The way forward.
2 0 2 0 A N N U A L R E P O R T
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101
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O U R M I S S I O N
Financially
empowering
the next
generation.
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C O N T E N T S
03
P E R F O R M A N C E H I G H L I G H T S
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07
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W H O W E A R E
E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
S U S T A I N A B I L I T Y R E P O R T
D I R E C T O R S ’ R E P O R T
O P E R A T I N G & F I N A N C I A L R E V I E W
K E Y R I S K S & B U S I N E S S C H A L L E N G E S
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
D I R E C T O R S ’ D E C L A R A T I O N
A D D I T I O N A L A S X I N F O R M A T I O N
C O R P O R A T E D I R E C T O R Y
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SEZZLE INC ANNUAL REPORT 2020
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02
Performance
highlights.
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AC T I V E
C O N S U M E R S
0
2
0
2
9
1
0
2
0
2
0
2
9
1
0
2
2,231,089
914,886
26,690
10,010
AC T I V E
M E R C H A N TS
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2
0
2
9
1
0
2
89.8 %
83.7 %
R E P E AT
U S AG E
03 |
+ 144%
Active Consumers increased
by 144%.
+ 167%
Active Merchants increased
by 167%.
+ 6.1pp
Repeat Usage increased 6.1
percentage points (pp) and is
calculated as the percentage of
cumulative orders made by returning
end-customers to date relative to total
cumulative orders to date. This is an
indication of increasingly positive user
experience and growing brand loyalty.
|
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U N D E R LY I N G
M E R C H A N T
S A L E S ( U M S )
( $ 0 0 0,0 0 0 s )
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s
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TOTA L
I N C O M E
( $ 0 0 0 ’ s )
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N E T
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T R A N S AC T I O N
M A R G I N
p
( N T M ) A S A
P E R C E N TA G E
O F U M S
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N E T
T R A N S A C T I O N
LO S S A S A
P E R C E N TA G E
O F U M S
P E R F O R M A N C E M E T R I C S
0
2
0
2
9
1
0
2
0
2
0
2
9
1
0
2
0
2
0
2
9
1
0
2
0
2
0
2
9
1
0
2
US$856.4
US$244.1
+ 251%
Underlying Merchant Sales
(UMS) increased by 251%.
US$58,788
US$15,801
+ 272%
Total income increased by
272% from 2019 reflecting
strong top-line growth.
1.4 %
0.2 %
1.2 %
1.5 %
+1.2pp
NTM as a percentage of
UMS increased 1.2pp in 2020
reflecting lower processing
costs, improved net loss
rates, and increased usage.
+ 0.3pp
Losses as a percentage of
UMS decreased 0.3 pp since
2019 reflecting disciplined
credit risk management
and increased usage.
SEZZLE INC ANNUAL REPORT 2020
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04
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Who we are
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Launched in 2017, Sezzle is a
purpose-driven payments platform
with about 2.4 million Active
Consumers1 and a growing base of
over 29,200 Active Merchants2 online
and in a select number of brick-and-
mortar retailers.
Sezzle’s core product allows
consumers to split purchases into
four interest-free payments over six
weeks, which increases purchasing
power and offers them a built-in way
to budget their purchases. Sezzle
has one of the highest approval
rates in the industry giving more
consumers the credit they deserve.
Approval is instant and applying
never negatively impacts consumers’
credit scores.
Sezzle’s greatest differentiator is its
mission: to financially empower the
wary of credit and worry about
their finances more than any other
generation. Sezzle’s focus on giving
this next generation of consumers
access to credit while avoiding debt-
traps is fueling dramatic growth.
Sezzle’s business model has proved
to be mutually beneficial for all.
Over 80% of Sezzle’s total income is
derived from merchant fees and for
consumers who pay on time, Sezzle’s
product offering is completely
free. In turn, merchants experience
improved conversion rates, higher
spend per transaction, and lower
return rates without any credit risk.
Tech savvy and socially-minded, this
generation of consumers expects
brands to stand for something. By
championing financial inclusion,
Sezzle is enabling all consumers to
next generation of consumers.
take control over their spending, be
An overwhelming percentage of
the US population lacks access to
financial knowledge and resources.
Young consumers are particularly
more responsible, and gain access
to financial freedom.
1 Active Consumers is defined as those using
Sezzle within the last 12 months as of 31 January
2021.
2 Active Merchants is defined as those that have
had transactions in the last 12 months as of 31
January 2021.
05 |
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The way forward.
SEZZLE INC ANNUAL REPORT 2020
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06
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Driving value
by delivering
our mission.
E X E C U T I V E C H A I R M A N
A N D C E O ’ S L E T T E R
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E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
SEZZLE INC ANNUAL REPORT 2020
SEZZLE INC ANNUAL REPORT 2020
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08
08
“We see change as an
opportunity to shape
the future.”
Dear Fellow Shareholders,
As a purpose-driven company, our mission to financially empower the
next generation of consumers took on deeper meaning in 2020. The
impact of COVID-19 on our consumers, merchants, employees, as well as
the world of e-commerce presented new challenges and opportunities.
Even in this challenging time Sezzle remained a bright spot, creating
increased value and positive outcomes across all stakeholder segments.
Amid uncertainty, e-commerce is
dominating the retail landscape and
means of payments are shifting. Now
more than ever, a flexible payment
solution is a valuable partner —
especially one that mirrors the
values of a new generation of
consumers. Providing a tool to
empower our consumers to spend
responsibly without stretching
themselves too thin is proving to be
a solution to some of the most acute
problems caused by this pandemic.
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09 |
95% of Sezzle consumers report that
Delivering on our mission has
Sezzle has helped them ease their
resulted in exceptional growth
financial anxieties. We saw countless
across all our operating metrics.
consumer reviews that thanked our
Each month in 4Q20 represented
team for helping their family through
new records for Underlying
difficult times. Having that kind of
Merchant Sales (UMS), Active
impact is incredibly satisfying.
Consumers, Active Merchants, and
Our enormous growth in merchant
Repeat Usage:
acquisition is proof that retailers
- For the first time, our December
value Sezzle’s ability to attract
UMS beat November, which included
incremental consumers with a
Black Friday and Cyber Monday.
flexible payment option that
encourages responsible spending.
- In 4Q20 we added, on average,
150,000 Active Consumers per month,
well ahead of our previous record
pace of 108,000 in 2Q20.
- By the end of 2020, over 5.0M
consumers have signed up to use
Sezzle.
None of this would have been
possible without our stellar team.
Our people remained incredibly
resilient during the year and did not
miss a beat. So much so that we were
able to grow our team and develop
new levels of expertise during such a
challenging period.
E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
Our focus on three key areas
has succeeded in laying a solid
infrastructure to support explosive
growth.
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1 . E X P A N S I O N
2 . I N N O V A T I O N
3 . E M P O W E R M E N T
SEZZLE INC ANNUAL REPORT 2020
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E X P A N S I O N
From startup to enterprise.
C A P I T A L R A I S I N G
A C C E L E R A T E S
G R O W T H
In July 2020, Sezzle completed an
equity capital raising of US$60
million to accelerate our growth
strategy and drive long-term
value. The capital raise is fueling
development of infrastructure and
expansion in a number of areas
including sales and marketing,
platform enhancements and systems
integration, international expansion,
as well as strengthening the balance
In February 2021, we signed a new
US$250 million receivables funding
facility to support the expansion of
our business in the US and Canada.
The new 28-month facility replaces
our US$100 million receivables
facility, extends the maturity of our
funding well into 2023, and lowers
our cost of funding, which will
provide a positive effect on Sezzle’s
net transaction margin over time.
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T A P P I N G I N T O A
G L O B A L M A R K E T
While it is still in the very early
stages, we are optimistic about
the opportunity to be a first-mover
As we continue to invest in the
in such a high growth market. In
United States we are pursuing a
Europe, Sezzle is in the discovery
thoughtful approach to global
stages. We are cost effectively
expansion, pinpointing opportunities
building the infrastructure for future
for our product offering. Launched
expansion.
in the Spring of 2019, our efforts
in Canada are gaining significant
D E V E L O P I N G
traction. In 2020, Sezzle’s Canadian
O M N I C H A N N E L
Active Consumer count rose over
O P P O R T U N I T I E S
800% YoY, its Active Merchants
increased more than 400%, and its
Canadian UMS jumped over 1,500%.
As technology becomes more
integrated into our daily lives,
We are proud to note that we have
Sezzle aims to improve the payment
approximately 1,500 Canadian-based
experience and drive better
Active Merchants on our platform at
relationships for our merchants
the end of 2020.
In Canada, we saw a
YoY increase of over
1,500% in UMS.
across all points of contact. In
November 2020, just in time for the
holidays, Sezzle launched multi-
channel offerings with GameStop,
the world’s largest video game
retailer, creating a seamless
experience in-store, online and in
In July 2020, we launched a pilot in
the GameStop app. 2021 will be a big
India to test for product market fit.
year for the expansion of our
in-store capabilities. We believe our
TRENDING
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E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
small and medium–size merchants
Black-owned, sustainable, and
will have the most to gain as we
location-specific offerings. Sezzle is
broadening the footprint of diverse,
boutique e-commerce merchants
across the country.
S T R E N G T H E N I N G
O U R B E N C H
In response to rapid growth, we’ve
more than doubled our workforce
in 2020 across the company and
are continuing to add throughout
the organization in areas such
as product development, sales,
and marketing. Sezzle’s enterprise
retail expansion efforts have been
effective, and we’re building out our
team to increase momentum and
execute strategic initiatives. We hired
new leaders with large enterprise
experience to strategically expand
our Sales and Marketing Teams,
including Chief Revenue Officer
Veronica Katz, VP of Enterprise Sales
Reid Bork, and VP of Marketing
Penelope Holt. A growing workforce
with this specific expertise puts
Sezzle in a strong position for the
future. We are especially proud of
increasing our women in leadership
at Sezzle. Our leadership is now 35%
women, reflecting our commitment
to a diverse and inclusive culture.
With the ability to attract and retain
top talent, Sezzle is prepared to
sustain growth.
VERONICA KATZ
Chief Revenue Officer
REID BORK
Vice President of Enterprise Sales
expand our offering into brick-and-
mortar retail. The ability to pay with
Sezzle in-store will create another
way we can support retailers who
were hit hard during COVID-19.
I N C R E A S I N G R E T A I L
P A R T N E R S H I P S
As we added to our stable of small
business merchants, this year saw
an increase in partners at the
enterprise level.
Sezzle is one of the
leading Buy Now Pay Later
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companies in North America
with over 29,200 retail
partners.
While growing our core offering
in apparel and accessories at an
astounding rate, we continue to
grow other merchant categories to
serve new trends in our consumers’
spending habits such as vitamins
and supplements, health and
wellness, and electronics. We even
created new themed verticals that
allow consumers to shop their
values with category options like
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ECO-SHOP
BLACK-OWNED
TECH
DEALS
SMALL BIZ
PENELOPE HOLT
Vice President of Marketing
CANADA
EVERY DAY SPEND
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SEZZLE INC ANNUAL REPORT 2020|
I N N O V A T I O N
Engineering the most
consumer-friendly product
on the market.
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Sezzle Up uses expanded payment
features and benefits, along with
Sezzle U’s education and support,
to aid consumers in building
their credit scores and spending
limits, while unlocking additional
purchasing power. No other Buy
Now Pay Later company offers this
solution to their consumers.
Gen Z has a deep understanding
of how technology can transform
everyday life. Sezzle Up is targeting
a new generation of aspirational
credit builders and acting as a
financial co-pilot in aiding them on
the path to financial empowerment.
B U I L D I N G C R E D I T F O R
T H E F U T U R E
The launch of our groundbreaking
product, Sezzle Up, started with one
simple question: How can we further
promote our mission of financial
empowerment?
In partnership with TransUnion,
our world-class team of developers
engineered an “upgraded” version
of the Sezzle experience that allows
consumers to build their credit
scores.
S E A M L E S S LY
I N T E G R A T I N G
I N - S T O R E
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Sezzle’s new virtual card gives
consumers the power to Sezzle their
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purchases in-store. The virtual card
is a frictionless, touch-free payment
method that can be used on both
Apple Pay and Google Pay.
Immediate, effortless integration
makes Sezzle’s virtual card ideal
for rapid installations and also
allows for risk-free testing with large
enterprise merchants. Notable
merchants such as GameStop are
using it in-store with positive results.
Adding the ability to use Sezzle
for in-store transactions was an
important strategic company
initiative that is propelling new
opportunities for significant growth.
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E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
P I O N E E R I N G N E W
P R O D U C T S T H R O U G H
Through Ally Lending we will offer
and compliments Sezzle’s existing
our consumers and merchants
short-term, interest-free offering
P A R T N E R S H I P S
To enhance our customer financing
options, in 3Q20 Sezzle entered into
an agreement to provide long-term
loans through a new partnership
with Ally Lending. Ally Lending is the
B2B2C lending arm of Ally Bank, the
banking subsidiary of Ally Financial
(NYSE: ALLY). Ally Financial is a
leading digital financial services
company with over US$180 billion in
assets as of December 31, 2020.
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Build credit
for your future
with Sezzle Up.
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monthly fixed-rate installment-
without adding any balance sheet
loan products that extend up
risk to Sezzle.
to 60 months and US$40,000 per
installment plan through a fully
digital application process.
Collaborating with like-minded
partners, those with a consumer-
obsessed focus like ours, will help
Providing access to long-term
expand our product universe and
options at lower rates than
build brand loyalty.
traditional credit cards has the
potential to extend our relationship
with consumers over a lifetime
SEZZLE INC ANNUAL REPORT 2020
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SEZZLE INC ANNUAL REPORT 2020|
E M P O W E R M E N T
Creating social impact for the
good of all stakeholders.
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S U P P O R T I N G A
These efforts have not gone
Recognizing the disparity in
C U LT U R E O F P U R P O S E
Beset by COVID-19, we quickly
recalibrated our day-to-day
operations. As a tech company, we
put telecommuting and productivity
tools at our employees’ fingertips
unnoticed. Our Employee Net
opportunity for minority students in
Promoter Score rose and remains
technology, we launched the Sezzle
near an all-time high. Additionally,
Scholars program awarding a 4-year
Sezzle was named by Forbes as
scholarship to a deserving minority
one of the nation’s Top Startup
undergraduate student who may
Employers for 2020.
not be able to afford or complete
to make the shift from working at
C O N N E C T I N G
a technical degree due to the
financial burden. Additionally, Sezzle
C O M M U N I T Y T H R O U G H
has pledged to continue offering a
full-ride scholarship for this cause
every year moving forward.
As a Public Benefit Corporation
we are committed to making a
positive, social impact in the world
by engaging in the same issues and
values that our Sezzle community
pursues.
S O C I A L G O O D
Sezzle is leading the revolution
in using business as a force for
good and the effects are being felt
throughout our local communities.
Our dollar-for-dollar charitable
match program encourages
employees to contribute and the
company directly supported a
number of causes including No
Kid Hungry, Sponsor a Family
Minnesota, Make a Wish, and the
YMCA.
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the office to operating from home
seamless. One example is the
change to our policies allowing for
unlimited sick time for any of our
employees experiencing COVID-19
symptoms.
Creating a virtual workplace has
enabled us to tap a national
talent pool and hire world-class
professionals, integrating them into
a growing high-performance team.
We have developed outstanding,
highly-skilled resources and are
deploying top talent across all
functions.
The ability to attract and retain
top talent is key to forging Sezzle’s
future. Engaging our team in our
mission and offering an opportunity
to own shares is maximizing value
for the entire organization. While
‘acting as owners’ is a common
phrase used throughout Sezzle, we
believe our employees should be
owners. In 2020, we introduced a new
short-term incentive plan for our
employees so that they may become
shareholders.
15
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E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
We are on the path to becoming a
G I V I N G C O N S U M E R S
T H E F R E E D O M T O
S P E N D R E S P O N S I B LY
Sezzle was created for those
underserved by traditional credit
channels. Our proprietary risk
management algorithm results
in one of the highest approval
rates in the industry, making
credit accessible and increasing
purchasing power for more people,
especially for those with little to
no credit history. Over 70% of our
consumers are aged 18-39 and
represent a young consumer in need
of credit and often excluded from
traditional credit options. For most
of these users, Sezzle has become a
safe-haven and improved their daily
lives.
We expanded our fee forgiveness
and payment flexibility programs
during COVID-19, such as allowing
consumers an additional free
reschedule per order. Our best-
in-class user experience, friendly
payment reminders, and customer
service support have resulted in
extraordinarily positive consumer
reviews.
payment method in their checkout.
Sezzle also has the benefit of
reducing consumer return rates
in comparison to other payment
options.
Sezzle is uniquely positioned to
collaborate with purpose-driven
merchant partners on meaningful
campaigns.
In 4Q20, Sezzle partnered with
Ministry of Supply, a company
P R O S P E R I N G W I T H
offering performance apparel
Certified B Corporation, reinforcing
our commitment to build trust and
value for all stakeholders.
Protecting the environment is one
of the most pressing issues of
our time and a key cause for our
stakeholders. We’re starting down
the environmental improvement
path by implementing a program
to reduce our carbon footprint and
become Climate Neutral certified.
Climate Neutral measures the
impacts of a company’s greenhouse
gas emissions and offsets it by
investing in renewable energy.
But, we’re not stopping at carbon
l
neutral. We are going to push
beyond that frontier to become a
carbon negative company.
In collaboration with Trees
for the Future, Sezzle has
committed to planting one
tree for every new, active user.
Finally, this COVID-19 environment
has shown us how we can operate
a high-performing company with a
remote work approach. We’ve shifted
our mindset and have embraced a
new approach for the foreseeable
future. This shift will reduce our
gasses and increase their efficiency,
as the hours will not be wasted in
rush-hour traffic.
These environmental efforts are
indicative of Sezzle’s firm focus on
the future and our commitment to
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team’s emission of greenhouse
P R I N C I P L E
The Sezzle brand has become a
magnet for merchants who wish to
win the attention, hearts, and loyalty
of young, socially-focused and values-
driven consumers. In 2020, over 90%
of our Active Merchant growth came
making the right decisions for the
from inbound channels as word is
benefit of all of our stakeholders.
spreading about the benefits of our
merchant experience. With one of the
highest consumer approval rates in the
industry, merchants are experiencing
an increase in average order value and
conversions by implementing our
designed by MIT technologists.
Together, we took out a full-page
New York Times advertisement
announcing our plan to offer 10,000
masks and Starter Clothing Kits
to support Americans hit hard
by COVID-19 as they sought fresh
starts, new job opportunities, or
simply the chance to have new
clothes. A social media, email, and
PR campaign that included coverage
by Forbes magazine amplified the
program, extending reach, consumer
engagement, and positive social
impact.
Page 15 image credit: Trees for the Future
16
SEZZLE INC ANNUAL REPORT 2020|
E L E V A T I N G O U R
S T A N D A R D S O F
S U C C E S S
In July 2020, we provided guidance
that by the end of 2020, we would
have achieved an annualized
run-rate for UMS exceeding US$1.0B
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per annum. By the end of 2020,
we significantly surpassed
our guidance and reached an
annualized run-rate of US$1.36B
based on the month of December
2020. Our excellent execution
As we look forward to 2021, we
continue to expect Sezzle’s growth
to exceed the industry’s and sales
to perform better than the wider
market. For 2021, we expect to exceed
an annualized run-rate of US$2.5B
throughout this trying year made
in UMS.
this result possible.
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On behalf of our leadership team, I would
like to thank our employees, consumers,
merchants, shareholders and our broader
community of stakeholders for an incredible
year of accomplishments and growth. 2020 has
proved that we are not only here to stay, but
that we are driving the future of payments by
delivering on our mission. We believe that 2021
will be an important year for our company,
and we are poised to deliver great results for
all of our stakeholders.
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Charlie Youakim
Executive Chairman and
Chief Executive Officer
Charlie.Youakim@sezzle.com
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E X E C U T I V E C H A I R M A N A N D C E O ’ S L E T T E R
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Sharing our
vision for
long-term
value.
S U S T A I N A B I L I T Y R E P O R T
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Creating a culture
rooted in integrity.
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O U R P E O P L E P O W E R
O U R P E R F O R M A N C E
Sezzle employees are our company’s
greatest asset. Recruiting and
retaining a team of highly skilled
professionals is imperative to daily
operations and to support our
aggressive growth strategies. Sezzle
currently has about 280 employees,
which includes approximately 45
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interns.
This year, a number of initiatives were
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created to hire and retain employees,
and ensure that they thrive.
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Sezzle is in the process of upgrading
our Human Resources Information
Systems (HRIS) to ensure state-of-
the-art management, operation,
and oversight of our workforce.
Our system upgrade will ensure
that People Operations is equipped
with the tools to operate in the
most efficient and effective manner.
People Operations is critical to our
success as our employees are the
most valuable asset that we have to
recruit and retain in order for Sezzle
build upon our ability to promote
and recruit the best-qualified
people, while embracing the value
of diversity in the workplace. We are
excited to develop the full potential
of our workforce by providing
training and development for career
enhancement, which will lead to
long-term success in employee
turnover, mobility, retention, and
internal promotions.
shift to remote working due
to the pandemic has shown us that
we can continue to perform at a
high-level and has resulted in a
flexible, remote-work approach for
the foreseeable future.
In an effort to give our employees
a voice, Sezzle conducts frequent
employee surveys. Every month,
Sezzle issues a survey to measure
overall employee happiness.
Each monthly survey also
includes an additional rotating
topic of, Autonomy/Ownership,
Management/Team Work, Benefits,
Morale/Retention, Learning/Growth,
and Recognition/Performance.
Sezzle averaged a 95% overall
happiness rating by its employees
during 2020. Our employee reviews
garnered Sezzle a Glassdoor rating
of 4.9 out of 5.
Furthermore, Sezzle recently
conducted an inclusivity and
belonging survey. Of the 97
employees who took the survey, 81%
agreed that Sezzle is committed
to Diversity and Inclusion, 17%
were neutral, and less than one
percent disagreed. 92% of those
who responded felt included in the
company.
updated Diversity and Ethics Policy.
In addition to updating Sezzle’s
People Operations’ Policies,
Sezzle has updated its Legal,
Finance and Information Technology
Policies. These foundational
changes have prompted a new
training regime for the employees
whereby each quarter employees
will receive training on a different
department’s policies. Along with the
industry standard training, Sezzle
offers a wide and diverse set of
training and informational sessions
the basics of Sezzle, the market, the
industry as a whole, and the roles
and responsibilities within each
department.
To hold ourselves to a high standard
of employee safety, Sezzle has
Workplace Safety and Workplace
Expectations Policies. However,
the recent COVID-19 pandemic has
shifted us to a primarily remote
workforce. From an employee health
to succeed. The system upgrade will
to better educate its employees on
Our new HRIS will also allow for
and wellness perspective, we do not
more accurate measurement and
count COVID-19 related sick days
accountability on our recently
against an employee’s sick leave. The
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background.
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D I F F E R E N C E S F U E L
O U R S U C C E S S
We pride ourselves on a diverse
and inclusive workplace and
recognize the financial benefits of
bringing together different insights
and perspectives to improve
performance and innovate quickly.
A Diversity Policy was published
to ensure our commitment
to maintaining a culture that
embraces inclusivity, diversity
and equal opportunity, and to
supporting all employees regardless
of gender, age, physical and mental
disability, religious, or cultural
A Diversity, Equity and Inclusion
(DEI) Committee was formed
to address three key areas:
Representation & Retention,
Inclusive Experience, and External
Impact.
To enhance hiring of
underrepresented groups and
minimize bias in the recruitment
process, Sezzle established Hiring
Manager best practices. We are
broadening our applicant pool by
partnering with the Diversity Jobs
Board, AchieveMPLS, and local
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Embedded in our brand is a belief
in inclusivity. To create an inclusive
culture where every individual feels
welcomed, respected, and support-
ed, we are instilling responsibility for
DEI throughout the organization.
The Committee’s efforts include
providing unconscious bias training
and empowering the Sezzle team
through Employee Resource Groups
(ERG).
Sezzle Pride is an ERG that
celebrates and empowers the
FEMALE LEADERSHIP
LGBTQ+ community — giving people
a chance to share experiences and
foster relationships.
The Women of Sezzle group provides
a variety of mentoring opportunities
from basic Slack channel
discussions to a monthly fireside
chat with various female leaders
outside of Sezzle.
Veronica Katz
Chief Revenue Officer
Penelope Holt
Vice President of Marketing
Candice Ciresi
Chief Legal Counsel
Mel Burckhardt
Our commitment to diversity and
Vice President of People Ops
inclusion is evident throughout
the organization. 35% of our leaders
are women and we are especially
proud of their positive impact.
Karen Hartje
Chief Financial Officer
Kathleen Pierce-Gilmore
Board Member
Sezzle is focused on acting openly,
equitably, and consistently in our
pursuit of uncompromising quality.
To meet this goal, we are committed
to recruiting, developing, rewarding
and retaining our global workforce.
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SEZZLE INC ANNUAL REPORT 2020|
Doing good for
the good of all.
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A C O M M I T M E N T T O
L I V I N G O U R M I S S I O N
In alignment with our ethos, Sezzle
became a Public Benefit Corporation
(PBC) in June of 2020. Beyond
maximizing value for investors,
our designation as a PBC will drive
company governance and ensure
our focus on creating a positive
impact for all stakeholders.
Sezzle is the first PBC in the
“buy now, pay later” payments
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space.
PBCs are a relatively new class
of corporation that are intended
to produce a public benefit and
to operate in a responsible and
sustainable manner. Under Delaware
law, PBCs are required to identify
in their certificate of incorporation
the public benefit or benefits they
will promote and their directors
have a duty to manage the affairs
of the corporation in a manner that
balances the pecuniary interests of
the stockholders, the best interests
of those materially affected by the
corporation’s conduct, and the
specific public benefit or public
benefits identified in the PBC’s
certificate of incorporation.
Sezzle’s management team and
fiduciary board strongly believe
that the company’s long-standing
commitment to financially educate
young adults, as well as creating
alternative means for consumers to
purchase items they need without
incurring high-interest finance
charges, benefit the community and
serve as a public good.
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Accordingly, Article II of Sezzle’s
Certification is the only certification
Third Amended Certificate of
that measures a company’s
Incorporation directs that in,
entire social and environmental
“pursuing any business, trade,
performance from supplier policies
or activity which may lawfully be
and employee benefits to consumer
conducted by [Sezzle], [Sezzle] shall
transparency. Our desire to become
promote a specific public benefit
a Certified B Corporation label will
of having a material positive effect
be attractive to all stakeholders and
(or reduction of negative effects) on
further aligns our business interests
consumer empowerment, education,
and the interests of our world.
and transparency in [Sezzle’s] local,
national, and global communities.”
To bolster our mission even further,
it is our goal to become a Certified
B Corporation. Independently
assessed by B Lab, B-Corp
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S U S T A I N A B I L I T Y R E P O R T
mission-driven, publicly- traded
organizations pursue. Our goal is
to not only clean up after ourselves,
but to leave the planet better than
we found it. Going beyond our
Carbon Neutral efforts, Sezzle has
committed to planting one tree
for every new, active user through
a collaboration with Trees for the
Future. It started as a partnership
with our merchant Keen - we would
plant a tree for every new user.
For 2021, we decided to take the
commitment one-step further -
planting a tree for every new, active
user. Trees for the Future works with
farmers to plant thousands of trees
that protect and bring nutrients
back to the soil. Planting trees is a
tangible contribution to the greater
good that demonstrates Sezzle’s
active participation in securing a
sustainable future.
T A K I N G A C T I O N
T O I M P R O V E T H E
E N V I R O N M E N T
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One of the most critical challenges
facing the world and future
generations is inheriting a healthier
planet. Leaving our imprint on the
world better than we found it is
a top priority for Sezzle and our
customers. Sezzle’s efforts to create
a healthier environment help ensure
long-term, sustainable value for all
stakeholders.
Sezzle has made the commitment
to reduce our carbon footprint
by implementing a carbon offset
program with Climate Neutral,
a non-profit organization that
works to decrease global carbon
emissions. Climate Neutral measures
a company’s impact and offsets
emissions by purchasing credits
in verified projects, neutralizing
any unavoidable negative impacts
a business may have on the
environment. Many organizations
are recognizing the benefits of
taking care of the planet and
carbon offsetting has emerged as
a common area that many
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O P P O R T U N I T I E S I N
O U R C O M M U N I T I E S
To increase participation of
underrepresented groups in
technology, we were excited to
participate in Black Virtual Career
Fair (BVCF). BVCF connects talented
Black professionals to companies
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committed to building a diverse and
inclusive workforce. We are delighted
to report the Virtual Fair was a
success for our hiring managers.
underrepresented students. The
program, which includes a US$124,000
donation from Sezzle, provides a
4-year scholarship to a deserving
undergraduate student who may
We also established Sezzle Scholars,
not be able to afford or complete
a new scholarship program in
school due to the financial burden.
collaboration with the University of
Sezzle will continue to fund a full,
Minnesota College of Science and
four-year scholarship for a new,
Engineering focused on supporting
underrepresented student each year.
Jonathan Olaleye, a first-year University of Minnesota Honors Program
student in the College of Science and Engineering and graduate of
Champlin Park High School, was chosen as the inaugural Sezzle Scholar.
During his high school years, Jonathan completed many Advanced
Placement and International Baccalaureate classes, was named a
National Merit Commended Scholar, and graduated with Highest Honors.
He was involved in student council service projects and the school’s Link
Crew, which helps new students acclimate to the school. He’s also a
budding entrepreneur who has designed websites, computer apps, and his
own gaming system. Olaleye plans to major in computer science or computer
engineering.
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S U S T A I N A B I L I T Y R E P O R T
Sezzle Up reports payment history
We are expanding our offerings to
to credit bureaus. By paying on
financially empower consumers
time, Sezzlers can increase their
with the introduction of Sezzle U,
credit scores and buying power.
a curated series of high-quality,
Sezzle Up acts as a co-pilot aiding
engaging lessons on personal
aspirational credit builders on the
finance. Reaching consumers with
path to financial freedom.
bite-sized digital content, Sezzle is
constantly integrating guidance and
equipping users with knowledge to
help them gain financial freedom.
As consumers build more credit
and their needs grow, Sezzle Plus
will have their backs with a long-
term payment option. Sezzle Plus
is a collaboration with ALLY and
is currently in development. It will
give our customers access to loan
amounts of up to US$40,000 with
payment options up to 60 months at
our over 26,600 retailers.
E M P O W E R I N G A
N E W G E N E R A T I O N
R E S P O N S I B LY
Sezzle is moving beyond
transactional engagement to
grow and deepen our consumer
relationships by empowering them
to spend responsibly, encouraging
them to build for the future,
and educating them in financial
wellbeing.
Our new product innovations are
leading the way. The introduction of
Sezzle Up allows consumers to
opt-in to a product that enables
users to make responsible spending
habits and build the credit they
deserve.
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Understanding our consumer’s
desire to avoid debt, being inclusive
and transparent, and not lending
them more than they can afford, has
made Sezzle a trusted partner to
over 2.2 million Active Consumers.
We are extremely proud of our 4.8
Trust Pilot score.
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SEZZLE INC ANNUAL REPORT 2020|
P A R T N E R I N G W I T H
Together we invested and assembled
R E T A I L E R S T O A M P L I F Y
Starter Kits which included
protective masks and professional
clothing. Thousands of kits were
gifted to those preparing for an
upcoming job interview, pursuing
fresh starts or simply in need of
new, quality clothing. The initiative
was promoted with a full-page ad
in the New York Times and a PR
campaign that included coverage
by Forbes magazine. By partnering
with purpose-led brands, Sezzle is
forging new paths to make a better
world.
S A V E T H E H O L I D A Y
Our Save the Holiday US$20K Giveaway brightened up
a difficult year, with an old-school, prize-packed game
designed to sweeten the season and make shopping a
whole lot more fun. Daily instant wins, discounts, and
prizes promoted through social channels engaged our
consumers and more than doubled the pace of our daily
app downloads and social network followers in November
and December. Hearing how Sezzle helped consumers buy
gifts this season was truly rewarding.
O U R P U R P O S E
Sezzle scaled up its mission to
financially empower the next
generation by partnering with our
friends at Ministry of Supply to
support those in need of a fresh
start. The increase in unemployment
due to the pandemic has many
Americans facing unexpected
challenges.
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S U S T A I N A B I L I T Y R E P O R T
U N L O C K I N G
R E L A T I O N S H I P
P U R C H A S I N G P O W E R
T O E X T E N D T H E
C O N S U M E R L I F E
C Y C L E
By living up to our unique position
as a payment with purpose and
by bringing merchants a new
generation of consumers, Sezzle is
fast becoming the preferred partner
for a growing stable of small-to
medium-sized business. Sezzle
added over 16,680 Active Merchants
in 2020 raising our count to over
26,600. Sezzle’s frictionless and
seamless integration allows new
B U I L D I N G T H R O U G H
M A R K E T I N G S U P P O R T
Sezzle retailers become part of
multi-leveled marketing efforts
beginning with a launch campaign
that introduces new brands to
Sezzle consumers. With bi-weekly
promotional support throughout
the retail calendar year, Sezzle
connects and converts deal
seekers. Our quarterly, full-funnel
mega campaigns such as Save the
Holiday meet consumer needs and
promote participating merchants
with added, compelling incentives.
merchants to onboard within 24
These campaigns can increase
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hours. It’s not surprising that over
90% of our merchant signups are
inbound.
Sezzle is gradually expanding to
large enterprise and broadening
into new merchant categories with
plans to add travel, grocery and
general merchandising. Sezzle is
also creating specialized markets
that resonate with our audience’s
values by promoting black-owned
businesses, eco-friendly products
and small businesses. Plus our
new virtual card enhances Sezzle’s
omnichannel offering and provides
add Sezzle in-store.
Our commitment to educating
our consumers is creating a new
group of credit-worthy customers
for our merchants. Unlocking
average order value. In December,
we developed a pop-up shop in
collaboration with Thursday Boots
creating a new infrastructure
for many merchant partnership
opportunities to come.
Moving from purchasing over time
to credit building and financial
empowerment, and constantly
collaborating to support our
position as a payment with purpose,
Sezzle has become a rapidly growing
platform for today’s merchants
and consumers. In 2020, our Active
Merchant growth was 167% and our
an easy interface for merchants to
Active Consumer growth was 144%.
more purchasing power for our
consumers is leading to larger order
amounts and increasing purchase
frequency as well as extending the
customer life cycle.
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Doing good
through governance.
U T I L I Z I N G
T E C H N O L O G Y I N R I S K
M A N A G E M E N T
The external audit for compliance is
conducted on our systems yearly to
review our policies and test controls.
We have 3 years of certification
A critical component to the Sezzle
without any findings or required
business model is the ability to
remediations.
effectively manage risk and data.
Risk and data management are
extremely important for, reputation/
customer confidence, financial,
productivity, fines/legal penalties,
and safety and health. To that end,
in-house Sezzle engineers built and
continue to maintain Sezzle Platform
systems in order to mitigate risks.
We never rest when it comes to
protecting our data. Penetration
Tests are performed annually on
our web applications, external,
The Sezzle Fraud Detection
System and Sezzle Underwriting
Engine are critical components
to the Sezzle business model to
effectively manage the repayment
risk of providing consumers with the
capacity to pay over time.
The Sezzle Fraud Detection System
is a proprietary system developed
by Sezzle’s data sciences team,
which utilizes numerous data points
from a transaction to identify the
and internal networks. Alongside
likelihood of a fraudulent attempt
our Penetration testing system, we
within the Sezzle system. Shopper
operate a Bug Bounty Program,
interactions with the Sezzle Platform
which enables security researchers
are recorded and analyzed along
to test sandbox environments and
with data points on the consumer
earn bounties for confirmed security
and order itself. This data
items using an industry standard
passes through the Sezzle Fraud
risk ranking system.
Detection System, which scores the
likelihood of fraud occurring in the
Sezzle is certified as Payment Card
transaction.
Industry I Level 1 Compliant (the
highest level of compliance), as both
a merchant and a service provider.
PCI Compliance focuses on systems
that pertain to cardholder data, but
we leverage the same environment
for all of our systems. This means
that all of our systems get the same
level of controls.
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W O R K I N G W I T H
R E G U L A T O R S T O
L E A D T H E W A Y
I N R E S P O N S I B L E
L E N D I N G
Our consumer-friendly product puts
us in a positive light with regulators
who are typically focused on the
prevention of predatory lending
practices. However, we don’t take our
favorable position with regulators
for granted. In 2020, we stepped
up our proactive approach at the
federal, state and provincial levels,
giving them an overview of our
consumer-friendly product and our
burgeoning sector. Discussions have
been well received by regulators
because of Sezzle’s consumer
friendly product and the most senior
levels of Sezzle’s management have
been involved in the discussions.
The “buy-now, pay-later” segment of
the point of sale financing market
in which Sezzle primarily operates is
a developing field. Sezzle is subject
to a range of legal and industry
compliance requirements that are
constantly changing. This includes
consumer protection, consumer
disclosure, licensing and data
privacy, and security laws. Currently,
Sezzle is not subject to specific
“buy now, pay later” regulations in
the United States or Canada for
operating within the “buy now, pay
later” segment of the point of sale
financing market.
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S U S T A I N A B I L I T Y R E P O R T
The success of our Fraud Detection
B A L A N C I N G P U R P O S E
As we continue to disrupt a
W I T H F I N A N C I A L
P E R F O R M A N C E
traditional credit system and
empower a new generation of
consumers, we are diligently
Creating sustainable value for
managing growth and laying the
all stakeholders, employees,
foundation for a bright future.
consumers, merchant partners,
communities and shareholders
We look forward to 2021 and
requires a steadfast commitment to
many years to come.
transparency and good corporate
governance.
System allows us to have one of
the highest approval rates in the
industry.
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Our Sezzle Underwriting Engine
assigns a score to each new user
that passes through the Sezzle
Fraud Detection System. Sezzle’s
view is that its product enables
the democratization of credit, so
unless Sezzle believes there is fraud
involved, it gives every user access
to an amount of credit. Based on
data obtained from traditional and
non-traditional sources, along with
the order data and retailer data,
Sezzle is able to give some shoppers
a fair limit.
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These additional data points allow
Sezzle to optimize its initial credit
limits for users, enhancing the
effectiveness of the Sezzle Platform
for its merchants. As consumers
use the Sezzle Platform, Sezzle’s
system learns from the behavior
of the individual consumers and
adapts the consumer’s limit to the
appropriate level based on the
consumer’s success level within
the Sezzle Platform.
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SEZZLE INC ANNUAL REPORT 2020|
Directors’
Report
F O R T H E Y E A R E N D E D D E C E M B E R 3 1 , 2 0 2 0
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D I R E C T O R S ’ R E P O R T
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The Directors present their report, together with the consolidated financial
statements, of Sezzle Inc. (ASX: SZL, Sezzle, or Company) and its wholly owned
subsidiaries for the year ended December 31, 2020.
D I R E C T O R S
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The following individuals were Directors of Sezzle for the full year ended December 31, 2020:
Charlie Youakim
Paul Paradis
Paul Lahiff
Kathleen Pierce-Gilmore
Paul Purcell
Co-founder, Executive Chairman, and Chief Executive Officer
Co-founder, Executive Director, and President
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Additionally, the following individual was appointed to the Board of Directors during the
reporting period:
Mike Cutter
Independent Non-Executive Director -
appointed on June 1, 2020
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D I R E C T O R S ’ R E P O R T
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I N F O R M A T I O N O N D I R E C T O R S
Charlie Youakim
Executive Chairman and Chief Executive Officer
Charlie is a co-founder, Executive Chairman, and Chief Executive Officer of Sezzle. Charlie
is a serial technology entrepreneur with over ten years of experience in growing fintech
companies from inception to large-scale businesses. Charlie began his career as an
engineer and software developer. After successfully advancing in his early career, he
returned to business school where he was able to focus on expanding his knowledge
of finance, marketing, and business strategy. In 2010, after completing business school,
Charlie founded his first payments company, Passport Labs, Inc. (“Passport”). Passport became a leader in software and payments for the
transportation industry. At Passport, Charlie led the construction and the original technology and led the company as it disrupted the
industry through the introduction of white label systems and payment wallets. Passport is the technology behind enterprise
transportation installations like ParkChicago, ParkBoston, and the GreenP in Toronto.
Charlie co-founded Sezzle in 2016 and also planned much of the business’ technology architecture. Charlie has a degree in Mechanical
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Engineering from the University of Minnesota and an MBA from the Carlson School of Management at the University of Minnesota.
Other current Directorships: Charlie does not currently hold any other directorships.
Interests in Shares: 88,359,809
Interests in Options: 500,000
Paul Paradis
Executive Director and President
Paul is co-founder, Executive Director, and President at Sezzle. Paul has extensive
experience in sales and marketing. He began his career in sales with the Minnesota
Timberwolves. He left the Timberwolves to attain his MBA from the Carlson School
of Management at the University of Minnesota, where he focused on marketing and
strategy. After graduating from the Carlson School of Management, Paul spent six years
leading sales and marketing at Dashe & Thomson and the Abreon Group, management consultancies focused on change management.
Paul left the Abreon Group in 2016 when he co-founded Sezzle. At Sezzle, Paul oversees the revenue departments, international expansion,
and corporate strategy.
Paul has a BA in Political Science from Davidson College and an MBA from the University of Minnesota.
Other current Directorships: Paul does not currently hold any other directorships.
Interests in Shares: 10,000,0001
Interests in Options: 500,000
1 Paul Paradis holds 10,000,000 shares. As of the date of this Annual Report, 9,375,000 shares have fully vested with the remaining shares subject to vesting
conditions as follows: 625,000 shares will vest in monthly installments over the next 10 months.
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D I R E C T O R S ’ R E P O R T
Paul Lahiff
Independent Non-Executive Director
Paul Lahiff was previously Chief Executive Officer of Mortgage Choice and prior to
this, Chief Executive Officer of Permanent Trustee and Heritage Bank. He also held
senior management roles for Westpac Banking Corporation in Sydney and London. He
previously held Board roles with Sunsuper, Thorn Group, New Payments Platform Australia
and Cancer Council NSW. Paul holds a BSC degree from the University of Sydney, and is a
graduate of the Australian Institute of Company Directors.
Other current Directorships: Paul is a Non-Executive Director of AUB Holdings and NESS Superannuation. Paul is a Senior Non-Executive
Director at 86400.
Interests in Shares: 42,627
Interests in Options: 250,000
Kathleen Pierce-Gilmore
Independent Non-Executive Director
Kathleen has been a payments and fintech executive for 20+ years across firms, including
American Express, Capital One, PayPal, and most recently startup companies Raise
Marketplace and Flexa Technologies. She has held leadership positions from leading
Strategy to COO, President, and CEO roles. In addition to her deep expertise in customer
experience, consumer lending, product development, and P&L management, she has also
led businesses on the merchant side of the payments ecosystem. She is currently the Head of Global Payments at Silicon Valley Bank.
Kathleen graduated with a BA from the Integrated Sciences Program at Northwestern University and has recently completed the
Non-Executive Director Diploma program through the Financial Times.
Other current Directorships: Kathleen serves as a Director for Tala.
Interests in Shares: 0
Interests in Options: 350,000
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Paul Purcell
Independent Non-Executive Director
Paul Purcell has invested in financial services companies (public and private markets)
for nearly 20 years. He maintains a specialization in emerging financial innovation as
well as non-bank financial services. He has been the Chief Investment Officer of Jupiter
Management since January 1, 2019 and prior to assuming that position led the sourcing
and origination of investments at Continental Investors. Paul is a frequent panelist at
industry conferences and has published several articles on the trends and developments
in the emerging commerce and financial services marketplaces. Before joining Continental Investors, Paul was a co-founder of
Continental Advisors, a manager of two sector-based hedge funds. He was also Manager of Internet marketing at the Chicago Board
Options Exchange (CBOE), a department he helped found.
Paul is a graduate of the University of San Diego where he is a member of the Board of Trustees.
Other current Directorships: Paul currently serves on the Boards of Drizly, AeroPay, GigWage, Listo!, Veritec Solutions, Winestyr, Intuition
LLC, CarHop, and What’s Next Media.
Interests in Shares: 0
Interests in RSAs: 01
1 In accordance with Paul Purcell’s director appointment agreement, 350,000 restricted stock awards were issued to Continental Investment Partners on 29 March
2019 which comprises compensation for Paul Purcell’s services as director.
Mike Cutter
Independent Non-Executive Director
Mike has more than 33 years’ experience in a wide range of financial services business-
es in Australia, New Zealand, Asia, and Europe. Mike is currently serving as the interim
Managing Director of Bambora Retail Pacific which follows his previous role as the Group
Managing Director for the information services business Equifax ANZ. Prior that he held
various CEO, CRO, Product and Operations roles with GE, ANZ, Wesfarmers, Halifax/
BankOne and NAB. Mike is a Graduate of the Australian Institute of Company Directors (GAICD) and a Senior Fellow of the Financial
Services Institute of Australia and has previously served on the Board of Directors of the Women’s Cancer Foundation, Ovarian Cancer
Institute, the Australian Finance Congress, the National Insurance Brokers Association and the Australian Retail Credit Association. Mike
has a BSc (Hons) from Hertfordshire University.
Other current Directorships: Mike is currently a Director of Kadre Consulting and Retail Enterprise Services Australia as well as a Board
Advisor to Pepper Money and Credit Clear.
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Interests in Shares: 0
Interests in Options: 250,000
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Justin Clyne is a company director and/or company secretary for public-listed and unlisted companies. He
has significant experience and knowledge in international law, the Corporations Act, the ASX Listing
Rules and corporate regulatory requirements. Mr. Clyne was admitted as a solicitor of the Supreme Court
D I R E C T O R S ’ R E P O R T
of New South Wales and High Court of Australia in 1996 before gaining admission as a barrister in 1998.
I N F O R M A T I O N O N C O R P O R A T E S E C R E T A R Y
He had 15 years of experience in the legal profession acting for the country’s largest corporations,
initially in the areas of corporate and commercial law before dedicating himself full time to the provision
Justin Clyne is a company director and/or company secretary for public-listed and unlisted companies. He has
of corporate advisory and company secretarial services. Mr. Clyne holds a Master of Laws in
significant experience and knowledge in international law, the Corporations Act, the ASX Listing Rules and corporate
regulatory requirements. Mr. Clyne was admitted as a solicitor of the Supreme Court of New South Wales and High
International Law from the University of New South Wales. He is also a qualified Chartered Company
Court of Australia in 1996 before gaining admission as a barrister in 1998. He had 15 years of experience in the legal
Secretary and a Member of the Australian Institute of Company Directors.
profession acting for the country’s largest corporations, initially in the areas of corporate and commercial law before
dedicating himself full time to the provision of corporate advisory and company secretarial services. Mr. Clyne holds a
Master of Laws in International Law from the University of New South Wales. He is also a qualified Chartered Company
Secretary and a Member of the Australian Institute of Company Directors.
MEETINGS OF DIRECTORS
M E E T I N G S O F D I R E C T O R S
During the financial year ended December 31, 2020, Sezzle held eleven meetings of the Board of
Directors and four meetings of the noted committees, all of which were standard meetings.
During the financial year ended December 31, 2020, Sezzle held eleven meetings of the Board of Directors and separate
meetings of the noted committees, all of which were standard meetings.
Charlie Youakim
Paul Paradis
Paul Lahiff
Full Board
Audit and Risk Committee
Remuneration and
Nomination Committee
Held
Attended
Held
Attended
Held
Attended
11
11
11
11
11
11
0
0
4
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21
4
0
0
5
51
21
5
Kathleen Pierce-Gilmore
3. Mr Cutter attended all 4 meetings of the Audit & Risk Committee held in the 2020 financial year, attending
3 meetings at the invitation of the Committee and 1 meeting as a member following his appointment to the
Committee on 17 August 2020.
11
11
11
11
4
4
4
4
5
5
5
5
Paul Purcell
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Mike Cutter
Mr Cutter attended all 5 meetings of the Remuneration & Nomination Committee held in the 2020 financial year,
attending 3 meetings at the invitation of the Committee and 2 meetings as a member following his appointment to
24
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62
13
13
1 Not a committee member.
the Committee on 17 August 2020.
2 Mike Cutter joined the board on 1 June 2020 following the approval of stockholders at the Company’s Annual General Meeting. Mr. Cutter attended all 11 Board
meetings held in the 2020 financial year, attending 5 meetings as a Board Observer and 6 meetings as a Director following his appointment.
3 Mr Cutter attended all 4 meetings of the Audit & Risk Committee held in the 2020 financial year, attending 3 meetings at the invitation of the Committee and 1
meeting as a member following his appointment to the Committee on 17 August 2020.
4 Mr Cutter attended all 5 meetings of the Remuneration & Nomination Committee held in the 2020 financial year, attending 3 meetings at the invitation of the
Committee and 2 meetings as a member following his appointment to the Committee on 17 August 2020.
As of the date of this report Sezzle has an Audit and Risk Committee and a Remuneration and
As of the date of this report, Sezzle has an Audit and Risk Committee and a Remuneration and Nomination Committee
committee are as follows:
Nomination Committee of the Board of Directors. All committee members are independent non-
of the Board of Directors. All committee members are independent non-executive directors. The members of each
executive directors. The members of each committee are as follows:
1. Not a committee member.
2. Mike Cutter joined the board on 1 June 2020 following the approval of stockholders at the Company’s
Annual General Meeting. Mr. Cutter attended all 11 Board meetings held in the 2020 financial year,
attending 5 meetings as a Board Observer and 6 meetings as a director following his appointment.
Remuneration and Nomination Committee
Audit and Risk Committee
Paul Lahiff (Chair)
Paul Lahiff (Chair)
Kathleen Pierce-Gilmore
Kathleen Pierce-Gilmore
Paul Purcell
Mike Cutter
Paul Purcell
Mike Cutter
PRINCIPAL ACTIVITIES
The principal activities of Sezzle are to provide a technology-driven payment platform that
facilitates fast, secure and easy payments between consumers and retailers through its short-term,
interest-free installment plans that delivers to consumers both a budgeting and financing value
38
proposition.
FINANCIAL RESULT
The Company reported a net loss of US$27.3 million after tax for the year ended December 31,
2020, compared to a loss of US$13.1 million in the previous year ended.
OPERATING AND FINANCIAL REVIEW
Refer to pages X–Y for the Company’s operating and financial review, which covers discussion
of the Company’s:
–
financial and operating performance;
– business strategies and initiatives; and
– key risks and challenges.
SEZZLE INC ANNUAL REPORT 2020|
Operating and Financial Performance
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P R I N C I P A L A C T I V I T I E S
The principal activities of Sezzle are to provide a technology-driven payment platform that facilitates fast, secure
and easy payments between consumers and retailers through its short-term, interest-free installment plans that
delivers to consumers both a budgeting and financing value proposition.
F I N A N C I A L R E S U LT
The Company reported a net loss of US$32.4 million after tax for the year ended December 31, 2020, compared to a
loss of US$13.1 million in the previous year ended December 31, 2019.
O P E R A T I N G A N D F I N A N C I A L R E V I E W
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Refer to pages 49-58 for the Company’s operating and financial review, which covers discussion of the Company’s
financial and operating performance as well as key risks and challenges.
F U T U R E D E V E L O P M E N T S
The Company’s UMS outlook reflects an annualized run-rate of US$2.5 billion by the end of 2021. Any other
information on likely developments in the operations of the Company and its prospective financial future have not
been included in this report because the Directors believe it to be commercial-in-confidence and, as a result, likely
to result in unreasonable prejudice to the Company.
S I G N I F I C A N T E V E N T S S U B S E Q U E N T T O T H E E N D O F T H E Y E A R
On February 10, 2021, Sezzle entered into an agreement with Goldman Sachs Bank USA (the ‘Class A’ senior lender)
and Bastion Funding IV LLC (the ‘Class B’ mezzanine lender) for a US$250,000,000 receivables funding facility. The
funding facility has a maturity date of June 12, 2023 (a 28-month term from the agreement date). The agreement is
secured by the Company’s consumer notes receivable it chooses to pledge and is subject to covenants. Fifty percent
of the total available funding facility (US$125,000,000) is committed while the remaining fifty percent is available
to the Company for expanding its funding capacity. The funding facility carries an interest rate of LIBOR+3.375%
and LIBOR+10.689% (the LIBOR floor rate is set at 0.25%) for funds borrowed from the Class A and Class B lender,
respectively. In the event of a prepayment due to a broadly marketed and distributed securitization transaction with
a party external to the agreement, an exit fee of 0.75% of such prepaid balance will be due to the lender upon such
transaction. Additionally, the Company paid a US$1,000,000 termination fee to exit its previous receivables funding
facility.
S I G N I F I C A N T C H A N G E S I N T H E S T A T E O F A F FA I R S
In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity
during the financial period, except as otherwise noted in this report.
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D I R E C T O R S ’ R E P O R T
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•
•
•
•
•
•
•
No dividends on common stock were declared or issued during the year ended December 31, 2020.
S T O C K - B A S E D P A Y M E N T P L A N S
A summary of the Company’s stock based payment plans is disclosed within Note 14 of the Consolidated Financial
D I V I D E N D S
Statements.
S U S T A I N A B I L I T Y
Sezzle supports the increased role environmental, social, and economic factors play into the sustainability of its busi-
nesses and its stakeholders. The Company also understands that there are stakeholders that expect additional infor-
mation on the Company’s sustainability initiatives. To this extent, the Company discusses its sustainability initiatives
and stakeholder approach in pages 19-30 of this report.
The consolidated entity is not subject to any significant environmental regulation under the laws of the United States.
The Company’s Corporate Governance Statement for the year ended December 31, 2020 can be found at
C O R P O R A T E G O V E R N A N C E
https://www.sezzle.com/investors.
R E M U N E R A T I O N R E P O R T
The Directors of the Company present the Remuneration Report for Non-Executive Directors, Executive Directors and
other Key Management Personnel (KMP), prepared in accordance with the Corporations Act 2001 and the Corporations
Regulations 2001.
The Remuneration Report is set out under the following main headings:
Remuneration Philosophy and Structure;
Performance;
Details of remuneration;
Service agreements;
Share-based compensation;
Remuneration of Non-Executive Directors; and
Other information.
SEZZLE INC ANNUAL REPORT 2020
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Remuneration Philosophy and Structure
The performance of Sezzle depends upon our ability to attract and retain KMP. To prosper, we must attract, motivate
and retain these highly skilled individuals. To that end, Sezzle embraces the following principles in its remuneration
framework:
•
•
•
•
•
Offer competitive rewards to attract high caliber executives;
Clear alignment of remuneration with strategic objectives;
Focus on creating sustainable value for all of the Company’s stakeholders;
Merit-based remuneration across a diverse workforce; and
Ensure total remuneration is competitive by market standards.
The Remuneration and Nomination Committee (RNC) is responsible for determining and reviewing compensation
arrangements for the KMP. The RNC assesses the appropriateness of the nature and amount of remuneration for KMP on a
periodic basis by reference to relevant market conditions within the overall objective of ensuring maximum stakeholder benefit
from the retention of a high-quality board and executive team.
The Board of the Company believes the remuneration framework to be appropriate and effective in attracting and retaining
the best KMP to operate and manage the Company.
The KMP remuneration framework is designed to support the Company’s reward philosophies and to underpin the Company’s
growth strategy and is based on the following:
•
•
•
Base salary - appropriate to the position and experience and is competitive in the market
Short Term Incentive Plan
Long Term Incentive Plan
For 2020, the RNC has approved the short-term and long-term compensation programs for executive KMP described below.
Short-Term Incentive Plan (STIP)
Executive officers and other personnel are entitled to participate in the STIP, which provides an annual bonus opportunity
based on a STIP %, representing the employee’s bonus potential. The payout is based on a combination of the Company
Performance Score (CPS) and individual performance. CPS is determined each year by metrics within four weighted categories:
Growth (50%), Stakeholder Satisfaction (20%), Optimization (15%), Innovation (15%), with the metrics including Revenue,
Underlying Merchant Sales, Active Consumers, Stakeholder Satisfaction and Net Transaction Margin. Individual performance
is based on outcomes achieved by the employee and how those outcomes are achieved (i.e., exemplifying Sezzle’s values).
Each executive officer is participating in the STIP for the year ending December 31, 2020. Short Term Incentives awarded are
settled as Restricted Stock Units (RSUs) in the Company that vest in 6 months upon the grant date to reflect goals met in
the prior year. The RSUs awarded are, at a maximum, 50% of the base salary for the executive in question. Payout for each
individual depends on achievement of the goals for corporate and individual performance. For Messrs. Youakim and Paradis,
the grants of the RSUs are subject to prior shareholder approval.
Long-Term Incentive Plan (LTIP)
The use of long-term incentive awards (LTIs) is to reward senior executives in a manner that aligns remuneration with the
creation of shareholder wealth. As such, LTI grants go to certain executives who influence the generation of shareholder
wealth and thus have a direct impact on the Company’s performance against the relevant long-term performance hurdle.
The formal LTIP comprises grants of market priced stock options under the 2019 Equity Incentive Plan, with vesting subject to
formal long-term performance hurdles tested over three years, and subject to continued employment for a three-year period.
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D I R E C T O R S ’ R E P O R T
LTIs issued are subject to vesting conditions comprising both market and service conditions, and both hurdles must be
satisfied for vesting to occur. Stock options will automatically vest in full upon certain circumstances including a sale, merger,
or consolidation. Grants must be exercised within 10 years of the beginning of the performance period or they will lapse.
Unvested options will automatically lapse.
The three-year performance period for vesting of the initial grants is from January 1, 2020 through December 31, 2022. and
on a three year rolling basis for new KMP. Subject to the satisfaction of the performance hurdles and continued employment,
options issued under the LTIP will vest and become capable of exercise three years from the beginning of the performance
period. Performance for vesting purposes for each of the three years within the performance period will be tested against
Comparative Total Shareholder Return (TSR). For each year, the Comparative TSR encompasses share price appreciation,
measured against the S&P/ASX All Technology Index (excluding materials and energy companies). For comparative purposes,
Sezzle’s Volume Weighted Average Price (VWAP) over a 30-day period up to the end of the relevant performance period will be
used and compared to the average S&P/ASX All Technology Index price over that same period.
The shares vesting for each year in the performance period are determined as follows based on TSR for the year:
The vesting for each year in the performance period are determined as follows based on TSR for the year:
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Comparative TSR Target
Less than 51st percentile of companies in S&P/ASX All Technology
Index
Greater than or equal to 51st percentile but less than the 90th
percentile of companies in S&P/ASX All Technology Index
Greater than or equal to 90th percentile of companies in S&P/ASX
All Technology Index
Percentage of options available in the given year satisfying
conditions
0%
Pro rata between 1% and 100%
100%
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performance period applicable to those LTI grants if the Board believes it is appropriate to do so to reflect the Company’s
The Board has the discretion to amend the Comparative TSR performance condition at any time during the relevant
circumstances.
performance period applicable to those LTI grants if the Board believes it is appropriate to do so to reflect the
Company’s circumstances.
On May 22, 2020, key management personnel of the Company received an option from the LTIP plan to purchase shares at an
On May 22, 2020, each of Mr. Youakim, Mr. Paradis and Ms. Hartje, the executive officers of the Company,
exercise price of A$2.10 per share, based on the closing sale price of CDIs on the ASX on May 21, 2020 (the ‘LTIP Options’). The
received an option from the LTIP to purchase 631,366 shares at an exercise price of $1.37865 per share, based on the
amount of shares subject of the LTIP Options were calculated so that the value of options was equal to 300% of the individual’s
closing sale price of CDIs on the ASX on May 21, 2020 (the “LTIP Options”). The amount of shares subject of the
salary in effect at the time (i.e., 100% for each of the three years in the performance period). The fair value of the options was
LTIP Options were calculated so that the Black-Scholes value of each Option was equal to 300% of the individual’s
determined under a Monte Carlo Simulation valuation method. Grants issued to executive directors of the Company are
salary in effect at the time (i.e., 100% for each of the three years in the performance period). Subsequently, on
subject to shareholder approval and, if not approved by the shareholders, the executive directors will be issued comparable
October 22, 2020, the LTIP Options to Messrs. Youakim and Paradis were rescinded in exchange for a promise by
compensation through payments in cash and/or the issuance of incentive compensation. As of the date of this report, no
the Company to provide to each such executive officer with comparable compensation through payments in cash
comparable compensation has been issued.
and/or the issuance of inventive compensation, subject to any required stockholder approvals. As of [insert filing
date], no comparable compensation has been issued.
Performance
A summary of the Company’s key performance indicators is included below:
Year ended December 31
2020
2019
2018
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Underlying Merchant Sales (US$)
$
856,381,590
$
244,125,995
$
31,081,277
Active Consumers
Active Merchants
2,231,089
26,690
914,886
10,010
155,257
2,228
Total income (US$)
$
58,788,273
$
15,801,111
$
1,609,305
Details of Remuneration
Amounts of Remuneration
Commented [JK1]: Open to update for final LTIP amounts
SEZZLE INC ANNUAL REPORT 2020
The shares vesting for each year in the performance period are determined as follows based on TSR for the year:
Comparative TSR Target
Percentage of options available in the given year satisfying
conditions
Less than 51st percentile of companies in S&P/ASX All Technology
0%
Index
Greater than or equal to 51st percentile but less than the 90th
Pro rata between 1% and 100%
percentile of companies in S&P/ASX All Technology Index
Greater than or equal to 90th percentile of companies in S&P/ASX
100%
All Technology Index
The Board has the discretion to amend the Comparative TSR performance condition at any time during the relevant
performance period applicable to those LTI grants if the Board believes it is appropriate to do so to reflect the
Company’s circumstances.
On May 22, 2020, each of Mr. Youakim, Mr. Paradis and Ms. Hartje, the executive officers of the Company,
received an option from the LTIP to purchase 631,366 shares at an exercise price of $1.37865 per share, based on the
closing sale price of CDIs on the ASX on May 21, 2020 (the “LTIP Options”). The amount of shares subject of the
LTIP Options were calculated so that the Black-Scholes value of each Option was equal to 300% of the individual’s
salary in effect at the time (i.e., 100% for each of the three years in the performance period). Subsequently, on
October 22, 2020, the LTIP Options to Messrs. Youakim and Paradis were rescinded in exchange for a promise by
the Company to provide to each such executive officer with comparable compensation through payments in cash
and/or the issuance of inventive compensation, subject to any required stockholder approvals. As of [insert filing
date], no comparable compensation has been issued.
Performance
Performance
A summary of the Company’s key performance indicators is included below:
A summary of the Company’s key performance indicators is included below:
Commented [JK1]: Open to update for final LTIP amounts
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Non-Executive Directors (A$)
P. Purcell
K. Pierce-Gilmore
P. Lahiff
M. Cutter
Executive Directors (US$)
C. Youakim
P. Paradis
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K. Hartje
Executive Management (US$)
Year ended December 31
Underlying Merchant Sales (US$)
Active Consumers
Active Merchants
2020
2019
2018
$
856,381,590
$
244,125,995
$
31,081,277
2,231,089
26,690
914,886
10,010
155,257
2,228
Total income (US$)
$
58,788,273
$
15,801,111
$
1,609,305
Details of the remuneration of KMP of the Company are set out in the following tables. The KMP of the
Details of Remuneration
Details of Remuneration
Company during the reporting period consisted of the following:
Details of the remuneration of KMP of the Company for the year ended December 31, 2020 are set out in the following
Amounts of Remuneration
tables. The KMP of the Company during the reporting period consisted of the following:
Charlie Youakim, Executive Chairman and Chief Executive Officer;
-
Charlie Youakim, Executive Chairman and Chief Executive Officer;
Paul Paradis, Executive Director and President;
Paul Paradis, Executive Director and President;
-
Kathleen Pierce-Gilmore, Non-Executive Director;
-
-
Paul Purcell, Non-Executive Director;
-
Paul Purcell, Non-Executive Director;
Paul Lahiff, Non-Executive Director;
Paul Lahiff, Non-Executive Director;
-
Mike Cutter, Non-Executive Director;
-
Kathleen Pierce-Gilmore, Non-Executive Director;
Mike Cutter, Non-Executive Director, and;
Karen Hartje, Chief Financial Officer;
-
Karen Hartje, Chief Financial Officer
Short Term
Long Term
Cash Salary and Fees
Non-Monetary
Options/RSAs
A$
A$
A$
A$
US$
US$
US$
20,000
80,000
100,000
80,000
250,000
250,000
—
—
—
—
—
—
—
—
—
—
—
—
250,000 US$
59,579
1,171,875 Options
Service Agreements
Remuneration and other terms of employment for KMP are formalized in service agreements. Details of
these agreements are as follows:
Name:
Title:
Agreement
commenced:
Terms of Agreement:
43
Charlie Youakim
Executive Chairman and CEO
June 21, 2019
Charlie serves as Executive Chairman and Chief Executive Officer. Charlie’s
agreement commenced June 21, 2019, and he receives an annual $250,000 salary. He
is entitled to participate in the Short-Term Incentive Plan (STIP) and Long-Term
Incentive Plan (LTIP) and is entitled to severance upon termination of employment in
some circumstances as described below. His employment may be terminated: (i) at an
time upon mutual written agreement of the parties; (ii) by the Company immediately
and without prior notice for cause; (iii) immediately upon Charlie’s death or disability;
(iv) by the Company other than for cause with advance written notice of at least 12
months; or (v) by Charlie, other than due to Charlie’s death or disability, with advance
written notice of at least 12 months.
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D I R E C T O R S ’ R E P O R T
Service Agreements
Remuneration and other terms of employment for KMP are formalized in service agreements. Details of these agree-
ments are as follows:
Agreement commenced:
Terms of Agreement:
Agreement commenced:
Terms of Agreement:
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Title:
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Title:
Name:
Charlie Youakim
Executive Chairman and CEO
June 21, 2019
Charlie serves as Executive Chairman and Chief Executive Officer. Charlie’s agreement commenced
June 21, 2019, and he receives an annual US$250,000 salary. He is entitled to participate in the Short-Term
Incentive Plan (STIP) and Long-Term Incentive Plan (LTIP) and is entitled to severance upon termination of
employment in some circumstances as described below. His employment may be terminated: (i) at an time
upon mutual written agreement of the parties; (ii) by the Company immediately and without prior notice
for cause; (iii) immediately upon Charlie’s death or disability; (iv) by the Company other than for cause with
advance written notice of at least 12 months; or (v) by Charlie, other than due to Charlie’s death or disabili-
ty, with advance written notice of at least 12 months.
Paul Paradis
Executive Director and President
June 21, 2019
Paul serves as Executive Director and President. Paul’s agreement commenced on June 21, 2019, and he
receives an annual salary of US$250,000. He is entitled to participate in the STIP and LTIP and is entitled
to severance upon termination of employment in some circumstances as described below. His employ-
ment may be terminated: (i) at an time upon mutual written agreement of the parties; (ii) by the Company
immediately and without prior notice for cause; (iii) immediately upon Paul’s death or disability; (iv) by the
Company other than for cause with advance written notice of at least 12 months; or (v) by Paul, other than
due to Paul’s death or disability, with advance written notice of at least 12 months.
Karen Hartje
CFO
Agreement commenced:
June 21, 2019
Terms of Agreement:
Karen serves as Chief Financial Officer. Her agreement commenced June 21, 2019, and she receives an
annual base salary of US$250,000. She is entitled to participate in the STIP and LTIP and is entitled to sev-
erance upon termination of employment in some circumstances as described below. Her employment may
be terminated: (i) at an time upon mutual written agreement of the parties; (ii) by the Company immediate-
ly and without prior notice for cause; (iii) immediately upon Karen’s death or disability; (iv) by the Company
other than for cause with advance written notice of at least 6 months; or (v) by Karen, other than due to
Karen’s death or disability, with advance written notice of at least 6 months.
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SEZZLE INC ANNUAL REPORT 2020
Name:
Title:
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y
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Agreement commenced:
Terms of Agreement:
Name:
e
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Title:
Agreement commenced:
Terms of Agreement:
l
Name:
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p
Title:
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Name:
Title:
Agreement commenced:
Terms of Agreement:
Paul Purcell
Non-Executive Director
March 28, 2019
The Agreement shall continue until terminated by either party for any reason upon five (5) days prior
written notice without further obligation or liability other than as otherwise set forth in the Agreement.
350,000 RSAs at US$0.05 per share were issued to Continental Investment Partners on March 29, 2019 which
comprises compensation for Paul Purcell’s services as Director. Additionally, Paul is compensated A$20,000
per year for serving as a member of the ARC and RNC committees.
Kathleen Pierce-Gilmore
Non-Executive Director
March 26, 2019
The Agreement shall continue until terminated by either party for any reason upon five (5) days prior writ-
ten notice without further obligation or liability other than as otherwise set forth in the Agreement. Kath-
leen received 350,000 options exercisable at US$0.05 each and expiring March 29, 2029 vesting monthly over
3 years engagement as a director but automatically vesting in full upon certain circumstances including a
sale, merger or consolidation. Additionally, Kathleen receives a total of A$80,000 per annum comprising
A$60,000 as a director and an additional A$20,000 serving as a member of the RNC and ARC committees.
Paul Lahiff
Non-Executive Director
May 7, 2019
The Agreement shall continue until terminated in accordance with the provisions of the Agreement
including in the event that Paul is not re-elected as a director of the Company by shareholders or
becomes disqualified from acting as a director. Paul receives a total of A$100,000 per annum comprising
A$60,000 as a director and an additional A$40,000 serving as the chair of both the ARC and RNC
committees. Additionally, Paul was granted 250,000 options exercisable at US$0.84 each, vesting monthly
over a three year term from the July 27, 2019 grant date.
Mike Cutter
Non-Executive Director
Agreement commenced:
June 1, 2020
Terms of Agreement:
The Agreement shall continue until terminated in accordance with the provisions of the Agreement including
in the event that Mike is not re-elected as a director of the Company by shareholders or becomes disqualified
from acting as a director. Mike receives a total of A$80,000 per annum comprising A$60,000 as a director and an
additional A$20,000 serving as a member of the RNC and ARC committees. Additionally, Mike was granted 250,000
options exercisable at US$0.84 each, vesting monthly over a three year term from the July 27, 2019 grant date.
45
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The Board’s policy is to reward Non-Executive Directors (NEDs) at competitive market rates to
attract and retain NEDs of caliber and quality, having regard to fees paid for comparable
companies and the size, complexity, and spread of the Company’s operations.
NED remuneration consists of base fees and may include additional amounts for Committee
D I R E C T O R S ’ R E P O R T
work.
Non-Executive Director Fees
Remuneration of Non-Executive Directors
Annual fee
The Board sets the fees for Non-Executive Directors based on recommendations of the RNC.
Committee fees - Chair
The Board’s policy is to reward Non-Executive Directors (NEDs) at competitive market rates to attract and retain NEDs of
Committee fees - Members
caliber and quality, having regard to fees paid and/or options granted for comparable companies and the size, com-
A$10,000
Per Annum
A$60,000
A$20,000
plexity, and spread of the Company’s operations.
Shares/CDIs held by KMP:
Share-based Compensation
Shares/CDIs held by KMP:
The number of ordinary shares in the Company during the 2020 reporting period held by each of the
The number of ordinary shares in the Company during the 2020 reporting period held by each of the Company’s key
Company’s key management personnel, including their related parties, is set out below:
management personnel, including their related parties, is set out below:
Balance at Start of
Year
Granted as
Remuneration
Received on Exercise Other Changes
Held at end of
Reporting Period
88,359,809
10,000,000
—
—
—
81,967
—
—
—
—
—
—
—
8,0753
—
—
—
—
—
—
—
—
—
—
—
—
(39,340)2
-
—
88,359,809
10,000,0001
—
—
—
42,627
8,075
1 Paul Paradis holds 10,000,000 shares. As of the date of this Annual Report, 9,375,000 shares have fully vested with the remaining shares subject to vesting condi-
tions as follows: 625,000 shares will vest in monthly installments over the next 10 months.
on 14 October 2020.
2 Mr Lahiff purchased 5,660 CDIs in the Company’s Securities Purchase Plan announced to the ASX on 10 July 2020 and sold 45,000 CDIs as announced to the ASX
1. Paul Paradis holds 10,000,000 shares. As of the date of this Annual Report, 9,375,000 shares have fully
3 Karen Hartje vested into 11,621 shares of restricted stock units durng 2020, resulting in 11,621 CDIs issued and valued at US$59,579 on the vesting date. 3,546 of
vested with the remaining shares subject to vesting conditions as follows: 625,000 shares will vest in
these shares were withheld to cover US income tax withholding obligations.
monthly installments over the next 22 months.
2. Mr Lahiff purchased 5,660 CDIs in the Company’s Securities Purchase Plan announced to the ASX on 10
July 2020 and sold 45,000 CDIs as announced to the ASX on 14 October 2020.
46
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Member of KMP
Charlie Youakim
l
Paul Paradis
Paul Purcell
Kathleen Pierce-
Gilmore
Mike Cutter
Paul Lahiff
Karen Hartje
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SEZZLE INC ANNUAL REPORT 2020|
Options held by KMP:
Options held by KMP
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Member of KMP
Charlie Youakim
Paul Paradis
Kathleen Pierce-Gilmore
Paul Purcell
Paul Lahiff
e
s
u
Mike Cutter
Karen Hartje
The number of options in the Company during the 2020 reporting period held by each of the Company’s
The number of options in the Company during the 2020 reporting period held by each of the Company’s KMP, including
KMP, including their related parties, is set out below:
their related parties, is set out below:
Balance at Start of Year
Granted as Remuneration Other Changes
Held at end of Reporting
Period
500,0001
500,0001
350,0002
03
250,0004
250,0005
—
—
—
—
—
—
2,235,0006
1,171,8756
—
—
—
—
—
—
—
500,0001
500,0001
350,0002
03
250,0004
250,0005
3,406,8756
Notes:
1.
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3.
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5.
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1 1/48th of the options for these KMPs vest each month after the grant of the options, provided the individual remains an employee of the Company as at the
applicable date. The options were granted at a strike price of US$0.84 and expire 10 years from July 27, 2019.
2 Kathleen Pierce-Gilmore received 350,000 options on March 29, 2019 with an exercise price of US$0.05, which comprises her compensation for her services. 1/36th
1/48th of the options for these KMPs vest each month after the grant of the options, provided the individual
of the options granted to Kathleen Pierce-Gilmore vest each month after the grant of the options, provided that she remains a Director of the Company as at the
remains an employee of the Company as at the applicable date. These options expire 10 years from July
3 In accordance with Paul Purcell’s director appointment agreement, 350,000 restricted stock awards were issued to Continental Investment Partners on March 29,
27, 2019.
applicable date. The options expire 10 years from March 29, 2019.
2019 which comprises compensation for Paul Purcell’s services as Director.
the LTIP option grants. All options held by Karen expire 10 years from the date of grant.
applicable date and are exercisable at the exercise price per option of US$0.84 The options expire 10 years from July 27, 2019.
applicable date and are exercisable at the exercise price per option of US$0.84 The options expire 10 years from July 27, 2019.
6 At the beginning of 2020, Karen Hartje held 1,735,000 options, exercisable at US$0.05 per share, and 500,000 options, exercisable at US$0.84 per share. On May 22,
2. Kathleen Pierce-Gilmore received 350,000 options on March 29, 2019 with an exercise price of US$0.05,
4 1/36th of the options granted to Paul Lahiff vest each month after the grant of the options, provided that he remains a Director of the Company as of the
which comprises her compensation for her services. 1/36th of the options granted to Kathleen Pierce-
5 1/36th of the options granted to Mike Cutter vest each month after the grant of the options, provided that he remains a Director of the Company as of the
Gilmore vest each month after the grant of the options, provided that she remains a Director of the
Company as at the applicable date. The options expire 10 years from March 29, 2019.
2020, Karen was granted 1,171,875 options through the Company’s LTIP plan. Refer to pages 41-42 of this Annual Report for detail around the vesting conditions of
In accordance with Paul Purcell’s director appointment agreement, 350,000 restricted stock awards were
issued to Continental Investment Partners on March 29, 2019 which comprises compensation for Paul
Purcell’s services as Director.
1/36th of the options granted to Paul Lahiff vest each month after the grant of the options, provided that he
remains a Director of the Company as of the applicable date and are exercisable at the exercise price per
option of US$0.84 The options expire 10 years from July 27, 2019.
1/36th of the options granted to Mike Cutter vest each month after the grant of the options, provided that he
remains a Director of the Company as of the applicable date and are exercisable at the exercise price per
option of US$0.84 The options expire 10 years from July 27, 2019.
We are not currently involved in any material legal proceedings, other than ordinary routine litigation incidental to the
P R O C E E D I N G S O N B E H A L F O F T H E C O M P A N Y
There were no loans made during the year to any Key Management Personnel.
Other Information - Loans to KMP
4.
business, to which we or any of our subsidiaries is a party or of which any of their property is subject.
Other Information - Loans to KMP
I N S U R A N C E O F D I R E C T O R S A N D O F F I C E R S
There were no loans made during the year to any Key Management Personnel.
During the year, Sezzle paid a premium for a Directors and Officers Liability Insurance Policy (D&O Insurance). This policy
covers Directors and Officers of the Company and the Consolidated entity. In accordance with normal commercial
PROCEEDINGS ON BEHALF OF THE COMPANY
practices under the terms of the insurance agreements, the disclosure of the nature of the liabilities
insured against and the amount of the premiums are prohibited by the policy.
47 |
D I R E C T O R S ’ R E P O R T
N O N - A U D I T S E R V I C E S
Sezzle may choose to employ its auditor for services additional to their statutory audit duties. Pursuant to the Sarbanes-
Oxley Act of 2002, Sezzle and its affiliates do not employ its auditors on assignments related to:
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–
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–
–
–
–
Bookkeeping;
Financial information systems design and implementation;
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
Actuarial services;
Internal audit outsourcing services;
Management functions or human resources;
Broker-dealer, investment adviser, or investment banking services; and
Legal services and expert services unrelated to the audit.
In all other instances, the Audit Committee considers whether any
service may impair the firm’s independence in fact or appearance
and approves the service before engagement.
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SEZZLE INC ANNUAL REPORT 2020
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F O R T H E Y E A R S E N D E D D E C E M B E R 3 1 ,
2 0 2 0 A N D 2 0 1 9
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O P E R A T I N G A N D F I N A N C I A L R E V I E W
SEZZLE INC ANNUAL REPORT 2020
SEZZLE INC ANNUAL REPORT 2020
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O V E R V I E W
Sezzle is a technology-enabled payments company based in the United States, with operations in the United States, Canada,
and startup operations in India and Europe. The Company offers its payment solution at online stores and a select number
of brick-and-mortar retail locations, connecting consumers with merchants via a proprietary payments solution that instantly
extends credit at point-of-sale, allowing consumers to purchase and receive the items that they need now while paying over
time in interest-free installments.
Merchants turn to Sezzle to increase sales by tapping into Sezzle’s existing user base, improve conversion rates, raise spend
per transaction, increase purchase frequency, and reduce return rates, all without bearing any credit risk. Sezzle is a high-
growth, networked platform that benefits from a symbiotic and mutually beneficial relationship between merchants and
consumers.
The Company’s core product allows consumers to make online purchases and effectively split the payment for the purchase
over four equal, interest-free payments over six weeks. The consumer makes the first payment at the time of checkout and
makes the subsequent payments every two weeks thereafter. The purchase price, less processing fees, is paid to merchants by
Sezzle in advance of the collection of the purchase price installments by Sezzle from the consumer.
The Company is headquartered in Minneapolis, Minnesota. Sezzle is a Delaware Public Benefit Corporation.
l
H O W W E E V A L U A T E O U R O P E R A T I O N S
The following discussion of our results of operations includes references to and analysis of EBIT, EBITDA, Gross Margin, Net
Transaction Loss and Net Transaction Margin, which are financial measures not recognized in accordance with accounting
principles generally accepted in the United States of America (U.S. GAAP). These non-GAAP financial measures are used by
investors to measure our operating performance, especially against competitors in our industry, and lenders to measure
our ability to incur and service debt. These measures are not intended to serve as an alternative to U.S. GAAP measures of
performance and may not be comparable to similarly titled measures presented by other companies. A reconciliation of these
non-GAAP measures to their most directly comparable measure under U.S. GAAP is included below.
• EBIT is defined as earnings before interest and taxes.
• EBITDA is defined as earnings before interest, taxes, depreciation, and amortization.
• Gross margin is our gross profit divided by Total income, expressed as a percentage.
• Net Transaction Loss is calculated as the expected provision and actual losses against notes receivable and
reschedule fee losses to be incurred (less consumers fees collected).
• Net Transaction Margin is expressed as a percentage and is calculated as:
• Sezzle Income earned divided by Underlying Sales, expressed as a percentage;
• Less the cost of consumer communications and the total fees paid by Sezzle to process transactions,
divided by Underlying Merchant Sales, expressed as a percentage;
• Less Net Transaction Loss, divided by Underlying Merchant Sales, expressed as a percentage; and
• Less net interest expense, divided by Underlying Merchants Sales, expressed as a
percentage.
Note, the amounts included in this section were rounded to the nearest US$1,000 (unless otherwise stated). Any discrepancies
between totals and the sums of components contained within the Operating and Financial Review are due to rounding.
51
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▪
▪
EBIT is defined as earnings before interest and taxes.
EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization.
▪ Gross margin our gross profit divided by Total income, expressed as a percentage.
▪ Net Transaction Loss is calculated as the expected provision and actual losses against notes
receivable and reschedule fee losses to be incurred (less consumers fees collected).
▪ Net Transaction Margin is expressed as a percentage and is calculated as:
•
•
•
•
Total Sezzle Income earned divided by Underlying Sales, expressed as a percentage;
Less the cost of consumer communications and the total fees paid by Sezzle to process
transactions, divided by Underlying Merchant Sales, expressed as a percentage;
Less Transaction Funding Financing Costs, divided by Underlying Merchants Sales,
expressed as a percentage; and
Less net Transaction Loss, divided by Underlying Merchant Sales, expressed as a
percentage.
O P E R A T I N G A N D F I N A N C I A L R E V I E W
Below is a reconciliation of non-GAAP measures to GAAP measures:
Below is a reconciliation of non-GAAP measures to GAAP measures:
(US$000s)
Operating loss
Other income and expense
Earnings before interest and taxes (EBIT)
Depreciation and amortization expense
Impairment losses
Earnings before interest, taxes, depreciation, and amortization
(EBITDA)
For the years ended December 31,
2020
2019
$
$
(27,932) $
(126)
(28,059)
428
8
(27,622)
$
(11,252)
(20)
(11,247)
245
16
(10,986)
Net Transaction Loss and Net Transaction Margin are comprised of U.S. GAAP measures as disclosed within the ‘Results of
Net Transaction Loss and Net Transaction Margin are comprised of U.S. GAAP measures as disclosed
Operations’ section below.
within the ‘Results of Operations’ section below.
R E S U LT S O F O P E R A T I O N S
RESULTS OF OPERATIONS
Sezzle’s management uses a variety of financial and key operating metrics to analyze the Company’s performance. These
Summary of Key Operating Metrics
financial and operating metrics include: (i) volume of Active Merchants and Active Consumers; (ii) Net Transaction Margins and
Net Transaction Gain/Loss; (iii) Gross Profit and Gross Margin; (iv) EBITDA; and (v) EBIT.
The Company’s key operating metrics continue to show signs of rapid growth during the financial year
due to the continued success of onboarding and retaining Active Merchants and Active Customers. A
Summary of Key Operating Metrics
summary of the key operation metric results as of and for the years ended is shown below:
The Company’s key operating metrics continue to show signs of rapid growth during the financial year due to the continued
success of onboarding and retaining Active Merchants and Active Consumers. A summary of the key operation metric results
as of and for the years ended is shown below:
Active Merchants
Active Consumers
Underlying Merchant Sales (UMS) (US$000s)
Merchant Fees (US$000s)
Net Transaction Margin (NTM) (% of UMS)
Net Transaction Loss (NTL) (% of UMS)
For the years ended December 31,
2020
2019
26,690
2,231,089
856,382
47,581
$
$
1.4 %
(1.2) %
10,010
914,886
244,126
12,969
0.2 %
(1.5) %
$
$
4
For the year ended December 31, 2020, Active Merchants increased by 167% to 26,690 compared to the year ended December 31,
2019. Likewise, Active Consumers has increased by 144% to 2,231,089 during the same comparative period.
For the year ended December 31, 2020, Active Merchants increased by 167% to 26,690 compared to the
year ended December 31, 2019. Likewise, Active Consumers has increased by 144% to 2,231,089 during
the same comparative period.
Net Transaction Margin
The Company’s NTM for the year ended December 31, 2020 improved by 1.2%, as a percentage of UMS,
compared to the year ended December 31, 2019, driven primarily by improved efficiencies in Sezzle
income, reductions in processing costs, and overall improvements in Net Transaction Losses.
52
Summarized below, Net Transaction Margin for the years ended December 31, 2020 and 2019 are as
follows:
For the years ended December 31,
2020
2019
Net Transaction Margin (NTM)
US$000s
% of UMS
US$000s
% of UMS
Underlying Merchant Sales (UMS)
Sezzle income
Cost of income
Net Transaction Loss
Transaction funding financing costs
Net Transaction Margin
856,382
49,659
(22,490)
(10,459)
(4,303)
12,408
— %
5.8 %
(2.6) %
(1.2) %
(0.5) %
1.4 %
244,126
13,319
(7,660)
(3,754)
(1,307)
598
— %
5.5 %
(3.1) %
(1.5) %
(0.5) %
0.2 %
Sezzle income relative to UMS was 5.8% and 5.5% for the years ended December 31, 2020 and 2019,
respectively. The 0.3pp improvement in Sezzle income relative to UMS is due to increases in Active
Merchants and efficiencies in direct loan origination costs, offset by the onboarding of large enterprise
merchants. Cost of income relative to UMS was (2.6%) and (3.1%) for the years ended December 31,
2020 and 2019, respectively. The 0.5pp improvement, is driven by reductions in fees incurred for
processing payments of consumer transactions.
Net Transaction Loss
5
SEZZLE INC ANNUAL REPORT 2020|
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Active Merchants
Active Consumers
Underlying Merchant Sales (UMS) (US$000s)
Merchant Fees (US$000s)
Net Transaction Margin (NTM) (% of UMS)
Net Transaction Loss (NTL) (% of UMS)
For the years ended December 31,
2020
2019
26,690
2,231,089
856,382
47,581
1.4 %
(1.2) %
10,010
914,886
244,126
12,969
0.2 %
(1.5) %
For the year ended December 31, 2020, Active Merchants increased by 167% to 26,690 compared to the
year ended December 31, 2019. Likewise, Active Consumers has increased by 144% to 2,231,089 during
the same comparative period.
Net Transaction Margin
Net Transaction Margin
The Company’s NTM for the year ended December 31, 2020 improved by 1.2%, as a percentage of UMS,
compared to the year ended December 31, 2019, driven primarily by improved efficiencies in Sezzle
The Company’s NTM for the year ended December 31, 2020 improved by 1.2%, as a percentage of UMS, compared to the year
income, reductions in processing costs, and overall improvements in Net Transaction Losses.
ended December 31, 2019, driven primarily by improved efficiencies in Sezzle income, reductions in processing costs, and overall
improvements in Net Transaction Losses. Summarized below, Net Transaction Margin for the years ended December 31, 2020
Summarized below, Net Transaction Margin for the years ended December 31, 2020 and 2019 are as
and 2019 is as follows:
follows:
Net Transaction Margin (NTM)
Underlying Merchant Sales (UMS)
Sezzle income
Cost of income
Net Transaction Loss
Net interest expense
Net Transaction Margin
For the years ended December 31,
2020
2019
US$000s
% of UMS
US$000s
% of UMS
$
856,382
— %
$
244,126
49,659
(22,490)
(10,459)
(4,303)
12,408
$
5.8 %
(2.6) %
(1.2) %
(0.5) %
1.4 %
$
13,319
(7,660)
(3,754)
(1,307)
598
— %
5.5 %
(3.1) %
(1.5) %
(0.5) %
0.2 %
Sezzle income relative to UMS was 5.8% and 5.5% for the years ended December 31, 2020 and 2019,
Sezzle income relative to UMS was 5.8% and 5.5% for the years ended December 31, 2020 and 2019, respectively. The 0.3pp
respectively. The 0.3pp improvement in Sezzle income relative to UMS is due to increases in Active
improvement in Sezzle income relative to UMS is due to lower promotional rates and efficiencies in direct loan origination
Merchants and efficiencies in direct loan origination costs, offset by the onboarding of large enterprise
costs, partially offset by the onboarding of large enterprise merchants. Cost of income relative to UMS was (2.6%) and (3.1%)
merchants. Cost of income relative to UMS was (2.6%) and (3.1%) for the years ended December 31,
for the years ended December 31, 2020 and 2019, respectively. The 0.5pp improvement is primarily driven by reductions in fees
2020 and 2019, respectively. The 0.5pp improvement, is driven by reductions in fees incurred for
incurred for processing payments of consumer transactions.
processing payments of consumer transactions.
Net Transaction Loss
Net Transaction Loss
During the year ended December 31, 2020, Net Transaction Loss improved 0.3pp of UMS compared to
During the year ended December 31, 2020, Net Transaction Loss improved 0.3pp of UMS compared to the year ended December
the year ended December 31, 2019, primarily due to higher collections of notes receivable, and consumer
31, 2019, primarily due to higher collections of notes receivable and consumer account reactivation fees.
Account Reactivation Fees.
Net Transaction Loss (NTL)
Provision for uncollectible accounts
Account reactivation fee income
Net Transaction Loss
2020
5
US$000s
$
$
(19,588)
9,129
(10,459)
For the years ended December 31,
2019
% of UMS
US$000s
% of UMS
(2.3) %
$
(6,236)
1.1 %
2,482
(1.2) %
$
(3,754)
(2.6) %
1.0 %
(1.5) %
During the year ended December 31, 2020 the Company had improved collections on consumer notes
During the year ended December 31, 2020 the Company had improved collections on consumer notes receivable as a result
receivable as a result of building its repeat usage and Active Consumer bases, along with refinements in
of building its repeat usage and Active Consumer bases, along with refinements in the Company’s underwriting processes.
the Company’s underwriting processes. In the first half of the year, the various stimulus measures
In the first half of the year, the various stimulus measures enacted by the U.S. government pertaining to the Coronavirus Aid,
enacted by the U.S. government pertaining to the Coronavirus Aid, Relief, and Economic Securities Act
Relief, and Economic Securities Act (CARES Act) contributed to the Company’s improved collections, in addition to underwriting
(CARES Act) contributed to the Company’s improved collections, in addition to tightened underwriting. In
changes made in anticipation of the COVID-19 impact. In the second half of the year, Sezzle saw higher Net Transaction Losses
primarily due to seasonality and universe expansion testing.
the second half of the year, Sezzle saw higher Net Transaction Losses primarily due to universe
expansion testing and seasonality.
Account reactivation fee income as a percentage of UMS remained relatively flat year over year.
Account reactivation fee income represents Account Reactivation Fees (formerly referred to as Failed
Payment Fees) collected during the period. Account reactivation fee income as a percentage of UMS
remained relatively flat year over year. As a percentage of Total Income, Account Reactivation Fees were
53
15.5% and 15.7% for the years ended December 31, 2020 and 2019, respectively. The 0.2pp reduction,
as a percentage of Total Income, is a result of improved collections on consumer notes receivable and the
expansion of the Company’s fee forgiveness and payment flexibility programs offered to consumers as a
response to COVID-19.
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As a percentage of Total income, Account Reactivation Fees were 15.5% and 15.7% for the years ended December 31, 2020 and
Financial Review
2019, respectively. The 0.2pp reduction, as a percentage of Total income, is a result of improved collections on consumer notes
receivable and the expansion of the Company’s fee forgiveness and payment flexibility programs offered to consumers as a
A summary of Sezzle’s financial results for the years ended December 31, 2020 and 2019 are as follows:
response to COVID-19.
A summary of Sezzle’s financial results for the years ended December 31, 2020 and 2019 are as follows:
15,801
Total income
A summary of Sezzle’s financial results for the years ended December 31, 2020 and 2019 are as follows:
58,788
272 %
Financial Review
Financial Review
(US$000s)
Cost of income
Net loss after tax
(US$000s)
Total income
Cost of income
Provision for uncollectible accounts
Provision for uncollectible accounts
For the years ended December 31,
2020
2019
Change (%)
(22,490)
(7,660)
(19,588)
For the years ended December 31,
(6,236)
194 %
214 %
2020
(32,393)
2019
(13,061)
Change (%)
148 %
$
58,788
$
(22,490)
(19,588)
15,801
(7,660)
(6,236)
272 %
194 %
214 %
148 %
Net loss after tax
The financial results of the Company for the years ended December 31, 2020 and 2019 are presented
below:
The financial results of the Company for the years ended December 31, 2020 and 2019 are presented below:
(13,061)
(32,393)
(US$000s)
The financial results of the Company for the years ended December 31, 2020 and 2019 are presented
below:
Sezzle income
Change
49,659
13,319
2020
2019
$
$
$
36,340
For the years ended December 31,
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Account reactivation fee income
Total income
Cost of Income
(US$000s)
Gross profit
Sezzle income
Gross margin %
Account reactivation fee income
Other income (expense)
Total income
Provision for uncollectible accounts
Cost of Income
Other operating expenses
Gross profit
EBITDA
Gross margin %
Depreciation and amortization
Other income (expense)
Impairment losses
Provision for uncollectible accounts
EBIT
Other operating expenses
Net interest expense
EBITDA
Interest expense on beneficial conversion feature
Depreciation and amortization
Loss before tax
EBIT
Income tax expense
Net interest expense
Net loss after tax
Interest expense on beneficial conversion feature
Other comprehensive income
Loss before tax
Income tax expense
Total comprehensive loss
Net loss after tax
Other comprehensive income
Total comprehensive loss
9,129
2,482
58,788
For the years ended December 31,
15,801
6,647
42,987
2020
(22,490)
2019
(7,660)
Change
(14,829)
36,299
49,659
9,129
61.7 %
(126)
58,788
(19,588)
(22,490)
(44,207)
36,299
8,141
13,319
2,482
51.5 %
(20)
15,801
(6,236)
(7,660)
(12,896)
8,141
28,158
36,340
6,647
10.2 %
(106)
42,987
(13,352)
(14,829)
(31,311)
28,158
(27,622)
61.7 %
(11,011)
51.5 %
(16,612)
10.2 %
(428)
(126)
(8)
(19,588)
(28,059)
(44,207)
(4,303)
(27,622)
—
(436)
(32,362)
(28,059)
(31)
(4,303)
(32,393)
—
495
(32,362)
(245)
5
(16)
(6,236)
(11,272)
(12,896)
(1,307)
(10,986)
(470)
(261)
(13,049)
(11,247)
(12)
(1,332)
(13,061)
(470)
—
(13,049)
$
(31)
(31,898)
$
(12)
(13,061)
$
(32,393)
495
(31,898)
(13,061)
0
(13,061)
(183)
(131)
8
(13,352)
(16,787)
(31,311)
(2,996)
(16,637)
470
(175)
(19,312)
(16,812)
(19)
(2,971)
(19,331)
470
495
(19,312)
(19)
(18,837)
(19,331)
495
(18,837)
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SEZZLE INC ANNUAL REPORT 2020|
Total Income
Sezzle income totaled US$49.7 million for the year ended December 31, 2020, compared to US$13.3 million for the year ended
December 31, 2019, an increase of 273% year-over-year driven by growth in Underlying Merchant Sales throughout the United
States and Canada, including the addition of a number of enterprise merchants. Merchant fees and consumer reschedule
fees, less direct financing origination costs, collectively comprise Sezzle income and are initially recorded as a deduction
from notes receivable in the consolidated balance sheets. Deferred fees and expenses are recognized in the consolidated
statements of operations over the average duration of the underlying notes receivable. Together, total consumer reschedule
fees and note origination costs were US$1.9 million, or 3.9% of total Sezzle income recognized during the year ended December
31, 2020 compared to US$0.4 million and 2.6% of Sezzle income during the year ended December 31, 2019, driven by an
improvement in note origination costs year over year.
Account reactivation fee income was US$9.1 million for the year ended December 31, 2020, compared to US$2.5 million for the
year ended December 31, 2019. Account reactivation fee income made up 15.5% of Total income for the year ended December
31, 2020, compared to 15.7% for the year ended December 31, 2019. The relative reduction in this metric is driven by improvement
in the Company’s collections of consumer notes receivable, as well as an expansion of fee forgiveness and payment flexibility
programs offered to consumers as a response to COVID-19.
Cost of Income
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Cost of income primarily comprises payment processing costs paid to third-party payment processors, consumer
communication costs, and merchant affiliate program and partnership fees. Payment processing costs as a percentage of
UMS were 2.0% and 2.4% for the years ended December 31, 2020 and 2019, respectively. The 2020 results included the full benefit
of Sezzle’s change in card processing service providers, executed in April 2019, as well as 0.1pp year over year reduction, as a
percentage of UMS, in customer communication expenses.
As a percentage of UMS, short-term referral fee costs stipulated by agreements with partners and merchants of Sezzle
remained consistent year over year.
Receivables and Uncollectible Accounts
Sezzle’s consumer notes receivables before expected losses and deferred net loan origination fees increased to US$95.4
million as of December 31, 2020, compared to US$29.7 million as of December 31, 2019, an increase of 221%, driven by increases
in UMS and Active Consumers. Sezzle’s notes receivable had a weighted average days outstanding of 34 days, consistent with
prior year’s duration.
Provisions for uncollectible accounts on the notes receivable were calculated on an expected loss basis. The total provision
for uncollectible accounts was US$19.6 million or 2.3% of UMS for the year ended December 31, 2020, compared to US$6.2 million
or 2.6% of UMS for the year ended December 31, 2019. For the 2020 year, overall the Company saw improved loss rates driven
by several factors, including increased repeat usage among consumers, continuous improvements in Sezzle’s proprietary
underwriting processes, tightening of credit to consumers as an initial respond to COVID-19, and overall improved collections
driven in part by U.S. government stimulus offered to many of Sezzle’s consumers through the CARES Act. These improvements
are offset by higher loss rates as a result of universe expansion testing of its underwriting processes and seasonality of loss
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rate patterns noted in the second half of 2020.
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Other Operating Expenses
Other Operating Expenses
Overall, other operating expenses increased 207% year over year as a result of the Company’s continued
Overall, other operating expenses increased 243% year over year as a result of the Company’s continued investment in its
investment in its personnel, marketing, and other various third party service provider and professional
personnel, marketing, and other various third-party service provider and professional service expenses. Other operating
service expenses. Other operating expenses for the years ended December 31, 2020 and 2019 are
expenses for the years ended December 31, 2020 and 2019 were comprised of the following:
comprised of the following:
Compensation-related expenses
Equity and incentive–based compensation
expenses
Third-party service provider costs
Marketing, advertising, and tradeshows
Professional services
Other operating expenses
2020
2019
US$000s
% of Total
US$000s
% of Total
$
17,077
38.6 %
$
7,420
57.5 %
13,613
30.8 %
1,167
9.1 %
2,464
4,275
2,357
540
3,881
5.6 %
9.7 %
5.3 %
1.2 %
8.8 %
$
44,207
100.0 %
$
1,284
839
720
369
1,096
12,896
10.0 %
6.5 %
5.6 %
2.9 %
8.5 %
100.0 %
Compensation related expenses increased to $26.1 million for the year ended December 31, 2020, from
Compensation related expenses increased to US$17.1 million for the year ended December 31, 2020, from US$7.4 million for the
year ended December 31, 2019. Sezzle continued to invest in its employees throughout 2019 and 2020. Total employees were 279
$8.6 million for the year ended December 31, 2019. Sezzle continued to invest in its employees
as of December 31, 2020, compared to 133 as of December 31, 2019.
throughout 2019 and 2020. Total employees were 279 as of December 31, 2020, compared to 133 as of
December 31, 2019.
Stock and incentive–based compensation expenses increased to US$13.6 million for the year ended December 31, 2020, from
US$1.2 million for the year ended December 31, 2019, due to the increase in number of employees as well as the introduction
Third-party service provider costs consist primarily of costs incurred to obtain data used in underwriting
of new incentive plans. In 2020, Sezzle introduced new short-term and long-term stock based incentive programs to attract,
consumers and fraud prevention. These costs increased to $2.5 million for the year ended December 31,
motivate and retain talented employees. The expenses for the new incentive plans totaled US$8.1 million for the year ended
2020, compared to $1.3 million for the year ended December 31, 2019, driven by growth in Active
December 31, 2020.
Consumers.
Third-party service provider costs consisted primarily of costs incurred to obtain data used in underwriting consumers and
Marketing, advertising, and tradeshow costs increased to $4.3 million for the year ended December 31,
fraud prevention. These costs increased to US$2.5 million for the year ended December 31, 2020, compared to US$1.3 million for
2020, compared to $0.8 million for the year ended December 31, 2019, as a result of the Company’s
the year ended December 31, 2019, driven by growth in Active Consumers.
efforts in expanding its presence with both merchants and consumers, as well as the investment to
implement Sezzle’s new brand.
Marketing, advertising, and tradeshow costs increased to US$4.3 million for the year ended December 31, 2020, compared to
US$0.8 million for the year ended December 31, 2019, as a result of the Company’s increased initiatives to co-market the Sezzle
brand with its merchants.
Professional services include legal, consultation, recruiting, financial audit, and tax compliance related
costs. Costs of $2.4 million for the year ended December 31, 2020 were driven by the completion of its
Professional services included legal, consultation, recruiting, financial audit, and tax compliance related costs. Costs increased
financial statement audit for the 2019 reporting year, as well as other ongoing professional services costs
by US$1.6 million year over year as a result of costs associated with the Company’s status of being publicly listed on the ASX,
associated with the Company’s status as publicly listed on the ASX.
as well as additional financial statement audit, tax, and legal costs.
Other operating expenses as a percent of UMS decreased to 4.6% for the year ended December 31,
Other operating expenses as a percent of UMS decreased to 5.2% for the year ended December 31, 2020 from 5.3% for the
2020 from 5.3% for the year ended December 31, 2019, primarily driven by the Company’s objective to
year ended December 31, 2019, primarily related to reductions in costs in response to COVID-19. Most notably, the Company
reduce or maintain costs in response to COVID-19. Most notably, the Company rolled out a work-from-
rolled out a work-from-home program for its employees beginning in mid-March 2020. In addition, the Company implemented
restrictions in travel and attendance of group events, including industry-related conferences. These COVID-19 related
measures resulted in lower than anticipated operating expenses, offset against expenses related to the Company’s new short
and long–term incentive plans, for the year ended December 31, 2020.
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Net Interest Expense
Net interest expense was US$4.3 million for the year ended December 31, 2020, driven by the Company’s continued utilization of
both its revolving line of credit and its Merchant Interest Program to facilitate the growth in UMS and related consumer notes
receivable. Refer to Notes 11 and 15 within the Consolidated Financial Statements for additional commentary on the Company’s
line of credit and Merchant Interest Program, respectively.
Interest expense on the beneficial conversion feature was incurred on the Company’s Initial Public Offering date and resulted
from the conversion of US$5.8 million of notes issued in the first half of 2019. Refer to Note 13 of the Consolidated Financial
Statements for further information.
Financial Position Activity
Sezzle’s total assets increased to US$174.1 million as of December 31, 2020 from US$64.5 million as of December 31, 2019. This
growth of US$109.6 million was primarily driven by increases in both cash and cash equivalents and consumer notes receivable.
Merchant accounts payable increased to US$60.9 million as of December 31, 2020, compared to US$13.3 million as of December
31, 2019. This increase was related to the growth in Underlying Merchant Sales and Active Merchants during 2020, in addition
to increased merchant participation in the Merchant Interest Program. Total liabilities increased to US$114.2 million as of
December 31, 2020, compared to US$37.2 million in the prior year.
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Stockholders’ equity increased to US$60.0 million as of December 31, 2020, from US$27.3 million as of December 31, 2019, primarily
as a result of the proceeds from the Company’s capital raise in the third quarter of 2020. Refer to Note 9 of the Consolidated
Financial Statements for further information.
Capital Management
To help manage the increase in UMS, Sezzle signed an agreement with the Syndicate to increase its debt facility to US$100
million in November 2019. As of December 31, 2020, Sezzle had drawn US$40.0 million from its revolving line of credit and had
US$23.9 million in additional borrowing capacity.
On July 15, 2020, Sezzle raised US$55,316,546 of proceeds via an institutional placement. On August 10, 2020, the Company
raised an additional US$5,140,710 of proceeds via a Securities Purchase Plan offered to existing investors. The total costs of
the capital raise were US$2,484,504, resulting in overall net proceeds of US$57,972,752. In exchange for the capital raise, Sezzle
issued 16,289,935 Chess Depository Interests (CDIs) at a price of A$5.30 (approximately US$3.82). The issued CDIs are equivalent
to common shares on a 1:1 basis.
Annual Report for further information.
Refer to the Consolidated Balance Sheets and the accompanying notes to the Consolidated Financial Statements in the
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O P E R A T I N G A N D F I N A N C I A L R E V I E W
Cashflow Activity
Sezzle incurred net losses from operating activities for the years ended December 31, 2020 and 2019. For the years ended
December 31, 2020 and 2019 Sezzle incurred a net loss of US$32.4 million and US$13.1 million, respectively. As of December 31,
2020, Sezzle had cash and cash equivalents of US$84.3 million and working capital of US$104.6 million.
Operating Activities
Net cash used for operating activities was US$24.8 million and US$19.9 million for the years ended December 31, 2020
and 2019, respectively. The increase in cash used for operating activities during the year ended December 31, 2020 was
driven by increased consumer notes receivable, offset with an increased participation in the Company’s Merchant
Interest Program. Net cash used for operating activities for the year ended December 31, 2019 was primarily driven by
increases in notes receivable due from consumers.
Investing Activities
Net cash used for investing activities during the year ended December 31, 2020 increased slightly to US$0.7 million,
compared to US$0.5 million during the year ended December 31, 2019. Cash outflows for investing activities were
primarily used for purchasing computer equipment, as well as payments of salaries to employees who create
capitalized internal-use software.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2020 was US$77.6 million, compared to
US$50.0 million during the year ended December 31, 2019. The increase was related to the Company’s capital raise, as
well as additional funds drawn on the Company’s line of credit facility.
Off Balance Sheet Arrangements
Sezle does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to
as structured finance or special purpose entities, that would have been established for the purpose of facilitating off balance
sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited
purposes. As such, Sezzle is not exposed to any financing, liquidity, market or credit risk that could arise if the Company
had engaged in those types of relationships. Sezzle enters into guarantees in the ordinary course of business related to the
guarantee of its performance and the performance of its subsidiaries.
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Key Risks
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R I S K S A N D C H A L L E N G E S
SEZZLE INC ANNUAL REPORT 2020
SEZZLE INC ANNUAL REPORT 2020
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In the course of conducting our business operations, we are exposed to a
variety of risks, some of which are inherent in our industry and others of which
are more specific to our businesses.
This discussion addresses the most significant factors, of which we are currently aware, that could affect our businesses,
results of operations, and financial condition. However, other factors not discussed below or elsewhere in this Annual
Report could also adversely affect our businesses, results of operations, and financial condition. Therefore, the risk
factors below should not be considered a complete list of potential risks that we may face.
E A R LY S T A G E C O M P A N Y R I S K
The Company is an early stage financial technology company with limited trading history. Since launching the Sezzle Platform
in August 2017, Sezzle’s activities have principally involved raising money to develop its software, products and services
(including the Sezzle Platform). Like many early stage companies, the Company has incurred losses since its inception. The
reported cumulative losses up to December 31, 2020 are approximately US$51.8 million. Given the Company’s limited trading
history, it is difficult to make an evaluation of Company’s business or its prospects and there is a significant risk that the
Company is not able to continue its growth at current rate, if at all, or successfully execute on its business plan and strategies.
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T R A N S A C T I O N V O L U M E A N D P R O D U C T O F F E R I N G S
The Company is currently in the early stages of establishing its presence in the US, Canadian, European and Indian markets,
and its ability to profitably scale its business is reliant on increase in transaction volumes and its customer and merchant
base to increase income and profits. Data from increasing transaction volumes will also better optimize the Company’s
systems and ability to make real-time consumers repayment capability decisions. Optimizing repayment capacity decisions of
our consumers may reduce our expenses and increase Sezzle Income.
The Company considers that establishing, expanding and maintaining the Company’s brand is important to growing its
merchant and consumer bases. Failure to expand in this way may materially and adversely impact the Company’s ability to
achieve economies of scale and to optimize its systems and may therefore adversely impact the Company’s ability to improve
its future profitability.
variety of reasons.
The Company’s growth strategy may also include the introduction of new services or technologies. There is a risk that
expansion initiatives may result in additional costs and risks or may not deliver the outcomes intended. The Company’s
growth strategy depends on increasingly expanding its consumer and merchant bases, which may not occur as intended for a
N E T T R A N S A C T I O N M A R G I N
The Company’s Net Transaction Margin, or the amount of money that the Company earns for each transaction divided by
the total transaction amount, is currently a positive percentage. The Company’s strategy to maintain the Net Transaction
Margin as a positive percentage, and to grow that percentage, depends upon the Company effectively managing transaction
processing costs, Loan Origination Costs and uncollectible accounts expenses, while efficiently utilizing external debt funding.
There is a risk that this strategy may not eventuate as intended, which may adversely impact the Company’s ability to improve
its future profitability.
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R I S K S A N D C H A L L E N G E S
L O S S O F K E Y P A R T N E R A N D M E R C H A N T R E L A T I O N S H I P S
The Company depends on continued relationships with its current significant merchants and partners that assist in obtaining
and maintaining our relationships with merchants. There can be no guarantee that these relationships will continue or,
if they do continue, that these relationships will continue to be successful. The Company’s contracts with merchants can
be terminated for convenience on relatively short notice by either party, and so the Company does not have long-term
contracted income.
There is a risk that the Company may lose merchants for a variety of reasons, including a failure to meet key contractual or
commercial requirements, or merchants shifting to in-house solutions (including providing a service competitive to us) or
competitor service providers. The Company also faces the risk that its key partners could become competitors of our business
if they are able to determine how we have implemented our model to provide our services.
Although the Company does not currently depend on any single merchant for more than approximately 2% of Sezzle Income,
the Company’s business is still at a relatively early stage, and merchant income is not as diversified as it might be for a more
mature business. The loss of even a small number of the Company’s key merchants may materially and adversely impact
the Company’s income and profitability and increase marketing expenses to sign up new merchants to replace those lost.
Depending on the reason for the loss of a key merchant, it may also negatively impact the Company’s reputation with other
merchants and with consumers.
There is also a risk that new agreements formed with merchants in the future may be less favorable to the Company, including
pricing and other key terms, due to unanticipated changes in the market in which the Company operates.
E X P O S U R E T O C O N S U M E R B A D D E B T S
The Company’s profitability depends on its ability to put in place and optimize its systems and processes to make
predominantly accurate, real-time decisions in connection with the consumer transaction approval process. Consumer
non-payment is a significant component of the Company’s expenses at present, and the Company is currently exposed to
consumer bad debts as a normal part of its operations. However, excessive exposure to bad debts through consumers failing
to meet their repayments to the Company will materially and adversely impact the Company’s profitability.
The Company also has an exposure, although much more limited, to the potential insolvency of merchants to which the
Company has advanced funds. Exposure occurs in the period between the advance of funds to a merchant for a consumer’s
purchase of goods, and the merchant shipping the goods to the consumer (at which point the Company is entitled to
payment from the consumer). However, this period of risk is typically only a few days.
A D D I T I O N A L R E Q U I R E M E N T S F O R C A P I T A L
As the Company’s current business grows and new lines of business are developed, the Company will require additional
funding to support the provision of installments plans to consumers and working capital. Although the Directors believe that
the Company has sufficient working capital and capacity to carry out its business objectives through December 31, 2022, there
can be no assurance that such goals can be met without further financing or, if new funding is necessary, that financing can
be obtained on favorable terms or at all. Further, if additional funds are raised by issuing equity securities, this may result in
dilution for some or all of our stockholders.
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decrease.
The Company intends to rely on a combination of fund options including equity and its current credit facility to finance
its operations. An inability to raise capital (through the issue of common stock and CDIs), secure funding, drawdown on
finance facilities, subsequently refinance the credit facility, or any increase in the cost of such funding, may adversely
impact the performance and financial position of the Company. Failure by the Company or its subsidiary, Sezzle
Funding, to meet financial covenants under its credit agreement, or the occurrence of other specified events, may lead
to an event of default or review event under the finance facilities. If an event of default or a review event applicable to
any given facility occurs, there may be a requirement to make repayments in advance of the relevant maturity dates
and/or termination of the credit facility. This may impact the financial performance and position of the Company and
its ability to operate in the ordinary course of business.
The Loan Agreement requires Sezzle to draw down a minimum of US$20 million between November 29, 2019 and
November 29, 2020, and US$40 million between November 29, 2020 and May 29, 2022. To the extent that Sezzle fails to
achieve consumer lending levels that exceeds these minimum drawdown requirements, Sezzle could incur additional
losses through significantly increased interest expenses that exceed Sezzle Income, which may adversely impact the
performance and financial position of the Company.
C O M P E T I T O R S A N D N E W M A R K E T E N T R A N T S
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The Company considers it has a competitive advantage in being one of the first to provide an interest-free ‘buy now, pay later’
service to the US and Canadian online retail market. However, there is always a risk of new entrants in the market, which may
disrupt the Company’s business and market share. Existing competitors, as well as new competitors entering the industry,
may engage in aggressive consumer acquisition campaigns, develop superior technology offerings, or consolidate with
other entities to deliver enhanced scale benefits. These competitors may also be better capitalized than us. Such competitive
pressures may materially erode the Company’s market share and income and may materially and adversely impact the
Company’s income and profitability. A general increase in competition may also require the Company to increase marketing
expenditure or offer lower fees to merchants, which would decrease profitability even if the Company’s market share does not
FA I L U R E S O R D I S R U P T I O N S O F T E C H N O L O G Y S Y S T E M S
The Company depends on the constant real-time performance, reliability, and availability of its technology system and third-
party technology and communication networks (including the systems of third-party e-commerce networks). There is a risk
that these systems may fail to perform as expected or be adversely impacted by several factors, some of which may be outside
the control of the Company, including damage, equipment faults, power failure, fire, natural disasters, computer viruses and
external malicious interventions such as hacking, cyber-attacks or denial-of-service attacks.
Events of that nature may cause part or all of the Company’s technology system and/or the communication networks used
by the Company to become unavailable. The Company’s operational processes and contingency plans may not adequately
address every potential event. This may disrupt transaction flow and adversely impact the Company’s financial performance
and reputation.
There is a risk that repeated failures to keep the Company’s technology available may result in a decline in consumer and
merchant numbers or merchants terminating their contracts with the Company. This may materially and adversely impact the
Company’s financial performance, including a reduction in income from completed transactions and an increase in the costs
associated with servicing consumers through the disruption, as well as negatively impacting the Company’s reputation.
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R I S K S A N D C H A L L E N G E S
R E L I A N C E O N T H E A C C U R A C Y O F T H I R D - P A R T Y
D A T A P R O V I D E D T O T H E C O M P A N Y
The Company purchases data from third parties that is critical to the Company’s assessment of the creditworthiness of
consumers before they are either approved or denied funding for their purchase from a merchant. The Company is reliant on
these third parties to ensure that the data they provide is accurate. Inaccurate data could cause the Company to not approve
transactions that otherwise would have been approved, or vice versa, meaning the Company either loses income, or earns
income that may lead to a higher incidence of bad debts.
E M P L O Y E E R E C R U I T M E N T R I S K A N D R E T E N T I O N
The Company’s ability to effectively execute its growth strategy depends upon the performance and expertise of its staff. The
Company relies on experienced managerial and highly qualified technical staff to develop and operate its technology and to
direct operational staff to manage the operational, sales, compliance, and other functions of its business.
There is a risk that the Company may not be able to attract and retain key staff or be able to find effective replacements in a
timely manner. The loss of staff, or any delay in their replacement, could impact the Company’s ability to operate its business
and achieve its growth strategies, including through the development of new systems and technology. There is a risk that the
Company may not be able to recruit suitably qualified and talented staff in a time frame that meets the growth objectives of
the Company. This may result in delays in the integration of new systems, development of technology, and general business
expansion, which may adversely impact the Company’s income and profitability.
There is also a risk that the Company will be unable to retain existing staff, or recruit new staff, on terms of retention that are
as attractive to the Company as past agreements. This would adversely impact employment costs and profitability.
G R O W T H M A N A G E M E N T
Sezzle has experienced a period of considerable growth of income, employee numbers and customers. A continuation of this
growth in the future could place additional pressure on current management, operational and finance resources, and on the
infrastructure supporting the Sezzle Platform. Failure to appropriately manage this growth could result in failure to retain
existing consumers and attract new consumers, which could adversely affect Sezzle’s operating and financial performance.
C O M P L I A N C E W I T H L A W S , R E G U L A T I O N S ,
A N D I N D U S T R Y C O M P L I A N C E S T A N D A R D S
The Company is subject to a range of legal and industry compliance requirements that are continually changing. Such
requirements include consumer protection, consumer disclosure, licensing and data security and privacy laws. There
has recently been an increased focus and scrutiny by regulators in various jurisdictions concerning ‘buy now, pay later’
arrangements. There is potential that the Company may become subject to additional legal or regulatory requirements if
its business, operations, strategy, or geographic reach expand in the future, or if the regulations change with respect to
the jurisdictions in which it operates. These changes may potentially include increased consumer protections, consumer
disclosures and additional licensing requirements. There is a risk that additional or changed legal, or regulatory requirements
may make it uneconomic for the Company to continue to operate, or to expand in accordance with its strategy. This may
materially and adversely impact the Company’s income and profitability, including by preventing its business from reaching
sufficient scale.
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If the Company fails to comply with these laws, and regulations we may incur significantly increased compliance costs,
be required to cease certain business activities, be unable to conduct business, or be subject to litigation or regulatory
inquiry or investigation and significant reputational damage.
Sezzle’s business is subject to investigation by regulators, enforcement agencies, and offices of state attorneys general,
which could lead to enforcement actions, fines and penalties, and qualifications to conduct business, or the assertion
of private claims and lawsuits against Sezzle. The U.S. Federal Trade Commission, the Department of Justice, and the
Department of Commerce have the authority to investigate consumer complaints against Sezzle, to conduct inquiries at
their insistence, and to recommend enforcement actions and seek monetary penalties.
Sezzle has satisfied the requirements to become a reporting company under the U.S. Securities Act and will accordingly
become subject to the periodic reporting requirements of the U.S. Exchange Act. The Company did not file the necessary
registration under Section 12(g) of the Exchange Act by the required filing date in the second quarter of 2020. Among
other things, this will require Sezzle to register the CDIs with the US Securities and Exchange Commission (SEC) under the
US Exchange Act. Registration under the US Exchange Act will involve Sezzle filing annual, quarterly, and current reports
on Forms 10-K, 10-Q and 8-K. In the absence of a waiver from the ASX Listing Rules, these SEC periodic reports will be in
addition to Sezzle’s periodic filings required by the ASX Listing Rules. At the time Sezzle becomes subject to the reporting
requirements of the U.S. Exchange Act, Sezzle will also become subject to the Sarbanes-Oxley Act and the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, which will impose additional governance and reporting
obligations. The Company expects to incur ongoing routine legal, accounting and administrative costs as it pertains to
the additional periodic filings. This situation could potentially result in claims or actions against the Company, including
fines or penalties, litigation, injunctions or damage awards. The Board, in consultation with its external counsel, does not
believe that any potential penalties or actions relating to this matter have the potential to significantly impact business
operations or outlook.
C O M P L I A N C E W I T H I N T E R N A T I O N A L L A W S ,
R E G U L A T I O N S , A N D I N D U S T R Y C O M P L I A N C E S T A N D A R D S
We are offering our services in India, and exploring expansion into other foreign markets, including Europe, as part of our
growth strategy. Our ability to grow in international markets and our future results could be adversely affected by a number of
factors, including:
• restrictions on money transfers to, from and between certain countries;
• currency controls, new currency adoptions and repatriation issues;
• changes in regulatory requirements and foreign policy, including the adoption of domestic or foreign laws,
regulations and interpretations detrimental to our business;
• possible increased costs and additional regulatory burdens imposed on our business;
• changes in political and economic conditions and potential instability in certain regions, including in particular
the recent civil unrest, terrorism, political turmoil and economic uncertainty in Africa, the Middle East and other
regions;
• burdens of complying with a wide variety of laws and regulations;
• possible fraud or theft losses, and lack of compliance by international representatives in foreign legal jurisdictions
where collection and legal enforcement may be difficult or costly;
• reduced protection of our intellectual property rights;
• unfavorable tax rules or trade barriers; and
• inability to secure, train or monitor international agents.
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In particular, as we expand, changes in the regulatory environment and violations of the U.S. Foreign Corrupt Practices Act
and similar worldwide anti-bribery laws may negatively impact our business. We are subject to regulations relating to our
corporate conduct and the conduct of our business, including securities laws, consumer protection laws, trade regulations,
advertising regulations, privacy and cybersecurity laws, wage and hour regulations, anti-money laundering and anti-
corruption legislation. Certain jurisdictions have taken aggressive stances with respect to such matters and have implemented
new initiatives and reforms, including more stringent regulations, disclosure and compliance requirements.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit
companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business.
Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive
investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity
by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our
policies mandate compliance with all anti-bribery laws. However, we operate in certain countries that are recognized as having
governmental and commercial corruption. Our internal control policies and procedures may not always protect us from
reckless or criminal acts committed by our employees or third-party intermediaries. Violations of these anti-bribery laws may
result in criminal or civil sanctions, which could have a material adverse effect on our business and results of operations.
Anti-Money Laundering (AML) laws and related Know-Your-Customer (KYC) laws in other jurisdictions generally require
companies to conduct necessary due diligence to prevent and protect against money laundering. AML enforcement activity
could result in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance
with all AML applicable laws. However, we operate in certain countries that may be at higher risk of money laundering
activities. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by
our employees or third-party intermediaries. Violations of AML laws may result in criminal or civil sanctions, which could have
a material adverse effect on our business and results of operations.
Various regulatory agencies demand licensing or other controls in order to operate in each market; such requirements vary
country by country and are fact dependent. Our innovative approach to the market makes interpretations in regulatory
requirements speculative. Local authorities may determine that the nature of our offerings may require different licenses or
requirements than the licenses that we have obtained or secured. Any delays in securing the necessary licenses or obtaining
the necessary approvals could delay our expansion into foreign markets, which would adversely affect our anticipated growth.
Further, any violations of the regulations around licensing may result in criminal or civil sanctions, which could have material
adverse effects in our operations
D A T A S E C U R I T Y B R E A C H E S
Through the ordinary course of business, the Company collects a wide range of confidential and personal information. Cyber-
attacks may compromise or breach the technology platform used by the Company to protect sensitive data. The Company’s
business could be materially impacted by security breaches of the data and information of merchants and consumers data
and information, either by unauthorized access, theft, destruction, loss of information, or misappropriation or release of
confidential data.
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There is also a risk that the measures the Company takes may not be sufficient to detect or prevent unauthorized access
to, or disclosure of, such confidential, personal or proprietary information, and any of these events may cause significant
disruption to the business and operations. This risk may also expose the Company to reputational damage, legal claims,
termination of the Company’s contracts with merchants, and regulatory scrutiny and fines, any of which could materially
adversely impact the financial performance and prospects of the Company. In addition, any security or data issues
experienced by other software companies globally could adversely impact consumers’ trust in providing access to their data
generally, which could adversely affect the Company’s ability to provide its services.
A C T I V I T I E S O F F R A U D U L E N T P A R T I E S
The Company is exposed to risks imposed by fraudulent conduct, including the risks associated with consumers attempting
to circumvent the Company’s system and repayment capability assessments. There is a risk that the Company may be
unsuccessful in defeating fraud attempts, resulting in a higher than budgeted cost of fraud and consumer non-payment.
The Company guarantees payment to merchants and accepts the responsibility associated with minimizing fraudulent
activity and bears all costs associated with such fraudulent activity. Fraudulent activity may result in the Company suffering
losses due to fraud, causing a materially adverse impact to the Company’s reputation and having to bear certain costs to
rectify and safeguard business operations and the Company’s systems against fraudulent activity.
P R O T E C T I O N O F I N T E L L E C T U A L P R O P E R T Y
The Company’s business depends on its ability to commercially exploit its technology and intellectual property rights,
including its technological systems and data processing algorithms. The Company relies on laws relating to trade secrets,
copyright and trademarks to assist in protecting its proprietary rights. However, there is a risk that unauthorized use or
copying of the Company’s software, data, specialized technology or platforms will occur. In addition, there is a risk that the
validity, ownership or authorized use of intellectual property rights relevant to the Company’s business may be successfully
challenged by third parties. This could involve significant expense and potentially the inability to use the intellectual property
rights in question, and if an alternative cost-effective solution was not available, it may materially adversely impact the
Company’s financial position and performance. Such disputes may also temporarily adversely impact the Company’s ability to
integrate new systems, which may adversely impact the Company’s income and profitability.
There is also a risk that the Company will be unable to register or otherwise protect new intellectual property rights it develops
in the future, or which is developed on its behalf by contractors. In addition, competitors may be able to work around any of
the intellectual property rights used by the Company, or independently develop technologies, or competing payment products
or services that are not protected by the Company’s intellectual property rights. The Company’s competitors may then be able
to offer identical or very similar services or services that are otherwise competitive against those provided by the Company,
which could adversely affect the Company’s business.
I N T E G R A T I O N W I T H M E R C H A N T S
The Company uses and relies on integration with third-party systems and platforms, particularly websites and other systems
of its merchants. The success of the Company’s services, and its ability to attract additional consumers and merchants,
depends on the ability of its technology and systems to integrate into, and operate with, these various third-party systems
and platforms. In addition, as these systems and platforms are regularly updated, it is possible that when such updates occur
it could cause the Company’s services to not operate as efficiently as previously. This will require the Company to change the
way its system operates, which may take time and expense to remedy.
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T E C H N O L O G I C A L C H A N G E S
The Company participates in a competitive technological environment. Technology systems are continuing to develop and are
subject to rapid change, while business practices continue to evolve. The Company’s success will, in part, depend on its ability
to offer services and systems that remain current with the continuing changes in technology, evolving industry standards, and
changing consumer preferences. There is a risk that the Company will not be successful in addressing these developments in
a timely manner, or that expenses will be higher than expected. In addition, there is a risk that new products or technologies
(or alternative systems) developed by third parties will supersede the Company’s technology. This may materially and
adversely impact the Company’s income and profitability.
T H I R D - P A R T Y I N T E L L E C T U A L P R O P E R T Y
There is a risk that third parties may allege that the Company’s solutions use intellectual property derived by them or from
their products without their consent or permission. The Company may be subject of claims that could result in disputes or
litigation, and this could require us to incur significant expenses even if the Company is able to successfully defend or settle
such claims. If the Company is found to have infringed the third-party’s intellectual property rights, the Company may be
required to pay monetary compensation to the third party or take other actions that may cause disruption to its service
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delivery model and increase its costs. This in turn could have an adverse impact on the Company’s operations, reputation and
financial performance.
O P E N S O U R C E S O F T W A R E R I S K
Some of the Company’s systems incorporate and are dependent on the use and development of “open source” software. Open
source software is generally licensed under open source licenses, which may include a requirement that the Company make
available, or grant licenses to, any modifications or derivatives works created using the open source software. If an author or
other third party that uses or distributes such open software were to allege that the Company had not complied with the legal
terms and conditions of one or more of these licenses, the Company could incur significant legal expenses defending against
such allegations and could be subject to significant damages.
U N A N T I C I P A T E D T R A N S A C T I O N V O L U M E S
Continued increases in transaction volumes may require the Company to expand and adapt its network infrastructure
to avoid interruptions to the Company’s systems and technology. Any unanticipated transaction volumes may cause
interruptions to the Company’s systems and technology, reduce the number of completed transactions, increase expenses,
and reduce the level of customer service, and these factors may potentially adversely impact the Company’s financial
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performance.
I N T E R N E T R I S K
The Company depends on the ability of its merchants and consumers to access the internet. Should access to the internet be
disrupted or restricted, usage of the Company’s services may be adversely impacted.
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performance.
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P A Y M E N T G A T E W A Y S R I S K
The Company relies on online payment gateways, banking and financial institutions for the validation of bank cards,
settlement and collection of payments. Any failures or disruptions to such platforms and technology may impact the financial
performance of the Company.
R E P U T A T I O N R I S K
Maintaining the strength of the Company’s reputation is important to retaining and increasing its consumer and merchant
base, maintaining its relationships with partner companies and other service providers, and successfully implementing the
Company’s business strategy. There is a risk that unforeseen issues or events may adversely impact the Company’s reputation,
and this may negatively impact the future growth and profitability of the Company.
The Company’s reputation is also closely linked to the timely and accurate provision of services to consumers. There is a risk
that the Company’s actions and the actions of the Company’s suppliers and merchants may adversely impact the Company’s
reputation. Any factors that diminish the Company’s reputation could result in consumers, merchants, or other parties ceasing
to do business with the Company. Such reputation risk would impede the Company’s ability to successfully provide its goods
and services, negatively affect its future business strategy, and materially and adversely impact its financial position and
E X P O S U R E T O A D V E R S E M A C R O E C O N O M I C C O N D I T I O N S
The Company’s business depends on consumers transacting with merchants, which in turn can be affected by changes in
general economic conditions. For example, the retail sector is affected by such macroeconomic conditions as unemployment,
interest rates, consumer confidence, economic recessions, downturns or extended periods of uncertainty or volatility, all of
which may influence consumer spending and suppliers and retailers’ focus and investment in outsourcing solutions. This may
subsequently impact the Company’s ability to generate income. Additionally, in weaker economic environments, consumers
may have less disposable income to spend, and as a result, may be less likely to purchase products by utilizing the Company’s
services and bad debts might increase.
C O V I D - 1 9 P A N D E M I C
Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the
outbreak of the COVID-19 respiratory illness first identified in Wuhan, Hubei Province, China. At this time our financial results
have not been adversely affected by the COVID-19 pandemic, but as the pandemic is ongoing, we believe that it could
adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could
adversely affect consumer spending, demand for our merchants’ goods, our ability to collect outstanding payments owed by
the consumers and thereby our operating results, all of which may have a material adverse effect on our business.
L I T I G A T I O N R I S K
The Company may be subject to litigation and other claims and disputes in the course of its business, including contractual
disputes, employment disputes, indemnity claims, and occupational and personal claims. Litigation is expensive and diverts
time and energy away from the Company’s business. Even if the Company is ultimately successful, there is a risk that such
litigation, claims and disputes could materially and adversely impact the Company’s operating and financial performance due
to the cost of settling such claims and a diversion of our employees’ time, and affect the Company’s reputation.
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R I S K S A N D C H A L L E N G E S
I N S U R A N C E R I S K
The Company plans to maintain insurance as it considers appropriate for its needs. However, the Company will not be insured
against all risks, either because appropriate coverage is not available or because the Directors consider the applicable
premiums to be excessive in relation to the perceived benefits that would accrue. Accordingly, the Company may not be fully
insured against all losses and liabilities that could unintentionally arise from its operations. If the Company incurs uninsured
losses or liabilities, the value of the Company’s assets may be at risk.
A C H I E V E M E N T O F P U B L I C B E N E F I T P U R P O S E
As a PBC, we are required to produce a public benefit or benefits and to operate in a responsible and sustainable manner,
balancing our stockholders’ pecuniary interests, the best interests of those materially affected by our conduct, and the public
benefit or benefits identified by our Amended Charter. There is no assurance that we will achieve our public benefit purpose
or that the expected positive impact from being a PBC will be realized, which could have a material adverse effect on our
reputation, which in turn may have a material adverse effect on our business, results of operations and financial condition.
As a PBC, we are required to publicly disclose a report at least biennially on our overall public benefit performance and on
our assessment of our success in achieving our specific public benefit purpose. If such reports are not viewed favorably by
parties doing business with us, regulators, or others reviewing our credentials, our reputation and status as a public benefit
corporation may be harmed.
I M P A C T O F P U B L I C B E N E F I T P U R P O S E O N F I N A N C I A L P E R F O R M A N C E
Unlike traditional corporations, which have a fiduciary duty to focus exclusively on maximizing shareholder value, our directors
have a fiduciary duty to consider not only the shareholders’ interests, but also the company’s specific public benefit and the
interests of other stakeholders affected by our actions. Therefore, we may take actions that we believe will be in the best interests of
those stakeholders materially affected by our specific benefit purpose, even if those actions do not maximize our financial results.
While we intend for this public benefit designation and obligation to provide an overall net benefit to us and our customers, it
could instead cause us to make decisions and take actions without seeking to maximize the income generated from our business,
and hence available for distribution to our shareholders. Our pursuit of longer-term or non-pecuniary benefits may not materialize
within the timeframe we expect, or at all, yet may have an immediate negative effect on any amounts available for distribution to
our shareholders. Accordingly, being a PBC and complying with our related obligations could have a material adverse effect on our
business, results of operations and financial condition, which in turn could cause our stock price to decline.
As a PBC, we may be less attractive as a takeover target than a traditional company because our directors have a fiduciary duty
to consider not only the stockholders’ financial interests, but also the Company’s specific public benefit and the interests of other
stakeholders affected by our actions and, therefore, our stockholders’ ability to realize a return on their investments through an
acquisition may be limited. Under Delaware law, a PBC cannot merge or consolidate with another entity if, as a result of such merger
or consolidation, the surviving entity’s charter “does not contain the identical provisions identifying the public benefit or public
benefits,” unless the transaction receives approval from two-thirds of the target public benefit corporation’s outstanding voting
shares. Additionally, PBCs may also not be attractive targets for activists or hedge fund investors because new directors would still
have to consider and give appropriate weight to the public benefit along with shareholder value, and shareholders committed
to the public benefit can enforce this through derivative suits. Further, by requiring that board of directors of PBCs consider
additional constituencies other than maximizing shareholder value, Delaware public benefit corporation law could potentially
make it easier for a board to reject a hostile bid, even where the takeover would provide the greatest short-term financial yield to
investors.
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C O N F L I C T O F I N T E R E S T B E T W E E N P U B L I C B E N E F I T A N D S T O C K H O L D E R S
While directors of traditional corporations are required to make decisions they believe to be in the best interests of their
stockholders, directors of a PBC have a fiduciary duty to consider not only the stockholders’ interests, but also the company’s
specific public benefit and the interests of other stakeholders affected by the company’s actions. Under Delaware law,
directors are shielded from liability for breach of these obligations if they make informed and disinterested decisions that
serve a rational purpose. Thus, unlike traditional corporations which must focus exclusively on stockholder value, our directors
are not merely permitted, but obligated, to consider our specific public benefit and the interests of other stakeholders. In
the event of a conflict between the interests of our stockholders and the interests of our specific public benefit or our other
stakeholders, our directors must only make informed and disinterested decisions that serve a rational purpose; thus, there is
no guarantee such a conflict would be resolved in favor of our stockholders, which could have a material adverse effect on our
business, results of operations and financial condition, which in turn could cause our stock price to decline.
L I T I G A T I O N D U E T O C O N F L I C T O F I N T E R E S T B E T W E E N P U B L I C B E N E F I T
A N D S T O C K H O L D E R S
Stockholders of a Delaware PBC (if they, individually or collectively, own at least two percent of the company’s outstanding
shares) are entitled to file a derivative lawsuit claiming the directors failed to balance stockholder and public benefit
interests. This potential liability does not exist for traditional corporations. Therefore, we may be subject to the possibility of
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increased derivative litigation, which would require the attention our management, and, as a result, may adversely impact our
management’s ability to effectively execute our strategy. Additionally, any such derivative litigation may be costly, which may
have an adverse impact on our financial condition and results of operations.
T H E E X I S T I N G M A J O R S H A R E H O L D E R S O F T H E C O M P A N Y O W N A
L A R G E P E R C E N T A G E O F T H E S T O C K O F T H E C O M P A N Y A N D C A N E X E R T
S I G N I F I C A N T I N F L U E N C E O V E R T H E C O M P A N Y.
The existing major shareholders of the Company, particularly Charlie Youakim and to a lesser extent, Paul Paradis, together
hold approximately 50.1% of the total CDIs outstanding as of March 18, 2021, and can exert significant influence over the
Company, including in relation to the election of directors, the appointment of new management and the potential outcome
of matters submitted to the vote of shareholders. As a result, other shareholders will have minimal control and influence over
any matters submitted to our shareholders. There is a risk that the interests of these existing major shareholders may be
different from those of other shareholders.
A L A R G E N U M B E R O F S H A R E S A R E H E L D I N E S C R O W, A N D T H E R E T E N T I O N
O F S U C H S H A R E S , A N D A C T U A L O R P E R C E I V E D L A R G E S A L E S U P O N T H E I R
R E L E A S E , M A Y A D V E R S E LY A F F E C T T H E L I Q U I D I T Y O F T H E M A R K E T F O R
T H E C O M P A N Y ’ S S H A R E S O R T H E M A R K E T V A L U E O F T H E C O M P A N Y ’ S
S H A R E S .
As of March 18, 2021, a total of 93,975,244 shares/CDIs, representing 47.9% of the currently outstanding CDIs remain subject
to escrow restrictions under restriction agreements required by the Australian Securities Exchange (ASX) in connection with
the Company’s initial public offering in July 2019. These shares include a significant number of shares held by the major
shareholders of the Company. All of such shares/CDIs will be released from such restrictions on July 30, 2021. Until expiration
of the escrow period, the holders of the escrowed shares/CDIs cannot transfer their respective shares/CDIs without the
approval of the ASX. The retention of such escrow shares/CDIs through the end of the escrow period may cause or contribute
to limited liquidity in the market for the Company’s shares, which could affect the market price at which other shareholders
are able to sell. There is also a risk that a significant sale of CDIs or shares by existing shareholders after the end of the escrow
period, or the perception that such a sale might occur, could adversely affect the market price of the stock.
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R I S K S A N D C H A L L E N G E S
SEZZLE INC ANNUAL REPORT 2020
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S E Z Z L E I N C . & S U B S I D I A R I E S
Consolidated
Financial
Statements
F O R T H E Y E A R S E N D E D D E C E M B E R 3 1 ,
2 0 2 0 A N D 2 0 1 9
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F I N A N C I A L S T A T E M E N T S
SEZZLE INC ANNUAL REPORT 2020
SEZZLE INC ANNUAL REPORT 2020
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Report of Independent Registered Public Accounting Firm
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F I N A N C I A L S T A T E M E N T S
December 31, 2020
December 31, 2019
As of
$
84,285,383 $
4,798,520
80,807,300
1,403,306
1,705,919
173,000,428
537,046
375,186
145,576
20,000
32,537
34,965,069
1,639,549
25,189,135
315,502
882,939
62,992,194
480,098
134,400
867,272
20,000
49,171
$
$
174,110,773 $
64,543,135
60,933,272 $
13,284,544
Consolidated Balance Sheets
Sezzle Inc. and Subsidiaries
Consolidated Balance Sheets
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Assets
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Current Assets
Cash and cash equivalents
Restricted cash, current
Notes receivable, net
Other receivables, net
Total current assets
Non-Current Assets
Prepaid expenses and other current assets
Internally developed intangible assets, net
Property and equipment, net
Right-of-use assets
Restricted cash
Other assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Merchant accounts payable
Lease liabilities
Accrued liabilities
Other payables
Total current liabilities
Long Term Liabilities
Long term debt
Lease liabilities
Other non-current liabilities
Total Liabilities
Stockholders' Equity
142,743
6,680,870
615,839
68,372,724
1,470,332
—
39,826,227
4,483,073
114,152,356
1,970
112,640,974
(69,440)
(875,232)
494,505
(52,234,360)
59,958,417
Line of credit, net of unamortized debt issuance costs of $173,773 and
$590,827, respectively
Common stock, $0.00001 par value; 300,000,000 shares authorized;
197,078,709 and 178,931,312 shares issued, respectively; 196,926,674 and
178,931,312 shares outstanding, respectively
Additional paid-in capital
Stock subscriptions; 64,000 and no shares subscribed, respectively
Treasury stock, at cost; 152,035 and no shares, respectively
Accumulated other comprehensive income
Accumulated deficit
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
$
174,110,773 $
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
2
389,257
1,677,780
267,934
15,619,515
250,000
500,131
20,859,173
—
37,228,819
1,789
47,154,147
—
—
—
(19,841,620)
27,314,316
64,543,135
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SEZZLE INC ANNUAL REPORT 2020|
Consolidated Statements of Operations and Comprehensive Loss
Sezzle Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
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Sezzle income
$
49,659,042 $
Income
Account reactivation fee income
Total income
Cost of Income
Gross Profit
Operating Expenses
Selling, general, and administrative expenses
Provision for uncollectible accounts
Total operating expenses
For the years ended
December 31, 2020
December 31, 2019
9,129,231
58,788,273
22,489,626
36,298,647
44,643,039
19,587,918
64,230,957
13,319,218
2,481,893
15,801,111
7,660,276
8,140,835
13,156,891
6,235,820
19,392,711
Operating Loss
(27,932,310)
(11,251,876)
Other Income (Expense)
Net interest expense
Interest expense on beneficial conversion feature
Other income and expense, net
(4,303,175)
—
(126,291)
(1,307,143)
(470,268)
(20,085)
Loss before taxes
(32,361,776)
(13,049,372)
Income tax expense
30,964
11,981
Net Loss
(32,392,740)
(13,061,353)
Other Comprehensive Income
Foreign currency translation adjustment
494,505
—
Total Comprehensive Loss
(31,898,235) $
(13,061,353)
(0.12)
111,576,824
$
$
Net losses per share:
Basic and diluted net loss per common share
(0.17) $
Basic and diluted weighted average shares outstanding
186,842,646
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity (Deficit)
F I N A N C I A L S T A T E M E N T S
Sezzle Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Stock
Subscriptions
Treasury
Stock, At
Cost
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
59,416,666 $
594 $
143,713 $
—
$
— $
— $
(6,016,328) $ (5,872,021)
—
—
1,034,578
882,914
407,000
8
4
37,099
132,683
—
—
—
70,446,291
705
11,925,866
12,064,155
121
6,370,877
35,714,286
357
27,509,331
—
—
—
178,931,312
1,789
47,154,147
—
—
6,528,356
1,672,476
16
436,190
464,736
5
482,483
—
—
—
—
—
—
—
—
—
—
—
—
64,000
1
69,439
(69,440)
—
—
—
—
—
—
—
—
—
—
—
—
—
(152,035)
(343,750)
—
(3)
—
(2,231)
16,289,935
162
57,972,590
—
—
—
—
—
—
—
(875,232)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,034,578
—
37,107
—
132,687
(763,939)
(763,939)
—
11,926,571
—
6,370,998
—
—
27,509,688
—
(13,061,353)
(13,061,353)
—
(19,841,620)
27,314,316
—
—
—
—
—
—
—
6,528,356
—
436,206
—
482,488
—
—
—
(875,232)
—
(2,234)
—
—
57,972,752
494,505
—
494,505
—
(32,392,740)
(32,392,740)
196,926,674
$
1,970
$ 112,640,974
$
(69,440)
$ (875,232) $
494,505
$
(52,234,360)
$ 59,958,417
The accompanying notes are an integral part of these consolidated financial statements.
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Balance at January 1, 2019
Equity based
compensation
Stock option exercises
Restricted stock issuances
and vesting of awards
Preferred stock dividend
Conversion of preferred
stock to common stock
Conversion of notes to
common stock
Proceeds of initial public
offering, net of issuance
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costs
Net loss
Balance at December 31,
2019
Equity based
compensation
Stock option exercises
Restricted stock issuances
and vesting of awards
Stock subscriptions
receivable related to stock
option exercises
Repurchase of common
stock
Retirement of common
stock
Proceeds from issuance of
common stock, net of
issuance costs
Foreign currency
translation adjustment
Net loss
Balance at December 31,
2020
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SEZZLE INC ANNUAL REPORT 2020|
Consolidated Statements of Cash Flows
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Sezzle Inc. and Subsidiaries
Consolidated Statements of Cash Flows
US$
Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization
Provision for uncollectible notes receivable
Provision for uncollectible other receivables
Equity based compensation and restricted stock vested
Amortization of debt issuance costs
Impairment losses on long-lived assets
Loss and accrued interest on conversion of convertible notes
Changes in operating assets and liabilities:
Notes receivable
Other receivables
Prepaid expenses and other assets
Merchant accounts payable
Other payables
Accrued liabilities
Operating leases
For the years ended
December 31, 2020
December 31, 2019
$
(32,392,740) $
(13,061,353)
428,374
19,587,918
2,723,853
7,010,844
417,054
7,850
—
(74,983,119)
(3,810,392)
(795,884)
47,467,731
84,962
9,469,738
(25,050)
245,496
6,235,820
1,188,201
1,167,265
72,379
15,623
579,216
(26,494,339)
(1,470,923)
(788,428)
11,007,664
171,682
1,190,018
22,116
Net Cash Used for Operating Activities
(24,808,861)
(19,919,563)
Investing Activities:
Purchase of property and equipment
Internally developed intangible asset additions
Net Cash Used for Investing Activities
Financing Activities:
Proceeds from issuance of long term debt
Costs incurred for convertible note issuance
Proceeds from line of credit
Payments to line of credit
Proceeds from stock option exercises
Payments of debt issuance costs
Proceeds from initial public offering
Costs incurred for initial public offering
Retirement of common stock
Proceeds from issuance of common stock
Costs incurred from issuance of common stock
Repurchase of common stock
Net Cash Provided from Financing Activities
Effect of exchange rate changes on cash
Net increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of year
Cash, cash equivalents, and restricted cash, end of year
Noncash investing and financing activities:
Withholding of restricted stock units to cover employee tax withholding
Conversion of notes to common stock
Conversion of preferred stock to common stock
Issuance of preferred stock dividend
Noncash lease liabilities arising from obtaining right-of-use assets
$
$
(410,896)
(322,015)
(732,911)
1,220,332
—
85,650,000
(67,100,000)
436,206
—
—
—
(2,234)
60,457,256
(2,484,504)
(611,215)
77,565,841
455,216
52,024,069
36,624,618
89,103,903 $
264,017 $
—
—
—
—
(125,885)
(406,333)
(532,218)
5,812,500
(25,000)
24,200,000
(6,950,000)
37,107
(592,750)
30,286,785
(2,777,097)
—
—
—
—
49,991,545
—
29,539,764
7,084,854
36,624,618
—
6,370,998
11,926,571
763,939
872,210
Supplementary disclosures:
Interest paid
Income taxes paid
3,770,838
8,326
1,153,730
—
The accompanying notes are an integral part of these consolidated financial statements.
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F I N A N C I A L S T A T E M E N T S
SEZZLE INC ANNUAL REPORT 2020
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Notes
T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
F O R T H E Y E A R S E N D E D
D E C E M B E R 3 1 , 2 0 2 0 A N D 2 0 1 9
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
SEZZLE INC ANNUAL REPORT 2020
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SEZZLE INC ANNUAL REPORT 2020|
N O T E 1 – P R I N C I P A L B U S I N E S S A C T I V I T Y
A N D S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
Principal Business Activity
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Sezzle Inc. (the “Company” or “Sezzle”) is a technology-enabled payments company based in the United States with operations
in the United States, Canada, and startup operations in India and Europe. The Company is a Delaware Public Benefit
Corporation formed on January 4, 2016. The Company offers its payment solution at online stores and a select number of
brick-and-mortar retail locations, connecting consumers with merchants via a proprietary payments solution that instantly
extends credit at point-of-sale, allowing consumers to purchase and receive the items that they need now while paying over
time in interest-free installments.
Merchants turn to Sezzle to increase sales by tapping into Sezzle’s existing user base, increase conversion rates, increase
spend per transaction, increase purchase frequency, and reduce return rates, all without bearing any credit risk. Sezzle is a
high-growth, networked platform that benefits from a symbiotic and mutually beneficial relationship between merchants and
consumers.
The Company’s core product allows consumers to make online purchases and split the payment for the purchase over four
equal, interest-free payments over six weeks. The consumer makes the first payment at the time of checkout and makes the
subsequent payments every two weeks thereafter. The purchase price, less processing fees, is paid to merchants by Sezzle in
advance of the collection of the purchase price installments by Sezzle from the consumer.
The Company is headquartered in Minneapolis, Minnesota.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements are prepared and presented under accounting principles generally accepted in the
United States of America (U.S. GAAP). All amounts are reported in U.S. dollars, unless otherwise noted. It is the Company’s policy
to consolidate the accounts of subsidiaries for which it has a controlling financial interest. The accompanying consolidated
financial statements include all the accounts and activity of Sezzle Inc. and Sezzle’s wholly-owned subsidiaries: Sezzle
Canada Corp; Sezzle Funding SPE, LLC; Sezzle Holdings I, Inc.; Sezzle Holdings II, Inc.; Sezzle Holdings III B.V.; Sezzle Payments
Private Limited; Sezzle FinTech Private Limited; Sezzle Germany GmbH; and Sezzle Lithuania UAB. All significant intercompany
balances and transactions have been eliminated in consolidation.
Concentrations of Credit Risk
Cash and Cash Equivalents
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and
cash equivalents. The Company maintains its cash in depository accounts that, at times, may exceed limits established by the
Federal Deposit Insurance Corporation (FDIC) and equivalent foreign institutions. As of the date of this report, the Company
has experienced no losses on such accounts.
Foreign Currency Risk
The Company holds funds and settles payments that are denominated in currencies other than US dollars. Changes in
foreign currency exchange rates expose the Company to fluctuations on its consolidated balance sheets and statements of
operations and comprehensive loss. Currency risk is managed through limits set on total foreign deposits on hand that the
Company routinely monitors.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
Notes Receivable
The Company is exposed to the risk of credit losses as a result of extending credit to consumers. Changes in economic conditions
may result in higher credit losses. The Company has a policy for establishing credit lines for individual consumers that helps mitigate
credit risk. The allowance for uncollectible accounts is adequate for covering any potential losses on outstanding notes receivable.
Cash and Cash Equivalents
The Company had cash and cash equivalents of US$84,285,383 and US$34,965,069 as of December 31, 2020 and 2019, respectively.
The Company considers all money market funds and other highly liquid investments with an original maturity of three months or
less when purchased to be cash equivalents. The Company accepts debit and credit cards from consumers as a method to settle
its receivables, and these transactions are generally transmitted through third parties. The payments due from the third parties for
debit and credit card transactions are generally settled within three days. The Company considers all bank, debit, and credit card
transactions initiated before the end of the period to be cash and cash equivalents.
Restricted Cash
The Company is required to maintain cash balances in a bank account in accordance with the lending agreement executed on
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November 29, 2019 between Sezzle Funding SPE, LLC, Sezzle Inc, and their third party line of credit providers Bastion Consumer
Funding II, LLC, Atalaya Asset Income Fund IV LP, and Hudson Cove Credit Opportunity Master Fund, LP (“the Syndicate”). The bank
account is the property of Sezzle Funding SPE, LLC, but access to consumer payments is controlled by the Syndicate. On a regular
basis, cash received from consumers is deposited to the bank account and subsequently made available to Sezzle through daily
settlement reporting with the Syndicate. Cash deposits to the bank account represent cash received from consumers not yet
made available to Sezzle, as well as a minimum balance consisting of the sum of US$20,000, accrued interest on the drawn credit
facility, and accrued management fees charged by the Syndicate. The Company is also required to maintain a minimum balance of
US$25,000 in a deposit account with a third-party service provider to fund notes receivable. The Company has funds on deposit with
foreign banking institutions as part of their respective local licensing processes that are restricted until the processes are completed.
The amount on deposit within the current restricted bank accounts totaled US$4,798,520 and US$1,639,549 as of December 31, 2020
and 2019, respectively.
As of December 31, 2020 and 2019, the Company was required to maintain a US$20,000 cash balance held in a reserve account to
cover Automated Clearing House (ACH) transactions. The cash balance within this account is classified as non-current restricted
cash on the consolidated balance sheets.
Receivables and Credit Policy
Notes receivable represent amounts from uncollateralized consumer receivables generated from the purchase of merchandise.
The original terms of the notes for the Company’s core product are to be paid back in equal installments every two weeks over
a six-week period. The Company does not charge interest on the notes to consumers. Sezzle defers direct note origination costs
over the average life of the notes receivable using the effective interest rate method. These net deferred costs are recorded within
notes receivable, net on the consolidated balance sheets. Notes receivable are recorded at net realizable value and are recorded
as current assets. The Company evaluates the collectability of the balances based on historical performance, current economic
conditions, and specific circumstances of individual notes, with an allowance for uncollectible accounts being provided as
necessary.
Other receivables represents the net realizable value of consumer account reactivation fees receivable, merchant accounts
receivable, and merchant processing fees receivable. Consumer account reactivation fees receivable, less an allowance for
uncollectible accounts, represents the amount of account reactivation fees the Company reasonably expects to receive from
consumers. Receivables from merchants represent amounts merchants owe Sezzle relating to transactions placed by consumers on
their sites.
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All notes receivable from consumers, as well as related fees, outstanding greater than 90 days past due are charged off as
uncollectible. It is the Company’s practice to continue collection efforts after the charge-off date. Refer to Note 4 and Note 5
for further information about receivable balances, allowances, and charge-off amounts.
Sezzle Income
Sezzle receives its income primarily from fees paid by merchants in exchange for Sezzle’s payment processing services. These
fees are applied to the underlying sales to consumers passing through the Company’s platform and are predominantly based
on a percentage of the consumer order value plus a fixed fee per transaction. Consumer installment payment plans typically
consist of four installments, with the first payment made at the time of purchase and subsequent payments coming due every
two weeks thereafter. Additionally, consumers may reschedule their initial installment plan by delaying payment for up to two
weeks, for which Sezzle generally earns a rescheduled payment fee. The total of merchant fees and rescheduled payment fees,
less note origination costs, are collectively referred to as Sezzle income within the consolidated statements of operations and
Sezzle Inc. and Subsidiaries
comprehensive loss.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Sezzle income is initially recorded as a reduction to notes receivable, net within the consolidated balance sheets. Sezzle
income is then recognized over the average duration of the note using the effective interest rate method. Total Sezzle income
to be recognized over the duration of existing notes receivable outstanding was US$3,458,222 and US$1,049,626 as of December
based on historical performance, current economic conditions, and specific circumstances of individual
31, 2020 and 2019, respectively. Total Sezzle income recognized was US$49,659,042 and US$13,319,218 for the years ended
notes, with an allowance for uncollectible accounts being provided as necessary.
December 31, 2020 and 2019, respectively.
Account Reactivation Fee Income
All notes receivable from consumers, as well as related fees, outstanding greater than 90 days past due
Sezzle also earns income from consumers in the form of account reactivation fees. These fees are generally assessed
are charged off as uncollectible. It is the Company’s practice to continue collection efforts after the
to consumers who fail to make a timely payment. Sezzle allows a 48-hour waiver period where fees are dismissed if the
charge-off date. Refer to Note 5 for further information about receivable balances, allowances, and
installment is paid by the consumer. Account reactivation fees are recognized at the time the fee is charged to the consumer,
charge-off amounts.
less an allowance for uncollectible amounts. Account reactivation fee income recognized totaled US$9,129,231 and US$2,481,893
for the years ended December 31, 2020 and 2019, respectively.
Debt Issuance Costs
Costs incurred in connection with originating debt have been capitalized and are classified in the
Debt Issuance Costs
consolidated balance sheets as a reduction of the notes payable or line of credit balance to which those
costs relate. Debt issuance costs are amortized over the life of the underlying debt obligation utilizing the
Costs incurred in connection with originating debt have been capitalized and are classified in the consolidated balance
straight-line method, which approximates the effective interest method. Amortization of debt issuance
sheets as a reduction of the notes payable or line of credit balance to which those costs relate. Debt issuance costs are
costs is included within interest expense in the consolidated statements of operations. For the years
amortized over the life of the underlying debt obligation utilizing the straight-line method, which approximates the effective
ended December 31, 2020 and 2019 amortization of debt issuance costs totaled $417,054 and $72,379,
interest method. Amortization of debt issuance costs is included within interest expense in the consolidated statements of
respectively. Total cumulative cash payments to date for debt issuance costs were $663,649 for the years
operations and comprehensive loss.
ended December 31, 2020 and 2019.
Property and Equipment
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using either the
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided
straight-line or double-declining balance method, based on the useful lives of the assets:
using either the straight-line or double-declining balance method, based on the useful lives of the assets:
Computers and computer equipment
Office equipment
Furniture and fixtures
Years
Method
3
5
7
Double-declining balance
Double-declining balance
Straight-line
Maintenance and repairs are expensed as incurred. See Note 2 for further information.
Maintenance and repairs are expensed as incurred. See Note 3 for further information.
85
Internally Developed Intangible Assets
The Company capitalizes costs incurred for web development and software developed for internal use.
The costs capitalized primarily relate to direct labor costs for employees and contractors working directly
on software development and implementation. Projects are eligible for capitalization once it is determined
that the project is being designed or modified to meet internal business needs; the project is ready for its
intended use; the total estimated costs to be capitalized exceed $1,000; and there are no plans to market,
sell, or lease the project.
as follows:
Amortization is provided using the straight-line method, based on the useful lives of the intangible assets
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Internally Developed Intangible Assets
The Company capitalizes costs incurred for web development and software developed for internal use. The costs capitalized
primarily relate to direct labor costs for employees and contractors working directly on software development and
implementation. Projects are eligible for capitalization once it is determined that the project is being designed or modified
Sezzle Inc. and Subsidiaries
to meet internal business needs; the project is ready for its intended use; the total estimated costs to be capitalized exceed
US$1,000; and there are no plans to market, sell, or lease the project.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Amortization is provided using the straight-line method, based on the useful lives of the intangible assets as follows:
Internal use software
Website development costs
See Note 3 for further information.
See Note 4 for further information.
Research and Development Costs
Years
3
3
Method
Straight-line
Straight-line
Research expenditures that relate to the development of new processes, including internally developed software, are expensed
as incurred. Such costs were approximately US$490,000 and US$517,000 for the years ended December 31, 2020 and 2019,
respectively. Research expenditures are recorded within selling, general, and administrative expenses within the consolidated
statements of operations and comprehensive loss.
Research and Development Costs
Impairment of Long-Lived Assets
Research expenditures that relate to the development of new processes, including internally developed
software, are expensed as incurred. Such costs were approximately $993,000 and $517,000 for the years
ended December 31, 2020 and 2019, respectively. Research expenditures are recorded within selling,
The Company reviews the carrying value of long-lived assets, which includes property, equipment, and internally developed
general, and administrative expenses within the consolidated statements of operations.
intangible assets, for impairment whenever events and circumstances indicate that the assets’ carrying value may not be
recoverable from the future cash flows expected to result from its use and eventual disposition. In cases where undiscounted
Impairment of Long-Lived Assets
expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the
carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include
US$7,850 and US$15,623, respectively.
The Company reviews the carrying value of long-lived assets, which includes property, equipment, and
current operating results, trends, and prospects; the manner in which the asset is used; and the effects of obsolescence,
internally developed intangible assets, for impairment whenever events and circumstances indicate that
demand, competition, and other economic factors. Impairment losses for the years ended December 31, 2020 and 2019 totaled
the assets’ carrying value may not be recoverable from the future cash flows expected to result from its
use and eventual disposition. In cases where undiscounted expected future cash flows are less than the
carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds
the fair value of assets. The factors considered by management in performing this assessment include
current operating results, trends, and prospects; the manner in which the asset is used; and the effects of
obsolescence, demand, competition, and other economic factors. Impairment losses for the years ended
December 31, 2020 and 2019 totaled $7,850 and $15,623, respectively.
As of December 31, 2020 and 2019, the Company had not renewed or extended the initial determined life for any of its
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Income Taxes
Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist
As of December 31, 2020 and 2019, the Company had not renewed or extended the initial determined life
for any of its recognized internally developed intangible assets.
of taxes currently due plus deferred taxes related primarily to differences between the basis of receivables, property and
equipment, and accrued liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities
Income Taxes
are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance is
recorded against the Company’s deferred tax assets as of December 31, 2020 and 2019.
Income taxes are provided for the tax effects of transactions reported in the consolidated financial
statements and consist of taxes currently due plus deferred taxes related primarily to differences between
the basis of receivables, property and equipment, and accrued liabilities for financial and income tax
reporting. The deferred tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and liabilities are recovered or
86
settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be realized. A full
valuation allowance is recorded against the Company’s deferred tax assets as of December 31, 2020 and
2019.
The Company evaluates its tax positions that have been taken or are expected to be taken on income tax
returns to determine if an accrual is necessary for uncertain tax positions. As of December 31, 2020 and
2019, the unrecognized tax benefits accrual was zero. The Company will recognize future accrued
interest and penalties related to unrecognized tax benefits in income tax expense if incurred.
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SEZZLE INC ANNUAL REPORT 2020|
The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to
determine if an accrual is necessary for uncertain tax positions. As of December 31, 2020 and 2019, the unrecognized tax
benefits accrual was zero. The Company will recognize future accrued interest and penalties related to unrecognized
tax benefits in income tax expense if incurred. Refer to Note 8 for more information.
Advertising costs are expensed as incurred and consist of traditional marketing, digital marketing, sponsorships, and
promotional product expenses. Such costs were US$3,883,936 and US$368,235 for the years ended December 31, 2020
Advertising Costs
and 2019, respectively.
Equity Based Compensation
The Company maintains stock compensation plans that offer incentives in the form of non-statutory stock options and
restricted stock to employees, directors, and advisors of the Company. Equity based compensation expense reflects
the fair value of awards measured at the grant date and recognized over the relevant vesting period. The Company
estimates the fair value of stock options without a market condition on the measurement date using the Black-Scholes
option valuation model. The fair value of stock options with a market condition is estimated, at the date of grant, using
the Monte Carlo Simulation model. The Black-Scholes and Monte Carlo Simulation models incorporate assumptions
about stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. For valuing
the Company’s stock option grants, significant judgment is required for determining the expected volatility of the
Company’s common stock and is based on the historical volatility of both its common stock and its defined peer group.
The fair value of restricted stock awards and restricted stock units is based on the fair market value of the Company’s
common stock on the date of grant. The expense associated with equity based compensation is recognized over the
requisite service period using the straight-line method. The Company issues new shares upon the exercise of stock
options and vesting of restricted stock units. Refer to Note 14 and Note 16 for further information around the Company’s
equity based compensation plans.
Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements. The Company’s
estimates and judgments are based on historical experience and various other assumptions that it believes are
reasonable under the circumstances. The amount of assets and liabilities reported on the Company’s consolidated
balance sheets and the amounts of income and expenses reported for each of the periods presented are affected
by estimates and assumptions, which are used for, but not limited to, determining the allowance for uncollectible
accounts recorded against outstanding receivables, the useful life of property and equipment and internally developed
intangible assets, determining impairment of property and equipment and internally developed intangible assets,
valuation of equity based compensation, leases, and income taxes.
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Fair Value
Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of
the fair value hierarchy are as follows:
• Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
• Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are
observable either directly or indirectly for substantially the full term of the asset or liability; and
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
• Level 3 — Unobservable inputs for the asset or liability, which include management’s own assumption
about the assumptions market participants would use in pricing the asset or liability, including assumptions
about risk.
The Company measures the value of its money market securities on a regular basis. The fair value of its money market
securities was US$9,996,155 and US$7,282,946 as of December 31, 2020 and 2019, respectively, and are Level 1 on the fair value
hierarchy. The cost of these securities equate to their fair values.
Cost of Income and Selling, General, and Administrative Expenses
The primary costs classified in each major expense category are:
Cost of Income:
• Payment processing costs
• Consumer communication expenses
• Merchant affiliate program fees
• International payment processing costs
• Partner revenue share fees
Selling, general, and administrative expenses:
• All compensation related costs for employees and contractors
• Third-party service provider costs
• Depreciation and amortization
• Advertising costs
• Rent expense
• Legal and regulatory compliance costs
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Segments
The Company’s operations consist primarily of lending to consumers located in the United States who purchase goods from
its affiliated merchants. During the year ended December 31, 2019, the Company began operations in Canada. Additionally,
during the year ended December 31, 2020, Sezzle began operations in India. While distinct geographic locations, the operations
in both countries are still in an early growth stage. As of December 31, 2020, management has not found any significant
difference in the economic performance of each operating segment; therefore, management has concluded that the Company
has one reportable segment on a consolidated basis.
Foreign Currency Exchange Gains (Losses)
Sezzle works with international merchants, creating exposure to gains and losses from foreign currency exchanges. Sezzle’s
income and cash can be affected by movements in the Canadian Dollar, Euro, and Indian Rupee. Sezzle has transactional
currency exposures arising from merchant fees and payouts to Canadian and Indian merchant partners. Gains (losses) from
foreign exchange rate fluctuations that affect Sezzle’s net gain (loss) totaled (US$125,292) and US$20,729 for the years ended
December 31, 2020 and 2019, respectively. Foreign currency exchange gains and losses are recorded within other income and
expenses on the consolidated statements of operations and comprehensive loss.
The financial statements of the Company’s non-U.S. subsidiaries are translated into U.S. dollars in accordance with ASC
830, “Foreign Currency Matters”. Under ASC 830, if the assets and liabilities of the Company are recorded in certain non-
U.S. functional currencies other than the U.S. dollar, they are translated at current rates of exchange. Revenue and expense
items are translated at the average monthly exchange rates. The resulting translation adjustments are recorded directly into
accumulated other comprehensive income.
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SEZZLE INC ANNUAL REPORT 2020|
Reclassifications
Certain amounts in the 2019 consolidated financial statements have been reclassified to conform with the 2020 presentation
format. These classifications had no effect on operating loss or net loss.
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Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13,
“Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” which requires reporting
entities estimate credit losses expected to occur over the life of the asset. Expected losses will be recorded in current period
earnings and recorded through an allowance for credit losses on the consolidated balance sheet. During November 2018, April
2019, May 2019, October 2019 and November 2019, the FASB also issued ASU No. 2018-19, “Codification Improvements to Topic 326,
Financial Instruments – Credit Losses”; ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit
Losses”; ASU No. 2019-05 “Targeted Transition Relief”; ASU No. 2019-10 “Financial Instruments—Credit Losses (Topic 326): Effective
Dates”; and ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU No. 2018-19
clarifies the effective date for nonpublic entities and that receivables arising from operating leases are not within the scope
of Subtopic 326-20, ASUs Nos. 2019-04 and 2019-05 amend the transition guidance provided in ASU No. 2016-13, ASU No.2019-
10 delayed the effective date for applying this standard and ASU No. 2019-11 amends ASU No. 2016-13 to clarify, correct errors
in, or improve the guidance. ASU No. 2016-13 (as amended) is effective for annual periods and interim periods within those
annual periods beginning after December 15, 2022. Early adoption is permitted for annual and interim periods beginning after
December 15, 2018. Sezzle plans to adopt this standard beginning January 1, 2023 and is currently evaluating the impact of the
standard on its consolidated financial statements.
During August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for
Fair Value Measurement.” ASU No. 2018-13 modifies the disclosure requirements for fair value measurements in Topic 820, Fair
Value Measurement. The amendments are based on the concepts in the FASB Concepts Statement, Conceptual Framework for
Financial Reporting—Chapter 8: Notes to Financial Statements, which the Board finalized on August 28, 2018. Sezzle adopted
this standard beginning January 1, 2020 with no material impact to the consolidated financial statements for the year ended
December 31, 2020.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40)”
which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and
hosting arrangements that include an internal use software license. Sezzle adopted this standard beginning January 1, 2020
with no impact to the consolidated financial statements for the year ended December 31, 2020.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”
which requires franchise taxes calculated based on income are included in income tax expense. To the extent that the
franchise taxes not based on income exceed the franchise taxes based on income, the excess is recorded outside of income
tax expense. ASU No. 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December
15, 2020 for public entities. Sezzle plans to adopt this standard beginning January 1, 2021 and does not expect adoption to
have a material impact on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate
Reform on Financial Reporting” which provides optional expedients and exceptions if certain criteria are met when accounting
for contracts or other transactions that reference LIBOR. Application of the guidance is optional until December 31, 2022
and varies based on the practical expedients elected. The Company has not elected any expedients to date and is currently
evaluating any potential future impacts on the Company’s consolidated financial statements.
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Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
For the year ended December 31, 2019:
Net loss
$
(16,596,228) $
3,534,875 $
(13,061,353) b, c
Equity based compensation and restricted stock vested
951,979
215,286
1,167,265 c
As Previously
Reported
Restatement
Adjustments
As Restated
Restatement
Reference
Loss and accrued interest on conversion of convertible
notes
4,306,622
(3,727,406)
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
579,216 c
Increase in accrued liabilities
1,212,773
(22,755)
1,190,018 b
Other net loss to cash reconciling items
Net cash used for operating activities
Net cash used for investing activities
Net cash provided by financing activities
(9,794,709)
(19,919,563)
(532,218)
49,991,545
—
—
—
—
(9,794,709) c
(19,919,563)
(532,218)
49,991,545
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Net increase in cash, cash equivalents, and restricted cash
29,539,764
29,539,764
—
Contracts in an Entity’s Own Equity” which simplifies the accounting for convertible debt by eliminating the beneficial
Cash, cash, equivalents, and restricted cash, beginning of
year
conversion feature and cash conversion feature models from the guidance and instead requires entities to record convertible
7,084,854
—
7,084,854
debt at amortized cost. Application of the guidance is optional starting in fiscal years beginning after December 15, 2020 and
Cash, cash, equivalents, and restricted cash, end of year
$
36,624,618 $
— $
36,624,618
required for public entities after December 15, 2021. The Company is not expecting this standard to have any potential future
impacts on the Company’s consolidated financial statements.
Noncash investing and financing activities:
Conversion of notes to common stock
$
10,098,404 $
(3,727,406) $
6,370,998 c
Conversion of preferred stock to common stock
N O T E 2 – P R O P E R T Y A N D E Q U I P M E N T
12,442,367
(515,796)
11,926,571 c
As of December 31, property and equipment, net, consists of the following:
NOTE 3 – PROPERTY AND EQUIPMENT
Computer and office equipment
Furniture and fixtures
Property and equipment, gross
Less accumulated depreciation
2020
2019
636,950
$
28,393
665,343
(290,157)
375,186
$
225,186
28,394
253,580
(119,180)
134,400
$
$
Property and equipment, net
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
operations and comprehensive loss.
Depreciation expense relating to property and equipment was US$170,949 and US$74,151 for the years ended December 31, 2020
and 2019, respectively, and is recorded within selling, general, and administrative expenses on the consolidated statements of
N O T E 3 – I N T E R N A L LY D E V E L O P E D I N T A N G I B L E A S S E T S
NOTE 4 – INTERNALLY DEVELOPED INTANGIBLE ASSETS
As of December 31, internally developed intangible assets, net, consists of the following:
As of December 31, internally developed intangible assets, net, consists of the following:
Internal use software and website development costs
Works in process
Internally developed intangible assets, gross
Less accumulated amortization
Internally developed intangible assets, net
2020
2019
$
$
825,018
$
109,155
934,173
(397,127)
537,046
$
682,848
13,672
696,520
(216,422)
480,098
Amortization expense relating to internally developed intangible assets was $257,425 and $171,344 for
Amortization expense relating to internally developed intangible assets was US$257,425 and US$171,345 for the years
the years ended December 31, 2020 and 2019, respectively, and is recorded within selling, general, and
ended December 31, 2020 and 2019, respectively, and is recorded within selling, general, and administrative expenses on the
administrative expenses on the consolidated statements of operations.
consolidated statements of operations and comprehensive loss.
17
NOTE 5 – NOTES RECEIVABLE
As of December 31, Sezzle’s notes receivable, related allowance for uncollectible accounts, and deferred
net origination fees are recorded within the consolidated balance sheets as follows:
90
Notes receivable, gross
$
95,398,668
$
29,700,598
2020
2019
Less allowance for uncollectible accounts:
Balance at start of period
Provision
Charge-offs, net of recoveries
Total allowance for uncollectible accounts
Notes receivable, net of allowance
Deferred origination fees, net of costs
(3,461,837)
(19,587,918)
11,916,609
(11,133,146)
84,265,522
(3,458,222)
(645,332)
(6,235,820)
3,419,315
(3,461,837)
26,238,761
(1,049,626)
25,189,135
Notes receivable, net
$
80,807,300
$
Sezzle maintains an allowance for uncollectible accounts at a level necessary to absorb estimated
probable losses on principal and reschedule fee receivables from consumers. Any amounts delinquent
after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through
the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as
when a consumer becomes deceased or bankrupt—are charged off immediately. Included in charge-offs,
net of recoveries, are recoveries of $753,896 and $170,231 for the years ended December 31, 2020 and
2019, respectively.
Sezzle uses its judgement to evaluate the allowance for uncollectible accounts based on current
economic conditions and historical performance of consumer payments. The historical vintages are
grouped into monthly populations for purposes of the allowance assessment.The balances of historical
18
SEZZLE INC ANNUAL REPORT 2020|
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
NOTE 4 – INTERNALLY DEVELOPED INTANGIBLE ASSETS
As of December 31, internally developed intangible assets, net, consists of the following:
Internal use software and website development costs
Works in process
Internally developed intangible assets, gross
Less accumulated amortization
Internally developed intangible assets, net
2020
2019
$
$
825,018
$
109,155
934,173
(397,127)
537,046
$
682,848
13,672
696,520
(216,422)
480,098
Amortization expense relating to internally developed intangible assets was $257,425 and $171,344 for
the years ended December 31, 2020 and 2019, respectively, and is recorded within selling, general, and
administrative expenses on the consolidated statements of operations.
N O T E 4 – N O T E S R E C E I V A B L E
NOTE 5 – NOTES RECEIVABLE
As of December 31, Sezzle’s notes receivable, related allowance for uncollectible accounts, and deferred net origination fees
As of December 31, Sezzle’s notes receivable, related allowance for uncollectible accounts, and deferred
are recorded within the consolidated balance sheets as follows:
net origination fees are recorded within the consolidated balance sheets as follows:
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Notes receivable, gross
Less allowance for uncollectible accounts:
Balance at start of period
Provision
Charge-offs, net of recoveries
Total allowance for uncollectible accounts
Notes receivable, net of allowance
Deferred origination fees, net of costs
2020
2019
$
95,398,668
$
29,700,598
(3,461,837)
(19,587,918)
11,916,609
(11,133,146)
84,265,522
(3,458,222)
(645,332)
(6,235,820)
3,419,315
(3,461,837)
26,238,761
(1,049,626)
25,189,135
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Notes receivable, net
$
80,807,300
$
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Sezzle maintains an allowance for uncollectible accounts at a level necessary to absorb estimated probable losses on
Sezzle maintains an allowance for uncollectible accounts at a level necessary to absorb estimated
principal and reschedule fee receivables from consumers. Any amounts delinquent after 90 days are charged-off with an
probable losses on principal and reschedule fee receivables from consumers. Any amounts delinquent
offsetting reversal of the allowance for doubtful accounts through the provision for uncollectible accounts. Additionally,
after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through
amounts identified as no longer collectible—such as when a consumer becomes deceased or bankrupt—are charged off
the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as
immediately. Included in charge-offs, net of recoveries, are recoveries of US$648,799 and US$170,231 for the years ended
when a consumer becomes deceased or bankrupt—are charged off immediately. Included in charge-offs,
December 31, 2020 and 2019, respectively.
net of recoveries, are recoveries of $753,896 and $170,231 for the years ended December 31, 2020 and
2019, respectively.
Sezzle uses its judgment to evaluate the allowance for uncollectible accounts based on current economic conditions and
historical performance of consumer payments. The historical vintages are grouped into monthly populations for purposes of
Sezzle uses its judgement to evaluate the allowance for uncollectible accounts based on current
the allowance assessment.The balances of historical cumulative charge-offs by vintage support the calculation for estimating
economic conditions and historical performance of consumer payments. The historical vintages are
the allowance for uncollectible accounts for vintages outstanding less than 90 days.
grouped into monthly populations for purposes of the allowance assessment.The balances of historical
Deferred origination fees, net of costs are comprised of unrecognized merchant fees and consumer reschedule fees net of
direct note origination costs, which are recognized over the duration of the note with the consumer and are recorded as an
offset to Sezzle income on the consolidated statements of operations and comprehensive loss.
18
Sezzle estimates the allowance for uncollectible accounts by segmenting consumer accounts receivable by the number
of days balances are delinquent. Balances that are at least one day past the initial due date are considered delinquent.
Balances that are not delinquent are considered current. Consumer notes receivable are charged-off following the passage
of 90 days without receiving a qualifying payment, upon notice of bankruptcy, or death. Consumers are allowed to reschedule
a payment one time without incurring a reschedule fee and the principal of a rescheduled payment is not considered to be
delinquent. If consumers reschedule a payment more than once in the same order cycle they are subject to a reschedule fee.
Alternatively, account reactivation fees are applied to any missed payments for which an consumer did not reschedule within
48 hours of the original payment date. Any account reactivation fees associated with a delinquent payment are considered to
be the same number of days delinquent as the principal payment.
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Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Sezzle uses its judgement to evaluate the allowance for uncollectible accounts based on current
economic conditions and historical performance of consumer payments. The historical vintages are
grouped into monthly populations for purposes of the allowance assessment.The balances of historical
cumulative charge-offs by vintage support the calculation for estimating the allowance for uncollectible
accounts for vintages outstanding less than 90 days.
Deferred origination fees, net of costs are comprised of unrecognized merchant fees and consumer
reschedule fees net of direct note origination costs, which are recognized over the duration of the note
with the consumer and are recorded as an offset to Sezzle income on the consolidated statements of
operations.
Sezzle estimates the allowance for uncollectible accounts by segmenting end-customer accounts
receivable by the number of days balances are delinquent. Balances that are at least one day past the
initial due date are considered delinquent. Balances that are not delinquent are considered current. End-
customer notes receivable are charged-off following the passage of 90 days without receiving a qualifying
payment, upon notice of bankruptcy, or death. End-customers are allowed to reschedule a payment one
time without incurring a reschedule fee and the principal of a rescheduled payment is not considered to
be delinquent. If end-customers reschedule a payment more than once in the same order cycle they are
subject to a reschedule fee. Alternatively, failed payment fees are applied to any missed payments for
which an end-customer did not reschedule within 48 hours of the original payment date. Any failed
payment fees associated with a delinquent payment are considered to be the same number of days
delinquent as the principal payment.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
The following table summarizes Sezzle’s gross notes receivable and related allowance for uncollectible accounts as of December
The following table summarizes Sezzle’s gross notes receivable and related allowance for uncollectible
accounts as of December 31, 2020 and 2019:
31, 2020 and 2019:
2020
2019
Gross
Receivables
Less Allowance
Net Receivables
Gross
Receivables
Less Allowance
Net Receivables
US$
US$
US$
US$
US$
US$
Current
$
79,673,073 $
(2,692,254) $
76,980,819
$
25,695,723 $
(1,014,888) $
24,680,835
Days past due:
1–28
29–56
57–90
9,574,902
(3,616,327)
5,958,575
2,251,591
(923,396)
1,328,195
3,576,255
(2,646,627)
2,574,438
(2,177,938)
929,628
396,500
919,177
(719,910)
199,267
834,107
(803,643)
30,464
$
95,398,668 $
(11,133,146) $
84,265,522
$
29,700,598 $
(3,461,837) $
26,238,761
Sezzle Inc. and Subsidiaries
Principal payments recovered after the 90 day charge-off period are recognized as a reduction to the
Notes to the Consolidated Financial Statements
Principal payments recovered after the 90 day charge-off period are recognized as a reduction to the allowance for uncollectible
allowance for uncollectible accounts in the period the receivable is recovered.
accounts in the period the receivable is recovered.
For the Years Ended December 31, 2020 and 2019
N O T E 5 - O T H E R R E C E I V A B L E S
NEW TABLES TO INSERT IN NOTE 5 IN UPDATED FINANCIALS
20
As of December 31, the balance of other receivables, net, on the consolidated balance sheets is comprised of the following:
Account reactivation fees receivable, net
Receivables from merchants
Other receivables, net
Account reactivation fees receivable, gross
Less allowance for uncollectible accounts:
2020
2019
804,060
$
599,246
1,403,306
$
307,334
8,168
315,502
2020
2019
1,875,648
$
790,852
$
$
$
Balance at start of period
Provision
Charge-offs, net of recoveries
Total allowance for uncollectible accounts
(483,518)
(2,347,733)
1,759,663
(1,071,588)
Account reactivation fees receivable, net
$
804,060
$
(62,430)
(945,320)
524,232
(483,518)
307,334
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NOTE 6 – LEASES
The Company holds operating leases for its corporate office spaces in the United States and Canada.
Total lease expense incurred for the years ended December 31, 2020 and 2019 was $512,274 and
$335,620, respectively. Lease expense is recognized within selling, general and administrative expenses
on the consolidated statements of operations. Additionally, total cash paid for rent was $537,573 and
$323,491 for the years ended December 31, 2020 and 2019.
Right-of-use assets and lease liabilities are recognized as of the commencement date based on the
present value of the remaining lease payments over the lease term which include renewal periods that
the Company is reasonably certain to exercise.
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SEZZLE INC ANNUAL REPORT 2020|
US$
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Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
NEW TABLES TO INSERT IN NOTE 5 IN UPDATED FINANCIALS
US$
2020
2019
Account reactivation fees receivable, net
$
804,060
$
Receivables from merchants
599,246
Other receivables, net
As of December 31, Sezzle’s account reactivation fees receivable and related allowance for uncollectible
1,403,306
$
$
accounts are recorded within the consolidated balance sheets as follows:
307,334
8,168
315,502
Account reactivation fees receivable, gross
Less allowance for uncollectible accounts:
Balance at start of period
Provision
Charge-offs, net of recoveries
Total allowance for uncollectible accounts
Account reactivation fees receivable, net
2020
2019
$
1,875,648
$
790,852
(483,518)
(2,347,733)
1,759,663
(1,071,588)
$
804,060
$
(62,430)
(945,320)
524,232
(483,518)
307,334
Sezzle maintains the allowance at a level necessary to absorb estimated probable losses on consumer account reactivation
fee receivables. Any amounts delinquent after 90 days are charged-off with an offsetting reversal of the allowance for doubtful
accounts through the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as
NOTE 6 – LEASES
when a consumer becomes deceased or bankrupt—are charged off immediately. Included in charge-offs, net of recoveries, are
recoveries of US$71,110 and US$14,965 for the years ended December 31, 2020 and 2019, respectively.
The Company holds operating leases for its corporate office spaces in the United States and Canada.
Total lease expense incurred for the years ended December 31, 2020 and 2019 was $512,274 and
Receivables from merchants primarily represent merchant fees charged, not yet paid to the Company as of year end.
$335,620, respectively. Lease expense is recognized within selling, general and administrative expenses
Additionally, during the years ended December 31, 2020 and 2019, the Company recorded direct write-downs of US$376,120 and
on the consolidated statements of operations. Additionally, total cash paid for rent was $537,573 and
US$242,881 for uncollectible receivables from merchants against the provision for uncollectible other receivables.
$323,491 for the years ended December 31, 2020 and 2019.
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Right-of-use assets and lease liabilities are recognized as of the commencement date based on the
N O T E 6 – L E A S E S
Right-of-use assets and lease liabilities are recognized as of the commencement date based on the
present value of the remaining lease payments over the lease term which include renewal periods that
present value of the remaining lease payments over the lease term which include renewal periods that
the Company is reasonably certain to exercise.
The Company holds operating leases for its corporate office spaces in the United States and Canada. Total lease expense
the Company is reasonably certain to exercise.
incurred for the years ended December 31, 2020 and 2019 was US$513,248 and US$348,246, respectively. Lease expense
is recognized within selling, general and administrative expenses on the consolidated statements of operations and
comprehensive loss. Additionally, total cash paid for rent was US$558,631 and US$350,722 for the years ended December 31,
2020 and 2019, respectively.
Right-of-use assets and lease liabilities are recognized as of the commencement date based on the present value of the
remaining lease payments over the lease term which include renewal periods that the Company is reasonably certain to
exercise. Right-of-use assets and lease liabilities are recorded within current assets and current liabilities, respectively, on the
consolidated balance sheets.
The expected maturity of the Company’s operating leases as of December 31, 2020 is as follows:
The expected maturity of the Company’s operating leases as of December 31, 2020 is as follows:
2021
Less interest
Present value of lease liabilities
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$
$
US$
144,584
(1,841)
142,743
The weighted average remaining term of the Company’s operating leases is 0.49 years. During the nine
months ended September 30, 2020, the Company revised the estimated least term for its Corporate
headquarters and terminated two other leases, resulting in a reduction in the Company’s right-of-use
asset and lease liability. The weighted average discount rate of all operating leases is 4.75%. As of
December 31, 2020, Sezzle has not entered into any lease agreements that contain residual value
guarantees or financial covenants.
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NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company has entered into several agreements with third-parties in which Sezzle will pay for
marketing and advertising costs. For the years ended December 31, 2020 and 2019, the Company
entered into agreements that stipulate that Sezzle will commit to spend up to $2,906,500 and $1,085,000
in marketing and advertising spend. Absent a termination of the noted agreements, the Company is
committed to spend an additional $500,000 on an annual basis in future years. Sezzle has $210,764 and
$495,240 recorded as a prepaid expense in the consolidated balance sheets as of December 31, 2020
and 2019, respectively.
Expenses incurred relating to these agreements totaled $3,220,959 and $50,256 for the years ended
December 31, 2020 and 2019, respectively. These expenses are included within selling, general, and
administrative expenses in the consolidated statements of operations.
NOTE 8 – INCOME TAXES
The income tax expense components for the periods ended December 31, 2020 and 2019 are as follows:
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
The weighted average remaining term of the Company’s operating leases is 0.49 years. During the year ended December 31,
2020, the Company revised the estimated lease term for its corporate headquarters and terminated two other leases, resulting
in a reduction in the Company’s right-of-use asset and lease liability. The weighted average discount rate of all operating
leases is 4.75%. As of December 31, 2020, Sezzle has not entered into any lease agreements that contain residual value
guarantees or financial covenants.
N O T E 7 – C O M M I T M E N T S A N D C O N T I N G E N C I E S
The Company has entered into several agreements with third-parties in which Sezzle will reimburse the third-parties for
co-branded marketing and advertising costs. For the years ended December 31, 2020 and 2019, the Company entered into
agreements that stipulate that Sezzle will commit to spend up to US$2,906,500 and US$1,085,000 in marketing and advertising
spend. Absent a termination of the noted agreements, the Company is committed to spend up to an additional US$500,000
on an annual basis in future years. Sezzle had approximately US$211,000 and US$495,000 recorded as a prepaid expense in the
consolidated balance sheets as of December 31, 2020 and 2019, respectively.
Expenses incurred relating to these agreements totaled US$3,220,959 and US$34,760 for the years ended December 31, 2020
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and 2019, respectively. These expenses are included within selling, general, and administrative expenses in the consolidated
statements of operations and comprehensive loss.
Sezzle Inc. and Subsidiaries
N O T E 8 – I N C O M E T A X E S
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
The income tax expense components for the years ended December 31, 2020 and 2019 are as follows:
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Current tax expense
Deferred tax expense
Federal
Foreign
State
Federal
Foreign
State
Income tax expense
2020
2019
—
—
30,964
—
—
—
—
—
11,981
—
—
—
$
30,964
$
11,981
A reconciliation of the Company's provision for income taxes at the federal statutory rate to the reported
income tax provision for the period ended December 31, 2020 and December 31, 2019 is as follows:
Computed “expected” tax benefit
State income tax benefit, net of federal tax effect
Equity-based compensation
Nondeductible interest expense on beneficial conversion feature
Other permanent differences
Change in valuation allowance
Foreign rate differentials and other
Income tax expense (benefit)
2020
2019
21.0 %
1.7 %
— %
— %
— %
(23.6) %
0.8 %
(0.1) %
21.0 %
— %
94
(1.6) %
(0.8) %
(0.7) %
(19.1) %
1.1 %
(0.1) %
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SEZZLE INC ANNUAL REPORT 2020|
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Current tax expense
Deferred tax expense
Federal
Foreign
State
Federal
Foreign
State
2020
2019
30,964
11,981
—
—
—
—
—
—
—
—
—
—
Income tax expense
$
30,964
$
11,981
A reconciliation of the Company's provision for income taxes at the federal statutory rate to the reported
income tax provision for the period ended December 31, 2020 and December 31, 2019 is as follows:
A reconciliation of the Company’s provision for income taxes at the federal statutory rate to the reported income tax provision
UPDATED TABLE – please ensure ‘%’ on the far right column are not cut off on final copy (they
were missing in the filing we issued last month)
for the years ended December 31, 2020 and 2019 is as follows:
Computed “expected” tax benefit
State income tax benefit, net of federal tax effect
Nondeductible equity-based compensation
Nondeductible interest expense on beneficial conversion feature
Other permanent differences
Change in valuation allowance
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Foreign rate differentials and other
Income tax expense (benefit)
2020
2019
(21.0) %
(1.7) %
0.1 %
— %
— %
23.4 %
(0.7) %
0.1 %
(21.0) %
— %
1.6 %
0.8 %
0.7 %
19.1 %
(1.1) %
0.1 %
The components of the net deferred tax assets and liabilities as of December 31, 2020 and December 31, 2019 are as follows:
UPDATED TABLE 3/18 NEW
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2020
2019
$
5,849,989
$
2,686,878
2,822,803
773,546
—
31,855
10,857
1,722,143
144,194
11,355,387
(11,277,262)
(93,439)
(1,664)
(33,022)
(128,125)
861,239
42,384
7,482
184,788
11,488
45,421
539
3,840,219
(3,660,295)
—
—
(179,924)
(179,924)
Net deferred tax asset/(liability):
$
—
$
—
As of December 31, 2020, the Company has federal, state and foreign net operating loss carryforwards of approximately
US$23,303,218, US$5,790,498, and US$2,047,797 respectively. The federal net operating loss carryforwards that originated after
At December 31, 2020, the Company has federal, state and foreign net operating loss carryforwards of
2017 have an indefinite life and may be used to offset 80% of a future year’s taxable income. The federal net operating loss
approximately $23,170,623, $5,776,323, and $2,047,797 respectively. The federal net operating loss
carryforwards that originated prior to 2018 have expiration dates between 2036 and 2037. The state net operating losses will
carryforwards that originated after 2017 have an indefinite life and may be used to offset 80% of a future
year's taxable income. The federal net operating loss carryforwards that originated prior to 2018 have
expiration dates between 2036 and 2037. The state net operating losses carryforward for between 15-20
years and begin to expire in 2031.
carryforward for between 15-20 years and begin to expire in 2031.
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The Company’s ability to utilize a portion of its net operating loss carryforwards to offset future taxable
income is subject to certain limitations under Section 382 of the Internal Revenue Code due to changes in
the equity ownership of the Company. An ownership change under Section 382 has not been determined
at this time.
Management assesses the available positive and negative evidence to estimate whether sufficient future
taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of
objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended
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Deferred tax assets:
Net operating loss carryforwards
Allowance for uncollectible accounts
Equity based compensation
Depreciation and amortization
Lease liability
Startup costs
Accruals
Other
Total net deferred tax assets:
Valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Equity based compensation
Right-of-use asset
Total net deferred tax liabilities:
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
The Company’s ability to utilize a portion of its net operating loss carryforwards to offset future taxable income is subject to
certain limitations under Section 382 of the Internal Revenue Code due to changes in the equity ownership of the Company. An
ownership change under Section 382 has not been determined at this time.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will
be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated
was the cumulative loss incurred over the three-year period ended December 31, 2020. Such objective evidence limits the ability
to consider other subjective evidence, such as the Company’s projections for future growth.
On the basis of this evaluation, as of December 31, 2020, a valuation allowance of US$11,227,262 has been recorded to
recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred
tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward
period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and
additional weight is given to subjective evidence such as our projections for growth. The change in valuation allowance was
approximately US$7,567,000 and US$2,495,000 for the years ended December 31, 2020 and 2019, respectively.
The Tax Cuts and Jobs Act, signed into U.S. legislation on December 22, 2017, introduced a new Global Intangible Low-Taxed
Income (“GILTI”) provision. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either 1) treating
taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period cost when incurred, or 2) factoring
such amounts into the Company’s measurement of its deferred taxes. GILTI depends not only on the Company’s current
structure and estimated future income, but also on intent and ability to modify the structure or business. The Company has
chosen to treat GILTI as a current-period cost when incurred.
In November 2018, US Treasury issued proposed regulations for the new section 163(j), which generally limits business interest
deductions to 30% of adjusted taxable income (“ATI”). Any disallowed business interest can be carried forward on an indefinite
basis. The March 2020 Coronavirus Aid, Relief and Economic Security Act (CARES Act) increased the limitation to 50% of
adjusted taxable income. For the year ended December 31, 2020, the Company was not subject to the business interest
limitation.
Management’s intention is to reinvest foreign earnings into the Company’s foreign operations. To date, Sezzle’s various foreign
subsidiaries do not have any earnings.
N O T E 9 - S T O C K H O L D E R S ’ E Q U I T Y
Preferred Stock Dividend
On June 23, 2019, the Board of Directors declared and issued a preferred stock dividend of 909,451 shares of Series A preferred
shares to existing to preferred stockholders, valued at US$763,939. The preferred stock dividend was subject to the same
rights as all other series of preferred stock. All preferred stock converted to common stock in July 2019 in conjunction with the
Company’s initial public offering on the Australian Securities Exchange (ASX).
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SEZZLE INC ANNUAL REPORT 2020|
Conversion of Preferred Stock to Common Stock
On July 24, 2019, the Company restructured its share capital in anticipation of listing on the ASX. Each share of Series A
preferred stock was converted into common stock. The Company issued 70,446,291 common shares upon conversion of
70,446,291 Series A preferred stock, converted on a 1:1 basis in accordance with the terms of the preferred stock agreements.
Conversion of Convertible Notes to Common Stock
On April 14, 2020, the Company received loan proceeds in the amount of US$1,220,332 under the U.S. Small Business On July
24, 2019, the Company issued 12,064,155 common shares following the conversion of the US$5,812,500 of convertible notes
outstanding, along with accrued interest, at a conversion price of US$0.49 per common share. Refer to Note 13 for further
information on the convertible note issuance.
Initial Public Offering of Common Stock
On July 29, 2019, the Company listed on the ASX. The initial public offer of 35,714,286 CHESS Depository Interests (CDIs) over shares
of common stock (one CDI equates to one common share) were offered at an issuance price of A$1.22 (approximately US$0.84) per
CDI to raise approximately A$43.6 million (US$30,286,785) Total costs of the offer incurred during the year ended December 31, 2019
totaled US$2,777,097, resulting in overall net proceeds of US$27,509,688.
Repurchase and Retirement of Common Stock
On June 3, 2020, the Company repurchased 343,750 common shares from an existing stockholder. The purchase was made at the
original cost basis, totaling US$2,234, and is recorded as a reduction in common stock and additional paid-in capital within the
consolidated statements of stockholders’ equity as of December 31, 2020. The repurchased shares were retired upon purchase by
the Company.
Sezzle retains a portion of vested restricted stock units to cover withholding taxes for employees. For the year ended December
31, 2020, Sezzle withheld 152,035 shares at a value of US$875,232. Sezzle recognizes this amount as treasury stock, reported within
the consolidated balance sheets at cost as a reduction to stockholders’ equity.
Issuance of Common Stock
On July 15, 2020, Sezzle raised US$55,316,546 of proceeds via an institutional placement. On August 10, 2020, the Company raised
an additional US$5,140,710 of proceeds via a Securities Purchase Plan offered to existing investors. In exchange for the capital
raise, Sezzle issued 16,289,935 Chess Depository Interests (CDIs) at a price of A$5.30 (approximately US$3.82) per CDI. The issued
CDIs are equivalent to common shares on a 1:1 basis. The total costs of the capital raise were US$2,484,504, resulting in overall net
proceeds of US$57,972,752.
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N O T E 1 0 – E M P L O Y E E B E N E F I T P L A N
The Company sponsors a defined contribution 401(k) plan for eligible U.S. employees. Plan assets are held separately from those
of the Company in funds under the control of a third-party trustee. Participants in the plan may elect to defer a portion of their
eligible compensation, on a pre- or post-tax basis, subject to annual statutory contribution limits. The Company does not offer
matching contributions. There have been no Company contributions made to the plan through December 31, 2020.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
N O T E 1 1 – R E V O L V I N G L I N E O F C R E D I T
On November 14, 2018, Sezzle Funding SPE, LLC and Sezzle Inc. entered into an agreement with Bastion Consumer Funding
II, LLC (Bastion) that provided for a credit facility of US$30,000,000. On November 29, 2019, Sezzle Funding SPE, LLC, Sezzle
Inc. and Bastion amended and restated the original agreement and entered into a new Loan and Security Agreement (the
Loan Agreement) with Bastion, Atalaya Asset Income Fund IV LP, and Hudson Cove Credit Opportunity Master Fund, LP (the
“Syndicate”) for a credit facility of US$100,000,000 with a maturity date of May 29, 2022.
The Company had an outstanding revolving line of credit balance of US$40,000,000 and US$21,450,000 as of December 31, 2020
and 2019, respectively, recorded within line of credit, net as a non-current liability on the consolidated balance sheets. The new
line of credit agreement bears interest at a floating per annum rate equal to the 3-month LIBOR + 7.75% (minimum 9.50%) on the
US$100,000,000 (9.50% as of December 31, 2020). Beginning May 27, 2020, any daily unused amounts incur a facility fee due to the
Syndicate from Sezzle at a rate of .50% per annum.
Under the Loan Agreement, interest on borrowings is due monthly and all borrowings are due at maturity. Borrowings
subsequent to May 1, 2019 are based on 90% of eligible notes receivable from both the United States and Canada, defined as
past due balances outstanding less than 30 days originating from the United States. For the years ended December 31, 2020
and 2019, interest expense relating to the utilization of the line of credit was US$2,238,740 and US$908,309, respectively. As of
December 31, 2020 and 2019, Sezzle had pledged US$70,989,536 and US$23,757,188, respectively, of its notes receivable to Sezzle
Funding SPE, LLC.
the consent of the Syndicate.
The Company’s obligations under the Loan Agreement are secured by its consumer notes receivable. The collateral does not
include the Company’s intellectual property, but the Company has agreed not to encumber its intellectual property without
The Company must maintain a drawdown from the credit facility of at least US$20,000,000 beginning November 29, 2019 and of
at least US$40,000,000 beginning November 29, 2020. Sezzle will pay a termination fee and make-whole fee to the Syndicate in
the event of early termination. Fees differ based on termination timing differences.
For the years ended December 31, 2020 and 2019, amortization expense recorded for debt issuance costs on the line of
credit totaled US$417,054 and US$68,098, respectively. Total cumulative cash payments to date for debt issuance costs were
US$663,649 as of December 31, 2020 and 2019.
N O T E 1 2 – L O N G T E R M D E B T
Minnesota Department of Employment and Economic Development Loan
On July 26, 2018, the Minnesota Department of Employment and Economic Development (DEED) funded a US$250,000 seven-
year interest-free loan due in June 2025 to Sezzle under the State Small Business Credit Initiative Act of 2010 (the Act). The Act
was created for additional funds to be allocated and dispersed by states that have created programs to increase the amount
of capital made available by private lenders to small businesses. The loan proceeds are used for business purposes, primarily
start-up costs and working capital needs. The loan may be prepaid in whole or in part at any time without penalty. If more
than fifty percent of the ownership interest in Sezzle is transferred during the term of the loan, the loan will be required to be
paid in full, along with a penalty in the amount of thirty percent of the original loan amount.
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SEZZLE INC ANNUAL REPORT 2020|
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Paycheck Protection Program Loan
On April 14, 2020, the Company received loan proceeds in the amount of US$1,220,332 under the U.S. Small Business
Administration’s Paycheck Protection Program (PPP). The PPP, established as part of the CARES Act, provides loans to qualifying
businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. PPP loans are
uncollateralized and guaranteed by the SBA, and are forgivable after a “covered period” (eight or twenty-four weeks) as long as
the borrower maintains its payroll levels and uses the loan proceeds for eligible expenses, including payroll, benefits, rent, and
utilities. The forgiveness amount will be reduced if the borrower terminates employees or reduces salaries and wages more
than 25% during the covered period. Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%
with payments deferred until the SBA remits the borrower’s loan forgiveness amount to the lender, or, if the borrower does not
apply for forgiveness, ten months after the end of the covered period. PPP loan terms provide for customary events of default
including payment defaults, breaches of representations and warranties, and insolvency events and may be accelerated
upon the occurrence of one or more of these events of default. Additionally, the PPP loan terms do not include prepayment
penalties.
The Company met the PPP’s loan forgiveness requirements, and therefore, applied for forgiveness as of December 31, 2020.
When legal release is received, the Company will record the amount forgiven as forgiveness income within the other income
(expense) section of its consolidated statements of operations and comprehensive loss. If any portion of the Company’s PPP
loan is not forgiven, the Company will be required to repay that portion, plus unpaid interest, on April 14, 2022. Additionally, the
Company will be required to make semiannual payments of all accrued, unpaid interest, with the repayment term beginning at
the time that the SBA remits the amount forgiven to the Company’s lender. The Company has not received legal release from
the SBA to date. As of December 31, 2020, the Company has accrued US$8,526 of interest expense for this note.
The SBA reserves the right to audit any PPP loan, regardless of size. These audits may occur after forgiveness has been
granted. In accordance with the CARES Act, all borrowers are required to maintain their PPP loan documentation for six years
after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.
N O T E 1 3 – C O N V E R T I B L E N O T E S
On March 29, 2019, the Company issued US$5,662,500 of convertible notes to a group of investors. The promissory notes had a
stated maturity date of March 29, 2021 and paid an annual interest rate of 4% on the unpaid principal balance through June
30, 2019. Subsequent to June 30, 2019, the notes paid an annual interest rate of 8% on the unpaid principal balance. The notes
were issued at a US$25,000 discount, comprising of debt issuance costs, which is amortized over the life of the convertible notes.
Any unamortized discount is expensed upon the conversion of the notes. Amortization of the discount totaled US$25,000 for
the year ended December 31, 2019 and is recorded within interest expense within the consolidated statements of operations and
comprehensive loss.
Additionally, the notes carried a conversion feature whereby they would automatically convert upon either (a) a change in
control of the Company; (b) a reorganization, merger, or consolidation of the Company; (c) the sale of the Company’s assets;
or (d) an initial public offering of the Company’s common stock. The notes also would have converted in the event the
Company consummated an equity financing arrangement with an aggregate sales price of no less than US$10,000,000. Upon
the occurrence of one of the aforementioned events, the notes would have converted into 80% of the price per share value of
common stock applicable at the time of the event. The notes also carried an optional conversion feature whereby the notes may
convert into common stock.
On June 6, 2019, the Company issued two separate convertible notes totaling US$150,000. The promissory notes had a stated
maturity date of June 6, 2021 with the option of individual 1-year renewable periods for up to 5 years should no conversion event
occur. The notes paid an annual interest rate of 10% on the unpaid principal balance through June 6, 2021.
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
The first convertible note of US$75,000 carried a conversion feature where it would automatically convert upon either (a) a
change in control of the Company; (b) a reorganization, merger, or consolidation of the Company; (c) the sale of the Company’s
assets; or (d) an initial public offering of the Company’s common stock (or a security representing common stock). The note also
would have converted in the event the Company consummated an equity financing arrangement with an aggregate sales price
of no less than US$500,000. Upon the occurrence of one of the aforementioned events, the note would convert into 80% of the
price per share value of common stock applicable at the time of the event. The note also carried an optional conversion feature
whereby the note may convert into common stock.
The second convertible note of US$75,000 carried a conversion feature where it would automatically convert upon either (a) a
change in control of the Company; (b) a reorganization, merger, or consolidation of the Company; (c) the sale of the Company’s
assets; or (d) an initial public offering of the Company’s common stock (or a security representing common stock). The note also
would have converted in the event the Company consummated an equity financing arrangement with an aggregate sales price
of no less than US$500,000. Upon the occurrence of one of the aforementioned events, the note would convert into 80% of the
price per share value of common stock applicable at the time of the event. The note also carried an optional conversion feature
whereby the note may convert into common stock.
The contingent conversion features of the notes issued on March 29, 2019 and June 6, 2019 were triggered on July 24, 2019 as
a result of the Company’s initial public offering of common stock on the ASX. The total non-cash impact of the beneficial
conversion feature was US$579,216, comprised of US$470,268 of expense incurred on the date of conversion, and accumulated
interest incurred on the convertible notes of US$88,229. The impacts of the conversion are recorded within interest expense
on beneficial conversion feature and interest expense, respectively, in the consolidated statements of operations and
comprehensive loss for the year ended December 31, 2019.
N O T E 1 4 – E Q U I T Y B A S E D C O M P E N S A T I O N
The Company issues incentive and non-qualified stock options, restricted stock units, and restricted stock awards to employees
and non-employees with vesting requirements varying from six months to four years (the typical vesting is a one-year cliff vesting
and monthly vesting after the first year of service). The Company utilizes the Black-Scholes model for valuing stock option
issuances and the grant date fair value for valuing the restricted stock issuances.
Equity based compensation expense, including vesting of restricted stock units, totaled US$7,010,844 and US$1,167,265 for the
years ended December 31, 2020 and 2019, respectively. Equity based compensation expense is recorded within selling, general,
and administrative expenses within the consolidated statements of operations and comprehensive loss.
2016 Employee Stock Option Plan
The Company adopted the 2016 Employee Stock-Option Plan on January 16, 2016. The number of options authorized for
issuance under the plan is 10,000,000. The Company had 6,844,170 and 8,336,253 options issued and outstanding under the
plan as of December 31, 2020 and 2019, respectively. Additionally, the Company had 155,556 and 350,000 of restricted stock
awards issued and outstanding as of December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019, 1,344,145
and 882,914 options were exercised into 1,344,145 and 882,914 shares of common stock, respectively.
2019 Equity Incentive Plan
The Company adopted the 2019 Equity Incentive Plan on June 25, 2019. The number of options authorized for issuance under
the plan is 26,000,000. The Company had 17,671,374 and 8,716,250 options issued and outstanding as of December 31, 2020 and
2019, respectively; and 2,680,259 and 557,000 restricted stock units issued and outstanding as of December 31, 2020 and 2019,
respectively. During the year ended December 31, 2020, 392,331 options were exercised into 392,331 shares of common stock.
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SEZZLE INC ANNUAL REPORT 2020|
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—
—
—
—
—
8.65
—
8.04
—
8.90
8.65
8.04
8.90
—
—
—
9.18
—
8.40
9.37
—
9.18
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
UPDATED TABLE 3/18 NEW
For the year ended December 31, 2020
UPDATED TABLE 3/18 NEW
The following tables summarize the options issued, outstanding, and exercisable as of December 31, 2020 and 2019:
Weighted Average
Exercise Price
Number of Options
Intrinsic Value
Weighted Average
Remaining Life
Outstanding, beginning of period
17,052,503 $
0.624 $
14,895,996
Granted
Exercised
10,105,163
For the year ended December 31, 2020
0.826
—
Number of Options
(1,736,476)
Weighted Average
Exercise Price
0.305
Intrinsic Value
5,917,834
Weighted Average
Remaining Life
—
Outstanding, beginning of period
Canceled
Outstanding, end of period
Granted
Exercisable, end of period
Exercised
(905,646)
17,052,503 $
0.096
0.624 $
—
14,895,996
10,105,163
24,515,544
0.826
1.343
—
84,731,639
(1,736,476)
7,064,077
0.305
0.522
5,917,834
29,883,424
Expected to vest, end of period
Canceled
(905,646)
17,451,467 $
0.096
1.675 $
—
54,848,215
Outstanding, end of period
Exercisable, end of period
Expected to vest, end of period
24,515,544
1.343
84,731,639
7,064,077
0.522
29,883,424
17,451,467 $
1.675 $
54,848,215
Outstanding, beginning of period
Granted
Exercised
For the year ended December 31, 2019
Number of Options
Weighted Average
Exercise Price
Intrinsic Value
Weighted Average
Remaining Life
7,430,000 $
0.044 $
1,307,849
11,971,250
For the year ended December 31, 2019
0.891
—
—
—
Number of Options
(882,914)
Weighted Average
Exercise Price
0.042
Intrinsic Value
1,108,483
Weighted Average
Remaining Life
—
Outstanding, beginning of period
Canceled
Outstanding, end of period
Granted
(1,465,833)
7,430,000 $
0.215
0.044 $
—
1,307,849
11,971,250
17,052,503
0.891
0.624
—
14,895,996
Exercisable, end of period
Sezzle Inc. and Subsidiaries
Exercised
Notes to the Consolidated Financial Statements
13,656,178 $
Canceled
(1,465,833)
For the Years Ended December 31, 2020 and 2019
17,052,503
(882,914)
3,396,325
Outstanding, end of period
Expected to vest, end of period
0.042
0.071
1,108,483
4,731,629
0.762 $
0.215
10,164,367
—
0.624
14,895,996
Exercisable, end of period
3,396,325
The following table represents the assumptions used for estimating the fair values of stock options granted to employees,
The following table represents the assumptions used for estimating the fair values of stock options
contractors, and non-employees of the Company under the Black-Scholes method. The risk-free interest rate is based on the
granted to employees, contractors, and non-employees of the Company. The risk-free interest rate is
13,656,178 $
U.S. Treasury yield curve in effect on the grant date:
based on the U.S. Treasury yield curve in effect on the grant date:
Expected to vest, end of period
10,164,367
4,731,629
0.762 $
0.071
UPDATED TABLE
8.40
9.37
The following table represents the assumptions used for estimating the fair values of stock options
2019
granted to employees, contractors, and non-employees of the Company. The risk-free interest rate is
based on the U.S. Treasury yield curve in effect on the grant date:
Risk-free interest rate
0.37% - 0.56%
2020
1.59% – 2.61%
Expected volatility
Expected life (in years)
91.30% – 93.83%
65.00% – 82.88%
6.00
2.23
$
6.00
0.66
2020
2019
0.68%
93.0%
6.1
— %
— %
—
—
Weighted Average Grant
Date Fair Value
Number of Shares
US$
2,659,094
(581,402)
(16,171)
3.48
1.02
1.35
Weighted average estimated fair value of options granted
32
$
NEW TABLE
Risk-free interest rate
Expected volatility
101
Expected life (in years)
|
UPDATED TABLE
Granted
Vested
Forfeited or surrendered
32
33
Weighted average estimated fair value of options granted
$
0.64
$
Restricted stock award and restricted stock unit transactions during the years ended December 31, 2020
and 2019, respectively, are summarized as follows:
Unvested shares, January 1, 2020
772,222 $
1.12
Unvested shares, December 31, 2020
2,833,743 $
3.37
Sezzle Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
Sezzle Inc. and Subsidiaries
For the Years Ended December 31, 2020 and 2019
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2020 and 2019
UPDATED TABLE
UPDATED TABLE
Risk-free interest rate
Expected volatility
Risk-free interest rate
Expected life (in years)
Expected volatility
Weighted average estimated fair value of options granted
Expected life (in years)
Weighted average estimated fair value of options granted
2020
2020
0.37% - 0.56%
2019
2019
1.59% – 2.61%
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
65.00% – 82.88%
1.59% – 2.61%
91.30% – 93.83%
0.37% - 0.56%
$
$
6.00
91.30% – 93.83%
6.00
65.00% – 82.88%
2.23
6.00
$
2.23
$
0.66
6.00
0.66
The following table represents the assumptions used for estimating the fair values of stock options granted to executives under
the Long Term Incentive Plan (LTIP) of the Company under the Monte Carlo Simulation valuation model. Refer to Note 16 for
NEW TABLE
further information around the Company’s LTIP plan. The risk-free interest rate is based on the U.S. Treasury yield curve in effect
NEW TABLE
on the grant date:
Risk-free interest rate
Expected volatility
Risk-free interest rate
Expected life (in years)
Expected volatility
Weighted average estimated fair value of options granted
Expected life (in years)
Weighted average estimated fair value of options granted
2020
2020
0.68%
93.0%
0.68%
6.1
93.0%
0.64
6.1
$
0.64
$
2019
2019
— %
— %
— %
—
— %
—
—
—
$
$
Restricted stock award and restricted stock unit transactions during the years ended December 31, 2020
and 2019, respectively, are summarized as follows:
Restricted stock award and restricted stock unit transactions during the years ended December 31, 2020
Restricted stock award and restricted stock unit transactions during the years ended December 31, 2020 and 2019, respectively,
and 2019, respectively, are summarized as follows:
UPDATED TABLE
are summarized as follows:
UPDATED TABLE
l
Unvested shares, January 1, 2020
Granted
Unvested shares, January 1, 2020
Vested
Granted
Sezzle Inc. and Subsidiaries
Forfeited or surrendered
Notes to the Consolidated Financial Statements
Vested
For the Years Ended December 31, 2020 and 2019
Unvested shares, December 31, 2020
Forfeited or surrendered
Unvested shares, December 31, 2020
Unvested shares, January 1, 2019
Granted
Vested
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o
F
Forfeited or surrendered
Unvested shares, December 31, 2019
33
33
Weighted Average Grant
Date Fair Value
Number of Shares
Weighted Average Grant
US$
Date Fair Value
Number of Shares
772,222 $
US$
2,659,094
772,222 $
(581,402)
2,659,094
(16,171)
(581,402)
2,833,743 $
(16,171)
2,833,743 $
1.12
3.48
1.12
1.02
3.48
1.35
1.02
3.37
1.35
3.37
Weighted Average Grant
Date Fair Value
Number of Shares
US$
— $
907,000
(134,778)
—
772,222 $
—
1.15
0.95
—
1.13
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During the year ended December 31, 2020, employees and non-employees received restricted stock units totaling 2,659,094. Vesting
of restricted stock units and restricted stock awards totaled 464,736 and 116,666, respectively. The shares underlying the restricted
restricted stock issuances are scheduled to vest over a range of one to four years.
During the year ended December 31, 2020, employees and non-employees received restricted stock
stock units granted in 2020 were assigned a weighted average fair value of US$3.48 per share, for a total value of US$9,250,511. The
units totaling 2,659,094. Vesting of restricted stock units and restricted stock awards totaled 464,736 and
116,666, respectively. The shares underlying the restricted stock units granted in 2020 were assigned a
weighted average fair value of $3.48 per share, for a total value of $9,250,511. The restricted stock
issuances are scheduled to vest over a range of one to four years.
For the year ended December 31, 2019, employees and non-employees received restricted stock grants
totaling 907,000 shares, inclusive of 557,000 restricted stock units and 350,000 restricted stock awards.
Vesting of restricted stock units and restricted stock awards are totaled 57,000 and 77,778, respectively.
The shares underlying the awards were assigned a weighted average fair value of $1.15 per share, for a
total value of $1,043,050. The restricted stock issuances are scheduled to vest over a range of three to
SEZZLE INC ANNUAL REPORT 2020
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four years.
approximately 3.0 years.
approximately 3.6 years.
The Company had no restricted stock awards or restricted stock units issued or outstanding prior to 2019.
As of December 31, 2020, the total compensation cost related to non-vested awards not yet recognized is
$25,103,935 and is expected to be recognized over the weighted average remaining recognition period of
As of December 31, 2019, the total compensation cost related to non-vested awards not yet recognized is
$8,160,309 and is expected to be recognized over the weighted average remaining recognition period of
NOTE 16 – MERCHANT INTEREST PROGRAM
Sezzle offers its merchants an interest bearing program whereby merchants may defer payment from the
Company in exchange for interest. Merchant accounts payable in total were $60,933,272 and
$13,284,544 as of December 31, 2020 and 2019, respectively, as disclosed on the consolidated balance
sheets. Of these amounts, $53,528,501 and $10,053,570 were recorded within the merchant interest
program balance as of December 31, 2020 and 2019, respectively.
Deferred payments retained in the program bear interest at the LIBOR daily (3 month) rate plus five
percent (5.0%) on an annual basis, compounding daily. The weighted average annual percentage yield
for the year ended December 31, 2020 was 5.43%. Interest expense associated with the program totaled
$1,475,554 and $293,461 for the years ended December 31, 2020 and 2019, respectively.
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For the year ended December 31, 2019, employees and non-employees received restricted stock grants totaling 907,000 shares,
inclusive of 557,000 restricted stock units and 350,000 restricted stock awards. Vesting of restricted stock units and restricted
stock awards are totaled 57,000 and 77,778, respectively. The shares underlying the awards were assigned a weighted average
fair value of US$1.15 per share, for a total value of US$1,043,050. The restricted stock issuances are scheduled to vest over a
range of three to four years.
As of December 31, 2020, the total compensation cost related to non-vested awards not yet recognized is US$23,912,268 and is
expected to be recognized over the weighted average remaining recognition period of approximately 3.1 years.
As of December 31, 2019, the total compensation cost related to non-vested awards not yet recognized is US$8,160,309 and is
expected to be recognized over the weighted average remaining recognition period of approximately 3.6 years.
N O T E 1 5 – M E R C H A N T I N T E R E S T P R O G R A M
Sezzle offers its merchants an interest bearing program whereby merchants may defer payment from the Company in exchange
for interest. Merchant accounts payable in total were US$60,933,272 and US$13,284,544 as of December 31, 2020 and 2019,
respectively, as disclosed on the consolidated balance sheets. Of these amounts, US$53,528,501 and US$10,053,570 were recorded
within the merchant interest program balance as of December 31, 2020 and 2019, respectively.
Deferred payments retained in the program bear interest at the LIBOR daily (3 month) rate plus three percent (3.0%) on an annual
basis, compounding daily. The weighted average annual percentage yield for the year ended December 31, 2020 was 5.43%.
Interest expense associated with the program totaled US$1,475,554 and US$293,461 for the years ended December 31, 2020 and
2019, respectively.
withdrawal frequency.
Deferred payments are due on demand (up to US$250,000 during any seven day period) at the request of the merchant; however,
Sezzle reserves the right to impose additional limits on the program and make changes to the program without notice or limits.
These limits and changes to the program can include but are not limited to: maximum balances, withdrawal amount limits, and
N O T E 1 6 – S H O R T A N D L O N G T E R M I N C E N T I V E P L A N S
In May 2020, the Company adopted a short term incentive compensation program for its employees and executives. The program
is based on achievements where individuals will be compensated for Company-wide and individual and/or team performance
for the fiscal year. Measurement of compensable amounts is determined at the end of the year and payouts to individuals will
be made in the form of restricted stock units in the following year. As of December 31, 2020, the Company has accrued a total
of US$2,133,806 for this program, which is recorded in accrued liabilities on the consolidated balance sheets and offset by an
expense recognized in selling, general, and administrative expenses within the consolidated statements of operations and
comprehensive loss.
The Company also adopted the LTIP plan for its executive team in May 2020. The LTIP comprises grants of market priced stock
options under the 2019 Equity Incentive Plan, with vesting subject to required levels of Comparative Total Shareholder Return (TSR)
tested over three years, and subject to continued employment for a three-year period ending January 1, 2023. Both the market
and service vesting conditions must be met in order for the grantee to vest at the end of the three year measurement period.
Each of the executive and designated senior officers of the Company was awarded a long term incentive stock option grant to
purchase shares on May 22, 2020. The stock options have an exercise price of A$2.10 per share, based on the closing sale price
of CDIs on the ASX on May 21, 2020, the trading day prior to the date of grant. The amount of each award is equal to 300% of the
individual’s salary in effect as of May 22, 2020 (100% for each of the three years in the performance period and pro-rated for start
date).
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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
The Company’s stock price performance will be measured based on its volume weighted average price relative to other
companies included within the S&P/ASX All Technology Index. The number of long term incentive stock option grants were
calculated based on a fair value of US$0.64 per option, determined under the Monte Carlo Simulation valuation method.
Total expense recognized related to compensation under the LTIP program was US$5,939,644 for the year ended December 31,
2020. The compensable amounts under the LTIP to executive board members are subject to shareholder approval. Due to the
pending approval, as of December 31, 2020, the Company has remeasured the fair value of the awards issued to executive board
members utilizing the Monte Carlo Simulation valuation method and accrued US$4,483,073 within other non-current liabilities
in the consolidated balance sheets, and offset by an expense recognized in selling, general, and administrative expenses within
the consolidated statements of operations and comprehensive loss. The increase in value is primarily driven by the positive
performance of the Company’s share price during the year. Awards to non-board member executives are included within the
stock compensation amounts detailed within Note 14.
N O T E 1 7 – L O S S E S P E R S H A R E
The computation for basic loss per share is established by dividing net losses for the period by the weighted average shares
outstanding during the reporting period, including repurchases carried as treasury stock. Diluted loss per share is computed
in a similar manner, with weighted average shares increasing from the assumed exercise of employee stock options (including
options classified as liabilities) and assumed vesting of restricted stock units (if dilutive). Given the Company is in a loss position,
the impact of including assumed exercises of stock options and vesting of restricted stock units would have an anti-dilutive
impact on the calculation of diluted loss per share and, accordingly, diluted and basic loss per share were equal for the years
ended December 31, 2020 and 2019.
N O T E 1 8 – S U B S E Q U E N T E V E N T S
Receivable Funding Facility
On February 10, 2021, Sezzle entered into an agreement with Goldman Sachs Bank USA (the ‘Class A’ senior lender) and Bastion
Funding IV LLC (the ‘Class B’ mezzanine lender) for a US$250,000,000 receivables funding facility. The funding facility has
a maturity date of June 12, 2023 (a 28-month term from the agreement date). The agreement is secured by the Company’s
consumer notes receivable it chooses to pledge and is subject to covenants. Fifty percent of the total available funding facility
(US$125,000,000) is committed while the remaining fifty percent is available to the Company for expanding its funding capacity.
The funding facility carries an interest rate of LIBOR+3.375% and LIBOR+10.689% (the LIBOR floor rate is set at 0.25%) for funds
borrowed from the Class A and Class B lender, respectively. In the event of a prepayment due to a broadly marketed and
distributed securitization transaction with a party external to the agreement, an exit fee of 0.75% of such prepaid balance will
be due to the lender upon such transaction. Additionally, the Company paid a US$1,000,000 termination fee to exit the previous
Loan Agreement with the Syndicate.
Other Subsequent Events
The Company has evaluated subsequent events through the date of the audit report and determined that there have been
no events, other than those disclosed above, that have occurred that would require adjustment to the disclosures in the
consolidated financial statements.
104
SEZZLE INC ANNUAL REPORT 2020|
Directors’ Declaration
For the year ended December 31, 2020
The Directors declare that in the Directors’ opinion:
(a) The attached financial statements and notes give a true and fair view of the consolidated entity’s financial
position as of December 31, 2020 and performance for the financial year ended on that date;
(b) There are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when
they become due and payable;
(c) The attached financial statements and notes comply with accounting principles generally accepted in the
United States of America (U.S. GAAP) as issued by the Financial Accounting Standards Board as described in the notes to the
financial statements;
(d) The attached financial statements and notes also comply with mandatory professional reporting requirements,
including the Corporations Act 2001, the Accounting Standards, and the Corporations Regulations 2001 to the extent that the
Company is required to comply with such provisions; and
(e) The remuneration disclosures set out in the Directors’ Report comply with Corporations Regulations 2001 and
other mandatory professional reporting requirements to the extent that the Company is required to comply with such
provisions.
The Directors have been given a declaration by the Chief Executive Officer and Chief Financial Officer equivalent
to section 295(a) of the Corporations Act 2001.
On behalf of the Board,
Charlie Youakim,
Executive Chairman and CEO
31 March 2021
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Additional ASX Information
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Additional ASX Information:
During the course of the reporting period, the Company continued to use it cash and assets in a form readily convertible
Additional information required pursuant to ASX Listing Rule 4.10 and not disclosed elsewhere in this
to cash that it had at the time of admission in a way consistent with its business objectives. Additional information required
report is set out below. The information is effective as at 18 March, 2021.
pursuant to ASX Listing Rule 4.10 and not disclosed elsewhere in this report is set out below. The information is effective as at
18 March, 2021
Additional ASX Information:
Corporate Governance:
Additional information required pursuant to ASX Listing Rule 4.10 and not disclosed elsewhere in this
The Company’s Corporate Governance Statement for the year ended 31 December 2020 can be found
report is set out below. The information is effective as at 18 March, 2021.
Corporate Governance:
at https://sezzle.com/investors
Corporate Governance:
The Company’s Corporate Governance Statement for the year ended 31 December 2020 can be found at
Substantial Shareholders:
The Company’s Corporate Governance Statement for the year ended 31 December 2020 can be found
https://sezzle.com/investors
at https://sezzle.com/investors
As a company incorporated in Delaware and listed solely on the ASX, neither Chapter 6 of the
Substantial Shareholders:
Corporations Act 2001 (Cth.) (Corporations Act) or the corresponding provisions of the Securities
Substantial Shareholders:
Exchange Act of 1934 dealing with notification of substantial holding apply to shareholders in Sezzle.
As a company incorporated in Delaware and listed solely on the ASX, neither Chapter 6 of the
As a company incorporated in Delaware and listed solely on the ASX, neither Chapter 6 of the Corporations Act 2001 (Cth.)
However, as disclosed to the ASX on 29 July 2019, the Company has agreed with ASX to release to the
Corporations Act 2001 (Cth.) (Corporations Act) or the corresponding provisions of the Securities
(Corporations Act) or the corresponding provisions of the Securities Exchange Act of 1934 dealing with notification of
market certain information about a person (other than Sezzle itself) becoming a substantial holder in
Exchange Act of 1934 dealing with notification of substantial holding apply to shareholders in Sezzle.
substantial holding apply to shareholders in Sezzle. However, as disclosed to the ASX on 29 July 2019, the Company has agreed
However, as disclosed to the ASX on 29 July 2019, the Company has agreed with ASX to release to the
the Company within the meaning of section 671B of the Corporations Act, varying its substantial
with ASX to release to the market certain information about a person (other than Sezzle itself) becoming a substantial holder
market certain information about a person (other than Sezzle itself) becoming a substantial holder in
holding by 1% or more or ceasing to be a substantial holder.
the Company within the meaning of section 671B of the Corporations Act, varying its substantial
in the Company within the meaning of section 671B of the Corporations Act, varying its substantial holding by 1% or more or
Having regard to the qualifications and limitations as disclosed to the ASX, the table below sets out
holding by 1% or more or ceasing to be a substantial holder.
ceasing to be a substantial holder.
the information known to Sezzle as at 18 March 2021 concerning substantial holdings in Sezzle’s CDIs.
Having regard to the qualifications and limitations as disclosed to the ASX, the table below sets out
Having regard to the qualifications and limitations as disclosed to the ASX, the table below sets out the information known to
the information known to Sezzle as at 18 March 2021 concerning substantial holdings in Sezzle’s CDIs.
Sezzle as at 18 March 2021 concerning substantial holdings in Sezzle’s CDIs.
Name of Substantial Holder
within the meaning of
Name of Substantial Holder
section 671B of the
within the meaning of
Corporations Act
section 671B of the
Corporations Act
Record Holder (if different)
Record Holder (if different)
Number of CDIs in which
the substantial holder
holds a relevant interest
% of total CDI’s
on issue
Number of CDIs in which
the substantial holder
holds a relevant interest
% of total CDI’s
on issue
Charlie Youakim
Charlie Youakim
J P Morgan Nominees
J P Morgan Nominees
Australia Pty Limited
Australia Pty Limited
Paul Paradis
Paul Paradis
Charlie Youakim – 70,806,238
Charlie Youakim – 70,806,238
J P Morgan Nominees Australia Pty Limited – 9,553,571
J P Morgan Nominees Australia Pty Limited – 9,553,571
Mr Charles G Youakim - 6,000,000
Mr Charles G Youakim - 6,000,000
Mr Charles G Youakim - 2,000,000
Mr Charles G Youakim - 2,000,000
88,359,809
88,359,809
45.00%
45.00%
N/A
N/A
N/A
N/A
12,042,609
12,042,609
6.133%
6.133%
10,000,000
10,000,000
5.09%
5.09%
Number of Holders of Each Class of Equity Securities:
Number of Holders of Each Class of Equity Securities:
Number of Holders of Each Class of Equity Securities:
Category
Category
CHESS Depositary Interests (quoted on ASX)
CHESS Depositary Interests (quoted on ASX)
Unlisted Options (not quoted on ASX)
Restricted Stock Units (not quoted on ASX)
Unlisted Options (not quoted on ASX)
Common Stock (not quoted on ASX)
Restricted Stock Units (not quoted on ASX)
Common Stock (not quoted on ASX)
Voting Rights:
Voting Rights:
Voting Rights:
Number of Holders
Number of Holders
16,612
233
140
24
16,612
233
140
24
Shareholder and CDI Holder voting rights are summarised within section 9 ‘Additional Information’ (page 123) of the Company’s
Replacement Prospectus dated 8 July 2019 and section 9.4 (b) on page 125.
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SEZZLE INC ANNUAL REPORT 2020|
Shareholder and CDI Holder voting rights are summarised within section 9 ‘Additional Information’
Shareholder and CDI Holder voting rights are summarised within section 9 ‘Additional Information’
(page 123) of the Company’s Replacement Prospectus dated 8 July 2019 and section 9.4 (b) on page
(page 123) of the Company’s Replacement Prospectus dated 8 July 2019 and section 9.4 (b) on page
125.
125.
Distribution Schedule of CDI Holders:
Distribution Schedule of CDI Holders:
Distribution Schedule of CDI Holders:
Range
Range
Total Holders
Total Holders
CDIs
CDIs
% of CDIs
% of CDIs
l
y
n
o
1 - 1,000
1 - 1,000
1,001 - 5,000
1,001 - 5,000
5,001 - 10,000
5,001 - 10,000
10,001 - 100,000
10,001 - 100,000
100,001 Over
100,001 Over
Total
Total
11,078
11,078
4,067
4,067
777
777
638
638
52
52
16,612
16,612
4,017,275
4,017,275
9,699,667
9,699,667
5,743,331
5,743,331
14,900,684
14,900,684
161,964,638
161,964,638
196,325,595
196,325,595
2.05
2.05
4.94
4.94
2.93
2.93
7.59
7.59
82.50
82.50
100.00
100.00
Unmarketable Parcels:
Unmarketable Parcels:
Unmarketable Parcels:
There were 765 holders of less than a marketable parcel of CDIs, comprising a total of 33,654 CDIs (0.017% of
There were 765 holders of less than a marketable parcel of CDIs, comprising a total of 33,654 CDIs, being a parcel of less than
There were 765 holders of less than a marketable parcel of CDIs, comprising a total of 33,654 CDIs (0.017% of
CDIs on issue), being a parcel of less than 63 CDIs based on a closing price of AUD$7.94 per CDI on 17 March,
63 CDIs based on a closing price of AUD$7.94 per CDI on 17 March, 2021.
CDIs on issue), being a parcel of less than 63 CDIs based on a closing price of AUD$7.94 per CDI on 17 March,
2021.
2021.
Top 20 CDI Holders:
Top 20 CDI Holders:
Top 20 CDI Holders:
CHARLES G YOUAKIM
CHARLES G YOUAKIM
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
PAUL PARADIS
PAUL PARADIS
CONTINENTAL INVESTMENT PARTNERS LLC
CONTINENTAL INVESTMENT PARTNERS LLC
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
NATIONAL NOMINEES LIMITED
MR CHARLES G YOUAKIM
MR CHARLES G YOUAKIM
CITICORP NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
KILLIAN BRACKEY
KILLIAN BRACKEY
MR LEE BRADING
MR LEE BRADING
MR CHARLES G YOUAKIM
MR CHARLES G YOUAKIM
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
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Name
Name
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s
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e
p
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MS CARMELA BERNAD
MS CARMELA BERNAD
JACK ZIEGLER
JACK ZIEGLER
MR BRYAN KRUG
MR BRYAN KRUG
MR CHRIS HARDING
MR CHRIS HARDING
JOSEPH M DONOVAN
JOSEPH M DONOVAN
Total Top 20
Total Top 20
Total Balance of Holders
Total Balance of Holders
Total CDIs
Total CDIs
107 |
Number of CDIs Held
Number of CDIs Held
70,806,238
70,806,238
12,042,609
12,042,609
10,000,000
10,000,000
9,389,407
9,389,407
8,357,918
8,357,918
6,690,955
6,690,955
6,000,000
6,000,000
5,085,528
5,085,528
5,000,000
5,000,000
3,460,146
3,460,146
2,000,000
2,000,000
1,990,344
1,990,344
1,953,448
1,953,448
1,747,920
1,747,920
1,654,310
1,654,310
1,216,666
1,216,666
1,156,250
1,156,250
1,072,751
1,072,751
1,023,085
1,023,085
993,265
993,265
151,640,840
151,640,840
44,684,755
44,684,755
196,325,595
196,325,595
% of CDIs
% of CDIs
36.07
36.07
6.13
6.13
5.09
5.09
4.78
4.78
4.26
4.26
3.41
3.41
3.06
3.06
2.59
2.59
2.55
2.55
1.76
1.76
1.02
1.02
1.01
1.01
1.00
1.00
0.89
0.89
0.84
0.84
0.62
0.62
0.59
0.59
0.55
0.55
0.52
0.52
0.51
0.51
77.24
77.24
22.76
22.76
100.00
100.00
Escrowed Securities:
Escrowed Securities:
Escrowed Securities:
Category
CDIs
Category
Options
CDIs
Restricted Stock Units
Restricted Stock Units
Unquoted Securities:
Unquoted Securities:
Options
l
y
n
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Number
ASX or Voluntary
End of Escrow Period
93,975,244
Number
2,208,334
93,975,244
350,000
2,208,334
350,000
ASX
ASX or Voluntary
ASX
ASX
ASX
ASX
ASX
30 July 2021
End of Escrow Period
30 July 2021
30 July 2021
30 July 2021
30 July 2021
30 July 2021
Unquoted Securities:
Category
Number of Units
Number of Holders
Options
e
s
u
Category
Restricted Stock Units
Options
Common Stock
Restricted Stock Units
Common Stock
Other Information:
Buy-back:
20,912,110
Number of Units
2,688,445
20,912,110
728,454
2,688,445
728,454
233
Number of Holders
140
233
24
140
24
There is no current on-market buy back.
There is no current on-market buy back.
The Company is listed on the Australian Securities Exchange under the code ‘SZL’.
Buy-back:
The Company is listed on the Australian Securities Exchange under the code ‘SZL’.
There is no current on-market buy back.
There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act which have not yet
been completed.
The Company is listed on the Australian Securities Exchange under the code ‘SZL’.
Corporate Directory:
No securities were purchased on-market during the reporting period under or for the purposes of an employee incentive
Directors:
scheme or to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an
Corporate Directory:
employee incentive scheme.
Charlie Youakim – Executive Chairman and CEO – USA
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Directors:
Paul Paradis – Executive Director and President – USA
Charlie Youakim – Executive Chairman and CEO – USA
Paul Purcell – Independent Non-Executive Director - USA
Paul Paradis – Executive Director and President – USA
Kathleen Pierce-Gilmore - Independent Non-Executive Director - USA
Paul Purcell – Independent Non-Executive Director - USA
Paul Lahiff - Independent Non-Executive Director – Australia
Kathleen Pierce-Gilmore - Independent Non-Executive Director - USA
Mike Cutter - Independent Non-Executive Director – Australia
Paul Lahiff - Independent Non-Executive Director – Australia
Company Secretary:
Mike Cutter - Independent Non-Executive Director – Australia
Don McConnell – USA Corporate Company Secretary
Justin Clyne – Australia (Company Secretary – ASX Compliance)
Company Secretary:
Don McConnell – USA Corporate Company Secretary
Justin Clyne – Australia (Company Secretary – ASX Compliance)
SEZZLE INC ANNUAL REPORT 2020
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108
Corporate Directory
D I R E C T O R S
Charlie Youakim
Executive Chairman and Chief Executive Office – USA
Paul Paradis
Executive Director and President – USA
Paul Purcell
Independent Non-Executive Director – USA
Kathleen Pierce-Gilmore
Independent Non-Executive Director – USA
Paul Lahiff
Independent Non-Executive Director – Australia
l
Mike Cutter
Independent Non-Executive Director - Australia
C O M P A N Y S E C R E T A R Y
Don McConnell
USA Corporate Company Secretary
Justin Clyne
Australia (Company Secretary – ASX Compliance)
R E G I S T E R E D O F F I C E A N D
P R I N C I P A L P L A C E O F B U S I N E S S
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UNITED STATES
REGISTERED OFFICE:
A Registered Agent Inc.
Suite 8A, 8 The Green
City of Dover, Kent County
Delaware 19901, USA
PRINCIPAL PLACE OF BUSINESS:
251 N 1st Ave N, Suite 200
Minneapolis, MN 55401, USA
Tel: + 1 651 504 5402
AUSTRALIA
REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS:
Suite 6.02, Level 6
28 O’Connell Street
Sydney NSW 2000
Tel: + 61 2 9048 8856
109
A U D I T O R S
Baker Tilly US, LLP
225 South 6th Street, Suite 2300
Minneapolis, MN 55402
Tel: + 1 612 876 4500
www.bakertilly.com
S O L I C I T O R S
SQUIRE PATTON BOGGS
AUSTRALIA:
Raine Square
Level 21, 300 Murray Street
Perth WA 6000
Tel: + 61 8 9429 7444
www.squirepattonboggs.com
S H A R E R E G I S T R Y
COMPUTER SHARE INVESTOR
SERVICES PTY LIMITED
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Tel: + 61 3 9415 5000
www.computershare.com/au
Australia
I N V E S T O R I N Q U I R I E S
investors@sezzle.com
W E B S I T E
www.sezzle.com
A S X C O D E
SZL
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The way forward.
110
SEZZLE INC ANNUAL REPORT 2020|