Workflow
Katapult(KPLT) - 2025 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change ($K) | | :--- | :--- | :--- | :--- | | Total Assets | 90,584 | 93,171 | (2,587) | | Total Liabilities | 144,646 | 139,965 | 4,681 | | Total Stockholders' Deficit | (54,062) | (46,794) | (7,268) | | Cash and cash equivalents | 3,659 | 3,465 | 194 | | Restricted cash | 5,331 | 13,087 | (7,756) | | Property held for lease, net | 69,393 | 67,085 | 2,308 | | Revolving line of credit, net | 80,617 | 82,582 | (1,965) | | Term loan, net, current | 28,280 | 30,047 | (1,767) | | Derivative liability - new term loan | 3,558 | — | 3,558 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($K) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 71,886 | 58,863 | 13,023 | 22.1% | | Cost of Revenue | 60,718 | 48,935 | 11,783 | 24.1% | | Gross Profit | 11,168 | 9,928 | 1,240 | 12.5% | | Operating Expenses | 12,578 | 12,549 | 29 | 0.2% | | Loss from Operations | (1,410) | (2,621) | 1,211 | (46.2%) | | Net Loss | (7,835) | (6,888) | (947) | 13.7% | | Net Loss per Common Share | (1.63) | (1.61) | (0.02) | 1.2% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($K) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 143,832 | 123,924 | 19,908 | 16.1% | | Cost of Revenue | 118,315 | 97,508 | 20,807 | 21.3% | | Gross Profit | 25,517 | 26,416 | (899) | (3.4%) | | Operating Expenses | 27,463 | 25,237 | 2,226 | 8.8% | | Income (loss) from Operations | (1,946) | 1,179 | (3,125) | (265.1%) | | Net Loss | (13,523) | (7,458) | (6,065) | 81.3% | | Net Loss per Common Share | (2.87) | (1.75) | (1.12) | 64.0% | Condensed Consolidated Statements of Stockholders' Deficit Stockholders' Deficit Changes (amounts in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Balances at Period End (Shares) | 4,447 | 4,570 | | Total Stockholders' Deficit | (46,794) | (54,062) | | Accumulated Deficit | (148,451) | (161,974) | | Issuance of warrants (Refinancing Agreement) | — | 3,934 | | Stock-based compensation expense (Six Months) | — | 1,930 | | Issuance of shares (litigation settlement) | — | 752 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (dollars in thousands, Six Months Ended June 30) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | (3,196) | 1,352 | | Net cash used in investing activities | (660) | (337) | | Net cash (used in) provided by financing activities | (3,706) | 8,548 | | Net (decrease) increase in cash, cash equivalents and restricted cash | (7,562) | 9,563 | | Cash and cash equivalents and restricted cash at end of period | 8,990 | 38,374 | Notes to Unaudited Condensed Consolidated Financial Statements - Katapult operates a technology-driven lease-to-own platform for underserved U.S. non-prime consumers, with revenue strongest in Q1 due to holiday originations and tax refunds2526 - Key accounting estimates include property held for lease depreciation/impairment, derivative liability fair value, and deferred tax asset valuation2930 Property Held for Lease and Cost of Revenue (dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Property held for lease, net | 69,393 | 67,085 | | Cost of Revenue Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Depreciation expense for property held for lease | 41,473 | 34,441 | | Depreciation for early lease purchase options (buyouts) | 9,346 | 7,144 | | Depreciation for impaired leases | 7,300 | 5,932 | | Other | 2,599 | 1,418 | | Total cost of revenue | 60,718 | 48,935 | - On June 12, 2025, the company entered into a Refinancing Agreement, establishing a New Revolving Facility with an initial committed amount of $110 million and a New Term Loan with an initial principal amount of $33 million57585960 - The company's financial statements are prepared on a going concern basis, but rigorous covenants of the New Revolving Credit Facility raise substantial doubt about its ability to continue as a going concern76 - Warrants to purchase 486,264 shares of common stock were issued to Blue Owl with an exercise price of $0.01 per share9091 - The DCA Litigation was settled for $3.0 million, and the Shareholder Litigation was settled for $12.0 million97100104 Fair Value Measurements (dollars in thousands, June 30, 2025) | Metric | Carrying Amount | Fair Value | | :--- | :--- | :--- | | New Revolving Facility | 80,617 | 79,995 | | New Term Loan | 28,280 | 29,097 | | Derivative Liability - New Term Loan | 3,558 | 3,558 | | Warrant liability | 103 | 103 | - Subsequent to June 30, 2025, stockholders approved the issuance of shares for the Blue Owl Warrants and Term Loan Conversion, setting the Refinancing Agreement maturity date to December 31, 2026115116 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth from Katapult Pay, offset by declining margins, increased net losses, and liquidity challenges OVERVIEW - Katapult Holdings, Inc. operates a technology-driven lease-to-own platform that integrates with omnichannel retailers and e-commerce platforms to serve underserved U.S. non-prime consumers121 Key Performance Metrics Gross Originations (dollars in thousands) | Period | 2025 | 2024 | Change ($K) | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | 72,138 | 55,311 | 16,827 | 30.4% | | Six Months Ended June 30 | 136,337 | 110,941 | 25,396 | 22.9% | - Wayfair's share of gross originations (excluding Katapult Pay) decreased to 27% for the three and six months ended June 30, 2025, down from 48% in the prior year periods124126 - Katapult Pay's share of gross originations increased to 39% for the three months ended June 30, 2025 (from 28% in 2024) and to 37% for the six months (from 27% in 2024)125127 RESULTS OF OPERATIONS Total Revenue and Gross Profit (dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($K) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 71,886 | 58,863 | 13,023 | 22.1% | | Cost of Revenue | 60,718 | 48,935 | 11,783 | 24.1% | | Gross Profit | 11,168 | 9,928 | 1,240 | 12.5% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($K) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | 143,832 | 123,924 | 19,908 | 16.1% | | Cost of Revenue | 118,315 | 97,508 | 20,807 | 21.3% | | Gross Profit | 25,517 | 26,416 | (899) | (3.4%) | - Gross profit as a percentage of total revenue decreased to 15.5% for Q2 2025 (from 16.9% in 2024) and to 17.7% for H1 2025 (from 21.3% in 2024)140147 - Interest expense increased by $0.7 million for the three months and $1.3 million for the six months ended June 30, 2025, due to higher outstanding debt balances143148 Non-GAAP Financial Measures Non-GAAP Financial Measures (dollars in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Adjusted Gross Profit | 9,211 | 8,296 | 21,703 | 23,143 | | Adjusted EBITDA | 322 | (377) | 2,562 | 5,253 | | Adjusted Net Loss | (5,659) | (5,445) | (9,015) | (4,462) | | Fixed Cash Operating Expenses | 9,159 | 9,102 | 19,561 | 18,492 | LIQUIDITY & CAPITAL RESOURCES - As of August 8, 2025, the combined principal balance outstanding under the New Revolving Facility and New Term Loan was approximately $115.9 million158 Cash Flow Summary (dollars in thousands, Six Months Ended June 30) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | (3,196) | 1,352 | | Net cash used in investing activities | (660) | (337) | | Net cash (used in) provided by financing activities | (3,706) | 8,548 | | Cash, cash equivalents and restricted cash at end of period | 8,990 | 38,374 | - The company's financial statements are prepared on a going concern basis, but rigorous covenants of the New Revolving Credit Facility raise substantial doubt about its ability to continue for one year166 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk from its variable and fixed-rate debt facilities, with a 100 basis point change significantly impacting annual interest expense - The New Revolving Facility accrues interest at a SOFR-based rate plus 7.00% per annum, resulting in an 11.9% interest rate as of June 30, 2025177 - The New Term Loan bears a fixed interest rate of 18.0% per annum, accruing as PIK interest weekly178 - A hypothetical 100 basis point change in interest rates would alter the annual interest expense by approximately $0.8 million for the New Revolving Facility and $0.3 million for the New Term Loan179 - Inflation has indirectly impacted the business by negatively affecting consumer spending and the sales of key merchants180 ITEM 4. Controls and Procedures As of June 30, 2025, management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025182 - No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025183 PART II. Other Information ITEM 1. LEGAL PROCEEDINGS The company details its involvement in various legal proceedings, including settled lawsuits and an ongoing patent claim - The company is involved in various legal proceedings, with details provided in Note 9 to the Unaudited Condensed Consolidated Financial Statements184 ITEM 1A. RISK FACTORS The company faces significant risks from its debt agreement, merchant concentration, consumer behavior, competition, and legal and compliance challenges - If the company triggers an event of default under the Refinancing Agreement, obligations could accelerate, materially impacting the business186193196 - The New Term Loan and Blue Owl Warrants may result in substantial dilution to stockholders, with the Term Loan Conversion potentially issuing up to 21,378,017 shares186197 - The company has substantial indebtedness, with approximately $113.6 million principal outstanding under the Refinancing Agreement as of June 30, 2025190198 - The Refinancing Agreement includes restrictive and financial maintenance covenants that could limit operations or growth strategies190202 - A significant portion of gross originations is concentrated with Wayfair (27% for Q2 and H1 2025), creating vulnerability190205 - The company's success depends on customers making timely lease payments, which is influenced by factors affecting non-prime consumer spending212 - Proprietary algorithms and decisioning tools may not accurately predict consumer behavior, potentially leading to increased delinquencies and write-offs213214 - The company has a history of operating losses, with a net loss of $13.5 million for the six months ended June 30, 2025, and an accumulated deficit of approximately $162.0 million227 - The company utilizes AI/ML in its business, which carries risks related to model design, data quality, and evolving regulatory frameworks235236237 - The company is subject to stringent and changing data privacy and security laws (e.g., TCPA, CCPA, PCI DSS), which could increase compliance costs and risks243244245248249 - Data security breaches or other security incidents could result in regulatory investigations, litigation, fines, and reputational harm259262265266 - The company's auditors issued a going concern opinion, indicating substantial doubt about its ability to continue as an ongoing business195283 - The price of the company's securities is likely to be volatile due to macroeconomic conditions, operating results, and other market factors300301303 - Future sales of common stock could increase the number of shares eligible for public resale and result in dilution to existing stockholders307308309310311 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company issued shares as part of class action lawsuit settlements, relying on Section 3(a)(10) of the Securities Act for these unregistered sales - On April 10, 2025, the company issued 54,024 shares of common stock in connection with a class action lawsuit settlement320 - On June 13, 2025, the company issued 29,793 shares of common stock in connection with another class action lawsuit settlement320 - Both issuances were unregistered sales of equity securities, made in reliance upon Section 3(a)(10) of the Securities Act320 ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported317 ITEM 4. MINE SAFETY DISCLOSURES No mine safety disclosures were reported for the period - No mine safety disclosures were reported321 ITEM 5. OTHER INFORMATION No Rule 10b5-1 trading plans were reported for the period - No Rule 10b5-1 Trading Plans were reported322 ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and officer certifications - The exhibits include the Second Amended and Restated Certificate of Incorporation, Form of Warrant to Purchase Stock, and the Amended and Restated Loan and Security Agreement323 - Certifications from the Principal Executive Officer and Principal Financial Officer are also included323 SIGNATURES The report was duly signed on behalf of the registrant by the Chief Financial Officer on August 13, 2025 - The report was signed by Nancy Walsh, Chief Financial Officer, on August 13, 2025329