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.

Drive virality, increase attraction to the platform and improve retention to the platform by bringing consumers back into Sezzle for reasons other than shopping and by offering more value to them. As we continue to increase our value to the consumer, we'll continue to earn more share in their wallet. Although Sezzle Cash just launched, The average advance size is approximately $165, and nearly 10% of eligible new subscribers are requesting an advance as their first transaction in the Sezzle Anywhere ecosystem. That tells us the product is pulling in consumers we might not have reached through our traditional offering alone. On Sezzle Send, I think most of us on this call use a money transfer product, so we all understand the virality of these platforms. Our twist is to take the burden off the transfer. A consumer can send 100% of the money to their friend up front and repay us through PAN5. And because the recipient doesn't need a Sezzle account to get the money, every send is a potential low-cost acquisition in a new acquisition channel. Our consumers drive for us. For Sezzle Anywhere subscribers, we waive the service fee on PAN5 and and for non-subscribers, the fee is de minimis, around $3 for $100 cents. Unlike Sezzle Cash, we made the same product available to non-subscribers because of the virality it can help us create. But even though the fee for non-subs is small, it's still another reason to be a subscriber and another screen in our app where we can convert the consumer into a subscriber. I'll add the caveat I'd want to hear as an investor. As with any new lending product, we're being conservative early and still fine-tuning the underwriting. So I'll spoil part of Lee's narrative and tell you now that our guidance does not assume material upside from Sezzle Cash and assumes zero contribution from Sezzle Cent. A couple items about Sezzle Cent. First, we've already got about 100K users on the wait list. Our users are excited about it. And second, it's the first product we produced where the vast majority of the build was AI driven. And a small team has taken it from concept to launch ready in a matter of weeks rather than months. A product that moves real money between real people built by AI. A couple of years ago, that would have been a research project. For us, it was one quarter's worth of work, which leads us to slide eight. AI is embedded across this platform now, and I want to give you real numbers rather than talking points. On the consumer side, our AI support chatbot is deflecting 68% of consumer imbalance. And I'd note that the bot is scoring a higher CSAT than our human agents on those answers. That frees our people up for the complex issues that generally need a person. Our AI shopping assistant within our Discover tab is driving a 3.6 times product click-through rate versus control. And it's now live for 80% of Sezzle Anywhere users with plans to expand to all consumers. Internally, we've become an organization that effectively requires AI in the workflow. It's the expectation for every employee, and the team has taken that to heart. As new models roll out, I expect all of our internal KPIs Not just a few listed on the right side of the slide to get better, and our teams to do more with the same headcount. My first boss out of school told me, speed, quality, and cost, pick two out of three. With AI, Sezzle is taking all three. That brings me to slide nine. We're building fast, shipping quickly, and putting more product in front of consumers every quarter. And that pace compounds. It shows up directly in the year-over-year engagement metrics. Mods increased 234,000 year-over-year to 982,000. Quarterly purchase frequency reached a new high of 7.2 times, up 1.1 turns. And repeat usage was 97.2% of total orders, up 80 basis points. While these numbers continue to step up every quarter, the one I'd like to point out to you is the bottom left. The average quarterly revenue per monetized user increased 16.2%. Growth is coming from a larger user base, but it's also coming from consumers who engage with us more often and generate better economics over time. Those two things working together are the whole model. It's multiplication, not addition. A bigger base and a more valuable consumer within it compound on each other, and that's what we're building for over the long run. We are still early in what Sezzle can become for the value-focused consumer, but the flywheel is getting stronger every quarter. With that, I'll turn it over to Lee to walk you through the numbers in more detail.

Thanks, Charlie. I will get started on slide 10. It's exciting to see the hard work and effort put in by our team at Sezzle pay off. Q2 revenue increased 51.7% year-over-year. Net income rose 47.7% year-over-year. and adjusted net income expanded by 58.4% year-over-year. Growth did not come at the sacrifice of margins, as we have always said that we will not grow for growth's sake. We take bottom-line profitability seriously, if not more so than top-line growth. Total revenue less transaction-related costs as a percentage of total revenue increased 240 basis points to 63.5%, which is at the upper end of our 55% to 65% target range. Revenue growth plus EBITDA margin puts us right at a score of 91 for the rule of 40, exceeding our 82 score for Q1. On slide 11, you can see the strong momentum in our business. Q2 GMV grew 15.1% sequentially, 37.9% year-over-year, and exceeded our Q4 2025 holiday season peak. Q2 revenue rose 51.7% as revenue yield expanded 110 basis points year-over-year to 11.7%. For 2026, we expect our revenue yield will be similar to 2025's yield of 11.4%. Therefore, we project our revenue yield will continue to step down sequentially for the remainder of 2026 with Q4 being the seasonal low point. Turning to our unit economics on slides 12 through 14, As a reminder, transaction-related costs is a non-GAAP measure that combines transaction expense, provision for credit losses, and net interest expense. You might also hear us refer to revenue-less transaction-related costs as net transaction margin or gross margin. For those that listened to our Q1 earnings call, you heard us belabor the point about the seasonality in our business regarding the revenue yield and provision. As a quick reminder, revenue yield tends to be the highest in Q1 and lowest in Q4. while the provision for credit losses typically reaches its lowest point in Q1 and rises throughout the year. This is evident on slide 13. You can see that transaction expense and net interest expense are relatively static as a percentage of GMV compared to the provision for credit losses. Again, Q1 tends to be a seasonal low point in the provision led by the tax refund season. The increase in the provision is not unexpected, and I want to remind everyone of two things when we consider provision and its impact on our financials. First, we target a 55% to 65% net transaction margin, which is inclusive of the provision. And second, we expect the full year provision to be in the range of 2.5% to 3% of GMV. We are good on both accounts. We finished Q2 with a net transaction margin of 63.5%, which is at the high end of our target range. And we expect the provision for credit losses will be in the 2.5% to 3% range for 2026. So yes, We can have a provision in a quarter that goes above the 3% level. Before moving on, I want to emphasize the increase in provision was expected due to seasonality and our push to bring on new users. As Charlie noted in his comments, we had a record quarter-over-quarter and year-over-year gain in the number of net new subscribers. As a result, we had more new consumers utilizing the platform, and with new users comes higher provisioning. Our hyper focus on cost does not stop at the unit economic line. It also extends to our non-transaction related operating expenses as shown on slide 15. Non-transaction related operating expenses consist of personnel, third party tech and data, marketing, and G&A. The bulk of the expense is driven by personnel and marketing. Like last quarter, we more than doubled our marketing spend year over year. As Charlie noted earlier, As long as the math works for a less than six-month payback, we will continue spending. I'm guessing the marketing spend might be more than most people modeled for, but the results speak for themselves. New highs in active consumers, subscribers, and GMV. Further, we were still able to raise our net income and EPS guidance while removing the low end of our revenue guidance despite the significant growth in marketing expenditure. A large incremental increase in spending can be a headwind initially. that will start paying dividends for us over the coming quarters. On an apples to apples basis, we do expect our core marketing spend to decrease from Q2 to Q3. However, we are in the middle of launching two important products, Sezzle Cash and Sezzle Send. We have done little to no marketing for either of these, so it will require some basic awareness expense. And we will let the payback map dictate the magnitude of the spend. We did incur minor costs related to our corporate strategic projects during the quarter. On May 11th, the U.S. District Court granted in part and denied in part the defendant's motion to dismiss our antitrust suit. Most notably, the court denied the motion to dismiss our claims of monopolization and attempted monopolization under the Sherman Act and the parallel claims under Minnesota Antitrust Law and the Minnesota Deceptive Practices Act. We are now entering the discovery phase. which is expected to go through 2027. The banking charter process continues to roll forward and we are planning to submit our application for a national bank charter this quarter. I believe we have one of the cleanest income statements when it comes to add backs and adjustments. You can see on slide 16 very little difference between net income and adjusted net income. Most of the differences are attributable to discrete tax items recognized in each quarter. Further, you can see the seasonality of our numbers with Q1 followed by Q4 as typically the best bottom line performing quarters. We are well capitalized and positioned with plenty of liquidity and very low leverage, as seen on slide 17. At quarter end, we had over $205 million in liquidity between unrestricted cash and availability under our new $300 million line of credit. Our total debt to trailing 12-month adjusted EBDA stands at only 0.5 times, and our total debt to equity is also only 0.5 times. I'm sure by now everyone has already checked out slide 18 and therefore is quite aware of our updated guidance. We are really excited about the momentum in our business and believe some of that is captured in our updated guidance. I will make a couple of comments before passing the call over to the operator for Q&A. Our guidance does not take into consideration Sezzle Send as that product is just getting to the launch pad. Additionally, the guidance has very little impact from our recent launch of Sezzle Cash. Sezzle Cash has been a measured rollout in terms of marketing and risk, so it is still too early to put much emphasis on it in our guidance. I would now like to turn the call over to the operator for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble a roster. The first question comes from Mike Grondahl with Norton Capital. Please go ahead.

Hi, this is Mike Pachuchon from Mike Grondahl. Thanks for taking the questions. Maybe just on the bank charter, can you remind us what a typical timeline might look like for that application process?

Well, the OCC has been pounding the table that from application to conditional approval or conditional decision is around 120 days, or basically, I guess mandated at 120 days. But that's not the end of the process. You also have to go through FDIC approval and Fed approval. I would say our expectations are 12 to 18 months in total. I think we're being a little bit conservative with that but we view that as if we get our national charter in the next 18 months we feel pretty good about the entire process.

Got it. Makes sense. And then on the new partnership funnel if you could just characterize that maybe versus six months ago or a year ago is there anything to call out there?

Well I would just say just in general a lot stronger with a lot of nice enterprise names on the partnership side I think on-demand has lots to do with that and also our strong lifetime values of our consumers that that math all goes in the equation on-demand goes in the equation for the merchant side it helps us model better pricing for merchants that are sensitive to cost which brings many more merchants into the fold and on our side because our subscription products are you know such strong products for us on the consumer side we do model in you know winning these merchant deals and what percentage of those consumers will go into those products and that also helps us with you know more aggressive pricing more aggressive deal making and I think you know all in all I think that's helping quite a bit I don't know Paul anything to add to that?

I would just add to that you know We started to be added alongside other BNPL providers over the last two, three years. You know, early days, a merchant would commit to one exclusively. And so as we create successful case studies that show that adding a second or third brings incremental sales, it's accelerated the enterprise sales funnel. So, you know, we expect it to continue to improve.

Thanks, guys. I'll hop back in with you. Thanks.

The next question comes from Hal Gooch with VRE Securities. Please go ahead.

Hey, guys. A couple questions on the new products. And, you know, I know you partnered with Pagaya for some larger loan offerings. You got Pay in 5. And you have the two new initiatives you just announced today. Can you tell us, you know, maybe what's embedded in your outlook for some of those products?

Lee, I'll leave it to you on that one. We've already mentioned a couple of those, Hal, so Sezzle Sen, Sezzle Cash, not a lot. But, Lee, anything to add to that?

Yeah, and I think, Hal, you were asking about Bagaya, too, and Bagaya is helpful, but it's not, I'd say, not a material impact at this point. So, yeah, nothing significant from those. I would say that materially moved the needle.

Okay. And On the marketing spending, are you suggesting that like the payoff is so good that you're going to continue this kind of maybe dollar spend or even take that up because the subscriber numbers were pretty powerful sequentially in a seasonally week quarter, generally seasonally week. I mean, it was one of your largest deadheads in a non-holiday quarter ever.

I think it depends, Hal. You know, basically the way we're viewing it is You know, I always like to look at visuals or think of visualizations. And I think we were like hitting the gas in the car just to kind of see how the car reacted if we did it and just like what the cohort pumping through would look like. And so I think from that perspective, we're letting off the gas a little bit, you know, all things being equal. But that's why we mentioned like, you know, all things aren't equal because we have Sezzle Send launching. We have Sezzle Cache. Thank you for joining us. and see how the cohorts run out. But what we're seeing from the cohorts running out is it is a sub-six month return on investment. That being said, I think we just feel a little bit more comfortable not going near the six month or not going as near the six month edge. So that's another reason for a little bit of pullback. So some of it is just seeing the engine react. Some of it is just we feel a little bit more comfortable pulling it back. But then again, the reason I caveat is because now we've got these two products launching. And with those two products launching and pushing out a little bit more, that might be the offset that leads to a little bit higher spending level. Does that make sense?

Okay. Thanks, guys. Thank you very much. Thanks, Al.

The next question comes from Ryan Tamasello with KBW. Please go ahead.

Thanks, everyone. Congrats on a good quarter. I also wanted to ask about the thought process around the marketing spend. Maybe just help us understand why pull back if the payback is so strong. I know that a few of your peers that also focus on the lower income category have also been leaning heavily into customer acquisition. I'm curious if there were any signals that were suggesting pressure on the payback and why not run rate 2Q into the second half and then just looking at the second half guidance, obviously still really solid growth, but I think maybe the hope would have been that there would have been some more meaningful flow through of the growth momentum in the second half. So just help us understand what's driving the deceleration in second half revenue growth as well. Thanks.

Well, in marketing spend, again it's just a level of comfort you know the six month is our our edge and the closer you get to your edge you know the the tighter the you know the the higher the risk reward I guess near the edge so that that's you know part of the reason for maybe a little bit of a pullback in our mind but we also want to see it pulse through again this takes six months to get the return and if you're off by 30 percent it's not six months it's you know seven something months eight or near eight months and you know that then that starts to you don't know that until you a little bit further down the the month on month on month line and so that's why I was kind of analogy of like they're pumping the gas on the car we wanted to kind of hit the gas in the car push that cycle through let's see how it looks as it cycles through and as we start to feel more comfortable comfortable confident um you know I think maybe the next time we Go about an exercise like this, we might even feather on it a little bit slower instead of just pumping on a cycle like that. And as far as the guidance or the growth, I don't know, Lee, if you have anything to touch on that.

Yeah, and just following up, too, on your comments, Lamar. I think you kind of touched on that at the end. It was more of a smoothing, right? You don't want to accelerate too hard at one time. And so it's just a more steady process with it as well, just managing that. But from the guidance standpoint... Yeah, I mean, we guided here, got rid of the low end of our revenue guidance, did bump up our bottom line guidance. So, yeah, second half, you do the basic math, right? First half, we were up 40% year over year, 48% on net income, 40% on revenue, and guiding kind of 30% up here in revenue for the top line, and then bottom line, 40%. We feel very confident in those. We've talked about, too, not having some certain things in there at this point in time in our guidance. So that'll... to be determined as we go through the remaining quarters.

It's all very helpful. And then in terms of the, Charlie, how you're thinking about the overall growth algorithm for the business over the next year or so, and also looking at this disclosure in the slide deck that I think is new, the average quarterly revenue per monetized user, looks like the mix of revenue growth in the quarter was all at two-thirds I hear what you're saying Ryan I guess from my perspective I don't really totally focus on that kind of split I guess when I'm focusing on us growing the business

It's really about launching products and, you know, executing on existing products in a way that is showing that it's providing interest and value to the consumer. So we basically look at, like, take-up rates of products, attraction rates to products. Like, for instance, Pay in Five, an absolute home run. We said it from the start. It seems like, you know, It doesn't make sense to, you know, maybe the credit card user who's not maybe a BNPL user, but we saw it early with surveys. Our customers really wanted Pay in 5. We had really high engagement rates on the product. We launched it. We saw it play through. I think with Central Cash, we saw some of the same dynamics with surveys, and we played it through. A lot of our customers are uptaking it. I don't know if, you know, people caught the comment we made during the call, but Sezzle Anywhere, the subscribers when they first join it 10% of the customers that are joining Sezzle Anywhere their first transaction is a Sezzle Cash transaction and I mean that's I think that's pretty incredible especially the fact we're not even like leading with it at the moment it shows how much interest there is in that type of a cash flow product and then Sezzle Send I think that's a product that We have a really good sense that the customer wants. I mean, the waitlist is already over 100,000 on the waitlist, which is really exciting. We've basically just launched the waitlist. So the uptake on that is really exciting. And so with Sezzle Send, we have another avenue for providing value to existing customers, but also acquiring new customers. Because as those customers use our product with P2P, they can send it to new customers or new potential customers, non-Suzzle users. to accept their funds and get introduced into our platform. So it creates a whole new channel for customer acquisition. So I think from my perspective, you know, that breakdown that you mentioned, it's not even something I look at, but what I think about is just like what are home run type products. And I think what I feel good about with our business and our company is we've had just a very high percentage of home run products. We've had only a couple products where I, you know, call them singles or strikeouts. Like it's just... It's been a very high hit rate, and I think we have a few more in the hopper with Sezzle Cash and Sezzle Send that are going to be home runs. Thanks, Charlie.

The next question comes from Kyle Peterson with Needham. Please go ahead.

Hey, good afternoon. Thanks for taking the questions. I wanted to start out with some of the moving pieces and the take rate in the guide. I think you guys said 11.4 for the year, which would be about flat. So I understand there's some seasonality there, but just trying to square at least some of the year-on-year impacts with, you know, some of these newer products, you know, like a pay-in-five, which I would think would be accretive to take rate. So just wanted to see, like, how much is conservatism versus if there's any other mix or moving pieces that we should be mindful of.

Lee, do you want to take that one?

Yeah, yeah, you're right on the pay-in-five can be accretive. But as we launch new products, like Pagaya can be not accretive to the take rate, just the nature of how that is accounted for. And then also as we launch Sezzle Cash as well. So those can lower the take rates. While we still have very similar profitability and margin standpoints, the take rates on those can be a little lower.

Okay, okay, that is helpful. And then I guess, you know, wanted to, you know, double click on the provision expectations moving forward. You know, I know there's some seasonality there. And then you guys also have, you know, some more new customers coming on board, but I guess is there any change on an apples for apples basis that you guys are seeing in either repayment rates or consumer credit health or anything like that? Just want to be able to understand on a going forward basis and kind of what you're seeing real time especially with existing customers performance.

Yeah, everything seems just Normal Kyle, I'd say. So nothing related to the customer profile or, you know, customer and the economy. But I'd say our prior guidance on that stance, 2.5 to 3 for the year, which basically explains that there's going to be a step up in the third quarter and fourth quarter. I think that, you know, everyone modeling can expect that and model for that. You know, the only caveat I'd say is like all these new products take up and we start to really start to push them externally and I'd say especially with virality around Suzzle Send if that really does pick up a lot of new users. So basically it's like trade off with new users because new users have higher loss rates. So if new users pick up more than expected or more than modeled for many out there modeling, then I would expect if you have variability in your model, if you pick up new user growth, you're going to expect to have provision be higher than you have modeled for if you move that variable around. Okay.

All right. Thank you very much.

The next question comes from Rana Kumar with Oppenheimer. Please go ahead.

Hi, thanks for taking my question. Great quarter. I just want to better understand just the puts and takes of the revenue yield. Obviously, you know, it was up 110 basis points on my calculation year over year. I just want to understand, like, is that like mix? Is that pricing? And then secondly, your 2026 guidance assumes that there is going to be a sharp deceleration in revenue growth. and 2H from second quarter. Just want to understand the drivers there. Thank you.

Yeah, one of the key things that we, yeah, yeah, sorry. One of the key things we pointed out heading into Q2 on our Q1 call was that we had an easy comp on the revenue yield in Q2, which drove that revenue growth this quarter. So if you saw that, I think it was like a 10 handle or so last year versus the 11 handle this year. And we had a number of items change as far as types of fees or the rates that we had. And we mentioned on that call that going forward, I'd say more of a normalized, meaning that we weren't having much movement in terms of how we were charging and the fees that we did and the revenue items that were driving our revenue yield. so that you'd see a more consistent, I guess you could say, from Q3, 4, and on. And that's where we talked about seeing a more normal performance and revenue yield from a seasonality, that being Q1 being the strongest and Q4 being the lowest, because you're not seeing a lot of movement in the puts and takes. And so that's why you'll see, that's why you saw the, it was down year over year in Q1, up in Q2, But now, you know, you'll see an easier, more normal comparison going forward here. But overall, for the year, we said it would be flattish for the year.

The next question comes from Huang Yuan with TD Cohen. Please, go ahead.

Thanks, and thanks for taking my questions. I want to ask on, I guess, the charts on the The on-demand number of users versus subscribers. So I think since you guys made the pivot, I think on-demand count continues to go down while subscriber count continues to go up. And while subscriber demand has been strong, should we read this as a sign that once you kind of limit people's ability to use on-demand, a large percentage of these people eventually convert to subscribers?

Well, there is a portion that are converting. That's a good insight as we diminish the push towards it. But I'd say really more of the change has been just what is presented. We used to lead with on-demand as the lead product. Come and try Sezzle at a merchant site and you can pay as you go. Now that's really not the lead. The lead is join our subscription program. and then On Demand, the place where that's still let, where we still have a lead for On Demand is in merchant checkouts. So when we have these enterprise partnerships, some of these merchants coming on board, the way to pay is with essentially a transaction with a service fee, which is On Demand. So that's really the only place, or I shouldn't say the only, because there's always edge cases here and there, but the vast majority of the new cases for people entering On Demand are at those checkouts. So I think it's more about what's being presented or led as the transition product for consumers that are moving into our mod products.

This concludes our question and answer session. I would like to turn the conference back over to Charlie Youakim for any closing remarks. Please go ahead.

Well, thank you, Operator. I'd like to leave you all with something Warren Buffett said back in 1991. It's not a crazy idea, it's a simple one. He said, someone's sitting in the shade today because someone planted a tree a long time ago. I thought that even though it's a simple concept and a simple quote, I think it nailed one vector of our thinking at Sezzle. We plan for long-term returns. Let's take a look at the tree we planted and the tree today which is giving us all shade. Back in July of 2019, we listed on the Australian Stock Exchange. I wanted to share some of our results from the second quarter of that year, right before we went public about seven years ago, just to give you an idea of how long-term growth plans play out. Our second quarter of 2019 GMV, 41.2 million versus 1.3 billion today. Basically a 30x. Our second quarter 2019 revenue, 2.6 million versus 149.7 million today, nearly 60x. Our second quarter 2019 gross margin, a negative 260,000. This quarter, 95.1 million. As you can see, the long-term approach to growth works. I'm going to calendar this one as a reminder to do this again in seven years. I hope you'll all still be investors at that time. And to that seven year timeline, many members of our team have been there for that entire seven year journey. And to them and the rest of the team, a big thank you for your incredible work on getting us from there to here. We'll talk again next quarter. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.