Thank you for standing by, and welcome to the Sezzle Half-Year Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by number one on your telephone keypad. I would now like to hand the conference over to Mr. Charlie Youakim, CEO. Please go ahead.
Thank you. Good morning, everyone, or for those of us joining us from our home here in the U.S., good evening, and welcome to the Sezzle Inc. 2020 Half-Year Report. My name is Charlie Youakim, the CEO and Executive Chairman of Sezzle, and I will be leading the presentation today. Before we begin, I wanted to pop a virtual bubbly for our President, Paul Paradis, and his wife, Stacy, who just welcomed their third child, a boy, into the world this past Friday. Needless to say, Paul will not be joining us on the call today. I think he's going to have his hands full for a bit. Congrats, Paul and Stacy. I also wanted to extend a warm welcome to all of our investors who are listening in. We appreciate your support and are driven daily to provide a return for our long-term holders.
I'm joined on the call by our CFO, Karen Hartje, and our Head of Investor Relations, Lee Brading. We will now move on to our presentation. If you haven't already had the chance, you can find our presentation posted on the ASX website if you'd like to follow along. For those of you that are there already, please open your presentation and proceed to slide three, where we'll review our agenda. In today's presentation, we will discuss the following topics. First, our highlights and mission. Next, we'll cover the opportunity that exists for Sezzle. Third, we'll talk about meeting our consumer needs via innovation. Finally, we'll go over our financial results. Let's get started. First, I'm really excited to discuss some key first half results highlighted on slide five. As you can see, we had great results across the board.
In the first half of 2020, we more than quadrupled merchant sales through our systems as compared to the first half of 2019, reaching $307 million in volume. Also of note, our July UMS was greater than the entire first half's UMS of 2019. This increase in UMS led to a 5x increase in merchant fees, which topped $17.4 million for our first six months. Please keep in mind that our merchant fees make up only 84% of our total revenue. Our total revenues summed to $20.8 million for the first half. In the first six months of 2020, we've already surpassed our entire revenues for 2019, which totaled $16.1 million. Our active consumers and active merchants also made great leaps forward.
We reported 1.5 million active consumers and over 16,000 active merchants for the first half. Our repeat usage keeps on increasing, reaching 87.5% repeat usage rate. Finally, we made dramatic improvements in our NTM for the first half. We reached a positive 1.7%, almost 200 basis better than the prior- year's first half. If you move ahead to slide six, I'll cover some of the big takeaways for the first half. On the corporate front, we have multiple items to report. First, we recently completed a successful capital raise, which will help us prepare for all the upcoming growth. Next, we successfully converted to a PBC Corp structure, which endorses our approach to creating a responsible business. Finally, we expanded our corporate umbrella internationally by starting projects in India and the E.U.
In addition to these corporate items, we completed a number of key integrations, including Apple Pay and Google Pay, to assist with light integration pilots and our in-store capabilities. Two other integrations stand out in the first half. We integrated with Plaid and TransUnion to help create our Sezzle Up product expansion. We pushed deeper into our enterprise attack with the key hires of Veronica Katz and Reid Bork, both of which were previously senior executives at PayPal. Finally, we expanded product capabilities to continue to drive for more value creation. In the first half, we launched Sezzle Up, Sezzle Anywhere, and we laid the groundwork for Sezzle Spend and our in-store solutions. On slide seven, we touch on our improving consumer cohort. The key story here is that our consumer loves our platform and keeps returning.
As our cohorts age, we continue to see stronger repeat behavior, which helps drive our entire usage rate higher and our loss rate lower. To that end, July represented our 19th straight month in sequential improvement in repeat usage, reaching 88.1% rate. On the next slide, we wanted to review our mission. We have not lost sight of our mission-based approach. Our mission at Sezzle is to financially empower the next generation. We embrace that mission in every decision that we make at the company, which forces us to continue to win for the consumer. The more we win for them, the more they want to use us. It's a virtuous cycle, and I believe it's reflected in our strong first half performance. Slide nine reflects that our mission is more than just us. It represents a network of shared values, from consumers to merchants and to key strategic relationships.
We'll continue to fight for our consumers so they continue their love towards our brand. Let's discuss the opportunity that exists in our sector and our markets. On slide 11, I want to point out a couple highlights. We wanted to exhibit just how early we are in this market. The buy now, pay later product penetration rates in our markets are extremely low, less than 1% of addressable payments in our target markets as they sit today. Although we aren't in Australia, we included the data to show the potential for other markets that are just getting started. We wanted to talk about our focus areas and how we're riding tailwinds. If you look at the chart on the right, you'll notice that the three areas of payments that we're interested in are all expected to take market share in the coming years.
Buy now, pay later and mobile wallets are both areas of growth, and our decision to push towards bank payment rails to reduce processing costs rides another trend, the growth of bank transfer payments. We have a number of tailwinds in our favor today, and we should maintain those tailwinds for many years to come. If you flip ahead to slide 12, you'll see that we're anchored to large market potentials. We've displayed the U.S., Canada, and India on a relative basis next to Australia to give the investor some idea of our potential. Pairing these market sizes with the sub 1% buy now, pay later penetration rates should provide a positive indication on our potential as a company. The next couple of slides speak to our successful push in enterprise and general merchant expansion.
On slide 13, we highlight a number of our enterprise merchants across Canada and the U.S.A. We also wanted to highlight the continued SMB growth, which keeps pushing us forward. We now have over 17,500 active merchants on the platform as of July 31st. Our growth with SMB continues to speed up as we begin to land more enterprise accounts. Speaking of enterprise, on the next slide, we give you a bit more background on Veronica and Reid. Their vast experience in the payments world and our burgeoning platform make for great combination. Veronica's leading our global revenue efforts while Reid leads our enterprise sales division. We're excited to see where they can help take Sezzle in the coming years. Finally, on the next slide, we wanted to touch on the breadth of our category support.
As a company, we have made an effort to be a significant payment method in a number of categories. That work has paid off and helps to support consistent growth with less seasonal dependencies. On slide 16 through 22, we wanted to go over our product innovation to highlight how hard we're working to add value for our consumer. Please flip ahead to slide 19, where we talk about Sezzle Up. Sezzle Up is a product we're rolling out now. It's a product feature that allows our end users to build their credit scores. We know this feature is important to our young consumers, so it's been a focus of ours for quite some time. We plan to have it completely rolled out by the end of the quarter. Sezzle Up is one of those win-win type projects that we love at Sezzle.
We're winning for the consumer, but we're winning for the merchants too, and our team, our finances, and the community. We win for the merchants because we're able to give these credit-building consumers more access on their lines with us because they're basically raising their hands and telling us that they plan to pay us back. We're winning on our mission, plain and simple, because we're doing the right thing for our young consumers. Finally, we're winning for the business and making our cost-conscious CFO happy because we're asking these Sezzle Up users to pay us with their bank to complete their upgrade process. That innovation improves our unit economics on future transactions from these users, as processing costs are our largest unit costs in our business model. On slide 20, we cover Sezzle Anywhere, which is another great example of how we're adding value for our consumers.
We're still scaling up our merchant relationships, and we will be for some years to come, we have made a product enhancement to leverage affiliate and gift card solutions to fill in the gaps. You can see the brand support we add on slide 20 through this program. The brands there make for exciting additions to our platform for our consumers. The fees we derive from the affiliate links and gift cards are also in line with our existing merchant fees, which makes us comfortable with further expansion with this product. On slide 21, we wanted to talk about Sezzle Spend, which is a foundational element to our rewards platform. We have more innovation horizon with rewards, it will all tie into the plumbing we're creating with Sezzle Spend. The Sezzle Spend platform helps us in a number of ways, which we outline on that slide.
The realization of the benefit behind Sezzle Spend will take a number of quarters, if not years, to fully comprehend, but we're certain that it will be an important tool for us. Finally, on slide 22, we wanted to outline our in-store solution. Our in-store solution leverages our integrations into Google Pay and Apple Pay, allowing us to reach in-store capabilities with near zero integration work. This product has been field-tested for months and is ready for large-scale adoption. As you can see, our teams have been busy this year creating some amazing value for our stakeholders. Finally, we'd be remiss if we didn't cover how well-suited our product is proving to be during COVID and what we've been doing as a company to address the situation.
For many, the following slides are a rehash of a familiar story, so I'll spare the details, but please understand that as a company, we're focused on winning for all of our stakeholders during this time period, and we're succeeding. On slide 25, we also cover the U.S. government's response to COVID, which has been substantial thus far. We're in a government break at the moment, so the support to come is still uncertain, but there are indications that the upcoming package could be as substantial as the CARES Act, which provided $2.3 trillion in support. On slide 26, we wanted to reiterate that our team is handling regulation with care. We understand that our product is new, so we are getting out there and educating regulators on our products so they understand the benefits we provide for consumers.
The educational plan is working wonders so far. We plan to continue that approach. I'll now hand over the presentation to Karen Hartje, our steward of capital, to complete the presentation. Thanks, Karen.
Thanks, Charlie, and hello to everyone. Thank you for joining us tonight or this morning. Before I start the financial update, please note that our financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles and are presented in U.S. dollars. On to slide 28. The positive underlying merchant sales trends that Charlie has already spoken to are reflected in total income. First half 2020 total income was $20.8 million, nearly 5x total income for the same period last year. In 2020, the second quarter total income increased by 54% from the first quarter. Merchant fees comprise 84% of total income for the first half of 2020. While total income growth is impressive, the big news for the first half of the year is margin improvement.
Net Transaction Margin increased from -0.3% for the first half of 2019 to +1.7% for the first half of 2020, reflecting 190 basis points improvement. For more on Net Transaction Margin, let's move to slide 29. Compared with the same six-month period last year, there was improvement in all key Net Transaction Margin elements. Sezzle income increased to 5.8% from 5.1%. Cost of income fell to 2.8% from 3.3%. Net transaction loss declined to 0.7% from 1.5%, and cost of funding improved to 0.6% from 0.7%. The increase in the Sezzle income rate reflects higher repeat usage with our growing active consumer base and the mix of merchants comprised predominantly of small to medium-sized businesses. Lower card processing costs drove the year-over-year cost of income improvements. The decline in net transaction loss was driven by lower provision expense.
As a percentage of UMS, provision was 1.7% for the six months ended June 2020 versus 2.5% for the same period last year. Account reactivation fees remained constant at 1% for both six-month periods. The 0.8 percentage point drop in actual and expected losses on consumer notes receivable was driven by improved collections resulting from higher repeat usage, a growing active consumer base, and refinements in our underwriting processes. Additionally, the various stimulus measures enacted by the U.S. government, such as the CARES Act, likely contributed to improved repayment performance, but it is difficult to quantify the effect. On a dollar basis, Net Transaction Margin totaled $5.1 million for the six months ended June 30 versus negative $221,000 last year. Moving to slide 30. At June month-end, cash and cash equivalents totaled $55.7 million, reflecting the company's effective cash management strategies, also known as penny-pinching by some.
The cash position was partially funded by $38.5 million in debt, comprised primarily of $37 million drawn against the $100 million revolving line of credit. We closed that $100 million line of credit on November 29th, 2019, and it matures on May 29th, 2022. On July 15th, 2020, we raised $53.2 million net of cost of the offer via an institutional placement, and on August 10th, 2020, raised $5.1 million via securities purchase plan to accelerate our growth strategy. After the pro forma effect of the $58.3 million net equity raise, pro forma cash and cash equivalents total $114 million as of June 30th, 2020. We believe our current capital position supports our growth expectations as each incremental dollar of capital supports $14 of underlying merchant sales. Moving to slide 31.
With the additional equity proceeds, we are continuing to invest in sales and marketing as well as product enhancement and expansion to grow underlying merchant sales. July UMS totaled $71.8 million, setting another record month for the company. I'm happy to announce that we are on track to make our 2020 UMS outlook of an annualized run- rate of $1 billion by the end of the year. This translates to AUD 1.4 billion. In either continent, this is a large and exciting number. At this point, I would like to turn it back to the moderator for Q&A.
Thank you. If you wish to ask a question please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request please press star two. If you are on a speaker phone please pick up the handset to ask your question. Our first question comes from Phil Chippendale with Ord Minnett. Please go ahead.
Good morning, guys. Thanks for your time. Karen, first question is just for you. Your transaction losses were well ahead of my expectations. Can you just talk to what you're witnessing there? I really just want to try and understand what's driven that huge improvement versus the prior- period.
Well, I think part of the improvement is just the continued maturation of the portfolio, as well as continued improvement in our underwriting processes. I think also part of it is what I alluded to, we don't know what impact the government stimulus package had on our results, but it's likely that there was an impact, and there's no way that we can really quantify that. In addition to which, early on in the pandemic, and I guess that would be maybe in March, we didn't know what to expect. As a result, we did tighten- up a little bit in our underwriting, particularly on credit line assignment. Not knowing what to expect, we took a conservative approach, which I think was appropriate given the unknowns. As we have experienced the payment behaviors, we've actually reverted back to our previous standards, which obviously have been strong.
Basically, I think what we're seeing is a combination of all those factors, and we're excited about the future, and we feel like we've landed in a place where we'll continue to see improvement.
Thanks. My next question is just regarding the late fee, the percentage that you're realizing there. We've seen this with one of your significant competitors. Their late fee sort of recognition from a revenue standpoint has sort of trended down a little bit. Likewise, yours has in this half as well. Again, can you just talk to what's driving that? Is that really just a function of increased repeat usage and therefore, late fee income's just naturally going to continue to decline?
Yes. It also is attributable to the strong credit performance that we've seen in the portfolio as well. There just haven't been as many late payments.
Okay, thanks. Just going back to one of your earlier comments about your credit criteria. I think you basically said you've gone back to pre-COVID levels in terms of your assessment of individuals. When did you get back to that level? I guess I'm trying to understand, is that something that happened post-balance date, or did you get back to that pre-COVID level of approaching credit? Yeah, interested in that. Thanks.
Well, we have been, really from fairly early on, reverting back to previous standards, and so that would have happened prior to June 30th.
Yeah.
Yeah. On the we've just been unrolling piece by piece. We have a pretty quick feedback in our system. As we were implementing changes, we were watching that and watching COVID. Jamie, our Chief Risk Officer, in our meetings, was just mentioning, let's try to unroll piece by piece. We've just been slowly unrolling it.
Excellent. Thanks. Charlie, just one for you. You've highlighted the size of the Indian market in your presentation, and in the past, you've spoken about the potential of going to new geographies, and you have mentioned India. I guess can you just give us a snapshot of where you're up to in terms of that assessment, and what we should expect over the next six months, in regards to that?
Well, I think we're definitely going to know in the next six months, probably sooner, as to what the potential that lies with us within India. We already have. Things are looking slightly promising, but it's way too early to tell because we have to watch repayment rates, which I think is one of our key concerns for the area. Also watch how strongly our merchant and consumer growth progresses over the next couple of months. That's usually when we'll compare that to the United States growth, we'll compare that to the Canadian growth and watching repayments. Then after the end of a couple of months here, we should have a really good idea as to whether or not we have something there.
Can you talk to how big that program is currently? How many customers we're talking about, retailers?
We probably just have over 12 retailers that are on the program at this point. It's just early days. The group launched actually second half. It's just starting to take off now.
Okay, thanks. Final one from me, just in terms of the new products with Sezzle Anywhere, how many retailers do you have on that platform at the moment? Should we expect this to be rapidly expanded, or is this going to be something that takes a little bit of time to evolve?
It'll take a little bit of time to evolve. We've got, I think, a few dozen on the platform now, but that's just recent. We started, like we do with a lot of projects, we just start with a bit of a trickle just to launch it and make sure the product works well. Then we work out all the kinks, we start to unroll and roll it out to the entire population of users. So we're still in that process of rolling it out. It should be rolled out here probably within the next month completely.
Okay. Thanks. I'll let somebody else ask. Cheers.
Once again if you wish to ask a question please press star one on your telephone and wait for your name to be announced. Your next question comes from Tim Piper with RBC Capital Markets. Please go ahead.
Morning team. Just first one around your merchant pipeline and where that's heading and some of the ones that you called out in slide, I think, 13 on the larger side. Can you give us a sense now of what your merchant split kind of looks like, particularly over the past maybe three to six months, in terms of what you refer to as SMB merchants versus the sales now coming from some of these larger merchants you've signed recently?
Yeah. SMB is still going really strong, which is just wonderful to see. I think it just is a testament to the quality of product we provide for the SMB retailer. That continues to march along. As that's marching along, our team is getting better and better at landing larger retailers. I would still call us in more of the mids area. We're trickling in some large retailers like Bass Pro Shops, Cabela's. For the most part, we're still sub-billion in those additions. Great progress. The pipeline is getting bigger. The big retailers in the U.S. are taking notice, and they're all really starting to think about this product. If they're not going to get it here in the later half of 2020, I mean, a lot of retailers are tied up with COVID issues.
If they don't get to it in 2020, I would imagine it's something that they would get to in 2021.
Okay. Just following on from that, in terms of Canada, the pace of merchant onboarding in the Canadian market, how has that sort of trended over the past couple of months? Is it accelerating?
Yeah, it's still accelerating. I mean, a lot of those nice accounts that we have on that slide are actually from the Canadian market. They're doing a fantastic job. Probably, if anything, getting ahead of where we were in the U.S. in merchant size at the same stage. It's really looking promising.
Just finally, a follow-up on the Indian market. Could you just provide a bit of background around how you identified India? Is there something, an evolution in the payments infrastructure there, or something that you've seen that that market is particularly attractive to have gone and started to do testing in?
Yeah. Personally, I've been involved with working with people in India between my last two companies, so since 2010. I've watched the payments market there pretty closely just because when you have that sort of involvement, you watch it. We saw the likes of Razorpay and Paytm and others rise up in that market. When we launched Sezzle in the U.S., we had a team in India, and so we were continuing to monitor that market to see what types of products were available. We made the decision to launch the tests very late last year and started the groundwork. We did it because we don't really see anything in that market that looks similar to what we're doing.
For me, I mean, personally, that's exciting, that there's a market of that size where there is perhaps very little competition in the similar type of product set. That's, I think, what kind of piqued our interest. The team spent the first half of 2020 getting all the foundational elements in place for India, and we launched on, I think the pilot launched on July 1st, so on the first day of the second half there. We still have a lot to do to watch it and it's much too early to call anything there a success, as I mentioned. I'm definitely hopeful and watching closely.
Great. Thanks. Thanks for taking the questions.
There are no further questions at this time. I'll now hand back to Mr. Youakim for closing remarks.
No, thank you. In closing, I'd like to say how incredibly thankful and proud I am of our team at Sezzle for how we addressed the first half of the year. The first half or the first six months of 2020 were filled with unprecedented challenges in and out of the workplace. The team has not only stepped up, but they've thrived, and I think that's a testament to our team's fortitude and strength of the unit. I'm lucky to be with such a great group of people, and I'm excited to see how we finish the year out. Thank you for your time and for your support.
That does conclude our conference for today. Thank you for participating. You may now disconnect.