$7.20
$37.30
bear $7.20
base $26.00
bull $37.30
margin of safety $11.00
market price* $127.65
Business condition attached to the margin of safety
The revolving credit facility that funds the loan book (maturing April 19, 2027) is extended or replaced on comparable terms, and the originating-bank arrangement with WebBank remains in place.
Sezzle is a buy-now-pay-later company. Consumers in the United States and Canada split online and in-store purchases into installments through the Sezzle platform, and merchants pay processing fees to be on it. Sezzle also sells two paid subscriptions, Sezzle Premium and Sezzle Anywhere. In 2025 the platform handled $3.94 billion of purchases (up 55%), served about 3.05 million active consumers, and generated revenue of $450.3 million against $271.1 million in 2024. Subscriptions were 22% of 2025 revenue ($99.4 million). WebBank, a Utah-chartered bank, has originated a substantial majority of the loans since September 26, 2024. Sezzle funds the loans with a revolving credit line and its own cash, so it carries both credit risk on consumers and interest-rate risk on its borrowings. How we measured earning power. Sezzle records the loans it makes to consumers as investing activity rather than operating activity, and its 2025 filing restated 2024 to that presentation. That flatters operating cash flow, because the credit losses on those loans never pass through it. We therefore started from operating cash flow, deducted the provision for credit losses as a real, recurring cost ($89.3 million in 2025), removed the swing in working capital (a $21.0 million cash outflow in 2025, mainly lower merchant payables and higher prepaid items, which we add back), deducted stock compensation ($6.5 million) and deducted the maintenance portion of capital spending (about $1.5 million). Growth in the loan book itself is treated as discretionary growth funded by borrowing, not as a cost of staying in business. The result is owner earnings of about $133.6 million, or $3.74 per share, in 2025, versus $1.74 in 2024, $0.27 in 2023 and losses in 2020 through 2022. As a cross-check, net income plus depreciation less maintenance capital spending was $133.0 million, within 1% of that figure. 2020 through 2022 were loss years with a much smaller and differently priced business, and 2023 was the first profitable year in the period we reviewed. The level we use. Sezzle's economics changed in late 2024 and 2025: a new originating-bank arrangement, standardized consumer fees, and growth in subscribers and new products. Only 2025 is a full year under those conditions, so we take 2025 ($3.74 per share) as the current level in the base case. The first half of 2026 supports that level rather than lifting it: net income was $92.1 million versus $63.8 million a year earlier on revenue of $285.2 million versus $203.6 million. Owner earnings grew about 115% in 2025 (from $1.74 to $3.74), but we assume zero growth from here: that surge came from fee standardization, higher volume and new products, and none of it is locked in or proven through a downturn. The company has been profitable for only three years. Base case, $26.0 per share. Owner earnings stay at $3.74 for five years, then decline steadily to zero by year 15, a fade reflecting that nothing we can point to today guarantees the earnings beyond about five years. Discounted at 6%, that comes to about $16 per share from the first five years and $10 from the fade. We credit no volume growth, no share gains, and no value from the antitrust lawsuit Sezzle filed against Shopify on June 9, 2025, because a dismissal motion is pending and the outcome cannot be predicted. Bear case, $7.2 per share. The 2025 step-up partly reverses. Consumer fees were standardized in 2025 and added roughly $40 million of revenue (about $13.7 million in transaction income and $26.3 million in other income), and late fees alone were $74.0 million versus $25.2 million in 2024. Those fees are exposed to regulators, and Sezzle relies on a single non-exclusive originating bank that can end the arrangement in certain circumstances. Its credit line, with capacity of $225 million and $141.3 million drawn at year-end 2025, matures April 19, 2027 and must be renewed. In this case earnings fall back to the 2024 level of $1.74 per share for three years, then fade to zero by year 8. Bull case, $37.3 per share. Sezzle keeps executing on levers already visible: trailing twelve-month net income through June 2026 is about $161 million, or roughly $4.65 per share, after first-half 2026 growth. We hold $4.65 for seven years and then fade to zero over ten more years. This uses net income as a stand-in for owner earnings because we did not rebuild the 2026 interim cash flow on our own basis, so it is the least precise of the three cases. What could make this wrong. If consumer credit losses rise well beyond the 2.3% of purchase volume seen in 2025 (provisions of $89.3 million on $3.94 billion), or if the bank or lender relationships were disrupted, the bear case is the better guide. If profits keep compounding as they did in 2025, the shares are worth more than the base case. The margin-of-safety price carries a large margin because the profit record is short, earnings depend on consumer credit quality and regulation, and one bank and one credit line are central to the model. Net debt is not deducted separately, because interest on the credit line is already subtracted in the cash flow.