It’s tough out there right now and economic uncertainty and rising prices are clearly making life difficult for retailers and consumers who have already endured two traumatic years of life under COVID.
But Orlando Zayas, CEO of lease-purchase firm Katapult, told investors Tuesday (March 15) that the Texas-based FinTech — and the broader payment plan industry — will find a way forward as merchants and their customers shift to phase two, as the financing tool for subprime consumers moves from novelty to something closer to ubiquity.
“Our team continues to navigate the difficult macro environment for both our merchants and consumers,” Zayas said on the company’s Q4 earnings presentation Tuesday morning while pointing to ongoing supply chain headwinds, the end of government stimulus and changes in consumer spending. “But we are confident in our ability to navigate these challenges,” he added.
So far, that ability has failed to win the confidence of analysts who have shrunk the company’s stock by 50% this year alone, and by nearly 90% over the past 12 months, leaving it with a stock price that’s under $2 and a market value that’s slipped below $200 million.
As a result, Zayas said Katapult would be making strategic product, technology and sales staff investments designed to capture market share, saying the company was in the “initial stages of creating a sizable, durable and scalable business.
The Rearview Mirror
Officially, Katapult said its Q4 originations were down 4% and rental revenues were flat at $73.2 million, even though the company had added 20 new merchants during the fourth quarter and 102 new merchants for the year.
On the customer side, Zayas said the company’s net promoter score, a common industry metric measuring customer experience and loyalty, had risen in Q4 and into the new year, and that over half its new rental originations had come from repeat customers.
While Katapult, like most alt-finance industry players, benefitted from rising spend and adoption of new payment methods throughout most of 2021, CFO Karissa Cupito said that changed in Q4 and Q1, for both prime and non-prime consumers.
“Heading into Q4 2021, a significant increase in inflation, coupled with an absence of stimulus funds, further pressured performance,” Cupito said on the call. “In response to these new data trends and a deterioration in credit quality, we initiated proactive tightening of our underwriting in Q4 and we have continued to do so in 2022,” she added, before warning investors that impairment charges were expected trend up to pre-pandemic levels for the first half of 2022.
The SPAC Life and Beyond
While Katapult’s roots date back a decade, the modern, publicly traded version of the company is still only nine months old, after the company’s SPAC merger and Nasdaq listing last June at $14 per share.
At this point, Katapult really does not have much downside left and the company is counting on a raft of strategic investments to catalyze its turnaround plan including revamped and enhanced customer onboarding tools designed to improve conversion rates.
In addition, Zayas said, the company was finalizing its “next generation lease-to-own capabilities” which it anticipates launching in 2022, with the help of key senior level management new hires in technology, data science and analytics.
“We continue to integrate with more ecommerce platforms and point of sale systems that will drive future volume,” Zayas said, as well as major investments in infrastructure and security to ensure the company’s ability to scale.
“All these investments, which we characterize as core investments, have created a solid foundation, which we believe will enable us to accelerate growth in the future,” Zayas said.
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