Reiterates Full Year 2024 Outlook For At Least 10% Gross Originations and Revenue Growth
“We were able to deliver gross originations and revenue growth above our expectations, despite a challenging retail environment,” said
Operating Progress: Recent Highlights
- Upgraded
Katapult platform with integration of newest version of Shopify - Expanded relationships focused on growing direct merchant-partner pipeline
- Launched Katapult Cartridge for B2C Commerce on Salesforce AppExchange
- Made progress integrating with the requirements of the Synchrony digital waterfall application process, which will enable Synchrony’s retail partners to offer our LTO option to their customers
- Continued to build momentum for Katapult Pay and our app
- Katapult Pay gross originations grew more than 150% year-over-year
- Launched Lowe’s in the
Katapult marketplace; available for shopping using Katapult Pay as ofMay 7, 2024
- Customer satisfaction remained high and
Katapult had a Net Promoter Score of 65 as ofMarch 31, 2024 and 55.9% of gross originations for the first quarter of 2024 came from repeat customers.1
First Quarter 2024 Financial Highlights
(All comparisons are year-over-year unless stated otherwise.)
- Gross originations were
$55.6 million , an increase of 1.6% - Total revenue was
$65.1 million , an increase of 18.1% - Total operating expenses in the first quarter decreased 18.5%. Fixed cash operating expenses2 decreased approximately 20.6%
- Net loss was
$0.6 million for the first quarter of 2024 compared with net loss of$10.5 million reported for the first quarter of 2023. - Adjusted net income was
$1.0 million for the first quarter of 2024, an improvement of$9.6 million compared to an adjusted net loss of$8.6 million reported for the first quarter of 2023 - Adjusted EBITDA2 improved to positive
$5.6 million for the first quarter of 2024 compared to an Adjusted EBITDA2 loss of$1.0 million in the first quarter of 2023 Katapult ended the quarter with total cash and cash equivalents of$37.6 million , which includes$6.3 million of restricted cash. The Company ended the quarter with$68.0 million of outstanding debt on its credit facility- Write-offs as a percentage of revenue were 8.4% in the first quarter of 2024 and are at the low end of the Company’s 8% to 10% long-term target range. This is a 40 bps improvement compared with 8.8% in the first quarter of 2023.
[1] Repeat customer rate is defined as the percentage of in-quarter originations from existing customers.
[2] Please refer to the “Reconciliation of Non-GAAP Measure and Certain Other Data” section and the GAAP to non-GAAP reconciliation tables below for more information.
Second Quarter and Full Year 2024 Business Outlook
The Company is continuing to navigate an evolving macro environment and it is unclear if interest rates will move lower this year given recent inflation trends. At the same time, our results lead us to believe that our customer is generally resilient. As a result, it's difficult to assess what, if any impact these dynamics will ultimately have on our core consumer, and what, if any impact these dynamics will have on prime lending standards and the US consumer’s access to credit. We continue to believe that we have a large addressable market of underserved, non-prime consumers, and it’s important to note that lease-to-own solutions have historically benefited when prime credit options become less available.
Based on these dynamics and the operating plan in place for the full year 2024,
- 3 to 5% year-over-year increase in gross originations, which reflects the ongoing headwinds in the home furnishings retail category
- 8 to 10% year-over-year increase in revenue
- Continued improvement in Adjusted EBITDA performance compared with the second quarter of last year, despite an expectation for fixed cash operating expenses to increase slightly year-over-year as we invest in new growth initiatives
For full year 2024,
- We expect to continue to expand our customer base and acquire new customers
- Year-over-year growth in gross originations is expected to continue. For the full year we expect gross originations to grow at a rate of at least 10% and believe that our first quarter performance was the low point for the year.
This outlook does not include any material impact from prime creditors tightening or loosening above us and assumes that there are no significant changes to the macro environment. Our outlook also assumes the retail environment for home furnishings begins to normalize. The Company also expects gross originations to improve sequentially in the second half of 2024 compared to the first half of 2024 driven by growth in direct merchant originations and originations coming through Katapult Pay.
- We also expect to maintain strong credit quality in our portfolio. This will be driven by ongoing enhancements to our risk modeling, onboarding high quality new merchants through direct integrations, and repeat customers engaging with Katapult Pay
- Revenue growth is expected to be at least 10%
- Finally with the continued execution of our disciplined expense management strategy combined with our growing top-line we expect to deliver another year of Adjusted EBITDA growth. We also expect Adjusted EBITDA to follow the seasonal patterns that we have seen historically.
"During the first quarter we faced retail headwinds, but as expected, we picked up momentum as the quarter progressed,” said
Conference Call and Webcast
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ir@katapult.com
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. In some cases, forward-looking statements may be identified by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will,” “would,” or the negative of these terms or other similar expressions.. These forward-looking statements include, but are not limited to, statements regarding our second quarter 2024 and full year 2024 business outlook and underlying assumptions 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
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
Key Performance Metrics
Gross originations are defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period through the
Total revenue represents the summation of rental revenue and other revenue.
Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with generally accepted accounting principles in
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, adjusted net income/(loss) and fixed cash operating expenses. The Company believes that for management and investors to more effectively compare core performance from period to period, the non-GAAP measures should exclude items that are not indicative of our results from ongoing business operations. 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, provision (benefit) for income taxes, depreciation and amortization on property and equipment and capitalized software, provision of impairment of leased assets, loss on partial extinguishment of debt and stock-based compensation expense.
Adjusted net income/(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.
Fixed cash operating expenses is a non-GAAP measure that is defined as operating expenses less depreciation and amortization on property and equipment and capitalized software, stock-based compensation expense and variable lease costs such as servicing costs and underwriting fees. Management believes that fixed cash operating expenses provides a meaningful understanding of non-variable ongoing expenses.
Adjusted gross profit, adjusted EBITDA and adjusted net income/(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.
Reverse Stock Split
All share and per share amounts in the condensed consolidated statements of operations and comprehensive loss and condensed consolidated balance sheets have been retroactively adjusted for all periods presented to give effect to the reverse stock split that was effective as of
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended | ||||||||
2024 | 2023 | |||||||
(As Restated) | ||||||||
Revenue | ||||||||
Rental revenue | $ | 64,142 | $ | 54,131 | ||||
Other revenue | 919 | 952 | ||||||
Total revenue | 65,061 | 55,083 | ||||||
Cost of revenue | 48,573 | 43,213 | ||||||
Gross profit | 16,488 | 11,870 | ||||||
Operating expenses | 12,688 | 15,567 | ||||||
Income (loss) from operations | 3,800 | (3,697 | ) | |||||
Loss on partial extinguishment of debt | — | (2,391 | ) | |||||
Interest expense and other fees | (4,527 | ) | (5,189 | ) | ||||
Interest income | 324 | 620 | ||||||
Change in fair value of warrant liability | (162 | ) | 132 | |||||
Loss before income taxes | (565 | ) | (10,525 | ) | ||||
Provision for income taxes | (5 | ) | (20 | ) | ||||
Net loss | $ | (570 | ) | $ | (10,545 | ) | ||
Weighted average common shares outstanding - basic and diluted | 4,242 | 3,973 | ||||||
Net loss per common share - basic and diluted | $ | (0.13 | ) | $ | (2.65 | ) | ||
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
2024 | 2023 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 31,232 | $ | 21,408 | |||
Restricted cash | 6,339 | 7,403 | |||||
Property held for lease, net of accumulated depreciation and impairment | 57,575 | 59,335 | |||||
Prepaid expenses and other current assets | 3,461 | 4,491 | |||||
Litigation insurance reimbursement receivable | 5,000 | 5,000 | |||||
Total current assets | 103,607 | 97,637 | |||||
Property and equipment, net | 295 | 327 | |||||
Security deposits | 91 | 91 | |||||
Capitalized software and intangible assets, net | 1,811 | 1,919 | |||||
Right-of-use assets | 812 | 888 | |||||
Total assets | $ | 106,616 | $ | 100,862 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,657 | $ | 903 | |||
Accrued liabilities | 20,023 | 24,146 | |||||
Accrued litigation settlement | 12,000 | 12,000 | |||||
Term loan | — | — | |||||
Unearned revenue | 5,156 | 4,949 | |||||
Lease liabilities | 334 | 297 | |||||
Total current liabilities | 39,170 | 42,295 | |||||
Revolving line of credit | 67,631 | 60,347 | |||||
Term loan, non-current | 26,519 | 25,503 | |||||
Other liabilities | 257 | 95 | |||||
Lease liabilities, non-current | 522 | 614 | |||||
Total liabilities | 134,099 | 128,854 | |||||
STOCKHOLDERS' DEFICIT | |||||||
Common stock, 0.0001 par value-- 250,000,000 shares authorized; 4,105,645 and 4,072,713 shares issued and outstanding at | — | — | |||||
Additional paid-in capital | 95,623 | 94,544 | |||||
Accumulated deficit | (123,106 | ) | (122,536 | ) | |||
Total stockholders' deficit | (27,483 | ) | (27,992 | ) | |||
Total liabilities and stockholders' deficit | $ | 106,616 | $ | 100,862 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Three Months Ended | |||||||
2024 | 2023 | ||||||
(As Restated) | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (570 | ) | $ | (10,545 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 34,026 | 29,677 | |||||
Net book value of property held for lease buyouts | 7,613 | 6,747 | |||||
Impairment on property held for lease expense | 5,636 | 5,258 | |||||
Change in fair value of warrants liability | 162 | (132 | ) | ||||
Stock-based compensation | 1,391 | 2,090 | |||||
Loss on partial extinguishment of debt | — | 2,391 | |||||
Amortization of debt discount | 669 | 1,093 | |||||
Amortization of debt issuance costs, net | 66 | 81 | |||||
Accrued PIK Interest | 347 | 530 | |||||
Amortization of right-of-use assets | 76 | 98 | |||||
Change in operating assets and liabilities: | |||||||
Property held for lease | (45,249 | ) | (43,299 | ) | |||
Prepaid expenses and other current assets | 1,029 | 3,109 | |||||
Accounts payable | 754 | 252 | |||||
Accrued liabilities | (4,123 | ) | (594 | ) | |||
Lease liabilities | (55 | ) | (112 | ) | |||
Unearned revenues | 208 | 450 | |||||
Net cash provided by (used in) operating activities | 1,980 | (2,906 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | — | (4 | ) | ||||
Additions to capitalized software | (126 | ) | (297 | ) | |||
Net cash used in investing activities | (126 | ) | (301 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving line of credit | 10,058 | 4,350 | |||||
Principal repayments on revolving line of credit | (2,840 | ) | (872 | ) | |||
Principal repayment on term loan | — | (25,000 | ) | ||||
Repurchases of restricted stock | (312 | ) | (163 | ) | |||
Net cash provided by (used in) financing activities | 6,906 | (21,685 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 8,760 | (24,892 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 28,811 | 69,841 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 37,571 | $ | 44,949 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 3,382 | $ | 3,459 | |||
Cash paid for income taxes | $ | 112 | $ | 2 | |||
Deferred financing 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 | $ | 82 | $ | 126 | |||
RECONCILIATION OF NON-GAAP MEASURES AND CERTAIN OTHER DATA (UNAUDITED)
(amounts in thousands)
Three Months Ended | ||||||
2024 | 2023 | |||||
(As Restated) | ||||||
Total revenue | $ | 65,061 | $ | 55,083 | ||
Cost of revenue | 48,573 | 43,213 | ||||
Gross profit | 16,488 | 11,870 | ||||
Less: | ||||||
Servicing costs | 1,132 | 990 | ||||
Underwriting fees | 509 | 468 | ||||
Adjusted gross profit | $ | 14,847 | $ | 10,412 |
Three Months Ended | ||||||||
2024 | 2023 | |||||||
(As Restated) | ||||||||
Net loss | $ | (570 | ) | $ | (10,545 | ) | ||
Add back: | ||||||||
Interest expense and other fees | 4,527 | 5,189 | ||||||
Interest income | (324 | ) | (620 | ) | ||||
Change in fair value of warrant liability | 162 | (132 | ) | |||||
Provision for income taxes | 5 | 20 | ||||||
Depreciation and amortization on property and equipment and capitalized software | 266 | 197 | ||||||
Provision for impairment of leased assets | 173 | 424 | ||||||
Loss on partial extinguishment of debt | — | 2,391 | ||||||
Stock-based compensation expense | 1,391 | 2,090 | ||||||
Adjusted EBITDA | $ | 5,630 | $ | (986 | ) |
Three Months Ended | ||||||||
2024 | 2023 | |||||||
(As Restated) | ||||||||
Net loss | $ | (570 | ) | $ | (10,545 | ) | ||
Add back: | ||||||||
Change in fair value of warrant liability | 162 | (132 | ) | |||||
Stock-based compensation expense | 1,391 | 2,090 | ||||||
Adjusted net income (loss) | $ | 983 | $ | (8,587 | ) |
Three Months Ended | ||||||
2024 | 2023 | |||||
(As Restated) | ||||||
Total operating expenses | $ | 12,688 | $ | 15,567 | ||
Less: | ||||||
Depreciation and amortization on property and equipment and capitalized software | 266 | 197 | ||||
Stock-based compensation expense | 1,391 | 2,090 | ||||
Servicing costs | 1,132 | 990 | ||||
Underwriting fees | 509 | 468 | ||||
Fixed cash operating expenses | $ | 9,390 | $ | 11,822 |
CERTAIN KEY PERFORMANCE METRICS
(in thousands) | Three Months Ended | ||||
2024 | 2023 | ||||
(As Restated) | |||||
Total revenue | $ | 65,061 | $ | 55,083 | |
GROSS ORIGINATIONS BY QUARTER
Gross Originations by Quarter | ||||||||||||
($ millions) | Q1 | Q2 | Q3 | Q4 | ||||||||
FY 2024 | $ | 55.6 | $ | — | $ | — | $ | — | ||||
FY 2023 | $ | 54.7 | $ | 54.7 | $ | 49.6 | $ | 67.5 | ||||
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 |
Source:
2024 GlobeNewswire, Inc., source