Executive Summary

Q2 2022 showed stabilization with UMS up 1.9% YoY to $419.1M and Total Income up 6.8% YoY to $29.3M, while net loss improved YoY to $(15.1)M; sequentially, Total Income rose, but UMS declined from Q1 seasonality and underwriting tightening .
Management pivoted to profitability over growth, tightening credit underwriting and restructuring high-loss merchant contracts, which reduced provision for uncollectible accounts by 43% YoY; marketing spend rose sharply for co-marketing with enterprise partners .
Sezzle terminated the proposed Zip merger and received $11M reimbursement; liquidity remained solid with $63.3M cash and $10.1M unused LOC at quarter end, though a July 31 amendment reduced advance rate to 70% and increased Class A pricing (raising funding costs) .
Preliminary press release foreshadowed results and reiterated management’s focus on profitability and free cash flow—key near-term stock catalyst alongside cost/revenue initiatives launched during Q2 (e.g., Sezzle Premium, cost reductions) [2Sh8HfC5GQ0KjPDZwEZlpj PDF].

What Went Well and What Went Wrong

What Went Well
- Provision improvement: Provision for uncollectible accounts fell to $7.9M (30.7% of Sezzle income) vs $13.8M (58.5%) a year ago, reflecting tighter underwriting and contract restructuring .
- Monetization mix: Merchant fees rose 10.4% YoY to $25.3M and comprised 98.5% of Sezzle income (up from 96.8%), reflecting pricing actions with certain merchants .
- Clear profitability focus: “We remain dedicated to driving toward profitability and free cash flow and believe this is the best outcome for our shareholders.” — CEO Charlie Youakim (press release) .
What Went Wrong
- Top-line/volume pressure: UMS fell sequentially to $419.1M from $450.5M in Q1 amid seasonality and tighter underwriting; Active Merchants/Consumers edged lower vs Q1 (48k/3.407M vs 49k/3.460M) .
- Elevated operating costs: Marketing spend surged to $6.2M (vs $1.9M YoY) for co-marketing; G&A was $4.2M (Zip-merger related fees were a drag YTD), pressuring operating margin .
- Funding headwinds: Post-quarter LOC amendment lowered advance rate to 70% and raised Class A rate (SOFR+4.375%), tightening capacity and increasing cost of funds .

Financial Results

Metric	Q2 2021	Q1 2022	Q2 2022
UMS ($M)	$411.1	$450.5	$419.1
Total Income ($M)	$27.385	$27.634	$29.252
Sezzle Income ($M)	$23.689	$24.128	$25.717
Account Reactivation Fee Income ($M)	$3.697	$3.506	$3.536
Operating Loss ($M)	$(17.814)	$(26.124)	$(13.553)
Net Loss ($M)	$(19.059)	$(27.989)	$(15.084)
Diluted EPS ($)	$(0.10)	$(0.14)	$(0.07)
Provision for Uncollectible Accounts ($M)	$13.847	$10.466	$7.891
Net Interest Expense ($M)	$1.226	$1.615	$1.670

Operating margin % (derived): Q2’22 ≈ (−13.553 / 29.252) = −46.3% ; Q1’22 ≈ −94.5% ; Q2’21 ≈ −65.0% .
Liquidity (end of Q2): Cash & equivalents $62.076M; restricted cash $1.200M (total $63.297M); unused LOC $10.053M .

KPIs and Unit Economics

KPI	Q2 2021	Q1 2022	Q2 2022
UMS ($M)	$411.1	$450.5	$419.1
Total Income as % of UMS	6.7% (chart) [2Sh8HfC5GQ0KjPDZwEZlpj PDF]	6.1% (chart) [2Sh8HfC5GQ0KjPDZwEZlpj PDF]	7.0% (chart) [2Sh8HfC5GQ0KjPDZwEZlpj PDF]
Active Merchants (k)	—	49	48
Active Consumers (M)	—	3.460	3.407
Transaction Expense ($M)	$9.112	$11.794	$10.115
Provision / Sezzle Income	58.5%	43.4%	30.7%

Notes: “Total Income as % of UMS” from Q2 Appendix 4C presentation; “Provision/Sezzle Income” ratios from MD&A [2Sh8HfC5GQ0KjPDZwEZlpj PDF] .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal revenue/EPS guidance	FY / Q3	None disclosed	None disclosed	Maintained (no formal guidance) [2Sh8HfC5GQ0KjPDZwEZlpj PDF]
Annualized revenue+cost initiatives	Run-rate	N/A	~$40M expected annualized improvements (introduced across product monetization, cost actions)	New framework [2Sh8HfC5GQ0KjPDZwEZlpj PDF]

Management did not provide numeric revenue/EPS guidance; instead, they outlined initiatives to improve free cash flow and profitability, including Sezzle Premium and operating cost reductions [2Sh8HfC5GQ0KjPDZwEZlpj PDF] .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2021 and Q1 2022)	Current Period (Q2 2022)	Trend
Profitability vs growth	Q1: Pivot to profitability; workforce reduction; scaling back international ops	Continued underwriting tightening; improved loss rates; record Total Income less transaction-related costs in Q2 [2Sh8HfC5GQ0KjPDZwEZlpj PDF]	Improving unit economics
Product monetization	Q4’21: Strength with enterprise partners; in-store omnichannel momentum [PR 20220131]	Sezzle Premium launched; pricing actions raised merchant-fee mix [2Sh8HfC5GQ0KjPDZwEZlpj PDF]	Expanding monetization
Marketing/co-brand spend	Q1: Higher co-marketing commitments with partners	Marketing up sharply to $6.2M for enterprise co-marketing and digital ads	Elevated investments
Credit/underwriting	Q1: Implemented strategies to mitigate enterprise-related losses	Provision fell 43% YoY; 30.7% of Sezzle income vs 58.5%	Better loss performance
International footprint	Q1: Scale-back Europe, cease India processing, evaluate Brazil	Ceased India processing; exploring sale of Europe/Brazil; focus on North America	Streamlining
Funding & liquidity	Q1: LOC amended; adequate liquidity	Post-Q2 LOC amendment: lower advance rate, higher spread; $63.3M cash, $10.1M unused LOC at Q2-end	Tighter funding terms
Regulatory/macro	Ongoing BNPL scrutiny and macro consumer risk	Same risk factors reiterated	Ongoing

Sources: Q1 2022 10-Q; Q2 2022 10-Q; Q2 2022 Appendix 4C/Presentation; Q4 2021 PR [PR 20220131 link above].

Management Commentary

“We remain dedicated to driving toward profitability and free cash flow and believe this is the best outcome for our shareholders.” — Charlie Youakim, CEO (press release terminating Zip merger, providing prelim Q2 metrics) .
“We tightened our credit underwriting and restructured contracts with merchants that exhibited high consumer loss rates... we continued to see improvements in consumer loss rates.” — Q2 2022 MD&A .
Liquidity plan: “Management believes that the implementation of these plans will allow the Company to continue as a going concern through at least August 15, 2023.” — Q2 2022 10-Q .

Q&A Highlights

Themes discussed (per quarterly materials and call framing): profitability focus (underwriting, contract restructuring), marketing investments with enterprise partners, and liquidity/funding posture; management confirmed termination of Zip merger and $11M reimbursement .
LOC update and funding costs post quarter-end were highlighted via the amendment (lower advance rate; higher spread), relevant to capital intensity and margin trajectory .
Note: The full Q2 2022 call transcript is hosted externally; core operational themes are consistent with the 10-Q and Appendix 4C [2Sh8HfC5GQ0KjPDZwEZlpj PDF].

Estimates Context

Consensus (S&P Global) for Q2 2022 revenue and EPS was not available via our data connector during this session (request limit). As a result, we cannot determine beat/miss versus S&P Global Wall Street consensus for Q2 2022 at this time.
Actuals: Total Income $29.252M; Diluted EPS $(0.07) .
If you’d like, I can re-attempt to fetch S&P Global consensus to assess surprise once access resets.

Key Takeaways for Investors

Profitability pivot is gaining traction: provision ratio improved materially YoY; operating margin loss narrowed sharply sequentially; continued execution on underwriting and merchant repricing should support further unit economic gains .
Near-term top-line trade-off: tighter underwriting and seasonality drove sequential UMS decline; watch whether UMS stabilizes as monetization (Sezzle Premium, pricing) offsets volume moderation [2Sh8HfC5GQ0KjPDZwEZlpj PDF].
Marketing investment is a swing factor: co-marketing elevated OpEx in Q2; ROI from enterprise co-marketing will influence operating leverage in 2H .
Funding costs/availability tightened: post-quarter LOC amendment lowers advance rate and increases spread, potentially weighing on gross/EBIT margins; monitor cash generation and mix shift to lower-cost ACH [2Sh8HfC5GQ0KjPDZwEZlpj PDF].
Liquidity manageable post-Zip termination: $63.3M cash and $10.1M unused LOC at Q2-end, plus $11M from Zip in July; runway depends on sustained operating discipline .
Regulatory and macro remain overhangs: BNPL scrutiny and consumer credit cycle risks persist; Sezzle’s shorter-duration receivables and up-front 25% payment partly mitigate risk but not eliminate it .
Trading setup: narrative hinges on continued loss-rate improvement, operating expense discipline, and evidence that monetization can sustain Total Income growth without sacrificing credit quality.

Sources and documents reviewed: Q2 2022 8‑K/press release with prelims and Zip termination ; Q2 2022 10‑Q financials/MD&A ; Q1 2022 10‑Q for sequential comps ; Q2 2022 Appendix 4C & Presentation (ASX, July 29) [2Sh8HfC5GQ0KjPDZwEZlpj PDF]; Q2 2022 call transcript link (external) .

Sezzle Inc. (SEZL)·Q2 2022 Earnings Summary