In a notable shift, Sezzle has opted to focus primarily on its subscription model after achieving its first billion-dollar quarter in the third quarter (Q3). This strategic choice marks a departure from its recent test of an On-Demand payment model, which diluted customer lifetime value. By focusing on subscriptions, Sezzle aims to enhance its financial robustness and deepen customer relationships. As marketing efforts pivoted mid-quarter to prioritize subscriptions, subscriber numbers rose to approximately 568,000 by the end of September, demonstrating the effectiveness of this decision.
Sezzle’s move contrasts with its previous endeavors, where the On-Demand model was prominently featured. The company’s leadership believes that the subscription model better aligns with their goals, particularly when seeking to maximize customer lifetime value and ensure sustainable growth. As the buy now, pay later (BNPL) sector continues to develop, Sezzle is doubling down on its strategy to differentiate itself from competitors by emphasizing the benefits of subscriptions. This approach is seen as a response to consumer preferences and a way to position the company effectively within the market.
How Is Sezzle Adapting Its Business Strategy?
Sezzle is steering its business decision-making towards long-term benefits by shifting marketing efforts to promote its subscription services over On-Demand. This adjustment led to improved subscription totals, while the company re-assesses the role of On-Demand as a tool around the peripheries of their offerings. Rather than focusing on short-term gains, Sezzle plans to guide most consumers toward its subscription service, looking to boost revenue and earnings through predictable and recurring customer engagement.
What Financial Moves Is Sezzle Making?
To support its strategic pivot, Sezzle has made significant financial maneuvers. By exercising a $75 million accordion to elevate its revolving credit facility to $225 million, the company aims to capitalize on expected holiday profits. Furthermore, it is preparing to pursue an industrial loan company charter by 2026. Alice Youakim, Executive Chairman and CEO, comments,
“On-Demand is probably just a better tool around the fringes … on the consumer side, we really just want to lean back into subscription.”
In addition, Sezzle continues to see consistent credit performance, with CFO Karen Hartje noting,
“We haven’t seen any deterioration as consumer activity continues to perform in line with our expectation.”
Third-quarter financial results reflect the company’s strategy with gross merchandise volume (GMV) rising substantially, while net income and adjusted EBITDA have also grown. As Sezzle notes its increased purchase frequency and substantial rise in revenue, it underscores the effectiveness of emphasizing subscriptions. This strategy has allowed Sezzle to maintain a stable credit performance, with Q3 credit losses trending on target for future goals.
Looking forward, Sezzle has reaffirmed its forecast for full-year top-line growth, offering revised profit projections for 2025 and introducing optimistic guidance for 2026. These forecasts are framed within the context of emphasizing subscription models over potential future product offerings. The company’s strategy appears to align with trends within the burgeoning BNPL market, focusing on sustainability and customer retention.
Sezzle’s strategic refinement points toward a long-term vision of fostering steady growth through subscription-based revenue streams. By recalibrating its focus, the company is poised to deepen consumer trust, adapt to evolving market conditions, and secure financial stability. As the BNPL industry continues to evolve, Sezzle’s approach demonstrates a focus on responsible lending and sustainable profitability.
