KPLT - Earnings call transcript Q1 2022

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Operator

Thank you for standing by. And welcome to the Katapult Holdings, Inc.

First Quarter 2022 Earnings Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker, Mr. of President Vice Wright, Investor Relations. Bill ahead. go Please

Bill Wright

Chief Operating Both release corresponding the can Thank section XXXX quarter are Zayas, on Investor Karissa this our be investor referencing these of earnings to Chief Derek will Relations With and found you good morning. Orlando we Cupito, Officer; be Executive issued and Katapult’s our during Chief Officer. Officer; earnings presentation today and Medlin, first me Welcome Financial results We and call. morning the website. call. the conference

remarks. will for We available Q&A be following today’s prepared

future law, or those any statements, required for no as by publicly a Before remind management's statements future and events update contain and in information, recent undertake most new will Form we impact our statements. quarterly financial subject as from to be in should to would current contained statements begin, materially future financial a our our our I the are conjunction These cautionary expectations like revise that and growth year Except regarding beliefs, everyone this SEC to earnings statements These events release the reflect differ ended XX-Q obligation considered of our cause actual assumptions these report reports, factors of of may our any regarding results we whether result statements including to market performance. December and call and with number or periodic including company's performance, opportunity, forward-looking of XX. initiatives the otherwise.

for Relations financial measures adjusted the is of financial should section GAAP This call income. as release, to for on are be to a together Relations and financial rules. is results. the included measures our provide include replay of earnings and call adjusted on EBITDA available information Reconciliations being replacements not our will certain financial in non-GAAP read and website. our of also available measures performance, Investor be such now today's today's During GAAP will recorded we Orlando. These should Investor the considered which These certain that SEC additional non-GAAP information with be I under turn measures will over and our website. net constitutes webcast discussion section

Orlando Zayas

Bill. Good Thanks, review and will for the today’s the first growth we you morning, quarter our results of everyone provide and us. joining thank XXXX update call, on strategy. an On

non-prime bringing a need first on they is to inclusion are underserved for company Katapult, the access we these and provide attractive an financial that foremost and consumers. focused focused is living. products First consumers We essential At on as foremost everyday to non-prime for solution

both sale. Our facilitates non-prime of consumers or positions solution proprietary provide us virtual online, highly to and lease market. consumers technology that to focus transactions scalable merchants transparent that and a believe of large We purchase the lease-to-own enables significant clear share point the at our with us capture on

our merchants is to to to customers. value technology risk and along proprietary with decisioning sophisticated Our designed added our enable and us deliver model solutions platform,

payment application experience point We incremental sell solutions options promote suite We that a of to solutions. lease simple robust Katapult’s of inventory. our designed innovative flexible have financing believe variety options process, efficiently and and merchants due a and integrated seamless is to across repeat enable of merchant customer business to sale wins transparent

the in we and serve. gain to customer merchant addressable We order of are continually committed to large the share enriching market experience

X. to Turning Slide

partners is deliver challenging team working our longer-term consumers. and both while a how to on on focus navigating our for ambitions is macro merchant environment will We that our to

the to turbulence including consumer consumer end and of pressures the in to economics. calls, inflationary government on mentioned ongoing supply past the changes have impact stimulus, headwinds, we current merchant chain and conditions, macroeconomic spending As continues

on While Key to volume these challenges our longer-term remain pressures we issues, ability are opportunities focused one, in from the value we in these from from in history backdrop. the quarter highlights confident and to new for weather second are new in not are; merchants of large company, market capturing addressable XX number despite first welcomed to quarter, order amount immune highest the shareholders. the we our macro a create the the

strong. in our nicely merchant building to wins. acceleration satisfaction pipeline starting metrics is see two, client In and remain are we our Number addition,

in Our our up invest of of net and XX, XXXX, strategy. are March promoter that continuing three, XX our we XX% repeat customers growth XXXX support long-term And number as score made initiatives QX to was originations.

During leadership the our key the quarter, of opportunities. facilitate to and we added in roles growth high execution caliber support talent

in investing are share. and designed also us market to to that initiatives enable product strategic are We technology capture

As our our on we foundation, more CFO, financial and provide durable scalable already creating who’ll Karissa, over solid build our I believe stages details we in now financial will initial operating it turn on sizeable, a to we're of performance. enterprise. services

Karissa Cupito

supply Of decline, of year-over-year revenue on Orlando you, lowered with the discussed down to that detailed for first quarter the $XX.X on difficult for reflected revenue inflationary due slide. down Gross originations Gross on was adoption of XX% tightening million XX our noted XXX, proactive challenges to were million, approval drivers. margins lease targeted of impact Thank macro the down Slide Total rates. consumer QX to XXXX is above challenges pressures profit underwriting relates was the macro due adoption merchants which X, ASC the and million chain next combined ASC-XXX. was and as on weighed results environment $XX.X the As of XX% which $X million our year-over-year. XXXX key

public X.X a not company we the were for was costs decreased combined near million company EBITDA X.X for income we QX QX first and quarter XXXX, as with growth XXXX headwinds a invest Our adjusted compared not of XXXX in incurred net public as through term XX.X million that to to by ago. million year loss the during net continue were

timing adopted a by as income dictates to statement. Turning accounting revenues required accounting of Xst, that for expense of of the leasing the changes company standard for standard revised as is recognition a bad the leases This ASC-XXX XXXX, leases. within treatment SlideX, the for reminder, GAAP, debt January a effective and Katapult leasing

new be standard As records table therefore and only, this on of this total for for revenue of accounting using adopted is recast if comparable months any months slide or going bad ended the expense earned revenue of in lower, adoption result in or million periods QX period longer optional now was this a restated the basis the total XXXX if may income when debt revenue March as for not and Therefore, the we impacts have lesser shows XXst, no the modified ASC-XXX the the company period. apply the approach which that permitted three revenues not conform not is We prior lease items year will three it or no method statement. ASC-XXX effect accounting the retrospective from revenue comparative debt cash periods XXXX basis periods. and from ended receivables XXXX illustrated were XXXX the to cash a revenue the year, On to line ASC-XXX by this to affected transition in purposes accrual for QX were longer to forward March expense recognition the standard rental XXst, adopted arising for are record transition effect corresponding XXXX reporting for entities and the prior have reported. to adoption. in change on been that bad collected would've in $X including the

million were to Turning operating year-over-year. slide X.X eight, overall up expenses

expense employees debt company of spend. operating our factors. to teams year-over-year costs XX X.X two, million compensation expense expenses growth The sales largely growth total development higher the related addition from general administrative year-over-year. by part is two strategic to full-time bad were in Excluding as operating up expenses investments of driven and increased marketing higher our and support plan technology and and public One

gross XXXX. nine, as percentage health in slide was the property X.X% release at Looking related charges originations impairment of to QX

COVID well will XXXX lenders through The environment in we leading to environment that payment trend with we normalize. government solutions. as Beginning the to to as point payments gross originations significant led to for pre believe discuss as trends, applications, coupled investments. of credit We response credit of our pressured quality to to XXXX, our in We historical underwriting has It XXXX, performance. repeat do will this overall as data of levels percentage both in as to In increase credit continued XXXX initiated historically As pattern XXXX. continue XXXX. to up to now strategic do to funds we I us absence this quarter pressures in pandemic anticipate these response weaker, further detailed, to stimulus of occurred as tighten becomes turn the volume QX move prime in that an is credit that some performance targeted themselves stimulus looking at year. have consumers. charges have non-prime anticipate worth focused over and noting and it tightening higher Orlando increase to to the the the the inflationary and third previously an well, and to customers begin XX prime of started of early we into impairment the for favorable so proactive

Orlando Zayas

to the and and a notably, Development capture the President strategic investments to Officer. made in large we XXXX. making of have People Most first opportunity believe key Vice ahead. President we during of Slide CMO, quarter to Karissa. we team Thanks, quarter, the and leadership Strategic including the growth and details of impactful us Partnerships are made Corporate position Strategy Chief XX Vice technology our strides talent We hires

than on of Gorsky, integrated market established of acquisition analyst to startups XX as growth experience she Katapult FinTech held drive supported cross-functional side, Strategy President Vice Visa, the Executive coach wide Katapult growth. executive at processing channels partnerships Eric boards Products engagement Ingenico. strategy and companies. through for Corporate of UBS. Strategic Our brings she capitalist creating founders Data to of U.S. customer years of a as our the recently, executing most strategic where fast of position holding the Adyen, he new Prior at U.S. started brand merchants. phase Katapult marketing Continuing the People to Jay and Jay as related payments leading served awareness developing new of Klarna, team partnerships VP Katapult, XX experience at of to He company. our companies. CMO, Diamonon, and And Partnerships for FirstData Alternative team. for FinTech to a Chief talent XX sales and joining his successful in and Vice Most accelerating a brings of and Partner more brings and positions in led to range in Marketing and managed experience new recently expand Jorge He Development served years over BXBXC and team Colleen Diaz, a Officer Harmon, management consultant a during NextGen certified has years Director to growing venture time brings previously from President strategies.

the grow quarter are Moving Vice metrics Ruiz, President of in we progress that seeing confidence addressable penetrate and key invest optimize team. it's and work to decision across large to process, by Katapult, at first to continue sales sales market. Sales, to right sales Marino is his to new full tangible we this our already the Guided growing and organization, our our our our

update of approach enhanced to land be Slide engagement on three re-acceleration new that large merchant us strategic maximize ambitions We our this chances to next augmented continuing retail seeing the are increased XX the by quarter, will lays and that our growth in the the confident product high next as additional to coming help for pipeline partners. quarters community. offerings you in out initiatives will progress we of look and forward robust level a years. drive our are launched brand from We

that, merchants merchant platform force A and solid more our headwinds, our to is and limit to believe expand product on eCommerce as leadership will market. ahead capturing with company to plans exciting an strong, over in strategically long-term not is the pipeline. a to remain relationships Near-term, well-positioned addressable team and digital their conclusion, of ecosystem pipeline current continue for macroeconomic merchants and alternative enhancements, In the confident year, high-quality in partners advantage our continuing that, technology built take macro are solutions. the our near-term trends our look of turbulence anticipated to commerce to growing confidence conditions our have and payment we in share that, choice. Katapult access increase sales our to despite We and deepen the give rest and product efficiently path of ability engaged new the and grow in the We longer-term. the existing company non-prime right consumers we our to

our managing are conservatively. We underwriting

customers to and innovations driven continue relationships next technology now are I and merchants With enable We deepen steadily our talent and phase of with growth. existing that new adding questions. that, take will will

Operator

comes Our Fitzgerald. from Josh with first question [Operator Cantor Instructions] Siegler

Josh Siegler

do looks XXXX? especially merchant compared during progress like accelerated team starting the new of to quarter, this expect as you guys it are to number further you roll So, to adds XQ, the see the through out? And you benefit accelerate sales we

Derek Medlin

conversations retailers. absolutely are with having meaningful We many

conversions. will customer actually sales more We environment them for and tough is many sales that a increase Katapult are finding a and solution help that merchants this retail is

for we're both we've but are conversations in optimistic. acceleration capabilities more process Absolutely, seeing like you demand sales the new and really conversations is made also those. just headcount, spurring and we investments investments and in said, increased that So in these of

And so optimistic really like. what the the year half looks of second we're

Josh Siegler

the Are XXXX that could or in that a of And for business. their we've out quarters I on to know Katapult’s prime impact positive is story? underwriting potential a what that see tightening have lenders and book of impact of now play more way any couple about back half talked you starting of

Karissa Cupito

point this the But some anticipating prime have yet. prime would it's we impact type it that lag these some consumers inflation, credit and where more consumers headwinds, There's we're where that point, but we are first usually to impacted et this macro cetera. seen have lenders by to going At at our up not move spectrum a out. seen the year, play ultimately not tighten, have of

Operator

Markets. comes next Anthony Loop from with Capital Our question Chukumba

Anthony Chukumba

of quarter you're for of wanted of on providing from at year-over-year in to comparison wanted Obviously, any least specific get Just tough seeing know to just a and I not against sort you're terms but first -- date, a really but originations. guidance, you ease. up were to basis, should, XXXX, what sense comparison quarter the lease

you're at adds easier just comparison -- any merchant the the benefit all I seeing So, was brought wondering Thanks. you've from least or that that -- on. if you've these

Derek Medlin

right of So many a now. are tough in general, merchants our time going through

and before, certainly overall. business are haven't like seen new I are lot That the improving a shift adds merchant we So side. our said, investments of mentioned our pulling through

we So we next we're that in we're back. invest if the headwinds, continue or despite have spaces opportunity are we keep to optimistic these whether going it to to going to trade what's coming And we as for or pull decide long-term monitoring see not growth.

Karissa Cupito

a more we conservative add bit seen QX. And underwriting. our continuing we're through that Anthony, we in trends stay macro with that, haven't just Through top the very little And today seeing change were of on much to context.

So we're managing in did like just approval prudently QX. rate also we our

Anthony Chukumba

up. follow one then And just quick Got it.

this mean still these investments You terms point where cycle? guess, brought are at investments talked you're to done are I need we much of pretty investments headcount I sort investment that this about to you've that on. in going make. made are or you've there those of in

Orlando Zayas

talent say. the expected, President because getting on is those guess we that position. in some for And all better which mentioned all Sure, excited pretty It’s And CPO, started Officer. than the have of hiring still We and hi, made I hires. the the considering then, we last that we the we're plan and I the should Anthony. the call, strategic candidates Orlando. come we're Revenue strong, we're good Vice Strategy, a have on really hire, we of CMO, Chief That's the the key

talking the but getting team people CMO And strong, we're to really so coming we're with both Chief mentioned as Revenue on Officer side, I experienced a obviously together. like Klarna, strong from

And that so executing it's strategy. now about

Derek Medlin

term made growth. the side, technology on for And good really long feel that product we've investments the and about we

to customer, back the And and get going to growth telling our though term All of and time, in listening in shopping. this they growth. of in retailers, opportunity digital need the to they're and through what really long is believe exactly payments tough we us a just response to voice they're digital

is being we look the will feel like at we're and announcements don't spend we're year. we some discretionary, And in continue traction, of about back excited ‘XX of into that to if said, later half So we'll of we'll this with some monitor. have pulling the back going but this, lots of

Operator

Thank you.

with Caintic Vincent from comes question next Stephens. Our

open. Your is line

Vincent Caintic

Thanks for taking questions. my

on First funding.

So I there's broad with funding but expensive. opportunities. ability of question, of funding lot getting source a industry be more second And to like and appreciate that's your discussion to kind going seems my the been on issues volume

just appetite, Thank you. And wondering and that if the your you're you about that so ability to could talk growth anticipating? the fund

Karissa Cupito

question. Great Sure.

So has we it, of our to and million lender actually asset have that's with backed an facility that over us. $XX committed capacity capacity on

asset get it's facility, So a an backed XX% advance rate. we

basically as be So leverage originations, able that to growth facility future. growing fund to the foreseeable we would the for all are we

So we that good that lender have. we a with spot we're in feel our like in arrangement

Vincent Caintic

Okay, helpful. so you're then, We've guys the I signing like have like That's wondering, could wondering was if weaker now on from have you just getting seen been e-comm the it opportunities, recently. seems more it great. biggest more was And volume so it, merchants I talk them. about of even about sounds you're engagement talking sales because difficult sales.

example, talk well. Bread, growth, trying the added Progressive save they've other what Wayfair seen I've of think how merchants, is? -- as what maybe of about or they find about has that an back you So also added channels the versus wanting sort dynamic So you to and to -- could that if as off that competition

your you're you. and Thank having discussions So just with you're kind getting of merchants? traction the the

Derek Medlin

Derek. is This Vincent. Hi,

some trajectory more a new in sales harder to entirely we financial also standpoint, in respond opportunity. would both in here to more an I Just coming forward that's and thanks more are with time really they It able existing those ways longstanding become and we to cuts seeing having and in are tough conversations what and conversations with But, has from the our retailers. customers of market terms We find, -- with relationships as general, prospects that. trusted as how investment where having a that and And relationships terms intentional and all meaningful been what -- question on be they a And have for hearing across say the a little back And back them lot partnerships really those our it had seeing yes, three the starts experience, building we focused move having we definitely inclusion your in segments with able support specific getting and them of and our experience see engagement are and opportunity. are they we be are a to help in merchants the how yes, product are where up our know and convergent in because more that, team time amazing general, their growth investments as all they can of them get support on sales their to an has operational marketing, from and areas. we different areas. in job user organization all made They on have but just made. in have headwinds, late. during been in growth technology tough open aggressive of to to our we three focused are that and segment, having really in of and of done

this to And be sales segment. so, their a and to able great access market partner are grow them we for

Orlando Zayas

provide have If levels. Vincent, they And what we for always with levels. multiple add is I lenders and all can is been I at Wayfair, that's have in Orlando. at to different they about position trying this why Hello. a they competitive Wayfair, think look are financing

And any hourly. since our haven't daily, so, if change. joined, rates. really And track And, change to us, rate. Progressive for see, conversion goes not We parties frankly, this with can share And if is the equally. seen we [indiscernible] material indicator quite is there we any all in has these

Vincent Caintic

have more for your mentioned tightening you. side, can Thank perfect. And early if -- could results tightened That's mentioned me. I is about That's you your you Okay. talk complete, Thank one on you you that sneak from in, the your it and tightening? credit you. underwriting, if

Karissa Cupito

some We but are changing of and always significant monitoring obviously we with were and some QX, that the things and QX in trends seeing. testing data credit we into then things, did tightening do

would up complete are performance. really all go good based probably our how the sits, rates likely we approval where not are most terms it's I So rate. current approval are the probably, at that performance in to from and we where going of that from rates of say, down optimize our off run And it's now rates, factors and building about, we understand approval back bad driving can sitting

what now. we are that's So,

our kind bit to of those being the surgical We going more how rates approval a and and are forward. going on manage are in mode we tweaking maintenance and little

Operator

Thank Siegler follow-up Instructions] with Cantor with have a you. We [Operator Fitzgerald. Josh

Your now open. line is

Josh Siegler

especially last the quarter. looks Friday on Can a high you you. of follow for taking one performed was drivers Thank during some performance? thanks of this very as well, color It like gross the there some please percentage of XQ considering revenue revenue up. And originations provide my

Karissa Cupito

about mean, biggest Tax refunds that how out season I Tax year the last half played happened was season. considering driver with for year. large the Credit actually uncertainty was the tax Child second this would there in pretty some us, of be well initiative

season, So strong a expectations. really some tax than we better revenue I which think of had spurred that

Josh Siegler

charges year growth pre until as Do reach expect levels? this ticked this acceleration up quarter. percentage you impairment you originations continue the to like rate And a acceleration it looks the of pandemic of throughout

Karissa Cupito

of Yeah, at second that low at were XXXX. expectation that's levels now is historically right half the the during COVID, we in starting

that we just pre kind on go growing think and a that's we where it'll it's So do higher And rate think forward up maintain basis. back of to levels. to go stop pandemic going

Operator

questions I'd hand back showing to closing no currently queue remarks. to at the I'm conference over this And further any for in the like time. Orlando

Orlando Zayas

questions we the year. all We're the of rest appreciate looking guys, forward for Thanks it. really to Thanks. the

year on I in the half side. announcements interesting going of you're the adds, on to only think technology not see second merchant also some but the

second bullish year very to the might the changes of about and the the half we're So that come company.

So, today. for thanks for your support and time your thanks

Operator

Ladies and participation. gentlemen, you for thank your

You may now disconnect. day. wonderful Everyone, a have

Katapult (KPLT) 10 May 222022 Q1 Earnings call transcript