Katapult Holdings, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing, signed April 24, 2024, reports full-year results; it does not provide a standalone Q4 income statement. Unless otherwise noted, amounts below are in U.S. dollars.
Business context
Katapult operates a digital lease-to-own platform for non-prime U.S. consumers buying durable goods through e-commerce and omnichannel merchants. It reported more than 200 integrated merchants and a mobile app featuring Katapult Pay. The company estimates a $50–$60 billion addressable market and says its 2023 originations represented less than 1% of that market.
Financial performance and position
| Metric | FY 2023 | FY 2022, restated |
|---|---|---|
| Total revenue | $221.6 million | $209.5 million |
| Gross profit / gross margin | $41.7 million / 18.8% | $37.4 million / 17.9% |
| Operating loss | $18.8 million | $28.4 million |
| Net loss | $36.7 million | $40.5 million |
| Adjusted EBITDA, non-GAAP | $(1.9) million | $(19.7) million |
| Net cash used in operating activities | $17.4 million | $20.8 million |
- Gross originations rose 15.1% to $226.6 million. Katapult Pay generated $42.0 million, or about 19% of originations.
- Write-offs as a percentage of revenue increased to 8.9% from 7.6%; management cites a long-term target range of 8%–10%.
- At year-end, cash and cash equivalents were $21.4 million and restricted cash was $7.4 million. Total assets were $100.9 million; total liabilities were $128.9 million, leaving a $28.0 million stockholders’ deficit.
- Debt principal was $91.1 million: $60.7 million under the revolving line and $30.3 million under the term loan, including PIK interest. Carrying value of the two facilities was $85.9 million. Year-end rates were 13.9% on the revolver and 17.9% on the term loan, including PIK interest.
- Reported cash, cash equivalents and restricted cash totaled $28.8 million, but a $9.6 million loan-processor timing delay reduced the reported balance temporarily. The filing says the issue was resolved in January 2024; excluding the delay, the total would have been $38.4 million.
Changes versus the prior comparable period
- Revenue increased 5.8% and gross profit increased 11.5%. Higher originations supported rental revenue growth; other revenue declined 21.4%, primarily due to fewer lease sales.
- Operating expenses fell 8.1%, reflecting cost reductions, lower headcount and lower professional, technology and general and administrative costs. These savings were partly offset by $7.0 million of net litigation expense.
- Net loss narrowed by 9.4%. Adjusted EBITDA improved substantially but remained negative.
- Cash used in operations decreased by $3.4 million year over year. Total cash, cash equivalents and restricted cash fell from $69.8 million to $28.8 million, including the temporary processor-related delay.
- In March 2023, Katapult repaid $25.0 million of term-loan principal, reduced the revolver commitment from $125 million to $75 million, and extended both facilities’ maturity to June 4, 2025. The revolver spread increased to 8.5% and the loans transitioned from LIBOR to SOFR-based rates.
Outlook, risks and unusual items
- Liquidity outlook: Management believes cash and available revolver borrowings are sufficient for the next 12 months, with longer-term needs expected to be met through cash on hand, operating cash flows and revolver availability. The credit agreement requires at least $10 million of unrestricted liquidity and includes other financial and operating covenants.
- Restatement and controls: The company restated 2022 annual and 2022–2023 quarterly financial information. The main issue was sales-tax miscalculation that overstated rental revenue and understated sales-tax payable; other corrections included lease-asset depreciation, deferred revenue and expense classifications. The previously filed affected statements should no longer be relied upon. Management said internal control over financial reporting and disclosure controls were ineffective at December 31, 2023, with material weaknesses not yet remediated.
- Debt waiver: On April 24, 2024, the lender waived specified defaults related to the restatement and amended certain financial covenants. Katapult reported that it was in compliance with its covenants as of year-end and the financial-statement issuance date.
- Merchant concentration: Wayfair is the largest partner. The filing gives differing Wayfair shares of originations: 52% for 2023 and 57% for 2022 in one section, versus approximately 47% and 54% in the risk-factor discussion. The top ten merchants represented about 81% and 83%, respectively. Wayfair may terminate its agreement on 60 days’ notice.
- Legal matters: Katapult accrued a $12.0 million potential shareholder-litigation settlement and recorded a $5.0 million insurance-reimbursement receivable, producing $7.0 million of net litigation expense. Settlement discussions were ongoing and any settlement could involve cash and shares. A separate Daiwa advisory-fee dispute was scheduled for trial in September 2024.
- Operating and regulatory risks: The company bears customer non-payment and lease-asset impairment risk and depends on merchant relationships, funding availability and proprietary underwriting models. It also highlights changing state and federal consumer-protection, lease-to-own, tax and data-privacy requirements, cybersecurity threats, and sensitivity of non-prime customers to economic conditions.
- Other notable developments: A 1-for-25 reverse stock split took effect in July 2023. A delayed 10-K filing prompted a Nasdaq deficiency notice in April 2024; the company believed filing this report restored compliance. No specific financial guidance or quantified forecast is provided.
Investor verification priorities
- Review the restatement notes and reconciliations, especially sales-tax liabilities, revenue recognition and the corrected comparative periods.
- Track remediation and independent testing of the disclosed material weaknesses; the auditor did not provide an internal-control effectiveness opinion.
- Confirm liquidity after the processor timing issue, usable revolver availability, covenant headroom and the ability to address debt maturing in June 2025.
- Reconcile the differing Wayfair origination-concentration figures and monitor merchant diversification and agreement termination provisions.
- Follow the shareholder settlement, insurance recovery and Daiwa litigation for cash, dilution or other effects.
- Assess whether originations growth, improving adjusted EBITDA and management’s liquidity expectations persist alongside the higher write-off rate.