Katapult Holdings, Inc. (“Katapult” or the “Company”) (NASDAQ:
KPLT), an e-commerce-focused financial technology company, today
reported its financial results for the first quarter ended March
31, 2023.
“We are pleased with our results this quarter. Despite continued
softness in consumer spending, our gross originations increased
17.3% year-over-year and we saw the first quarter of positive
Adjusted EBITDA since the third quarter of 2021,” said Orlando
Zayas, CEO of Katapult. “Our Q1 2023 results reflect continued
strong demand for lease-to-own products that support underserved
consumers who are unable to access traditional financing. We
believe Katapult is well positioned to continue to drive revenue
growth while executing a path to profitability.”
First Quarter
2023 Financial and Operational
Highlights:
- Gross originations of $54.7 million, increased 17.3% from the
first quarter of 2022
- Approximately 47% of gross originations for the first quarter
of 2023 came from repeat customers1
- Total revenue of $55.7 million, decreased 7.0% year-over-year,
but reflects sequential improvement due to strong collection
efforts and underwriting performance
- Net loss was $9.1 million for the first quarter of 2023 driven
primarily by lower revenue and increased interest expense. Adjusted
net loss2 was $7.2 million for the first quarter of 2023
- Adjusted EBITDA2 was $0.6 million for the first quarter of 2023
compared to an Adjusted EBITDA2 loss of $4.2 million in the prior
year period
- During the quarter, Katapult repaid $25.0 million of its term
loan and ended the quarter with total cash and cash equivalents of
$44.9 million
- Achieved continued high customer satisfaction with a Net
Promoter Score of 63 as of March 31, 2023
- Writeoffs as a percentage of revenue of 8.4% in the first
quarter of 2023, reflecting a sequential improvement from 9.7% in
the fourth quarter of 2022
Second Quarter 2023 Business
Outlook
The Company continues to navigate macro uncertainty and expects
further consumer spending headwinds to persist. However,
lease-to-own solutions have historically benefited from periods of
shrinking prime credit availability, creating a counter cyclical
hedge against the challenging macro environment. As a result, for
Q2 2023, the Company expects to see:
- A 15%-17% year-over-year increase in gross originations,
building on the 17.3% year-over-year increase in Q1 2023. This
outlook reflects the benefit of new merchants, expansion of the
mobile app featuring Katapult Pay and marketing initiatives
targeted to Katapult’s loyal customers.
- The lag between gross originations and revenue is expected to
result in roughly flat year-over-year revenue performance for the
second quarter, generating revenue growth in future quarters.
- Solid improvement in year-over-year Adjusted EBITDA reflecting
improved revenue and low-double-digit fixed cash operating expense
reduction.
Conference Call and Webcast
The Company will host a conference call and webcast at 8:00 AM
ET on Thursday, May 11, 2023, to discuss the Company’s financial
results. Related presentation materials will be available before
the call on the Company’s Investor Relations page at Calendar -
Katapult Holdings.
The conference call will be broadcast live in listen-only mode
on the Company’s Investor page https://ir.katapultholdings.com.
An archive of the webcast will be available for one year on the
website at
https://ir.katapultholdings.com/news-events/investor-calendar.
About Katapult
Katapult is a technology driven lease-to-own platform that
integrates with omni-channel retailers and e-commerce platforms to
power the purchasing of everyday durable goods for underserved U.S.
non-prime consumers. Through our point-of-sale (POS) integrations
and innovative, mobile app featuring Katapult PayTM, consumers who
may be unable to access traditional financing can shop a growing
network of merchant partners. Our process is simple, fast, and
transparent. We believe that seeing the good in people is good for
business, humanizing the way underserved consumers get the things
they need with payment solutions based on fairness and dignity.
Forward-Looking Statements
Certain statements included in this Press
Release that are not historical facts are forward-looking
statements for purposes of the safe harbor provisions under the
United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally are accompanied by words such
as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “expect,” “should,” “would,” “plan,” “predict,”
“potential,” “seem,” “seek,” “future,” “outlook,” and similar
expressions that predict or indicate future events or trends or
that are not statements of historical matters. These
forward-looking statements include, but are not limited to,
statements regarding our second quarter 2023 business outlook and
our ability to weather the macroeconomic headwinds, including that
lease-to-own solutions function as a countercyclical hedge, and our
ability to drive revenue growth and profitability. These statements
are based on various assumptions, whether or not identified in this
Press Release, and on the current expectations of Katapult’s
management and are not predictions of actual performance.
These forward-looking statements are provided
for illustrative purposes only and are not intended to serve as, a
guarantee, an assurance, a prediction or a definitive statement of
fact or probability. Actual events and circumstances are difficult
or impossible to predict and will differ from assumptions. Many
actual events and circumstances are beyond the control of Katapult.
These forward-looking statements are subject to a number of risks
and uncertainties, including execution of Katapult’s business
strategy, launching new product offerings, new brands and expanding
information and technology capabilities; Katapult’s market
opportunity and its ability to acquire new customers and retain
existing customers; the timing and impact of our growth initiatives
on our future financial performance and the impact of our new
executive hires and brand strategy; anticipated occurrence and
timing of prime lending tightening and impact on our results of
operations; adoption and success of our new mobile application
featuring, Katapult Pay™, general economic conditions in the
markets where Katapult operates, the cyclical nature of consumer
spending, and seasonal sales and spending patterns of customers;
failure to realize the anticipated benefits of the business
combination with FinServ Acquisition Corp. (the “Merger”); risks
relating to factors affecting consumer spending that are not under
Katapult’s control, including, among others, levels of employment,
disposable consumer income, inflation, prevailing interest rates,
consumer debt and availability of credit, pandemics (such as
COVID-19), consumer confidence in future economic conditions and
political conditions, and consumer perceptions of personal
well-being and security; risks relating to uncertainty of
Katapult’s estimates of market opportunity and forecasts of market
growth; risks related to the concentration of a significant portion
of our transaction volume with a single merchant partner, or type
of merchant or industry; the effects of competition on Katapult’s
future business; the impact of the COVID-19 pandemic and its effect
on Katapult’s business; unstable market and economic conditions,
including as a result of the conflict involving Russia and Ukraine;
reliability of Katapult’s platform and effectiveness of its risk
model; protection of confidential, proprietary or sensitive
information, including confidential information about consumers,
and privacy or data breaches, including by cyber-attacks or similar
disruptions; ability to attract and retain employees, executive
officers or directors; meeting future liquidity requirements and
complying with restrictive covenants related to long-term
indebtedness; effectively respond to general economic and business
conditions; obtain additional capital, including equity or debt
financing; ability to service our indebtedness; anticipate rapid
technological changes; comply with laws and regulations applicable
to Katapult’s business, including laws and regulations related to
rental purchase transactions; stay abreast of modified or new laws
and regulations applying to Katapult’s business, including rental
purchase transactions and privacy regulations; maintain
relationships with merchant partners; respond to uncertainties
associated with product and service developments and market
acceptance; anticipate the impact of new U.S. federal income tax
law; that Katapult has identified material weaknesses in its
internal control over financial reporting which, if not remediated,
could affect the reliability of its consolidated financial
statements; successfully defend litigation; litigation, regulatory
matters, complaints, adverse publicity and/or misconduct by
employees, vendors and/or service providers; and other events or
factors, including those resulting from civil unrest, war, foreign
invasions (including the conflict involving Russia and Ukraine),
terrorism, or public health crises, or responses to such events;
and those factors discussed in greater detail in the section
entitled “Risk Factors” in Katapult’s periodic reports filed with
the Securities and Exchange Commission (“SEC”), including
Katapult’s Annual Report on Form 10-K for the year ended December
31, 2022 and the Quarterly Report on Form 10-Q for the quarter
ended March 31, 2023.
If any of these risks materialize or our
assumptions prove incorrect, actual results could differ materially
from the results implied by these forward-looking statements. There
may be additional risks that Katapult does not presently know or
that Katapult currently believes are immaterial that could also
cause actual results to differ from those contained in the
forward-looking statements. Undue reliance should not be placed on
the forward-looking statements in this Press Release. All
forward-looking statements contained herein are based on
information available to Katapult as of the date hereof, and
Katapult does not assume any obligation to update these statements
as a result of new information or future events, except as required
by law.
Key Performance Metrics
Katapult regularly reviews several metrics,
including the following key metrics, to evaluate its business,
measure its performance, identify trends affecting our business,
formulate financial projections and make strategic decisions, which
may also be useful to an investor: gross originations, total
revenue, gross profit, adjusted gross profit and adjusted
EBITDA.
Gross originations are defined as the retail
price of the merchandise associated with lease-purchase agreements
entered into during the period through the Katapult platform. Gross
originations do not represent revenue earned. However, we believe
this is a useful operating metric for both Katapult’s management
and investors to use in assessing the volume of transactions that
take place on Katapult’s platform.
Total revenue represents the summation of rental
revenue and other revenue. Katapult measures this metric to assess
the total view of paythrough performance of its customers.
Management believes looking at these components is useful to an
investor as it helps to understand the total payment performance of
customers.
Gross profit represents total revenue less cost
of revenue, and is a measure presented in accordance with generally
accepted accounting principles in the United States ("GAAP"). See
the “Non-GAAP Financial Measures” section below for a description
and presentation of adjusted gross profit and adjusted EBITDA,
which are non-GAAP measures utilized by management.
Non-GAAP Financial Measures
To supplement the financial measures presented
in this press release and related conference call or webcast in
accordance with GAAP, the Company also presents the following
non-GAAP and other measures of financial performance: adjusted
gross profit, adjusted EBITDA, and adjusted net loss. The Company
urges investors to consider non-GAAP measures only in conjunction
with its GAAP financials and to review the reconciliation of the
Company’s non-GAAP financial measures to its comparable GAAP
financial measures, which are included in this press release.
Adjusted gross profit represents gross profit
less variable operating expenses, which are servicing costs, and
underwriting fees. Management believes that adjusted gross profit
provides a meaningful understanding of one aspect of its
performance specifically attributable to total revenue and the
variable costs associated with total revenue.
Adjusted EBITDA is a non-GAAP measure that is
defined as net loss before interest expense and other fees,
interest income, change in fair value of warrant liability, loss on
partial extinguishment of debt, provision for income taxes,
depreciation and amortization on property and equipment and
capitalized software, impairment of leased assets and stock-based
compensation expense.
Adjusted net loss is a non-GAAP measure that is
defined as net loss before change in fair value of warrant
liability and stock-based compensation expense.
Adjusted gross profit, adjusted EBITDA and
adjusted net loss are useful to an investor in evaluating the
Company’s performance because these measures:
- Are widely used to measure a
company’s operating performance;
- Are financial measurements that are
used by rating agencies, lenders and other parties to evaluate the
Company’s credit worthiness; and
- Are used by the Company’s
management for various purposes, including as measures of
performance and as a basis for strategic planning and
forecasting.
Management believes the use of non-GAAP
financial measures, as a supplement to GAAP measures, is useful to
investors in that they eliminate items that are not part of our
core operations, highly variable or do not require a cash outlay,
such as stock-based compensation expense. Management uses these
non-GAAP financial measures when evaluating operating performance
and for internal planning and forecasting purposes. Management
believes that these non-GAAP financial measures help indicate
underlying trends in the business, are important in comparing
current results with prior period results and are useful to
investors and financial analysts in assessing operating
performance. However, these non-GAAP measures exclude items that
are significant in understanding and assessing Katapult’s financial
results. Therefore, these measures should not be considered in
isolation or as alternatives to revenue, net loss, gross profit,
cash flows from operations or other measures of profitability,
liquidity or performance under GAAP. You should be aware that
Katapult’s presentation of these measures may not be comparable to
similarly titled measures used by other companies.
Contact
ir@katapult.com
KATAPULT HOLDINGS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)(amounts in
thousands, except share and per share amounts)
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenue |
|
|
|
Rental revenue |
$ |
54,724 |
|
|
$ |
58,903 |
|
Other revenue |
|
952 |
|
|
|
974 |
|
Total revenue |
|
55,676 |
|
|
|
59,877 |
|
Cost of revenue |
|
42,173 |
|
|
|
48,113 |
|
Gross profit |
|
13,503 |
|
|
|
11,764 |
|
Operating expenses: |
|
|
|
Servicing costs |
|
990 |
|
|
|
1,207 |
|
Underwriting fees |
|
468 |
|
|
|
488 |
|
Professional and consulting fees |
|
2,655 |
|
|
|
3,288 |
|
Technology and data analytics |
|
1,665 |
|
|
|
2,410 |
|
Compensation costs |
|
7,057 |
|
|
|
5,377 |
|
General and administrative |
|
2,934 |
|
|
|
3,805 |
|
Total operating expenses |
|
15,769 |
|
|
|
16,575 |
|
Loss from operations |
|
(2,266 |
) |
|
|
(4,811 |
) |
Loss on partial extinguishment of debt |
|
(2,391 |
) |
|
|
— |
|
Interest expense and other fees |
|
(5,189 |
) |
|
|
(4,282 |
) |
Interest income |
|
620 |
|
|
|
— |
|
Change in fair value of warrant liability |
|
132 |
|
|
|
3,089 |
|
Loss before provision for
income taxes |
|
(9,094 |
) |
|
|
(6,004 |
) |
Provision for income taxes |
|
20 |
|
|
|
35 |
|
Net loss |
$ |
(9,114 |
) |
|
$ |
(6,039 |
) |
Net loss per share: |
|
|
|
Basic |
$ |
(0.09 |
) |
|
$ |
(0.06 |
) |
Diluted |
$ |
(0.09 |
) |
|
$ |
(0.06 |
) |
Weighted average shares used
in computing net loss per share: |
|
|
|
Basic |
|
99,328,542 |
|
|
|
97,873,452 |
|
Diluted |
|
99,328,542 |
|
|
|
97,873,452 |
|
KATAPULT HOLDINGS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(amounts in thousands, except share and per share
amounts)
|
March 31, |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
(Unaudited) |
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
40,552 |
|
|
$ |
65,430 |
|
Restricted cash |
|
4,397 |
|
|
|
4,411 |
|
Property held for lease, net of accumulated depreciation and
impairment |
|
52,801 |
|
|
|
50,278 |
|
Prepaid expenses and other current assets |
|
5,737 |
|
|
|
8,515 |
|
Total current assets |
|
103,487 |
|
|
|
128,634 |
|
Property and equipment,
net |
|
514 |
|
|
|
557 |
|
Security deposits |
|
91 |
|
|
|
91 |
|
Capitalized software and
intangible assets, net |
|
1,994 |
|
|
|
1,847 |
|
Right-of-use assets |
|
674 |
|
|
|
772 |
|
Total assets |
$ |
106,760 |
|
|
$ |
131,901 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
1,516 |
|
|
$ |
1,264 |
|
Accrued liabilities |
|
14,040 |
|
|
|
14,532 |
|
Term loan |
|
— |
|
|
|
25,000 |
|
Unearned revenue |
|
2,002 |
|
|
|
1,552 |
|
Lease liabilities |
|
343 |
|
|
|
382 |
|
Total current liabilities |
|
17,901 |
|
|
|
42,730 |
|
Revolving line of credit |
|
60,905 |
|
|
|
57,639 |
|
Term loan, non-current |
|
22,811 |
|
|
|
23,057 |
|
Other liabilities |
|
770 |
|
|
|
902 |
|
Lease liabilities,
non-current |
|
372 |
|
|
|
445 |
|
Total liabilities |
|
102,759 |
|
|
|
124,773 |
|
STOCKHOLDERS' EQUITY |
|
|
|
Common stock, $.0001 par value-- 250,000,000 shares authorized;
99,561,148 and 98,585,563 shares issued and outstanding at
March 31, 2023 and December 31, 2022, respectively |
|
10 |
|
|
|
10 |
|
Additional paid-in capital |
|
89,781 |
|
|
|
83,794 |
|
Accumulated deficit |
|
(85,790 |
) |
|
|
(76,676 |
) |
Total stockholders' equity |
|
4,001 |
|
|
|
7,128 |
|
Total liabilities and stockholders' equity |
$ |
106,760 |
|
|
$ |
131,901 |
|
KATAPULT HOLDINGS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)(amounts in thousands)
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(9,114 |
) |
|
$ |
(6,039 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
29,012 |
|
|
|
32,740 |
|
Net book value of property buyouts |
|
6,452 |
|
|
|
10,020 |
|
Impairment expense |
|
5,223 |
|
|
|
3,224 |
|
Change in fair value of warrant liability |
|
(132 |
) |
|
|
(3,089 |
) |
Stock-based compensation |
|
2,090 |
|
|
|
1,089 |
|
Loss on partial extinguishment of debt |
|
2,391 |
|
|
|
— |
|
Amortization of debt discount |
|
1,093 |
|
|
|
1,018 |
|
Amortization of debt issuance costs |
|
81 |
|
|
|
91 |
|
Accrued PIK interest |
|
530 |
|
|
|
388 |
|
Amortization of right-of-use assets |
|
98 |
|
|
|
89 |
|
Change in operating assets and liabilities: |
|
|
|
Property held for lease |
|
(43,013 |
) |
|
|
(36,398 |
) |
Prepaid expenses and other current assets |
|
2,778 |
|
|
|
1,849 |
|
Accounts payable |
|
252 |
|
|
|
401 |
|
Accrued liabilities |
|
(985 |
) |
|
|
(1,444 |
) |
Lease liabilities |
|
(112 |
) |
|
|
(99 |
) |
Unearned revenues |
|
450 |
|
|
|
(99 |
) |
Net cash (used in) provided by operating
activities |
|
(2,906 |
) |
|
|
3,741 |
|
Cash flows from investing
activities: |
|
|
|
Purchases of property and equipment |
|
(4 |
) |
|
|
(139 |
) |
Additions to capitalized software |
|
(297 |
) |
|
|
(472 |
) |
Net cash used in investing activities |
|
(301 |
) |
|
|
(611 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from revolving line of credit |
|
4,350 |
|
|
|
— |
|
Principal repayments on revolving line of credit |
|
(872 |
) |
|
|
(13,224 |
) |
Principal repayment on term loan |
|
(25,000 |
) |
|
|
— |
|
Repurchases of restricted stock |
|
(163 |
) |
|
|
(195 |
) |
Proceeds from exercise of stock options |
|
— |
|
|
|
60 |
|
Net cash used in financing activities |
|
(21,685 |
) |
|
|
(13,359 |
) |
Net decrease in cash, cash
equivalents and restricted cash |
|
(24,892 |
) |
|
|
(10,229 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
69,841 |
|
|
|
96,431 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
44,949 |
|
|
$ |
86,202 |
|
|
|
|
|
Supplemental
disclosure of cash flow information: |
|
|
|
Cash paid for interest |
$ |
3,459 |
|
|
$ |
2,588 |
|
Cash paid for income taxes |
$ |
2 |
|
|
$ |
— |
|
Debt issuance costs included in accrued liabilities |
$ |
493 |
|
|
$ |
— |
|
Issuance of warrants to purchase common stock in connection with
debt refinancing |
$ |
4,060 |
|
|
$ |
— |
|
Right-of-use assets obtained in exchange for operating lease
liabilities |
$ |
— |
|
|
$ |
1,139 |
|
Cash paid for operating leases |
$ |
129 |
|
|
$ |
126 |
|
KATAPULT HOLDINGS, INC.RECONCILIATION
OF NON-GAAP MEASURES AND CERTAIN OTHER DATA
(UNAUDITED)(amounts in
thousands)
(in thousands) |
Three Months Ended March 31, |
|
|
2023 |
|
|
2022 |
Total revenue |
$ |
55,676 |
|
$ |
59,877 |
Cost of revenue |
|
42,173 |
|
|
48,113 |
Gross profit |
|
13,503 |
|
|
11,764 |
Less: |
|
|
|
Servicing costs |
|
990 |
|
|
1,207 |
Underwriting fees |
|
468 |
|
|
488 |
Adjusted gross
profit |
$ |
12,045 |
|
$ |
10,069 |
(in thousands) |
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Net loss |
$ |
(9,114 |
) |
|
$ |
(6,039 |
) |
Add back: |
|
|
|
Interest expense and other fees |
|
5,189 |
|
|
|
4,282 |
|
Interest income |
|
(620 |
) |
|
|
— |
|
Change in fair value of warrant liability |
|
(132 |
) |
|
|
(3,089 |
) |
Loss on partial extinguishment of debt |
|
2,391 |
|
|
|
— |
|
Provision for income taxes |
|
20 |
|
|
|
35 |
|
Depreciation and amortization on property and equipment and
capitalized software |
|
197 |
|
|
|
122 |
|
Impairment of leased assets |
|
552 |
|
|
|
(551 |
) |
Stock-based compensation expense |
|
2,090 |
|
|
|
1,089 |
|
Adjusted
EBITDA |
$ |
573 |
|
|
$ |
(4,151 |
) |
(in thousands) |
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Net loss |
$ |
(9,114 |
) |
|
$ |
(6,039 |
) |
Add back: |
|
|
|
Change in fair value of warrant liability |
|
(132 |
) |
|
|
(3,089 |
) |
Stock-based compensation expense |
|
2,090 |
|
|
|
1,089 |
|
Adjusted net
loss |
$ |
(7,156 |
) |
|
$ |
(8,039 |
) |
CERTAIN KEY PERFORMANCE METRICS
(in thousands) |
Three Months Ended March 31, |
|
|
2023 |
|
|
2022 |
Total revenue |
$ |
55,676 |
|
$ |
59,877 |
KATAPULT HOLDINGS, INC.GROSS
ORIGINATIONS BY QUARTER
|
|
Gross Originations by Quarter |
($
millions) |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
FY 2023 |
|
$ |
54.7 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
FY 2022 |
|
$ |
46.7 |
|
$ |
46.4 |
|
$ |
44.1 |
|
$ |
59.8 |
FY 2021 |
|
$ |
63.8 |
|
$ |
64.4 |
|
$ |
61.0 |
|
$ |
58.9 |
FY 2020 |
|
$ |
37.2 |
|
$ |
77.6 |
|
$ |
60.5 |
|
$ |
61.1 |
1 Customers who have originated more than one lease with
Katapult over their lifetime.2 Please refer to the “Reconciliation
of Non-GAAP Measures and Certain Other Data” section and the GAAP
to non-GAAP reconciliation tables below for more
information.
Katapult (NASDAQ:KPLTW)
Historical Stock Chart
From Jun 2024 to Jul 2024
Katapult (NASDAQ:KPLTW)
Historical Stock Chart
From Jul 2023 to Jul 2024