Minneapolis, Minnesota, United States
Region: US 🇺🇸
Expected Valuation: $101 million
IPO Date: 2023 (Expected)
Key Company Facts
|Headquarters||Minneapolis, Minnesota, United States|
|Industry||Fintech/Online Payment Solutions|
|Founders||Charlie Youakim, Paul Paradis, Killian Brackey, and Veronica Katz|
|Number of employees||600 (2022)|
|IPO Date||2023 (Expected)|
|Number of investors||5|
|Total funding||$401.6 billion USD|
|Valuation estimate||$101 million USD|
Company Overview & History
Sezzle is a publicly traded financial technology company founded in 2016 by Charlie Youakim (currently CEO), Paul Paradis (President), and Killian Brackey (CTO) in Minneapolis, U.S.
The company provides an alternative payment platform offering interest-free installment plans at selected online stores. As of June 2021, the Sezzle platform had over 10 million user sign-ups and over 48,000 participating merchants.
The company initially focused on next-business-day ACH payments and a cashback reward system but pivoted to a “buy now, pay later” model in 2017. Sezzle first launched its product in the United States in August 2017 and later expanded to Canada in 2019, with its Canadian headquarters established in Toronto, Ontario.
In 2020, Sezzle became a Public Benefit Corporation, the first “buy now, pay later” corporation with such a status. The same year, the company began testing its service offering in India, marking its first major expansion outside of the US and Canadian marketplaces.
In 2021, Sezzle started operating in the Brazilian market and also partnered with the major US retailer, Target Corporation.
As per the latest available data, for Q1 2023, Sezzle reported a revenue of US$34.7m, up 26% from Q1 2022. The company’s net income was US$1.72m, a significant improvement from a net loss of US$28.0m in Q1 2022.
The profit margin was 5.0%, and the EPS was US$11.96, up from a loss of US$5.20 per share in Q1 2022. The revenue growth forecast for the next three years is approximately 5.6% per annum, slightly below the industry average of 6.8%.
Sezzle’s business model revolves around its “buy now, pay later” platform, which allows customers to purchase items and pay for them in interest-free installments. This model provides consumers with increased purchasing power and flexibility, while simultaneously offering merchants an opportunity to increase their sales and customer base.
Sezzle, like any business, faces various risk factors that can affect its operations. As of the first quarter of 2023, Sezzle disclosed 52 risk factors in its earnings report.
The company reported the most risks in the “Finance & Corporate” category, accounting for 31% of the total disclosed risks.
These risks encompass financial and accounting risks, as well as those related to the execution of corporate activity and strategy. Other risk categories include Ability to Sell (19%), Legal & Regulatory (17%), Production (13%), Tech & Innovation (12%), and Macro & Political (8%).
The market opportunity for Sezzle is seen in the rapidly growing popularity of the Buy Now Pay Later (BNPL) sector. A study commissioned by Sezzle showed that BNPL use increased during the COVID-19 pandemic, with 15% of online shoppers and 21% of millennials increasing their use of BNPL.
The study also found that 91% of those who increased their usage during the pandemic predict they will continue to use it in the future. Furthermore, nearly one in three existing BNPL users have increased their usage in response to the pandemic.
The survey also highlighted that 82% of users say BNPL helps make the unaffordable, affordable and 73% spend more with BNPL. Over half of BNPL users want to improve their credit scores, and nearly 40% are interested in financial education and tips on money management.
Interestingly, BNPL provides an alternative to credit cards, with 46% of users surveyed having been denied credit in the past, and 25% having maxed out credit cards. These findings indicate a robust market opportunity for Sezzle, given the growing popularity and demand for BNPL services.