Sezzle reports maiden profit in November as it tracks towards $60m in cost cutting

The US-based buy now, pay later provider has booked its first profitable month as the effects of a cost cutting exercise that saw it sack nearly half its staff flow through.

Sezzle is upbeat about its futures after the buy now, pay later provider reported its maiden monthly profit as the effects of a $60m cost cutting exercise that saw it sack half of its staff flow through.

The US-based business turned profitable in November as measured by net income and adjusted earnings before taxes, depreciation and amortisation. Net income for Sezzle was $US200,000 ($298,000) for the month, limiting the net loss for the quarter to date to $US1.3m.

This is substantially lower than the $US8.6m loss booked by the come in the fourth quarter of 2021.

The maiden profit for Sezzle comes amid a horrid year for the buy now, pay later sector, which has been smashed by the sharemarket over concerns about the pathway to profitability in a high inflation environment and as central banks embarked on aggressive interest rate hikes.

Shares in Sezzle have plunged 82 per cent for the calendar year despite a bounce of 3 per cent to 52c on Monday following the update. The company is also 95 per cent lower from its peak of $11.34 achieved in August 2020 during the buy now, pay later rally.

Sezzle chairman and chief executive Charlie Youakim said November saw a record high in total revenue, which put it on target to continue to grow the company’s top and bottom lines in the new year.

“To say we are excited is an understatement, as this puts us in a strong position entering 2023,” he said.

“We believe we are the first in our segment to reach profitability, but one month does not make a trend. Our goal for 2023 is to achieve positive net income and adjusted EBTDA.”

Sezzle had been the subject of a takeover attempt by larger player Zip, however plans were abandoned in July after both parties agreed to dump the deal amid challenging market conditions and a darkening outlook.

This saw the smaller player step up its turnaround program which Sezzle ultimately expects to generate $60m in annualised and cost savings by the first quarter of 2023.

Measures Sezzle has take included laying off nearly 50 per cent of its worldwide staff, scaling back efforts in Europe and Brazil, offboarding or renegotiating rates with merchants and a pullback in third-party spending.

Morgan Stanley warned last month that while buy now, pay later demand was still healthy as customers continued to spend more online than before Covid-19, macro and inflation factors could impact growth in the coming quarter as more consumers start to tighten their belts. The analyst also said that downloads from the larger players such after Afterpay saw the number of downloads drop 11 per cent year-on-year in the September quarter.