BENCHMARKS USED
Used Sezzle, Afterpay, ZIP and Splitit as benchmarks
.2. PROFITABILITY
There is no profitability but looked at total merchant sales, company’s revenue from merchants, number of customers and number of merchants.Some interesting statistics arose.Sezzle Income as a percentage of merchant sales at 5% versus Afterpay at 4.6% ZIP at 8% and Splitit at 2% versus Open Pay at 11%. Open Pay is a very good performer here and they seem to have a model that charges merchant and customer. Plus their store profiles are higher margin operations in the main and possibly higher ticket prices. Sezzle merchant income per customer is $422 versus AP at $1190 ZIP at $933 , Splitit at $800 and Open Pay at $723.Open Pay seems to be in line with more established players here. Sezzle merchant income is $34,000 per merchant versus AP at $165,000 ZIP at $80,000, Splitit at $292,000 and Open Pay at $64,000. Open Pay probably needs to generate more sales for each merchant or merchants may go elsewhere for such services.Sezzle total merchant income is $114m versus AP at $5.12 B ZIP at $1.1 b , Spitit at $128m and Open Pay at $97m. Open Pay needs to grow a lot.Profit per customer is interesting with Sezzle earning $21 per customer , After Pay $55, ZIP $76 , Splitit $13 and Open Pay $82. Open Pay is the clear winner here.
3. ASSET MANAGEMENT
Cannot comment here because no profits.Used income to assets as a proxy. Interestingly, Zezzle generates 12% income relative to assets, versus AP at 40% and ZIP at 18%, Splitit at 15% and Open Pay at 10%. Open Pay should improve because most of its assets are in cash as was Sezzle at IPO. If I exclude excess cash then Open Pay will be about 35% and matches nicely with Afterpay.Accounts receivable also interesting. AfTer Pay turn over their AR every month but Open Pay and ZIP only every three or four months.
4. PRICING
I have looked at Income generated relative to Goodwill and assets needed to run the business.On this basis Sezzle generates a return of 1%, AP is 3%, and ZIP at 5.3% , Splitit at 1% and Open Pay at 6.2%. Based on the above, Open Pay is clearly the cheapest by a long way
. 5. SUMMARY
This is fascinating. Based on the five companies it looks like Open Pay and ZIP are going for higher margin per customer but slower receivables and Afterpay is going for lower margin per customer but much faster receivables. Sezzle and Splitit numbers are not clear yet.At this early stage I think Afterpay will end up being the High volume low margin player like a Woolworths and Open Pay and ZIP may end up being low volume and high margin like a David Jones. They will all do well but for different reasons. ( As mentioned , Sezzle and Splitit models not clear and this often spells trouble.)I think I must then price Open Pay like ZIP even though ZIP is a lot cheaper than Sezzle, Afterpay and Splitit. Worth noting that all players have increased in share price since we looked at Sezzle IPO. A good sign ?
6. CONCLUSION
If you price Open Pay like ZIP then Open Pay worth around $1.90 to $2 on listing. If you price similar to Sezzle, Afterpay and Splitit then price is crazy at least around $3.50 to $4.50
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