10-Q: Sezzle Reports Strong Q3 2025 Growth, Revenue Up 67%

Sezzle Inc. announced significant financial growth for the third quarter and first nine months of 2025, driven by increased revenue, active consumers, and Gross Merchandise Volume.

Summary

• Total revenue for Q3 2025 increased by 67.0% to $116.8 million, and by 85.3% to $320.4 million for the nine months ended September 30, 2025, compared to the same periods in 2024.
• Net income for Q3 2025 rose to $26.7 million from $15.4 million in Q3 2024, and for the nine months ended September 30, 2025, increased to $90.4 million from $53.2 million in the prior year.
• Gross Merchandise Volume (GMV) grew by 58.7% to $1,047.3 million in Q3 2025 and by 65.2% to $2,783.0 million for the nine months ended September 30, 2025.
• Active Consumers increased by 9.0% to 2.971 million as of September 30, 2025, compared to 2.725 million at December 31, 2024.
• Monthly On-Demand Users and Subscribers (MODS) increased by 11.0% to 784,000 as of September 30, 2025, from 707,000 at December 31, 2024.
• Cash and cash equivalents increased to $104.1 million as of September 30, 2025, from $73.2 million at December 31, 2024.
• Total Stockholders' Equity significantly increased to $155.3 million as of September 30, 2025, from $87.8 million at December 31, 2024.
• The company filed a lawsuit against Shopify Inc. on June 9, 2025, alleging monopolistic and anticompetitive practices related to buy now, pay later services.

Sentiment

Score: 8

Explanation: The company demonstrated very strong financial performance with significant revenue and net income growth, coupled with expanding user metrics and GMV. While credit losses increased, this was partially attributed to higher transaction volume and strategic underwriting changes. The increased line of credit capacity further strengthens its financial position. The lawsuit against Shopify is a notable event but management does not expect a material adverse effect.

Positives

• Strong revenue growth: 67.0% increase in Q3 and 85.3% increase YTD 2025.
• Significant net income growth: Q3 net income up to $26.7 million from $15.4 million, YTD net income up to $90.4 million from $53.2 million.
• Robust GMV expansion: 58.7% increase in Q3 and 65.2% increase YTD 2025, indicating strong platform usage.
• Growth in user base: Active Consumers increased by 9.0% to 2.971 million and Monthly On-Demand Users and Subscribers (MODS) by 11.0% to 784,000.
• Improved liquidity: Cash and cash equivalents increased to $104.1 million, and working capital increased to $235.8 million.
• Increased borrowing capacity: Line of credit increased from $150.0 million to $225.0 million post-period end, providing additional funding flexibility.
• Effective processing strategies: GMV growth outpaced the increase in payment processing expenses, indicating improved efficiency.
• Product innovation: Successful launch and adoption of new products like Payment Streaks, Sezzle On-Demand, price comparison features, and Sezzle Balance.

Negatives

• Significant increase in provision for credit losses: Up 108.9% in Q3 to $32.2 million and 114.2% YTD 2025 to $65.6 million, driven by higher GMV and changes in consumer underwriting.
• Credit losses as a percentage of total revenue increased: 27.5% in Q3 2025 vs 22.0% in Q3 2024, and 20.5% YTD 2025 vs 17.7% YTD 2024.
• Increased marketing and advertising expenses: Up 221.9% in Q3 to $8.8 million and 423.1% YTD 2025 to $22.9 million, indicating higher costs for consumer acquisition.
• General and administrative expenses nearly doubled in Q3 (99.5% increase to $4.8 million) and increased significantly YTD (61.2% to $11.8 million), primarily due to professional service fees and loan originator partnership costs.
• Unused borrowing capacity on the line of credit decreased from $39.0 million to $32.0 million as of September 30, 2025, prior to the subsequent increase in total capacity.

Risks

• 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 and consumer credit.
• Ability to maintain relationships with existing merchant base, increase merchant network and Gross Merchandise Volume (GMV).
• Ability to retain and increase consumer base and GMV.
• Ability to effectively manage growth, sustain growth rate, and maintain market share.
• Ability to maintain adequate access to capital to meet business requirements.
• Loans facilitated through the Sezzle Platform involve a high degree of financial risk.
• Reliance on originating bank partner to originate a substantial majority of loans.
• Reliance on third-party data to assess creditworthiness of consumers.
• Exposure to consumer bad debts and insolvency of merchants.
• Ability to comply with applicable requirements of Visa and other payment processors.
• 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 important services.
• Impact of exchange rate fluctuations in international markets.
• Ability to protect intellectual property rights and defend against third-party allegations of misappropriation.
• Ability to retain and recruit additional employees.
• Impact of costs of complying with various laws and regulations applicable to the BNPL industry in the United States and Canada.
• Ability to comply with applicable state lending licenses and other state lending laws and regulations.
• The impact of litigation, regulatory investigations and actions, and compliance issues on the business.
• Ability to achieve public benefit purpose and election to forego B Corporation recertification.
• If capital is insufficient to satisfy liquidity requirements, the company will need to seek additional equity or debt financing.
• Increasing interest rate environment could limit ability to raise equity or incur debt, increase borrowing costs, or require additional collateral.

Future Outlook

The company anticipates continued growth, particularly in the fourth quarter, which has historically been its strongest due to holiday shopping. It expects increases in Gross Merchandise Volume (GMV) and revenue to likely result in higher absolute amounts of credit losses. The underwriting strategy is evolving, which may affect credit losses as a percentage of total revenue. The company believes its existing cash, cash equivalents, restricted cash, unused borrowing capacity on its line of credit, and certain cash flows from operations will be sufficient to meet working capital and investment requirements beyond the next twelve months.

Management Comments

• "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."
• "We stand at the intersection of digital shopping and a need for credit for consumers who prefer to use credit alternatives other than credit cards or do not have access to traditional credit products."
• "The increase in GMV was driven by increased usage of our subscription products and On-Demand; our focus on consumer acquisition, engagement, and retention through increased marketing and advertising initiatives; as well as changes to consumer underwriting."
• "We believe our systems and processes are currently effective and allow for predominantly accurate, real-time decisions in connection with the consumer transaction approval process."
• "Optimizing repayment capacity decisions of our current and future consumer base is a critical component of our operations, and the optimization of our risk management strategy may influence both our profitability and our provision for credit losses and related charge-offs."
• "We expect that increases in GMV and revenue will likely result in higher absolute amounts of credit losses. Additionally, we expect changes in our underwriting strategy to affect the amount of credit losses as a percentage of total revenue."
• "While we believe our allowance for credit losses is appropriate based on the information available, actual losses could differ from our estimate."
• "We believe that our existing cash, cash equivalents, restricted cash, our unused borrowing capacity on our line of credit, and certain cash flows from operations will be sufficient to meet our working capital and investment requirements beyond the next twelve months."

Industry Context

The company operates in the rapidly evolving Buy Now, Pay Later (BNPL) sector, positioning itself as a flexible alternative to traditional credit. Its growth in GMV, active consumers, and subscription products aligns with the broader trend of increasing consumer adoption of alternative payment solutions, especially among those seeking to manage spending or lacking access to traditional credit. The industry faces increasing regulatory scrutiny and macroeconomic pressures affecting consumer spending and credit, which the company acknowledges as key factors impacting its performance. Its product innovations like "Payment Streaks" and "Sezzle Balance" reflect efforts to enhance consumer engagement and retention in a competitive market.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• On June 9, 2025, Sezzle Inc. filed a lawsuit against Shopify Inc. in the U.S. District Court for the District of Minnesota, alleging monopolistic and anticompetitive business practices related to buy now, pay later services on Shopify's e-commerce platform.
• Sezzle is seeking an injunction to prevent Shopify's anticompetitive conduct and to restore competition and consumer choice, as well as seeking damages, which could be tripled under applicable laws.
• On September 18, 2025, Shopify filed a motion to dismiss the complaint. Sezzle's opposition to this motion is due November 17, 2025, with a hearing scheduled for December 8, 2025.
• Management believes the outcome of this matter will not have a material adverse effect on the consolidated balance sheets, operations, or cash flows.

Related Party Transactions

• The company relies on an originating bank partner to originate a substantial majority of the loans facilitated by the Sezzle Platform.
• The company has a direct obligation to purchase receivables extended to consumers by its originating partner, with total order value of loans purchased from this partner being $2,469.7 million for the nine months ended September 30, 2025.
• Receivables from originating partner totaled $1,789,000 as of September 30, 2025.
• Costs related to the partnership with the loan originator contributed to the increase in general and administrative expenses.

Stakeholder Impact

• Shareholders: Positive impact from strong revenue and net income growth, increased EPS, and a stock repurchase program. Potential dilution from equity-based compensation. Risk from increased credit losses and ongoing litigation.
• Consumers: Benefit from flexible payment alternatives, new product offerings (Payment Streaks, Sezzle On-Demand, price comparison, Sezzle Balance), and access to credit. Face risks of late payment fees and potential adverse impact from macroeconomic conditions on their ability to repay.
• Merchants: Benefit from increased GMV through the Sezzle Platform and access to a toolkit for business growth. Merchants in the Delayed Settlement Incentive Program (DSIP) receive daily incentive payments.
• Employees: Benefit from equity-based compensation. Higher headcount indicates growth in employment opportunities.
• Creditors: The company's increased line of credit capacity and improved liquidity position are positive for creditors, though increased outstanding borrowings and credit losses represent ongoing risks.

Next Steps

• Sezzle's opposition to Shopify's motion to dismiss is due by November 17, 2025.
• A hearing on Shopify's motion to dismiss is scheduled for December 8, 2025.
• The company plans to include enhanced income tax disclosures in its 2025 annual consolidated financial statements (adoption of ASU 2023-09).
• The company is currently assessing the impact of the One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements.
• The stock repurchase program is set to expire on April 7, 2026, or earlier if all transactions are completed.
• The company will include enhanced expense disaggregation disclosures in its 2027 annual consolidated financial statements (adoption of ASU 2024-03).
• The company will adopt ASU 2025-06 regarding internal-use software accounting by December 31, 2028.
• Officers and directors may adopt 10b5-1 Plans or non-Rule 10b5-1 trading arrangements in the future.

Key Dates

Recommendation

The company demonstrates exceptional growth across key financial and operational metrics, including revenue, net income, GMV, and active users. The significant increase in borrowing capacity post-period end provides ample liquidity for continued expansion. While credit losses are rising, they are largely correlated with the substantial growth in transaction volume and are being actively managed through evolving underwriting strategies. The lawsuit against Shopify, while a concern, is not expected to have a material adverse effect by management. The overall trajectory indicates strong market penetration and effective product innovation in the high-growth BNPL sector, making it an attractive investment.

Keywords

Buy Now Pay Later, BNPL, Fintech, Payments Platform, Consumer Credit, Installment Payments, E-commerce, Financial Technology, Sezzle, Quarterly Report, Financial Results, Gross Merchandise Volume, Active Consumers, Credit Risk, SEC Filing