MINNEAPOLIS-based Sezzle Inc. has entered into an amendment to its credit and guaranty agreements, as disclosed in a recent SEC filing. The payment technology company, which is registered on the NASDAQ under the ticker SEZL, made changes to its financial covenants related to tangible net worth and restricted payments.
On Monday, the company and Bastion Funding VI LP, acting as the administrative agent for the lenders, signed Amendment No. 2 to the Limited Guaranty and Indemnity Agreement. This amendment revises the conditions under which Sezzle can distribute dividends to its shareholders or repurchase its common stock.
According to the terms of the amendment, Sezzle is now allowed to make restricted payments as long as it maintains a positive net income over the trailing twelve months. Furthermore, the total amount of such payments cannot exceed 50% of Sezzle's consolidated net income from October 14, 2021, to October 15, 2022, and 50% of its monthly consolidated net income thereafter. In the event of monthly net losses after this period, up to 100% can be used for restricted payments.
This adjustment in Sezzle's financial strategy comes as the company continues to navigate the competitive payment solutions sector. The disclosed amendment is based on a press release statement and provides investors with the latest governance on the company's financial management policies.
In other recent news, Sezzle Inc. has reported amendments to its agreements with WebBank and adjustments to its credit arrangements, according to a recent filing with the Securities and Exchange Commission. The changes bolster Sezzle's role in issuing its subscription products, Sezzle Anywhere and Sezzle Premium, while WebBank remains the exclusive originator and financier of Sezzle's "Pay-in-2" and "Pay-in-4" installment products.
Additionally, Sezzle Funding SPE II, a subsidiary of Sezzle, and its lenders have revised the terms of their Revolving Credit and Security Agreement to accommodate the purchase of loans from WebBank as per the new partnership terms.
In terms of governance, Sezzle has undergone significant board changes with the departure of Michael Cutter and Paul Alan Lahiff and the appointment of Stephen F. East and Kyle M. Brehm. B. Riley has initiated coverage on Sezzle with a Buy rating, citing the company's promising trajectory within the rapidly expanding buy-now-pay-later sector. Sezzle has maintained profitability since 2023, driven by its 0% APR point-of-sale financing, a fact underscored by B. Riley, which also highlighted Sezzle's potential for high growth at a low marginal cost leading to significant margin expansion.
InvestingPro Insights
Sezzle's recent amendment to its credit agreements aligns with its strong financial performance, as reflected in the latest InvestingPro data. The company's revenue growth of 39.33% over the last twelve months and an impressive 60.2% quarterly growth indicate a robust expansion trajectory. This growth may have influenced the decision to allow for potential restricted payments, as outlined in the new agreement.
InvestingPro Tips highlight that Sezzle's net income is expected to grow this year, which supports the amendment's provision for restricted payments based on positive net income. The company's profitability over the last twelve months further reinforces this outlook.
Investors should note that Sezzle is trading near its 52-week high, with a remarkable year-to-date price total return of 966.23%. While this suggests strong market confidence, the InvestingPro Tip indicating that the RSI suggests the stock is in overbought territory warrants careful consideration for potential investors.
For those interested in a deeper analysis, InvestingPro offers 13 additional tips that could provide valuable insights into Sezzle's financial health and market position.
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