0001662991-25-000257
SEC filingStrong revenue growth of 67% driven by consumer fee standardization and product expansion, with credit losses rising to 27.5% of revenue.
For the three months ended September 30, 2025, total revenue increased 67.0% to $116.8 million compared to $70.0 million in the prior year period. The growth was broad-based across all revenue streams. Transaction income rose 63.6% to $59.5 million, driven by a $7.2 million contribution from new products and $6.8 million from higher fee counts due to increased GMV. Subscription revenue grew 6.5% to $24.3 million, reflecting a steady expansion of Active Subscribers. Income from other sources nearly tripled to $32.9 million, primarily due to the standardization of late payment fees which contributed $10.2 million of the $22.2 million increase; late payment fees alone totaled $21.0 million versus $6.8 million a year ago.
Personnel expenses increased 6.7% to $14.3 million, with equity-based compensation rising to $2.4 million. Transaction expense grew 36.6% to $17.4 million, driven by higher payment processing costs as GMV increased 58.7% to $1.05 billion. Notably, GMV growth outpaced payment processing cost growth due to more efficient strategies. Third-party technology and data costs rose 55.2% to $3.7 million, reflecting higher cloud usage. Marketing, advertising, and tradeshows expenses surged 221.9% to $8.8 million as the company invested heavily in consumer acquisition and co-marketing. General and administrative expenses doubled to $4.8 million, mainly from professional service fees related to scaling.
The provision for credit losses increased 108.9% to $32.2 million, representing 27.5% of total revenue versus 22.0% a year ago. Of the $16.8 million increase, approximately $9.0 million was attributable to higher GMV, and the remainder from changes in consumer underwriting aimed at promoting acquisition and retention. Net interest expense rose 17.9% to $3.9 million due to higher outstanding borrowings on the line of credit, though the impact was partly offset by a lower interest rate facility entered in April 2024. Income tax expense increased to $5.0 million, with an effective tax rate of 15.7% compared to 12.3% in the prior year, driven by discrete tax benefits from equity compensation.
Management discusses three revenue categories. Transaction income remains the largest component at 51% of total revenue, driven by merchant fees and consumer fees. Subscription revenue, while smaller at 21%, shows steady growth as the subscriber base expands. Income from other sources was 28% of revenue, with its rapid growth attributable to the strategic decision to standardize late payment fees following the bank partnership. This fee standardization significantly boosted late fee income and is expected to continue contributing.
Management expects that increases in GMV and revenue will likely result in higher absolute credit losses. Changes in underwriting strategy will affect credit losses as a percentage of revenue, but the direction is uncertain. The company remains focused on product innovation (e.g., Payment Streaks, Sezzle On-Demand, price comparison tools, Sezzle Balance) to drive consumer engagement. Marketing spend is elevated to support acquisition. The company believes its existing cash, credit facility, and operating cash flows are sufficient for the next twelve months.
Cash and cash equivalents stood at $104.1M as of September 30, 2025, up from $73.2M at year-end 2024. Total restricted cash was $30.5M, including $10.9M current and $19.6M non-current. The company's primary debt facility—a secured line of credit—had a net carrying value of $117.3M (gross principal $118.0M) vs. $104.0M at year-end. Net borrowings increased by $13.0M year-to-date. Shareholders' equity more than doubled to $155.3M from $87.8M, driven by net income of $90.4M offset by $34.6M in share repurchases.
Sezzle has a direct obligation to purchase receivables from its originating partner under a five-year strategic partnership. As of September 30, 2025, the total order value of loans it was committed to purchase was $51.4M (carrying value $37.8M). During the nine months ended September 30, 2025, the company purchased $2,469.7M in total order value ($1,815.1M carrying value). No other material commitments were disclosed.
Year-to-date 2025, Sezzle repurchased 0.9M shares for $34.6M, split between retired shares ($23.5M) and treasury stock ($11.1M). No new authorization was announced. The company does not pay dividends. Net debt issuance was $13.0M, with $105.8M drawn and $92.8M repaid. Capital expenditures totaled $2.1M, primarily for software development.
The company operates as a single reportable segment: a payment processing platform in North America. Total revenue for the nine months ended September 30, 2025, was $320.4M, an 85% increase year-over-year. All revenue is generated in North America; no geographic breakdown is provided beyond that.
Net Income for 9M 2025 was $90.4M, while CFO was $55.6M, yielding a cash conversion ratio of 62%. The primary reconciling items were non-cash charges: provision for credit losses ($86.4M combined) and equity compensation ($5.2M), offset by growth in notes receivable ($85.2M) and other working capital outflows. Capex was minimal at $2.1M (2.3% of CFO), indicating low capital intensity. Free cash flow (implied CFO less capex) would be $53.5M, but not explicitly stated. Share repurchases of $34.6M consumed 65% of CFO, while no dividends were paid. Financing cash flow was negative $18.0M due to net line of credit payments and share repurchases exceeding proceeds from exercises. Overall, operating cash generation is strong, but working capital needs (primarily receivables growth) dampen cash conversion. The $25.3M income tax paid suggests a higher cash tax rate than prior year ($3.5M).