Thank you for standing by, and welcome to the Sezzle Inc. second quarter 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 the number one on your telephone keypad. I would now like to hand the conference over to Mr. Charlie Youakim, CEO. Please go ahead. Good morning, everyone, or to those of us joining from here in the U.S., good evening, and welcome to the Sezzle Inc. 2021 second quarter presentation. My name's Charlie Youakim. I'm the CEO and Executive Chairman of Sezzle, and I will be leading the presentation today. We're incredibly excited to report our second quarter results today. I've got to say, it's an exciting time to be a part of this industry. There's news every day, as many of you can relate to. I thought all the listeners would appreciate that our product launched about four years ago today, plus or minus a few days. It's pretty amazing to come here today to give you these results when you consider that this business started such a short time ago. I'm joined on the call by our CFO, Karen, our President, Paul Paradis, and our Head of Investor Relations, Lee Brading. I'll now move on to our presentation. If you haven't already had a chance to pull it up, you can find our presentation posts on the ASX website if you'd like to follow along. In today's presentation, we will discuss the following topics. First, a quick overview of our mission, our focus, and our differentiation. Our first half highlights and growth plans. An overview of new partnerships that will fuel us over the coming years, followed by our progress with retailers and some accolades that make us proud. Finally, we'll go over our financial results. Let's get started. Please move forward to slide three, if you will. Slides three through five cover the key points of differentiation that we've developed over those first four years. First, our mission. We've set a clear mission for our team and our stakeholders. Our mission is to financially empower the next generation. That's why you see our team launch products like Sezzle Up, where we can help consumers build their credit scores while they use our payment products. Hitting on that mission helps fuel our team's drive and improve our brand equity. We're winning with this approach. Through that mission-based focus, we've built a differentiated payments business, which slide four details. Our product improves consumer financial freedom through simple budgeting, accomplished through interest-free installments. We promote responsible spending because our perfect alignment with good decision-making. We don't gain from getting customers behind on their payments. We need to ensure that we're giving the customers who can pay us back the access they deserve. The product not only helps these consumers, but it helps our merchants too. We drive significant increases in sales, conversions, and average order values through a simple integration and a partnership approach that stands out relative to our industry. This differentiation accelerates the two-sided network effects that we're generating, as spelled out on slide five. The great features and value propositions of our core product attract consumers to us, which in turn attract our merchant partners. Our product provides those merchants with some additional value propositions, such as lower return rates, higher purchase frequencies, improved customer satisfaction, and marketing via our affiliate solution. In fact, over 10% of our volume is driven to our directory towards our merchant partners. This is all additional to the core value proposition of increased conversion sales and listing AOVs. These enhanced values attract more merchants, which makes our product even more valuable to the next consumer. This drives the virtual cycle that powers our business. That virtuous cycle leads to the results displayed on slide six. As we just passed our fourth anniversary, these numbers are fun to report. We now have over 3 million active consumers and nearly 42,000 active merchants who collectively have transacted $1.4 billion in processing volume through Sezzle over the past 12 months. When we call a customer active, we mean it. Our top 10% of active consumers transact at an average of 49 times per year, and collectively, our customers have downloaded our app 2.2 million times. The Trustpilot ranking gives you some idea of why. Our customers love Sezzle. One of the biggest complaints we have is, "You need more stores," which is something we prioritize daily. Slide seven exemplifies the growth plans, some of which lead to that very point, adding more stores. First, we believe we have the growth potential due to expanding market penetration. Buy now, pay later is still very new to our geographic markets, as is the installment mega-trend. We should have a tailwind for a number of years as these trends continue. Next, we're forever pushing the boundaries of product development and innovation. We've added long-term installments, in-store payments, and credit building, and we believe that there are more opportunities for innovation coming. We're at an early stage in this sector, and that means that we need to keep innovating in order to win. Another form of expansion is planting more seeds in other large geographies. We focus on geographies that have asymmetric opportunities, where we can make a smallish investment that can lead to huge upside for our investors. Canada, India, the EU, and Brazil are all examples of that asymmetric approach, all at different stages of maturity. In the key markets that we're already established in, namely the U.S. and Canada, we're also testing new verticals for payments. We're testing health, electronics, grocery, and travel, and a few other categories. Our view is that these categories could create more coverage for our payment platform, which in turn increases purchase frequency for our consumers. Finally, we're diversifying the types of merchants we work with. We're working on making Sezzle much more than an online payment option. We want to be seen as a payment method that you can use everywhere, with small and large merchants, online and offline. Slide eight gives you a bit more detail on our international expansion. Canada has already turned into a key market after two years, and we believe that India could be headed in that same direction based on the progress there to this point. It's worth noting that the EU market has been instrumental in helping us win enterprise deals, even though it's at a very early stage. Even though we're new to the EU, we're already getting some returns. On slide nine, we wanted to share the depth and breadth of our partnership activity. We believe that our partnership activity has become a differentiating factor for our company. We've picked our lane within payments and have created winning combinations with many different groups. We're going to dive into a couple of the key partnerships on the next slides. First, Discover. Discover is an exciting partnership for us here at Sezzle. Discover has a ubiquitous payment network in the United States and is allowing us to leverage their network to expand our buy now, pay later solution across every merchant that accepts Discover, which is just about every merchant in the United States. We're already growing rapidly online, and once this capability is rolled out, we should be able to expand that growth into the offline world by turning on our solution rapidly across the Discover merchant network. Merchants will turn us on and get a promotional package that lets shoppers know about the ability to pay with Sezzle at checkout. We should also be able to reduce operational costs through this partnership by taking over many of the operational elements of our card program in partnership with Discover. We'll work with Discover to graduate our customers into their banking products, which we see as a natural step in financially empowering our key stakeholder. We think this partnership is a perfect example of how Sezzle can work with existing financial institutions to create wins for Sezzle, our partner, and our customers. Next, we wanted to highlight our BigCommerce partnership, which you'll find on the next slide. We're partnering with BigCommerce to be the preferred buy now, pay later for their e-commerce ecosystem. BigCommerce is giving us top placement in their merchant dashboard and will be actively selling and marketing Sezzle to thousands of merchant customers. The partnership also makes it easy for their merchants to turn on our payment platform. The easier you can make the product to turn on for merchants, the faster they come our direction. We've become excellent at servicing small e-commerce merchants, and we think this partnership with BigCommerce will only help us raise the bar a bit further. On the next few pages, we call out some accolades for the company. The next slide covers many of the merchant partnerships that we're proud of. We can't list them all here, as 41,000-some merchant logos would take up way too much space, but we've got some of the bigger retail logos here, and some of you may recognize. I think you'll notice that these logos come from a variety of verticals and that we keep on adding new impressive logos to this slide. On the next slide, we call out some industry awards and other accolades that we're proud of. My favorite is always the user reviews. We watch them closely at this company, and if we see key issues, we fix them. If we see customer love, we celebrate it. We're obsessed with making our product great for our customers, and we think it shows. I'm now going to hand off the presentation to our CFO, Karen Hartje, so that she can take you through our financial updates, which completes the presentation. Karen? Thank you, Charlie. Before we start the financial update, please note that our financial statements are prepared in accordance with U.S. generally accepted accounting principles. Second quarter financial results for 2021 and 2020 are unaudited and presented in U.S. dollars. Certain prior period amounts have been reclassified to conform to current period presentation format. The reclassifications were made to the income statement presentation to be more consistent with other U.S. based SEC-registered competitors in the industry. These classifications are summarized as follows. Amounts previously reported as cost of income are now classified as transaction expenses and reported within operating expense. Gross profit has been removed from the income statement. Selling, general, and administration expenses have been disaggregated to reflect the primary components within this line, including personnel, third party and data, marketing, advertising and trade shows, and general and administrative. These expense line items for prior periods were reported in the MD&A. These reclassifications had no effect on operating loss or total comprehensive loss. Moving to slide 14. We are reporting continued strong growth in total income and UMS. Second quarter 2021 UMS totaled 411.1 million and was 2.2x the $188 million for second quarter 2020. Second quarter 2021 total income was $27.8 million, also 2.2x the $12.6 million total income for the same quarter last year. Second quarter 2021 total income included $24.1 million in Sezzle income and $3.7 million in account reactivation fees. Second quarter 2021 account reactivation fee income comprised 13% of total income. As a percentage of underlying merchant sales, total income was 6.8% for second quarter 2021, up just slightly from 6.7% in the same quarter last year. As we previously mentioned, we expect to see compression in this rate as we bring on even more enterprise merchants. Key drivers of growth include increase in active consumers, active merchants, and repeat usage. As Charlie mentioned, we continue to grow our consumer and merchant base. As of the end of July, we had 3 million active consumers and 41,800 active merchants. Active consumer repeat usage was 91.6% in June, reflecting the 30th consecutive month of growth. We've made continued progress with larger enterprise merchant partners, including Target, Lamps Plus, and Market America worldwide. On to slide 15. Transaction expense includes all expenses incurred directly on a transaction basis, including payment processing, merchant affiliate program or partnership fees, and consumer communication costs. The most significant of these is payment processing costs that dropped from 2.1% of UMS in second quarter 2020 to 1.7% in second quarter 2021, driven by ACH migration and lower processing rates due to our increased scale. In June 2021, approximately 18% of all processing volume was via ACH versus approximately 3% in June of 2020. Total transaction expense as a percentage of UMS dropped from 2.8% in second quarter 2020 to 2.3% in second quarter 2021. Net interest expense in second quarter 2021 was 0.3% of UMS, half of the 0.6% rate for second quarter 2020. The second quarter of 2021 reflected the full benefit of the $250 million line of credit debt facility that we closed during first quarter of this year. Moving to slide 16 for provision for uncollectible accounts. As a percentage of underlying merchant sales, second quarter 2021 provision expense totaled 3.4%. As you can see from the chart, provision expense fluctuates on a quarterly basis. 2020 was not an ordinary year. The impact of COVID was reflected in lower provisioning rates in second quarter, driven by both our actions and the timing of stimulus payments driven by the CARES Act. Not knowing what to expect going into COVID, we tightened up our credit line assignment strategy in anticipation of portfolio deterioration that ultimately did not materialize and ended up favorably impacting our results in second quarter last year. The combination of these factors resulted in a historically low loss provision for second quarter of 2020 of 1.2%. In second quarter of 2021, we experienced higher provisioning rates with larger enterprise merchants. This was driven by expansion testing in our line assignment strategy with newer enterprise merchants, as well as the impact of non-integrated product offerings that create more friction for the consumer. We are currently reevaluating credit line assignment strategies. We are also working with our new enterprise merchants on direct integrations that will remove the friction, or at least reduce it, in the checkout process for the consumer in the future. Regarding net transaction margins, underlying merchant sales is a key operating metric discussed in our MD&A, and we reviewed that performance on slide 15. Total income, less transaction expense, less provision expense, less net interest expense as a percentage of UMS totaled 0.8% in second quarter 2021 versus 2.1% in second quarter 2020. The difference of 1.3% was driven by 2.2% increase in provisioning rate, partially offset by improvements of 0.1% in total income, 0.5% in transaction costs, and 0.3% in net interest expense. Year-to-date through June, total income, less transaction expenses, less provision expense, less net interest expense as a percent of UMS totaled 1.3% in 2021 versus 1.7% for the same period last year. The year-to-date difference of 0.4% was driven by higher provision expense of 1.2%, partially offset by improvements of 0.1% in total income, 0.4% in transaction expenses, and 0.3% in lower funding costs. Moving to slide 17, other operating expenses. Personnel, including equity compensation expense, is still the most significant element for other operating expenses at 68% of the total other operating expenses for second quarter 2021, compared with 76% in second quarter 2020. The increase in personnel expense costs is due to our overall growth in employee headcount. The increase in equity and incentive-based compensation resulted from our stock appreciation combined with more employees on compensation plans. Third-party technology and data includes software used by our employees in the ordinary course of business, as well as costs associated with fraud prevention and data related to failed loan applications. The increase in marketing, advertising, and trade shows in second quarter 2021 from second quarter 2020 is a result of increased initiatives in digital marketing, co-marketing the brand with our merchants, and for expenses related to various social media promotional campaigns. Since the onset of the pandemic, there's been basically no trade show activity for obvious reasons. The increase in general and administrative expenses from second quarter 2021 from second quarter 2020 is due to third-party implementation costs, legal fees associated with SEC filings, and other public company reporting costs. On to slide 18. We believe we are well capitalized for the future. As of the end of June 2021, cash totaled $58.2 million, and we had $21 million drawn against our line of credit with unused borrowing capacity of $56.8 million. This compares with our year-end position with a total cash of $89.1 million and $40 million drawn against our line of credit with unused borrowing capacity of $23.9 million. Our total line of credit is $250 million, compared with the prior facility in place at year-end of $100 million. The new facility lowered our borrowing costs, extended the maturity of the facility, and increased borrowing capacity. Certain merchants elect not to receive their transaction accounts payable from us upfront and leave the balances with Sezzle in exchange for interest. This amount totaled $79 million as of June 30th, 2021. Subsequent to quarter end, Sezzle received a $30 million investment from Discover in exchange for the issuance of 4,559,270 shares of our common stock. Excuse me. I'll turn it back to the operator now for Q&A. Thank you. If you wish to ask a question, please press star one on your telephone and wait your name to be announced. If you wish to cancel your request please press star two. If your on the speaker phone, please pick up the handset to ask your question. Your first question comes from Phil Chippindale of Ord Minnett. Please go ahead. Good morning, guys. Thanks very much for your time. I just want to go back to slide 16. Karen, thanks for the extra commentary around the bad debt trending there. Could you just unpack a little bit this friction that you're talking about at some of the merchants that you've integrated with, and why is it that friction is driving higher provision? Karen, do you want to take that? Excuse me, I'm having a copy in the deck right now. Yes, I would say. Hang on. Phil, that Okay, thanks. Okay. Yeah. Phil, good to talk with you, by the way. Yeah, there's a few reasons behind what's going on. First of all, our move into enterprise gave us the opportunity to basically expand the universe of testing, which basically means we get a little bit more aggressive in terms of our underwriting because we felt it would be a good approach. Then we also had a non-ideal integration with our enterprise clients, which is this virtual card solution. Between the combination of those activities, we believe that that led to some of this lift in provision. The main reason for that is just think about the user experience. If you go through some of these checkouts, the user experience is not ideal because it's not a direct integration, which leads to adverse selection in the clients that will come through the checkout because there's a bit more friction in the process. Between these two elements, this is a lever we can control. What we're doing now is basically adjusting as a company towards this solution, understanding the difficulties with it in terms of the integrations. In these cases, we're pulling back a bit, which will help us target lower principal loss rates and lower provisions. Our goal going forward is to go back to the low 2s in terms of loss rate provision, principal loss rate provision. That's tough to target. I mean, targeting Q3 to give that sort of target, it's too near-term, but we think towards the end of the year, you can start to think this is a target that we're going to have in our line of sights, and we'll have the time to pull that off. It's difficult to call it for Q3 because the provision itself has a lag to it in terms of how we account for it, and so that's why it's a little bit more difficult to predict for Q3 hitting that sort of a target. Longer term, we believe we can do it. Okay. Just in terms of that change in the integration process, is that underway yet, or is that still work ahead of you? Well, we're also dependent on our partners. The retail partners that we're working with in enterprise, it's on their agenda in terms of integration activity. The only item that we have in our control is our underwriting in these situations, which we are controlling. We have made changes. Yeah. Okay. When you guys disclosed the July performance, which we saw customer additions that were above what we saw in the June quarter on a monthly basis. It looks like July growth was quite strong. That does take into account some of this additional conservatism that you're taking into account on the underwriting side of things. Yeah. That's why I think we're really excited by July because July is typically a lower retail month. We're doing quite well, and we're already undergoing a lot of the changes that we've talked about in terms of changing underwriting in these virtual card situations. Okay, thanks. Just obviously you guys have highlighted in the past that you're pursuing a U.S. IPO. These materials don't make any mention of it, nor does the SEC filing from yesterday. I'm assuming that there's a restriction in terms of what you can talk about here, is that right? If not, can you give us any color around timing or what that could potentially look like going forward? Yeah, that's correct. We still cannot give any sort of timing estimates for anyone listening. All I can say is that we're diligently working towards that path. Okay, thanks. I wish I could tell you more. It just, we're legally bound to less. Yeah, I understand. Okay, thanks. I'll let somebody else ask a question. Thanks. Thank you. Your next question comes from Chris Brendler of D.A. Davidson. Please go ahead. Hi. Thanks. Good morning, Charlie. Good afternoon, and thanks for taking my question. I wanted to follow up on the previous question in terms of some of the credit markers and loan completes in particular. We saw a pretty marked increase from the first quarter to the second quarter, obviously, some stimulus impact in the first quarter may have depressed that number. I was wondering if you could maybe sort of help us think about how much of the delivery components you're seeing today is from some of these newer pilot testing with new retailers or some of this non-integrated versus the core business that had been in place for some time. Are you seeing deterioration across the book or is it more than half of the sequential increase coming from some of these isolated items? Thanks. Hey, Chris. Yeah, thanks for your question. It really is focused in this non-ideal integration solution. At this time, it's north of 20% of our business now that's coming through that sort of integration. That's why it's become important for us to focus on it and make sure we get the underwriting handled in that sort of scenario. You are right, though. There are some elements of stimulus during COVID that have made it a little bit more difficult to write models that are predictive of the future. We've had these off and on stimulus checks coming through, pulling volume back and forwards and of course, helping with payments as they come through. I think there's a bit of that as well as March was the last stimulus check that came through, pulling forward volume with Q1, pulling improvements in payments into that month. There's a bit of both. I'd say that the area that we're focusing on is that virtual card solution and adjusting underwriting and controls there. Thanks, Charlie. That's great. Thank you. My follow-up question would be on the bad news, I guess, from these pilots is some of this near-term performance, but the bigger picture is Sezzle has really sort of stepped up and started to resonate with larger retailers, and I get the impression that it's not just targeting or working with in terms of these pilots. Can you maybe talk about the potential. I know you don't want to give numbers, but just sort of how we should be thinking about the growth outlook for the next six months and both in terms of larger enterprise retailers and maybe some commentary on volume. I feel like there's a little bit of a lull in the second quarter that may be followed by an acceleration as you get some of these growing pains. I just wanted to see if I was correct there. Yeah. Thanks. Yeah, great question, Chris. I can't give exacts in terms of what we expect for volumes, but I can tell you that our approach in the enterprise is working quite well. I think the breadth of our product, embracing the idea that customers and retailers do like the availability of both the short-term product, our core product, along with long-term installments, that has resonated. Our brand has resonated because we're a very high-class brand in the buy now, pay later space. It's very safe for these retailers to put on their website because our mission-based approach, our B Corp approach to business. Our partnerships approach, we're open arms. We'll work with financial institutions that are partners with the retailers, especially enterprise retailers. That's important. All of this approach and our team really working diligently on the enterprise side, they've pulled forward a handful of really impressive pilots for us here in the second half of the year that many of which we're very excited about. We're talking to significant retailers. We feel really good about our pipeline in the enterprise space. Obviously, you have some things to work through with this virtual card solution, which we're on and we're fixing. We know that this is going to be an important element of our growth is getting into enterprise, and these pilots are going to be critical for us. We're working towards that, excited by the pipeline. Our viewpoint is that what we're doing is working, which is exciting. Can I just give you one quick follow-up on that area? Just try your perspective, the competitive environment and how if you've changed or is it still sort of resonating for a company like Sezzle where you've got a very unique offering that a lot of competitors don't have? Obviously, it's gotten more credit, but I still think Sezzle's got a unique place. Is that true? It is true. I think it really depends on the retailer you're talking to, though. We're all starting to carve out unique differentiation in the space. If you've got just more like the core buy now, pay later product, which has a sweet spot from $100-$300, that's going to resonate more with some retailers. Having a full breadth type product is going to resonate with a different set of retailers. I think that we're finding that we resonate stronger with the full breadth type retailers that are looking for full spectrum product. I think that's why we're doing quite well. That puts us up against different competitors than other spaces. It really depends on the scenario. We are getting conversations going with both, but I think the differentiation is starting to lead us into certain directions. The directions that it's leading to are impressive. We're happy with them. That's great to hear. Thanks so much for taking my questions. Thanks. Thank you. Your next question comes from Nikolai Dale of Evans and Partners. Please go ahead. Hi. Thanks for taking my questions. Just on the merchant interest program, are you able to give us a bit more color there in terms of popularity of the program? We can obviously see the growth in the economics on the balance sheet, maybe you can give us some more detail as to sort of what rough proportion of the merchant base uses the program and if existing users of the program sort of increasing their usage. Thanks. Yeah, sure. Karen, are you able to take that one? Yes, I've recovered. Yes. Okay. I would say that I don't have the numbers in front of me, but we have a large percent of our merchants that participate in this opportunity to defer their accounts payable in exchange for interest. It is primarily a large number of merchants with balances with a distribution across that base of that large merchant base. What I would say further about that program is that the deferred payment, we have controls on the program. We use the portion of the payables that are available under our cash management and other financing mechanisms, and the deferred payments are due upon demand, and we have limitations on the program and can make changes to it without notice or limits. The program is very flexible, I think from our perspective, in terms of managing our financing and cash management strategies. It's a win for the merchants, as we've spoken to many times before. Yeah, Nikolai, just to follow up on that. I think the merchant interest program has become more and more important to us as time has progressed. When we first IPO'd, it was really a small percentage of our business, but it's just continued to grow and grow and grow in popularity. What's so nice about the program is it's just a win-win. We're allowing our merchant partners to leave their balances parked with us in exchange for an interest rate that they would not get with their banking partner, nowhere near at that level. That creates a win for our merchant partners, helping them drive their businesses. For us, it helps us on the receivable side. It helps us with reducing our costs in terms of our borrowing costs. It's already backed by our line of credit, so we've got redundancy there. For us, it just seems like a great program where we can create a win-win. Our view is anytime a business can create win-wins for your stakeholders, it's a good path to go down. We're really happy with the program. It's a big win for all of our stakeholders. As it's become more and more prominent of a program, I hope that everyone kind of is following along at how good of a program this is for the business. Yeah. Thanks. That's helpful. Then just on the Discover partnership, why do you sort of think they've chosen you to partner with? I mean, there's clearly many other emerging fintechs in the space to choose from. Then I guess sort of secondly on that, banks typically like to have control over their investments. Do you sort of see a path to control there for Discover? What sort of milestones are they looking for you to achieve? Well, I can't really speak to the second half of the question, but I think the reason they picked us, we've been in active dialogue with them for quite some time. We've been talking to Discover for over two years now, I think, in terms of partnership. I think they've been impressed by what we've been able to accomplish as a company. We've shown interest in taking advantage of this partnership and scaling up buy now, pay later on their network. I know they're excited about their networks and what it can do for fintechs. I think because we've shown interest, they've shown interest, we've just been developing this over time, and that's what's really led to the launch of the partnership. I think that's probably more than any, what led to it, is that we've been talking to them for quite some time about building this out. Again, just like enterprise retailers, enterprise partnerships take some time to develop, and so it's really about getting those conversations started early, having in-depth conversations over time, and really understanding each other before these kind of turn into fruition. Okay, great. Thanks. Just one final question from me. Maybe you could just comment a bit more on the Target partnership and how that's tracking so far, and I guess if volumes are sort of in line with what you were thinking two or three months ago. Yeah, just how you're seeing the progression there. I know at the time you viewed it as quite a transformational partnership. Yeah. No, it is an important partnership for us. I will pass that to Paul Paradis. He really is the lead for us on our team in terms of that partnership. Paul, are you there? Yeah. Can you hear me? Yeah. Yeah. The Target relationship is obviously an extremely important one for us. To my knowledge, they're the first top 10 retailer in the U.S. to adopt a pay-in-four solution. We've been working with them for a number of years now. At least starting dialogue and then going back to their accelerator program. What I'd say is that so far the volumes look quite good, and I think they've been very impressed by the value we've brought to them. I do think that there's a lot of room to grow. Like any large retailer, things take time to unfold. I would expect our relationship there to deepen and our volumes to increase over time as we gain better presentment on the Target site, as we gain a better integration and have a better customer experience in the checkout flow. I think it's off to a really good start, and I think we have great expectations for its improvement over the next several years as well. Great. Thanks for that. No more No more questions. Thank you. Thank you. Your next question comes from Siraj Ahmed of Citi. Please go ahead. Thanks. Hi, Charlie. Hi, Karen. Just a couple, got a couple of just three questions. First thing, can you take a step back and just on the June quarter performance, right? There was a bit of a slowdown in customer adds. Can you just talk to that? Clearly that's improved in July, so can you just give us what dynamics you saw in the June quarter and what you're seeing now? Yeah. Actually, just looking at the numbers here recently, in 2021, we actually had three of our top six months in terms of customer adds. The ones in the back half of 2020 are probably second during the holiday season. I think we are still accelerating. The trend towards customer adds is still upward. Where we need some work is on the tail end, is customer churn, which is an area we're focused on the tail end. I think as we increase ubiquity of our merchant partners, we get a lot of help there in terms of keeping customers active. I think that's where the work needs to be done as a company, and that's where we're focused. Actually, the customer adds, we continue to pace upwards. What's changed? Since you're in the July performance, Charlie, does the churn has come down? Is that what you're saying? No, on customer adds. Actually, July was our sixth-best month in history in customer adds, and three of those are this year, and we had three at the tail end of 2020. Got it. Secondly, on the provisioning stuff, you said 20% of volumes are non-integrated merchants. I mean, part of this is your good affiliate program right, through Sezzle Opera. I forget whether you are non-integrated and using the SBA networks. What can you do there? Are you going to take a step back from that sort of an arrangement? It's a little bit of a different scenario, Siraj. It's really when the customer onboards with this situation. When the customer onboards with the situation, it's a more friction-filled process. If we have a direct integration, it's just click, click right through the checkout. Easy. When you add friction into a process, who you turn away are the customers that you may want the most, the ones that are looking for easy, simple conversions. They like the product, they're not willing to go through an extra minute to make the checkout happen. That's what I was referring to, the adverse selection. When you turn away those customers, they tend to be good customers, and you're left with a higher ratio of customers that you may have more need, and that leads to potentially a higher loss rate shift for those new customers coming on board. It's not really a virtual card per se issue. It's because the virtual card is used for affiliate. It's more of the virtual card onboarding. Does that make sense? Got it. Yeah. The SBA is actually only for existing customers, right? Yeah. That clarifies it. Exactly. Good. Thanks. Exactly. Thanks. Last one, just on processing costs. Clearly that's improving. Can you just talk to, I mean 18% of volume come from ACH. Where do you think you can get to over the medium term? Just on that, what would the run rate be in June? Because obviously you've seen improvement in June, so heading into third quarter, and how should we think about it? I think we haven't had much change over the first half in terms of ACH processing, and I don't know if we really expect significant change in the next few months. It really comes down to creating incentive structures. I think we talked about this in the past, is we've done some incentive structures towards ACH. We plan to create more because we really like that payment method. I think there's more coming down the pipeline, but in the near term, the immediate term, I don't think that there's anything that would create a dramatic shift. It's something that's always on our mind, and we'll be thinking about how do we create more and more shift towards adding ACH. Just I wouldn't expect it here in the next few months. What you've been seeing, I think, is probably where it'll be. Got it. Okay, cool. Thanks, Charlie. Thank you. Your next question is a follow-up from Phil Chippindale of Ord Minnett. Please go ahead. Hi, Charlie. Just wanted to go back to the Ally partnership. Can you just give us a sense of the progress on this? I'm assuming it's still pretty early days. Yeah, just a sense of how that penetration's going amongst your merchant base. A sort of follow-on question is, I'm assuming that we'll have to sort of wait until it becomes of size before you separate it out in terms of either disclosures. Is that fair enough? Yeah, that's fair. At this point, Phil, it's really not a big% because it's really just post-launch, but it is a part of some important pilots for us. This product has become important, especially with enterprise that's looking for more full spectrum. I think if we find success in those enterprise pilots, we could expect that product to grow probably pretty significantly post-pilots if these convert. I think in the near term, I wouldn't expect much in terms of changing significance for that product. We're going to scale it up, but just like launching a new country, it takes time for that to become a significant portion as you roll it out. If we get some chunkier activity through an enterprise merchant converting because of that product, then you could see a lift. Okay. Thanks very much. No problem. Thank you. 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 Manroop Singh of Jarden. Please go ahead. Hey, Charlie and team. Appreciate you taking the questions today. Just a couple from me. If I demo the gross loss, and I appreciate you guys have had quite a few questions on this earlier. If I look at the arrears by number of days past due, it looks like you guys have got a reasonable increase in your greater than 29 and greater than the 60 days. If I apply that lens in terms of the losses you're experiencing, is it mostly still on the customers you've picked up in the last quarter, or is it the older customers you have as well? Just following on from that, it looks like obviously very positively that your percentage of orders made by returning customers is rising. It looks like to be about 92% now. Does that have that positive effect of repeat customer usage on lowering loss rates as almost entirely play down? We would think these losses are more of a steady state minus, obviously, the points you called it earlier regarding they're not integrated. The second question I've got is, there was a mention that turned to about one merchant now representing almost 8% of the income for the quarter, whereas at December, the max was two. I was just wondering if you could add any color around potentially what industry that merchant is. Assuming you probably can't give the name, but just a bit more color around how that's changed so quickly. Thirdly, just in terms of the UMS. The merchant services, there was a comment earlier about an expectation of decline in that income as a percentage of UMS from 6.8% lower. Just trying to get a feel for where you think that might be over the next one to two years as a greater percentage of your UMS comes from the enterprise merchants. All right. You're going to have to remind me of some of these questions as we go. I'm going to try and think. Sure. First of all, the 8%, we can't make any clarifications on who that might be. I don't want to misstep there. On your first question in terms of the buckets. Karen, if you have anything to add to this, please do. The provisions that we do, as I mentioned earlier in the call, there's a lagging effect on them. Yes, these are probably newer customers, but they're newer customers from a few months ago. The provision, the way it works is through cohorts that roll forward that we measure. Karen, would that be an accurate assessment in terms of how that's done? Yeah. We look at delinquency bucket, and then we look at vintage performance, order origination vintage, and then forecast forward based on recent vintage performance, basically. Right. It would then be fair to assume that and I'm assuming this will be confirmation what you said earlier, is that the newer customers just underperforming the older cohort you have. Well, I think your point about the 90%- Sorry. Oh, go ahead, Karen. Go ahead. I was just going to say, we talked about the newer merchants that we're bringing on the newer enterprise merchants. I think it's fair to say that a lot of those are newer customers. Your question about the 90% range, I think it's a fair point. I think you're having small tiny increments of improvement in repeat usage. I think you're right. There's some sort of diminishing return from that. I still think there is control. I wouldn't expect where we're sitting as a steady state because this product, our business, we have quite a bit of control in terms of where we want to drive our principal loss rate to through decisioning. I think that's why we're confident that we can say we're targeting a low 2% principal loss rate in our future. It's just, when Phil asked the question the first time, I don't want people to expect that for Q3 because there are lagging drivers of provision. That's more of like a Q4 type target in Q1 2022. I'm not saying we're not making changes to make that improvements in Q3. I just don't want people to think about those for Q3 because of the lag on provision. Does that make sense? Yeah. Perfect. Just the last one, I guess, on merchant services, the trajectory going forward. The what, excuse me? Just the income you receive as a percentage of your underlying merchant sales, which would be about 6.8% at the moment. I'm just keen to kind of get your thoughts on where you see that going over the near term, just as you get a greater percentage of your volume from the enterprise merchants. Yeah, it really depends on the enterprise mix. As enterprise mix rises, they tend to be on the lower MDR, which will pull that down, of course. We also roll off our merchants off of our SMB merchants off of deals. We tend to do give and get type deals for our SMB merchants, and as they roll off them, that helps to lift it. It's pricing them in our past. As a company, we're constantly thinking about what can we add to the product in terms of new features and new revenue streams to increase lifetime value. I think over the long term, it's hard to predict what that does to the top line. If you increase lifetime value of the customers through other product extensions, et cetera, naturally, that's going to do some lift to the top line on NTM. I think that's not a near-term activity, but long term, pulling that up through lifetime value increases will help us with NTM, of course. Cool. Appreciate that. No problem. Thank you. There are no further questions at this time. I'll now hand back to Mr. Youakim for closing remarks. Thank you. In closing, I'd like to thank our investors and our team at Sezzle. To our investors, we thank you for all the continued support. We work hard every day to build a company that makes you proud of your investment. To our team, I want to personally thank you for your hard work, your positive energy, and your act like an owner mentality. Thank you to all of you listening in. Have a great remainder of the year, and we'll meet again soon. Have a great rest of the day. Bye now.