. Seasonality remains a factor, with Q4 typically strongest. Liquidity is robust with $120.4 million in cash and equivalents, $69.0 million of unused line of credit, and strong operating cash flow of $89.0 million. Management believes existing resources are sufficient for at least 12 months. No specific numeric guidance was provided, but the tone is confident in sustainable growth and capital efficiency.
Cash and cash equivalents totaled $120.4M as of March 31, 2026, up from $64.1M at year-end 2025, driven by strong operating cash flow of $89.0M. Restricted cash (current and non-current) was $27.0M. Total assets grew to $454.3M, primarily reflecting an increase in notes receivable net to $263.0M. The allowance for credit losses on notes receivable decreased to $19.8M from $28.5M due to better expected performance. Total liabilities rose to $257.6M, mainly from a higher line of credit balance ($144.4M net) and increased other payables. Stockholders' equity improved to $196.7M from $169.8M, driven by net income of $51.3M partially offset by share repurchases.
Sezzle has a direct obligation to purchase receivables from its originating partner. As of March 31, 2026, the total order value of loans obligated to purchase was $60.3M, with a carrying value of $46.1M, up from $27.3M and $20.1M respectively at December 31, 2025. These purchase commitments are short-term in nature, as the underlying loans are due within 56 days. No other material purchase commitments or contractual obligations were disclosed in the notes.
Share Repurchases: During Q1 2026, Sezzle repurchased $25.7M of common stock, including $22.7M in retirement and $0.9M held as treasury. A total of 394,000 shares were repurchased. No new share repurchase authorization was disclosed, and the remaining authorization was not explicitly stated.
Debt: The company utilized its secured line of credit, drawing $100M and repaying $95.8M, resulting in a net increase of $4.2M. The outstanding principal balance was $145.5M at quarter end. The effective annual interest rate was 10.40%.
Capital Expenditures: CapEx totaled $1.1M ($0.4M for property and equipment, $0.7M for internal-use software), representing 0.8% of revenue.
Dividends: No dividends were paid or declared.
The company operates as a single reportable segment deriving revenue from its payment processing platform in North America. No further segment or geographic breakdown was provided in the notes. Revenue disaggregation by category (transaction income, subscription revenue, and income from other sources) is available but does not constitute segment reporting.
Operating cash flow (CFO) of $89.0M significantly exceeded net income of $51.3M, resulting in a CFO-to-net-income ratio of 1.73, indicating strong cash generation relative to accrual earnings. Key non-cash adjustments include $13.7M provision for credit losses, $6.9M provision for other credit losses, and $1.3M equity-based compensation. Working capital changes contributed positively: other payables increased $15.1M and other liabilities rose $6.3M, partially offset by a $5.4M increase in other assets.
Capital expenditures (capex) of $1.1M (property & equipment $0.4M, intangible assets $0.7M) remained low relative to CFO, representing only 1.2% of CFO, implying ample free cash flow for capital returns (though free cash flow is not explicitly reported). The company deployed $25.7M toward share repurchases, financed through operating cash flows and line of credit draws. Financing activities included $100M in line of credit proceeds and $95.8M in repayments, indicating active debt management. Overall, cash flow quality is robust with strong operating cash generation, low capex intensity, and significant shareholder returns.