Sezzle Inc.

Good day and welcome to SESL's second quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Charlie Youakim, CEO and Executive Chairman. Please go ahead.

Thank you and good afternoon everyone and welcome to Sezzle's second quarter 2026 earnings call. I'm Charlie Youakim, CEO and Executive Chairman of Sezzle. I'm joined today by our CFO Lee Brading, my co-founder and company president Paul Paradis, and head of IR and corporate development Jack Sagan. In conjunction with this conference call, we filed our earnings announcement with the SEC and have posted it along with our earnings presentation on our investor website at sezzle.com. To retrieve the documents, please go to the investor relations section of our website. Please be advised of the cautionary note on forward-looking statements and the reconciliation of gap to non-gap measures included in the presentation, which also covers our statements on today's call. Okay, with the board that played completed, let's get started. We know you can now see that 2026 is off to a great start. I was remarking to our leadership team earlier this past quarter that our volume growth curves look a lot like they did back in 2020 and 2021, which was an amazing growth period for the company. My tip off to that was our May GMV surpassing our December holiday GMV. In recent years, it had taken until August for the same sort of event to occur. And as many of you know, volume isn't our North Star. But it's a nice secondary indicator that our solutions are taking hold. In the second quarter, we made more strides towards improving those solutions and executing on their growth. We brought more consumers on the subscription platform in the quarter than we have ever done before. And we improved the subscription offering, deepening the relationship with the customer once they joined. Sezzle Cash is a new offering only available to subscribers that allows them to smooth their cash flow needs with a product that feels familiar with a pay in four or pay in five payback period. Now the customer can access funds at an extremely low cost relative to alternatives and budget for the payback. As we're supporting our customers with products like Sezzle Cash, they become more loyal to our brand because we keep nailing the offering. In layman's terms, Our products get stickier, which is a damn good thing. We're also winning outside the product ecosystem. On slide three, you'll see we continue to receive accolades by outlets that have recognized us before. CNBC named us one of the world's top fintech companies for 2026. Newsweek included us on America's best online platforms. And US News recognized us as one of the best companies to work for in 2026. We don't do this for the awards, but when the same outlets keep coming back, it tells us the product is working for our consumers and the culture is working for our team. Both of those matter. Now to the results. Second quarter GMD grew 37.9% year on year to a record $1.3 billion. And total revenue grew 51.7% to $149.7 million. Net income was $40.8 million. A 27.2% profit margin. And adjusted EBITDA was $58 million, a 38.8% margin. Total revenue, less transaction-related costs, came in at 63.5% of total revenue, right in the upper half of the 55% to 65% range that we target. Given the strength in the first half and the momentum we're seeing across the platform, we are raising full-year guidance again. We now expect total revenue growth of 35%, targeting the upper bound of our prior 30% to 35% range. We are raising adjusted net income guidance to $185 million from $180 million and adjusted net income per diluted share to $5.25 from $5.10. We will give you more detail later in the call. The engagement story behind those numbers is in the bottom right of the slide. Active subscribers reached 854,000, up an incredible 76.4% year over year. An average quarterly purchase frequency hit a record 7.2 times, compared to 6.1 times in the second quarter of last year. Subscribers are our highest lifetime value users, and frequency is the metric that tells us whether the ecosystem is actually working. Both are moving in the right direction. Turning to slide four. We added 140,000 net new subscribers in the quarter. That's the largest quarter-over-quarter and year-over-year subscriber gain we've had since we launched the subscription program. That didn't happen by accident. As you can see on the chart, marketing spend was $19.4 million in the quarter. We have said before that we would push marketing as far as we can while staying inside a six-month payback period. And the second quarter is us doing exactly that. Based on the core data we have so far, payback is still under six months. That tells us something important about the virality and the value of the subscription suite. When we put more dollars to work, consumers convert and they stick. I'd like to note that this was a deliberate step up to test out higher levels of marketing spend and not a new run rate. We tested to see how far channels could stretch until we became less comfortable with the ROI. We found that we could push levels of spend higher and still stay at the sub-six-month payback. But even with that, we feel more comfortable with better ROIs on marketing spend. I have always had a strong feeling that business is a bit art and a bit science. And while the science says, yes, you can do this, or even, yes, you should do this, perhaps, our gut is telling us that we feel more comfortable with stronger return curves at lower levels of marketing spend. You can expect a lower level of spend in Q3, all things being equal, but for us, it's never that simple. As we have just recently launched Suzzle Cash and are about to launch Suzzle Send. The mandate to the team hasn't changed. If they find places to put dollars to work that stay within our payback threshold, we're going to test them. And even with that step up in spend in this quarter, we're still raising our bottom line guidance because the consumers we added this quarter begin paying back in the third and fourth quarters. The other half of the equation is making the subscription itself worth more every quarter. On last quarter's call, we announced the Sezzle mobile plan, giving Sezzle Anywhere subscribers an unlimited 5G plan on AT&T's network starting at $29.99. At the end of the second quarter, we added another benefit, access to Sezzle cash. A new cash advance product that gives Anywhere subscribers a way to cover short-term liquidity needs through Pay In 4 or Pay In 5 with no down payment required. Add in card-linked offers, more points and rewards, and early access to beta products, and the subscription keeps getting harder to walk away from. And as an added benefit in the coming quarter, Anywhere consumers will enjoy no service fees on Fizzle Sense. However, we aren't only building value for subscribers. We're expanding what every consumer gets because retention and engagement matter across the whole base. A lot of this we're doing through partnerships, which lets us bring benefits to everyday shoppers quickly rather than building everything ourselves, as seen on slide five. That includes card-linked offers that reward virtual card spending at partner merchants, an expansion of cash back across more merchants, and daily actions like gamified surveys, trivia and giveaways that give consumers a reason to open the app even when they aren't shopping. And on the monetization side, we're converting engagement we already have into revenue without changing the user experience. The more value our consumers get from Sezzle, the more valuable they become to us. Consumer value and shareholder value move together here and that's the test we apply to every product decision. You'll also see the merchant side of this. When we launched On Demand, we said it would help us win enterprise merchants because it lets us offer more competitive pricing to merchants with thinner margins. Enterprise sales cycles are long, so this takes time, but the strategy is starting to bear fruit. Recent enterprise wins include Poshmark, Gymshark, Debenhams, and several others. Acquiring users and driving engagement matters in any consumer business. But what matters just as much to us is the pace at which we ship. As you'll see on slide six, the second quarter was another busy one for our product and engineering teams. We rolled out Sezzle Cash in June through a phased launch, reaching the full population of eligible Sezzle Anywhere subscribers by the end of the quarter. And coming in August, we plan to launch Sezzle Send, a peer-to-peer money transfer product that lets consumers send money by phone number and either pay in full or use pay in five. The recipient receives the full amount upfront and doesn't need to be a Sezzle consumer to get the money. So every send is a potential introduction to the platform. Slide seven goes deeper on both. Up to this point, almost everything we've built has been anchored to a purchase. Sezzle Cash and Sezzle Send aren't. They're about liquidity and moving money, everyday financial needs that have nothing to do with the checkout page. We are continually expanding beyond our original point of sale offering and our never-ending race to increase the value of our platform to our stakeholders.

Sezzle Cash and Sezzle Send do three things for us.