I'll analyze Sezzle's financials for you. Let me gather their financial statements and key metrics.## SEZZLE (SEZL) - Financial Analysis
KEY HIGHLIGHTS - DRAMATIC TURNAROUND
Sezzle executed an exceptional transformation in 2024, turning from a struggling BNPL player into a highly profitable fintech with strong fundamentals:
Revenue Growth: +70.1% YoY ($271.1M vs $159.4M in 2023)
Net Income: +1,006% YoY ($78.5M vs $7.1M in 2023)
Net Margin Expansion: 28.9% (2024) vs 4.5% (2023) - 640 bps improvement
FCF Generation: $39.4M in 2024 vs minimal in 2023
Market Cap: $1.53B (up from ~$400M in Q1 2024)
1. PROFITABILITY ANALYSIS - STELLAR IMPROVEMENT
Income Statement Breakdown (FY 2024)
Metric | 2024 | 2023 | YoY Change |
|---|---|---|---|
Revenue | $271.1M | $159.4M | +70.1% |
Gross Profit | $168.0M | $73.8M | +127.6% |
Gross Margin | 62.0% | 46.3% | +1,570 bps |
Operating Income | $82.3M | $22.2M | +270.7% |
Operating Margin | 30.3% | 13.9% | +1,640 bps |
Net Income | $78.5M | $7.1M | +1,006% |
Net Margin | 28.9% | 4.5% | +2,440 bps |
EPS (Diluted) | $2.19 | $0.21 | +943% |
Quarterly Trend - Accelerating Growth
Q4 2024 was their BEST quarter ever:
Revenue: $98.2M (Q4 '23: $48.9M) = +100.9% YoY
Net Income: $25.4M (Q4 '23: $2.9M) = +763% YoY
Net Margin: 25.8% vs 6.0% prior year
Strong seasonality driving Q4 outperformance
Sequential Quarterly Revenue:
Q1: $47.0M
Q2: $56.0M (+19%)
Q3: $70.0M (+25%)
Q4: $98.2M (+40%)
Clear acceleration pattern with Q4 holiday surge.
2. REVENUE MIX TRANSFORMATION
Revenue Composition Shift (2024 vs 2023)
Source | 2024 | 2023 | Strategic Shift |
|---|---|---|---|
Merchant/Partner Fees | 37% | 62% | Decreasing reliance |
Subscription Revenue | 30% | 19% | Growing fast |
Consumer Fees | Balance | Balance | Ethical approach maintained |
Key Insight: Subscription revenue (Sezzle Premium + Sezzle Anywhere) is rapidly growing - from 19% to 30% of total revenue. This is higher-margin, recurring revenue with better unit economics.
3. BALANCE SHEET - STRONG POSITION
Assets (Dec 31, 2024)
Asset Category | Value | Notes |
|---|---|---|
Cash | $73.2M | Strong liquidity |
Receivables | $168.2M | Core lending portfolio |
Total Current Assets | $257.6M | |
Long-term Investments | $20.3M | New position in Q4 |
Total Assets | $298.4M |
Liabilities & Equity
Category | Value | Notes |
|---|---|---|
Account Payables | $69.0M | Merchant settlements |
Total Current Liabilities | $105.7M | |
Long-term Debt | $104.0M | Revolving credit facility |
Total Liabilities | $210.5M | |
Stockholders' Equity | $87.8M | Turned positive! |
Retained Earnings | -$89.8M | Still negative but improving |
Key Metrics:
Current Ratio: 2.43x (excellent liquidity)
Debt-to-Equity: 1.19x (manageable)
Net Debt: $31.7M (only $32M after $73M cash)
Working Capital: $152M (strong)
Critical Note: Retained earnings went from -$149.9M (Q1 '24) to -$89.8M (Q4 '24) - improving by $60M in one yeardue to strong profitability.
4. CASH FLOW ANALYSIS - STRONG GENERATION
FY 2024 Cash Flow
Category | Amount | Notes |
|---|---|---|
Operating Cash Flow | $40.9M | Strong conversion |
Capex | -$1.5M | Minimal capital needs |
Free Cash Flow | $39.4M | Excellent |
FCF Margin | 14.5% | High quality earnings |
Quarterly Operating CF Trend:
Q1: $38.6M (exceptional)
Q2: -$4.4M (seasonal dip)
Q3: $5.7M (recovery)
Q4: $1.0M (working capital build for growth)
Working Capital Impact:
Receivables grew $102M (funding more consumer purchases)
This consumed cash but represents profitable growth
Capital Deployment:
Stock Buybacks: $23.6M (returning value)
Debt Increase: $10M net (funding growth)
Interest Paid: $14.1M (cost of funding receivables)
5. OPERATING METRICS & EFFICIENCY
Key Ratios (FY 2024)
Metric | Value | Interpretation |
|---|---|---|
ROE | 89% | Exceptional return on equity |
ROA | 26% | Strong asset utilization |
ROIC | 49% | High returns on invested capital |
Asset Turnover | 0.9x | Efficient use of assets |
Interest Coverage | 5.97x | Healthy debt coverage |
Credit Quality Indicators:
Cost of Revenue as % of Revenue:
2024: 38.0%
2023: 53.7%
Improvement: 1,570 bps - indicates better credit underwriting and lower charge-offs
This suggests their proprietary "Prophet Score" underwriting is working - they're approving better quality borrowers.
6. VALUATION ANALYSIS
Current Valuation (at $65.15/share)
Metric | Value | Assessment |
|---|---|---|
Market Cap | $1.53B | |
Enterprise Value | $1.56B | |
P/E Ratio | 19.5x | Reasonable for growth |
P/S Ratio | 5.6x | Moderate |
EV/EBITDA | 19.0x | Fair |
P/FCF | 38.8x | Premium |
Price-to-Book | 17.4x | High but improving |
Forward Valuation Considerations:
If they maintain 28% net margins and grow revenue:
2025E Revenue (40% growth): $380M
2025E Net Income (28% margin): $106M
2025E EPS (36M shares): $2.95
Forward P/E at current price: ~22x
Comparison to Peers:
Affirm (AFRM): Unprofitable, growing
Block/Afterpay: Profitable, P/E ~40x
Klarna: Private, preparing IPO
Sezzle appears reasonably valued given profitability + growth
7. BUSINESS MODEL STRENGTH
Revenue Model Economics:
Why margins expanded:
Subscription Revenue Mix: 30% of revenue now vs 19% in 2023
Better Underwriting:
Scale Benefits:
Funding Model:
$150M revolving credit facility funds receivables
Short-term products (6-week payback) = capital efficient
Receivables turn over ~8x per year
Interest expense: $13.8M on $105M debt = ~13% cost
But earning ~30% margins = strong spread
8. KEY RISKS & CONCERNS
🔴 Major Risks:
High Debt Load:
Regulatory Risk:
Concentrated Platform Risk:
Credit Risk:
Competition:
Geographic Concentration:
Valuation:
🟡 Medium Concerns:
Negative Retained Earnings: Still -$90M (though improving)
Working Capital Swings: Can be volatile quarter-to-quarter
Seasonality: Q4 heavy (37% of FY revenue)
Consumer Fee Dependence: While ethical, late fees still needed
9. STRENGTHS & COMPETITIVE ADVANTAGES
✅ Key Strengths:
Profitability in BNPL:
Proprietary Underwriting:
Subscription Revenue:
Balance Sheet Repair:
Capital Efficiency:
Mission-Driven:
Product Innovation:
10. INVESTMENT THESIS
🟢 BULLISH CASE:
Sezzle is a rare profitable growth story in BNPL:
Proven Business Model: 28% net margins prove this works at scale
Growth Accelerating: 70% revenue growth with improving margins
Capital Light: High FCF generation, minimal capex needs
Subscription Shift: Higher quality recurring revenue growing fast
Market Opportunity: BNPL still early innings, huge TAM
Valuation Reasonable: 19.5x P/E for 70% growth is fair
Balance Sheet Healing: Path to positive retained earnings clear
Fair Value Estimate: $80-100/share (23-29% upside)
Based on 25-30x forward earnings
Assuming 30-40% revenue growth continues
Maintained profitability
🔴 BEARISH CASE:
Regulatory Crackdown: CFPB could impose restrictions
Economic Recession: Would spike charge-offs, hurt margins
Competition Intensifies: Fee compression from larger players
Valuation Risk: Already priced in strong execution
Platform Risk: Loss of key e-commerce partner
Debt Refinancing: Credit facility needs renewal
Bear Case: $30-40/share (53% downside risk)
If margins compress to 15%
Or revenue growth stalls
Or regulatory changes
FINANCIAL SUMMARY SCORECARD
Category | Grade | Comment |
|---|---|---|
Revenue Growth | A+ | 70% YoY, accelerating |
Profitability | A+ | 28.9% net margin, best-in-class |
Cash Flow | A | $39.4M FCF, strong conversion |
Balance Sheet | B+ | Improving fast, some leverage |
Capital Efficiency | A+ | 89% ROE, 49% ROIC |
Valuation | B | Fair at 19.5x P/E for growth |
Competitive Position | A- | Differentiated, profitable model |
Risk Management | B | Some credit/regulatory risks |
Overall | A- | Strong fundamentals, monitored risks |
BOTTOM LINE
Sezzle executed a remarkable turnaround in 2024:
From marginally profitable ($7M) to highly profitable ($79M)
From negative FCF to $39M FCF generation
From weak margins (4.5%) to industry-leading (28.9%)
From struggling startup to potential category winner
The stock has re-rated accordingly (up 4-5x from 2023 lows), but fundamentals support the valuation at current levels given the growth + profitability combination.
Key to watch: Can they maintain 25%+ margins while scaling to $500M+ revenue? If yes, there's significant upside. If margins compress back to 15-20%, the stock would likely correct.
This is a high-quality financial profile with manageable risks for a growth fintech. The profitability moat they've built is impressive.
