Sezzle (SEZL) risk factors, FY2024 10-K

Risks Related to Our Industry

1. 01The BNPL industry has become subject to increased regulatory scrutiny, and our failure to manage our business to comply with new regulations would materially and adversely affect our business, results of operations and financial condition
2. 02We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and prospects
3. 03Macroeconomic conditions may adversely impact the ability and willingness of our shoppers to interact with the merchants on our platform, and for our shoppers to fulfill their obligations to us, each of which may adversely impact our business, results of operations and financial condition
4. 04Negative publicity about us or our industry could adversely affect our business, results of operations, financial condition, prospects and share price

Risks Related to Our Strategy and Growth

1. 05We have a limited operating history and, until recently, a history of operating losses, and we may not achieve or be able to maintain profitability in the future
2. 06If we fail to maintain our relationships with existing merchant partners, or if we do not attract a diverse mix of merchant partners to our platform, then our business, results of operations, financial condition, and prospects likely would be materially and adversely affected
3. 07If we fail to retain existing merchants or acquire new merchants in a cost-effective manner, our business, financial condition, and results of operations could be adversely affected
4. 08If we fail to retain existing consumers or acquire new consumers in a cost-effective manner, our business, financial condition, and results of operations could be adversely affected
5. 09We may not be able to sustain our total revenue growth rate, or our growth rate of related key operating metrics, in the future, and failure to effectively manage growth may adversely affect our financial results
6. 10If we fail to promote, protect, and maintain our brand in a cost-effective manner, we may lose market share and our results of operations and financial condition may be negatively impacted
7. 11We may require additional capital, and the terms of such capital may not be available on terms satisfactory to us, or at all

Risks Related to Our Financing Program

1. 12Loans facilitated through our platform involve a high degree of financial risk because they are not secured, guaranteed, or insured, and consumers may not view or treat them with the same significance as other loan obligations
2. 13We rely on the accuracy of third-party data, and inaccuracies in such data may lead to reduced total revenue
3. 14Consumer bad debts and insolvency of merchants may adversely impact our financial success
4. 15If our merchants fail to fulfill their obligations to consumers or comply with applicable law, we may incur costs
5. 16Our internet-based loan origination processes may give rise to greater risks than paper-based processes

Risks Related to Our Technology and the Sezzle Platform

1. 17Our results depend on integration, support, and prominent presentation of our platform by our merchants
2. 18Unanticipated surges or increases in transaction volumes may adversely impact our financial performance
3. 19Real or perceived software errors, failures, bugs, defects, or outages related to the Sezzle Platform could adversely affect our business, results of operations, financial condition, and prospects
4. 20Any significant disruption in, or errors in, service on our platform or relating to vendors could prevent us from processing transactions on our platform or posting payments
5. 21whether accidental or willful, or other factors, could harm our relationships with our merchants and consumers and also harm our reputation
6. 22Fraudulent activities may result in us suffering losses, causing a materially adverse impact to our reputation and results of operations
7. 23If we fail to comply with the applicable requirements of Visa or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and prospects
8. 24Our vendor relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business, results of operations and financial condition
9. 25The loss of key partners and merchant relationships would adversely affect our business
10. 26Changes to our key operating metrics may negatively affect our business and reputation
11. 27Conditions in the capital and credit markets, including higher interest rates, may adversely affect our access to various sources of capital or financing and the cost of capital, which could affect our business activities and earnings
12. 28We are exposed to exchange rate fluctuations in the international markets in which we operate
13. 29Our ability to use certain net operating loss carryforwards and certain other tax attributes may be limited
14. 30Our efforts to protect our intellectual property rights may not be sufficient
15. 31We may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights
16. 32Some aspects of our products and services incorporate open source software, and our use of open source software could negatively affect our business, results of operations, financial condition, and prospects
17. 33Any loss of licenses or any quality issues with third-party technologies that support our business operations or are integrated with our products or services could have an adverse impact on our reputation and business
18. 34Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation
19. 35Our business is subject to risks beyond our control, including fires, floods, pandemics, and other natural catastrophic events and to interruption by man-made issues such as strikes
20. 36We may not have adequate insurance to cover losses and liabilities
21. 37Any inability to retain our employees or recruit additional employees could adversely impact our financial position

Risks Related to Our Regulatory Environment

1. 38The BNPL industry is subject to various and complex state and federal laws in the United States and federal, provincial and territorial laws in Canada, and the costs to maintain compliance with such laws and regulations may be significant
2. 39If loans made by us under our state lending licenses are found to violate applicable state lending or other laws, or if we were found to be operating without having obtained necessary licenses or approvals, it could adversely affect our business, results of operations, financial condition, and prospects
3. 40Litigation, regulatory actions, and compliance issues could subject us to fines, penalties, judgments, remediation costs, and requirements resulting in increased expenses
4. 41Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and prospects, or otherwise harm our business

Risks Related to Our Corporate Structure

1. 42We do not currently intend to pay dividends on our common stock; holders will benefit from an investment in our common stock only if it appreciates in value
2. 43The trading price of our common stock has been, and may continue to be, volatile
3. 44We may initiate stock buyback programs in the foreseeable future and, if initiated, we cannot guarantee that such programs will enhance the long-term value of our share price
4. 45Our major stockholder owns a large percentage of our stock and can exert significant influence over us
5. 46Future sales of common stock by our directors and officers could adversely affect the price of our common stock and could, in the future, result in a loss of control of our Company
6. 47Future sales of common stock by our directors and officers, or their pledgees, as a result of foreclosure could adversely affect the price of common stock and could, in the future, result in a loss of control of our company
7. 48Our Chairman and Chief Executive Officer is a party to a loan arrangement pursuant to which he has pledged as collateral a portion of his common stock in our company to an institutional lender, the sale or perceived sale of which may adversely impact the price of our common stock and result in negative publicity
8. 49We are an “emerging growth company,” and the reduced U.S. public company reporting requirements applicable to emerging growth companies may make shares of our common stock less attractive to investors
9. 50We will incur significant costs and are subject to additional regulations and requirements as a public company in the United States, including compliance with the reporting requirements of the Exchange Act, the requirements of the Sarbanes-Oxley Act and the listing standards of Nasdaq Capital Market (“Nasdaq”)
10. 51We can provide no assurance that our securities will continue to meet Nasdaq listing requirements. If we fail to comply with the continuing listing standards of the Nasdaq, our securities could be delisted
11. 52Some provisions of our charter documents may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management

Risks Related to Our Existence as a Public Benefit Corporation and a Certified B Corporation

1. 53We operate as a Delaware public benefit corporation. As a public benefit corporation, we cannot provide any assurance that we will achieve our public benefit purpose
2. 54As a public benefit corporation, our focus on providing a specific public benefit purpose and producing a positive effect for society may negatively impact our financial condition
3. 55Our directors have a fiduciary duty to consider not only our stockholders’ interests, but also our specific public benefit and the interests of other stakeholders affected by our actions. If a conflict between such interests arises, there is no guarantee such a conflict would be resolved in favor of our stockholders
4. 56As a Delaware public benefit corporation, we may be subject to increased derivative litigation concerning our duty to balance stockholder and public benefit interest, the occurrence of which may have an adverse impact on our financial condition and results of operations
5. 57If we lose our certification as a B Corporation or our publicly reported B Corporation score declines, our reputation could be harmed and our business could be adversely affected