Niraj, be careful looking at EBITDA profitability on BeforePay.I...

Niraj, be careful looking at EBITDA profitability on BeforePay.

I agree with you that B4P is a better business model than most other buy-now-pay-laters which many investors compare BeforePay to. But many buy-now-pay-laters have unsustainable business models so being better than these is a bare minimum.

Also be very careful not to be fooled by the song-and-dance made about EBITDA profitability. BeforePay is a financial company which makes money by lending money. The interest expense that BeforePay incur is essential to their business model - so EBITDA is an inappropriate metric to look at. Instead, you need to consider their interest expense, look at EBTDA and you'll see that BeforePay is still loss making.

Irrespective of which metric you look at, in my opinion and per my model, I expect BeforePay to be loss making on both an EBITDA and EBTDA basis which is driven by seasonal weakness at this time of year per their recent earnings call (on the 27th of August) where the BeforePay CFO said "it gets a bit quieter during the winter, people are spending less, and also, tax refunds come in, in July and August". I have also modeled a continuation of the recent decline in user engagement.

But it's okay that BeforePay are loss making. You need to look at an investment in BeforePay on a long-term basis. Even though they're going to keep making losses for the forseeable future, the value in this business is in curating a more reliable and engaged user base, and they still have good runway on this opportunity.

For me personally I'm more concerned over the next 6 months about a continuation of the slowing momentum in the top-line, and the significant overhang from the upcoming end of the mandatory escrow period on the 17th of January which effects about 25% of the shares outstanding.