AGM 2020

Jun 1, 2020

Slides

Good morning, everyone. Or to those of us joining from our home here in The United States, good evening, and welcome to the Sezzle Inc. Twenty twenty Annual General Stockholder Meeting. My name is Charlie Yuehakim, the CEO and Executive Chairman of Sezzle, and I will be chairing the meeting today. Before we begin, I wanted to make a few statements about what we're seeing unfolding for us in Minneapolis. Our hearts go out to George Floyd's family and friends and to all of those who have been hurt during the riots that have unfolded since. What we saw from those four officers on Monday was a disgusting abuse of power and actions that are so far away from our core values that words can't do the situation justice. Those four officers disgraced their uniforms and damaged the reputations of so many honorable police officers. The riots that have happened since are also inexcusable and have led to a growing amount of fear and hatred and something that we need to work together to reverse. It feels like we already passed the worst of it here in Minnesota. The communities are now coming together to clean things up and get some some of normalcy back in place. I'm also happy to report that everyone in the company is safe. That's our number one priority. We're a family for each other. Let's hope and pray that we can turn 2020 around and finish on a positive note. Thank you. Let's return to the AGM proceedings. I confirm that we have a quorum for the meeting to proceed, and I am pleased to declare the meeting formally open. I'm delighted to be able to also extend a warm welcome to all our stockholders and CDI holders who are participating through our online meeting platform. This meeting is being held virtually, meaning there's no physical meeting taking place in person, but rather by remote electronic means as permitted by the company's bylaws. I would also like to start acknowledging my fellow directors who are each joining the call from their usual locations. Also here in Minneapolis is Paul Paradis, my cofounder, director and chief revenue officer. Joining the call as well are our three non executive directors, Paul Purcell from Chicago, Kathleen Pierce Gilmore from Maryland, and Paul Leith from Sydney, Australia. We are also joined by Mike Cutter from Melbourne, Australia whose appointment is being proposed at today's meeting. In terms of our executive team, we also have a number of people including our CFO, Karen Harte joining from our Twin Cities, St. Paul our Australian company director, Company Secretary, Justin Klein from Sydney, Australia and our Head of IR, Lee Bradings, who is joining us from Charlotte. Also online today is Rachel Polson, our Audit Partner from Baker Tilly in Minneapolis. The notice of meeting was distributed to all stockholders and CDI holders in accordance with the company's bylaws and the ASX listing rules and is also available from our website and the ASX announcements platform on the ASX website. I will take the notice of meeting as read. In terms of the process for the meeting, we will begin by meeting with a joint presentation we will begin the meeting with a joint presentation from Karen Hartshey, Paul Peritus, myself while the formal proceedings comprising voting on the resolutions occurs in the background. We will be withdrawing resolution 10 relating to the additional placement capacity as sales of market capitalization exceeds the threshold permitted under ASX listing rules. The resolutions will be decided by poll. Voting on the resolutions is now open via the online meeting platform. The voting icon will appear on the navigation bar. Once you click on this, the resolutions will appear on your screen. You can vote at any time during the meeting until I declare the voting closed. You can also change your vote at any time throughout the proceedings. I will give you a clear prompt later in the meeting to warn of the close of in voting. I don't propose to read each of the resolutions as these are clearly laid out in the notice of meeting. The proxies received in respect to each resolution prior to the cutoff time are contained in the back of the presentation, which has been lodged with the ASX. We will also take the opportunity for questions. You can start submitting questions now, including any questions for the company's auditor, and we will address them later in the proceedings. We will now move on to our presentation. As mentioned earlier, you can find our posted on the AFX website if you'd like to follow along. Please open your presentation and proceed to Slide three where we'll cover the agenda. In today's presentation, we'll cover the following topics. First, we'll reiterate our mission and talk about our plans to reinforce it. Next, we'll recap what was accomplished in 2019. Third, we'll talk about our positioning as the most consumer friendly payment option and our emphasis on Gen Z. Fourth, we'll discuss our push for top line growth, but how we push for growth with ever increasing efficiency improvements in mind. Next, we'll discuss the importance of product innovation and how those plans help us. We'll also touch on how we've been handling COVID nineteen. And finally, we'll move on to the votes. Let's get started. Please use slides four through seven as your guide as we discuss our mission and how it's leading us on an important path, a path towards reinforcing the social good of our products. In case we have any new com newcomers, I want to repeat our mission. Our mission at SEGL is to financially empower the next generation. We embrace that mission in every decision that we make at the company. In order to reach our mission, put in place some building blocks. Those building blocks are, first and foremost, security. We put a big focus on protecting our consumer data. Consumer data security is our number one priority. Second, flexibility. We offer a good amount of it, especially with our consumers. A recent a recent example of that was the flexibility we offered for hardship during COVID. But flexibility is also at the core of every product decision that we make. Third, transparency. We try to be as transparent as possible with all of our stakeholders as we feel it just makes everything easier. And the final building block is reliability. We're reliable in our relationships and our duties, and our product is also reliable. Our software has been operating with greater than 99.99% uptime since inception. These building blocks help us focus on our two key stakeholders, our consumers and our merchant partners, which helps us get to our mission. Slide six reveals our new brand image that we launched earlier this year, which is a much better representation of our belief system than our previous brand. Trust, freedom, and the future are what drives us forward, and we're excited that we're able to leverage our technology to do so. This all culminates into the announcement, which we're quite quite proud of. At this AGM, we are putting up to vote the amendments which would make SEZEL a public benefits corp or PDC, which puts us squarely on a path towards becoming a certified b corp. You may all be wondering, what does that mean for us shareholders? It what it means is, several stands for more than bottom line profit, which is something we've been saying all along. We follow a stakeholder approach to business, which is what you're saying when you become a public benefits corporation. We believe in doing more than just making money. We are always we we are always a public benefits corporation. We just didn't know it yet. Becoming a PBC and eventually becoming a d corp will reinforce our image and differentiate us as the most consumer friendly company in our industry and also as a social good product for our consumers. We're extremely excited to move forward with these plans. On Slides eight, nine and ten, we want to go over our business. We believe we make a compelling case for investment and our results from the last year represent that case. We experienced tremendous growth in 2019, growing our revenues by nearly 10 times from $1,630,000 to $16,100,000 And we continue to experience phenomenal top line growth both in UMS and revenue. We have an amazing opportunity in front of us with our strong positions in Canada and The USA. We made a great push in 2019 to get to unit economic profitability as we promised we would during our IPO process. We believe we have the most loved consumer brand in the sector based on the reviews we received from our consumers and from our SME retailers. We work hard for both groups and the results show. The network effects of our business are taking hold now that we've grown so dramatically. We have over 1,300,000 active consumers and over 14,900 active merchants. Those numbers are helping us attract more consumers and merchants to our platform. And we have also built every piece of technology in house. Our IP and technology will continue to make our business more valuable each and every day. 2019 was the year that jump started us, and the IPO was a big part of that ignition. During the IPO process, we issued over 35,000,000 shares raising over 27,500,000.0 USD net of costs incurred, which at the time was roughly 41,000,000 Australian dollars. We've used that money wisely and have been able to maintain a strong cash position. Our cash and cash equivalents balance sat at USD 38,900,000.0 as of March thirty first of this year. And we continue to use capital conservatively as we progress through 2020. We also closed the $100,000,000 line of credit to support our UMS growth. As of the end of the first quarter, we'd only utilized 25.7 USD of the line. Each additional dollar on the line can support up to $14 USD of UMS. Our metrics around growth were also phenomenal during 2019 while still improving our margins and efficiency as a company. Our past year demonstrated that our product is here to stay. On Slide 10, we display some of the data gathered in a recent survey conducted with CGK, a group that specializes in millennial and Gen Z research. In that study, they found that fifty five percent of Gen Z would try a new store if that store offered installment options. They also found that fifty percent of Gen Z either love installment options or find them helpful. Additionally, seventy one percent of Gen Z respondents said they worry about their finances. That's where a budgeting tool like ours comes in so handy. On slide 15 11 to 15, we touch on our differentiators and unique elements behind the business. We strongly believe that our product is the most consumer friendly product on the market. We are so consumer focused that we believe it's a key formula for winning. We're so consumer friendly that we've seen we're often seen as a social good here in the North American market. Our upcoming b corp goals reinforce that differentiation and our focus on Gen Z pairs nicely with that unique attitude. We know that Gen Z appreciates and is attracted to companies that behave with ESG add with ESG add to that we represent. Slide 12 shows why winning Gen Z is so important. Ad generation is the largest consumer population in The United States, representing over 84,000,000 individuals. The Gen Z population in The USA is over three times the size of the population of Australia by itself. Our consumer demographics shown on slide 13 show how well we're attracting Gen Z and millennials, but also display the opportunity that we have with Gen Z. Each year that passes brings a new group of young consumers from that segment that are attracted to our products. On Slide 14, we lay out some of the many highlights of our business. These highlights include over 600,000 app downloads, over 6,200,000 website visits in 2020 alone and our significant partnerships, which are helping us grow our business. On Slide 15, we wanted to show our investors that despite the rapid growth, we're not bending on many of the important elements to success. Our net loss rates continue to trend down and should continue to trend favorably as indicated by our leading loss indicators. We've also maintained strong merchant fees during our rapid growth, which point to the strength of our positioning with our merchant stakeholders. I'll now pass the baton to Paul Peritas, one of my cofounders and our Chief Revenue Officer, to go over what we've been focusing on in our business development. Hey, Charlie. Can you hear me? Yeah. Alright. Great. Hello, everybody. Well, it's certainly been challenging last few months for the entire world, really. Many of the changes that have resulted from the current global pandemic have really only increased the demand and usage of our solution for merchants and consumers both. E commerce went from accounting for about 12% of total retail sales in The US to about 25% in one month. And as a result of that, merchants are really moving more of their focus to optimizing their online channels, and Sezzle is a great tool to increase sales online. Historically, we've been a very SME focused company, as many young tech companies need to be early in their journeys. But as we've proven out the value of our solution with thousands of smaller merchants, we're now having success acquiring larger and larger merchants. We've highlighted a few of those larger merchants here across our two markets of The U. S. And Canada, and I'll touch on the ones shown here. Developed and Bass Pro Shops are two of the largest sporting goods retailers in North America. Keene Footwear is a very popular footwear brand based in Portland. The Chivory and Bodega are very large apparel merchants. Touch of Modern is a large men's lifestyle retailer. Combined, these six merchants alone do about USD 1,000,000,000 in online sales and an additional USD 8,000,000,000 in store. So obviously, a big opportunity here. Shifting to Canada, SoftMoc is one of Canada's largest footwear retailers. Popeyes is the largest vitamin and supplements chain in Canada. G Shock's a popular watch brand from Casio. Pila is a fast growing phone case brand that's backed by Jay Z. Nick's is a very popular women's intimates brand based in Canada. And Livestock is arguably the most popular streetwear retailer in Canada. These six merchants do about 200,000,000 Canadian dollars online and more than 500,000,000 Canadian dollars in store. These are just some of the larger merchants that are now under contract or are live with Sezzle, and we expect many more to come soon. Going to slide 17, I'm gonna touch a little bit more on Canada. This is our second market outside of The United States. You can move up the next slide. Thank you. And first of for some perspective here, Canada is about double the size of the Australian market. There's a ton of cross border commerce between The US and Canada. The time zones are the same, so it's an easy country for us to support. And culturally, our two countries are very similar. That's why we chose to expand here first. We do have an office in Toronto led by Patrick Chan, who served as an enterprise sales leader for PayPal for many years, and then Qualtrics, an SAP company. So far, we're seeing a very similar growth trajectory to our US business at its early stages. And it's accounting for a larger and larger percentage of our revenue every month. So Patrick and team have done just a fantastic job out of the gate. We can move to Slide 18 now, please. We believe our solution is needed across many retail verticals. And I believe our diversification on the merchant side is really one of our strong differentiators relative to our competition. Whereas most of our competition, here in The US or North America focuses almost exclusively on apparel and beauty, we've deliberately acquired a much broader merchant base, which broadens our user user base in turn. While apparel is our largest vertical as well, leisure and hobbies, beauty and cosmetics, and health and fitness are all categories that account for significant underlying merchant sales processed by our platform. And we're seeing growth across other categories like pets and home decor as well. As we move forward, we're going to continue to lean on this diverse merchant user base as a competitive advantage. And now I'll pass back to Charlie to talk about the evolution of our products. Thanks, Paul. Product innovation is at the heart of our young company as we believe it should be at this stage. We're we're learning so much about the needs of our stakeholders that it would be reckless to believe that we finished solving their needs. On on slide 20, we touch on a few of the innovations that we've been we've made significant progress on. These are all in the late stages of product development or the early stages of product launch. First, I wanted to talk about our virtual card solution. Through this technology, we've extended our payment capabilities, which has opened up new doors. Our virtual card solution has been a tool that allows for light integrations with enterprise retailers, allowing those retailers to test and integrate our products without any heavy technical projects. The virtual card also allows us to process payments in store with these same retailers. Tesla offers the product at later stages. It's a product feature that allows our end users to build their credit scores. We know this feature is important to our our young consumers, so it's been a focus of ours for quite some time. We'll be launching several up sometime in the next quarter, expanding its reach once we get it out of pilot stages. Double Spend is a reward tool that we're excited to launch in the second half of the year. One of our one of our predecessors is the credit card. And as it is with credit cards, we feel like rewards are a natural addition to our product feature set. And finally, we have launched Sezzle Anywhere in the pilot stages. It's a product that allows our shoppers to utilize Sezzle's retail brands that support affiliate marketing programs and gift card issuance. These programs support fee rates similar to our merchant fee rates and expand the capabilities and reach of our products. It feels like a win win for Sezzle and its end customers. On slide 21, we come back to our stakeholder approach, which has been such an important tenant for our company. The stakeholder we're focused on in slide 21 are our employees. We need to make sure that our employees are happy and in a good spot before we can expect them to deliver for our retailers, customers, community, and investors. As you can see, we've always been quite good at maintaining high levels of employee satisfaction, but those satisfaction levels have risen recently despite all of the turmoil. I think it shows how well our team has come together during this time. On Slide 22, we wanted to cover our current regulatory endeavors. Interacting with regulators has taken a top priority within the company and has become a project that I'm now responsible for. We want to work closely with regulators to ensure compliance with their rules and regulations. We also want to educate them on our products and our industry so that they can see the good that we're doing. We found this proactive approach is very productive. Many of the regulator regulators we've spoken with are unfamiliar with our product, and we generally feel like they come away disarmed. You have to remember, these regulators are effectively the police and focused on protecting consumers from bad actors. They're used to dealing with the bad actors. When we explain our product and our approach, we put discussions on the right path. We'll continue this proactive approach through 2020 and beyond. On Slides 22 to 27, we cover the final part of our presentation before we get on to vote. On Slide 24, we're covering how we're doing during COVID-nineteen. We've already covered this topic a few times publicly. The good news in a nutshell, things are going quite well. Our business sits squarely in e comm, so demand is up significantly. And we find that unemployment the unemployment support and stimulus package that we that we that have been created have helped our users. We acted swiftly in early March with our team, implementing a mandatory work from home policy to keep everyone safe and to support the approach of flattening the COVID curve. This has worked out quite effectively for our team as everyone on the team had laptops, and our internal systems and VPNs were built with remote work in mind. We focused on over communicating with our team to make sure everyone can feel safe and secure. We've also increased our communication with our merchant partners while asking many of them to raise the bar to perform at a higher level level. As businesses, our responsibility it's our responsibility to step up in times like these. At some of doing it, so we expect our business partners to rise to the same level. For consumers, we've expanded our hardship programs and increased the flexibility of our product. And by raising the bar on our retail partners, we've improved the overall quality of our service via our partnerships. Finally, for our community, we're doing our best to get back as a group. We promote a dollar for dollar charity match for all of our employees. We also had an employee led donation drive, which gave to Second Harvest, a local food bank, and of course, our B Corp efforts, which we hope will encourage more businesses to follow a similar path. On the bottom right hand corner of slide 24, you can see that our hardship requests are dwindling, which also gives us positive feelings about our trajectory out of COVID. Slide 25 gives a new level gives a high level overview of everything the US government has done thus far to support citizens and businesses. The government has enacted monetary and fiscal policies in an effort to help us all get out of this period with reduced damage. The policies have been working. On Slide 26, we give a bit more detail on the CARES Act, which is the biggest and most impactful of those efforts. The CARES Act was a $2,300,000,000,000 effort that provided for businesses and consumers. For businesses, the Paycheck Protection Program or the PPP was passed to help small employers keep their employees on staff. For individuals that did leave their job, the CARES Act provided $600 a week in additional unemployment assistance, which layered on top of state assistance programs that were already in place. Finally, the CARES Act included a stimulus package that gave every individual a cash payment of $1,200 to help spur the economy. I'll now pass it over to Karen Hartshey, our CFO, who will go over our current financial position and our highlights thus far from 2020. Thanks, Caroline. Can you hear me? Yep. Great. Okay. Moving to slide '27. As of 03/31/2020, the company had 38,900,000.0 in total cash, up 2,300,000.0 from year end. The increase in cash was driven by an additional $4,200,000 of borrowings on the company's line of credit, bringing the total draw to $25,700,000 on our $100,000,000 facility as of quarter end. Every additional dollar of capital supports $14 of underlying merchant sales. Capacity on the current line of credit will fund more than $1,000,000,000 in incremental UMS. Our balance sheet is healthy, and we are well positioned for future growth. Going on to Slide 28. You've heard some great news throughout this presentation, but Slide 28 is our favorite. First quarter highlights reflect impressive growth compared with the same period last year and the prior quarter. First quarter UMS totaled $119,400,000 and was up three twenty one percent from the same period last year. Also compared against first quarter twenty nineteen, active customers increased by 328% and repeat usage improved 190 basis points to 85.6%. As of quarter end, we had 12,715 active merchants, reflecting an increase of 27% from fourth quarter twenty nineteen. Merchant fees reflected the volume increase and rate improvement to 5.7% from 5.5% of UMS in the fourth quarter twenty nineteen. First quarter net transaction margin continues to trend positively. April 2020 was a record month. April UMS totaled $57,900,000 and for that month alone, volume was higher than UMS from January through May. We added over a 114,000 active customers and over 1,100 active merchants in April, both monthly records. We've been closely monitoring our leading loss indicators, and they remain steady to improving. Through April, the net transaction margin continues a positive trend. Today is the last day of May here in The US, and month to date UMS is reflecting higher daily volumes in April. May will be another record month. With that good news, I turn it back to Charlie. That is good news. Thank you, Karen. That concludes our presentation. Thank you all for your support. We're working hard each and every day to provide all of our shareholders with significant returns, and we hope you see that. We will now take questions from shareholders. And a reminder, you can submit a question by clicking on the question icon, looks like two text boxes. If you're having any difficulties in asking a question, please refer to the user guide, which can be accessed through the platform. I will now begin responding to the questions that have been submitted and will direct any questions to our auditor as relevant. Darren asks, I believe Shopify recently announced a buy now, pay later effort. Do you view this as an opportunity or a threat and why? I think, Darren, I think it's really a mix of both. You know, I think the fact that Shopify has released a product like this shows that we're on the front end of what we believe is a megatrend in terms of installments. They've seen this take hold. This this idea of installment take hold in Latin America and South America, more recently in Australia, and now it's taking hold in The United States and Europe. And I the fact that a a major entity like Shopify is trying to dive into this shows what an opportunity we have before us. But, of course, it represents another competitor. And that's something we're used to dealing with, which is also why we're so focused on the consumer and the consumer experience because it's not just about offering installments at this stage. It's beyond that. You have to create a a strong connection with your consumer so that when given a choice, the consumer will wanna choose your brand first. And we've always believed that would be the case. We've always believed it would be a multiplayer market. And the fact that we're moving so far ahead with so many new features on our our products, We'll we believe that'll set us apart within this competitive environment. Thank you. Any other questions? I'll I'll wait for a a couple minutes here just to make sure. That's the only one I see the best part. There are no other questions. Alright. Let's move on to the formalities of the meeting. The first item of business relates to the tables of the company's financial report for the year ended thirty one December two thousand nineteen. And I note shareholders have been given the opportunity to ask questions concerning the statements of the company. A vote in respect to financial statements and accounts is not required, and I will move to the resolution contained within the notes of the meeting. I appoint Steven Jones of Computershare Investor Services as the returning officer. As mentioned at the start of the meeting, voting on the resolutions is currently open, and you can vote at any time until I declare the voting is closed. Results will be released to the ASX after the conclusion of the meeting. Please note that only shareholders, CDI holders, proxy holders, or authorized shareholder representatives may vote. Any directed proxies given to you by the shareholder will automatically be cast as directed when the poll is closed. If you have an issue trying to vote, the voting icon will appear on the navigation bar. Once you click on this, the resolutions will appear on your screen along with the voting options that are relevant to that particular resolution. Simply select one of these options and cast your vote. When the voting is closed, your final voting session will be reported. If you have any difficulty, please refer to the user guide, which can be accessed through the platform. I I now move to the consideration of the resolutions. I advised at the beginning of the meeting that we will vote on the resolutions by way of a poll. Any undirected proxy votes given to the chairman will be voted in favor of the relevant resolutions. Voting is already open and will remain open until I direct otherwise. The resolutions to be considered in order are Resolution two, reelection of Charlie Uwakim. Resolution three, reelection of Paul Victor Peritus. Resolution four, reelection of Kathleen Pierce Gilmore. Resolution five, reelection of Paul Purcell. Resolution six, reelection of Paul Leia. Resolution seven, approval of amendment to the 2019 equity incentive plan to increase the number of shares of common stock reserved for issuance there under. Resolution eight, increase the number of directors from five to seven. Resolution nine, election of Mike Cutter as a director. Resolution 10, as mentioned earlier, this has been withdrawn. Resolution 11, approval of amendment to bylaws and certificate The board's recommendation in respect to each resolution outlined in the notice of meeting and including included within the presentation released to the AFX this morning are details of the proxies received in advance of the meeting for each resolution. I would like to advise that shortly the voting on all resolutions will close. Please take a few moments now. We will now take a few more moments to allow you to finish voting. Please complete your voting now. Voting will automatically close in one minute. Voting is now closed. Please note that the final results will be advised to the ASX and also made available on Federal website along with all of our ASX announcements after the meeting. Thank you all for your attendance online today. As the business in the meeting is now completed, I declare the meeting closed and thank everyone for their participation today. Have a great rest of your day. Goodbye.