Did Sezzle just beat Afterpay at its own game?

Q1 Highlights

Sezzle (ticker: SZL) on Friday reported its first quarter results, revealing heady growth across all of its key metrics. The stock rallied hard in response and management said they were now eyeing a US listing.

Here are the key figures from the quarterly, all on a year-on-year basis:

• Underlying Merchant Sales came in at US$375.1 million, up 214%
• Sezzle income hit US$22.3 million, up 216%
• 400,000 new active consumers were onboarded in the quarter, taking total active consumers to 2.6 million, up 126%
• Active merchants now total 34 thousand

At the time of writing the Sezzle share price was up 9.29% to $9.70 per share.

Strong UMS figures and ecosystem growth aside, it was the company’s repeat usage statistics that likely captivated the attention of investors.

Overall, Sezzle said its user profile 'continue to improve', with customer repeat usage coming in at 90.7%. RBC analysts said this performance ‘should be a key driver on improving loss rates.’

Elsewhere, management added that the top ten percent of its customers, on average, now transact with Sezzle 49 times per annum. That statistic comes in well ahead of Afterpay’s own top customer transaction averages, with Afterpay (ticker: APT) recently saying that the top ten percent of its US customers transacted with the company on average 23 times per annum.

Sezzle seems to have taken a cue from Afterpay’s emphasis on putting the customer first, a practice which appears to be now paying off for the fast growing company.

Finally, the company also announced its intention to file a registration statement with the SEC to launch a US IPO. The announcement was relatively light, with no specific plans around number of shares to be offered, use of funds raised or the IPO price.

Other Viewpoints

Commenting on these results, Sezzle CEO, Charlie Youakim said:

'The strong momentum we ended 2020 with has continued in to 2021. Our 1Q results set new company highs in UMS, Active Consumers, Active Merchants, and Repeat Usage.’

Brokers also responded positively to Sezzle’s Q1 release, with analysts from RBC saying:

‘Today’s result was strong with UMS and value per customer coming in as strong beats with customer adds a slight beat as well. SZL’s income margin appears to be tracking ahead of our estimates, while processing costs are also now likely to be benefitting from ACH processing.’

RBC has an Outperform rating and $11.00 price target on Sezzle.

Analysts from Ord Minnett were equally impressed, describing the business update as ‘strong’ while adding that ‘We would expect consensus revenue upgrades on the back of this update.’

Ord has a Buy recommendation and $11.50 price target on the stock.

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