Sezzle (SEZL) risk factors, FY2025 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 prospects55% rewritten
3. 03The increasing adoption of BNPL and other alternative payment products may attract additional large financial institutions, card networks and technology companies into our markets. Such interests may be better positioned due to scale, brand strength and existing customer relationshipsNew
4. 04Macroeconomic 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 condition25% rewritten
5. 05Negative 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. 06We have generated significant net losses in the past. We may not achieve or be able to maintain historic levels of profitability in the futureNew
2. 07Prior to 2023, we incurred substantial net losses. Although we achieved profitability in 2023 and subsequent periods, we may not be able to maintain profitability on a quarterly or annual basis, particularly as we continue to invest in growth initiativesNew
3. 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 affected66% rewritten
4. 09Our ability to attract and retain consumers enrolled in our subscription products or maintain the competitiveness and value of our paid subscription products, our business, financial condition, and results of operations could be adversely affectedNew
5. 10If 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 affected30% rewritten
6. 11We 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
7. 12If 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
8. 13We 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. 14Loans 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. 15We rely on the accuracy of third-party data, and inaccuracies in such data may lead to reduced total revenue
3. 16Consumer bad debts and insolvency of merchants may adversely impact our financial success
4. 17If our merchants fail to fulfill their obligations to consumers or comply with applicable law, we may incur costs

Risks Related to Our Technology and the Sezzle Platform

1. 18Our results depend on integration, support, and prominent presentation of our platform by our merchants
2. 19Unanticipated surges or increases in transaction volumes may adversely impact our financial performance
3. 20Real 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. 21Any 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 payments61% rewritten
5. 22Fraudulent activities may result in us suffering losses, causing a materially adverse impact to our reputation and results of operations
6. 23Other Risks Related to Our BusinessNew
7. 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
8. 25The loss of key partners and merchant relationships would adversely affect our business44% rewritten
9. 26Changes to our key operating metrics may negatively affect our business and reputation
10. 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
11. 28We are exposed to exchange rate fluctuations in the international markets in which we operate
12. 29Our efforts to protect our intellectual property rights may not be sufficient
13. 30We may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights
14. 31Some 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
15. 32Any 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
16. 33Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation
17. 34Our 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
18. 35We may not have adequate insurance to cover losses and liabilities
19. 36Any inability to retain our workforce or recruit additional workforce could adversely impact our financial position29% rewritten

Risks Related to Our Regulatory Environment

1. 37The 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. 38If 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. 39Litigation, regulatory actions, and compliance issues could subject us to fines, penalties, judgments, remediation costs, and requirements resulting in increased expenses
4. 40Stringent and evolving 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. 41We 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. 42The trading price of our common stock has been, and may continue to be, volatile
3. 43We 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 price54% rewritten
4. 44Our major stockholder owns a large percentage of our stock and can exert significant influence over us
5. 45Future 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. 46Future 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. 47Our 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. 48We are no longer an “emerging growth company” or a “smaller reporting company” and the reduced U.S. public company reporting requirements applicable to emerging growth companies and smaller reporting companies will no longer apply to usNew
9. 49We incur significant costs and are subject to extensive regulations and requirements as a U.S. public companyNew
10. 50We 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 delisted94% rewritten
11. 51Any delisting of our common stock could materially adversely affect our business, financial condition, and results of operationsNew
12. 52We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reportingNew
13. 53Some 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

1. 54We 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. 55As 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. 56Our 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. 57As 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 operations27% rewritten