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What changed in Katapult Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Katapult Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+435 added−372 removedSource: 10-K (2026-03-11) vs 10-K (2025-03-28)

Top changes in Katapult Holdings, Inc.'s 2025 10-K

435 paragraphs added · 372 removed · 264 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

51 edited+18 added−5 removed45 unchanged
Biggest changeWe utilize modern, cutting-edge technology including sophisticated behavioral machine learning models and cloud-based computing designed to offer a seamless digital customer experience on the front end as well as continually evolving real-time decision engine on the back end.
Biggest changeWe utilize modern, cutting-edge technology including sophisticated machine learning models and cloud-based computing designed to offer a seamless digital customer experience on the front end as well as continually evolving real-time decision engine on the back end. • Our proprietary technology drives the Katapult App and KPay by giving us the unique ability to quickly and reliably differentiate between leasable and non-leasable items in a customer's cart without a direct or waterfall integration with a merchant.
Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. 5 Employees and Human Capital Resources At Katapult, our people are our most valuable resource and critical to our success. We believe in an open and collaborative work environment which drives employee accountability and ownership in their performance and development.
Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. Employees and Human Capital Resources At Katapult, our people are our most valuable resource and critical to our success. We believe in an open and collaborative work environment which drives employee accountability and ownership in their performance and development.
Ultimately, we believe merchants that work with us and reach this underserved customer segment see higher retail conversion and greater marketing spend efficiency. Currently, we offer four channels by which consumers can access our platform, and these products are our primary customer acquisition channels. These options are: direct integration, waterfall integration, mobile app and text-to-checkout.
Ultimately, we believe merchants that work with us and reach this underserved customer segment see higher retail conversion and greater marketing spend efficiency. 1 Currently, we offer four channels by which consumers can access our platform, and these products are our primary customer acquisition channels. These options are: direct integration, waterfall integration, mobile app and text-to-checkout.
We believe this will allow us to grow gross originations even if merchants are not able to immediately integrate our LTO solution into their payment flows. • Partnerships: We intend to enter new partnerships that deliver new customers, increase brand awareness and customer loyalty and enhance our product offering while requiring minimal technical investment.
We 3 believe this will allow us to grow gross originations even if merchants are not able to immediately integrate our LTO solution into their payment flows. • Partnerships: We intend to enter new partnerships that deliver new customers, increase brand awareness and customer loyalty and enhance our product offering while requiring minimal technical investment.
None of our employees are subject to a collective bargaining agreement or are represented by a labor union at this time. Our proprietary technology platform is essential to our core operations. In order to build these proprietary, innovative and secure products, we place a significant emphasis on identifying and employing talented and driven technology-focused professionals and engineers.
None of our employees are subject to a collective bargaining agreement or are represented by a labor union at this time. 6 Our proprietary technology platform is essential to our core operations. In order to build these proprietary, innovative and secure products, we place a significant emphasis on identifying and employing talented and driven technology-focused professionals and engineers.
We believe we have significant opportunity to grow gross origination volumes by increasing our transaction volume with merchants we currently work with and others that have yet to adopt our solution. • Consumer Engagement: We are focused on using our app marketplace and disciplined marketing strategies to increase engagement with existing and potential customers, and grow our conversion and repeat purchase rates.
We believe we have significant opportunity to grow gross origination volumes by increasing our transaction volume with merchants we currently work with and others that have yet to adopt our solution. • Consumer Engagement: We are focused on using our app marketplace and disciplined marketing strategies to increase engagement with existing and potential customers, by growing our conversion and repeat purchase rates.
The CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages. A number of other U.S. states also have enacted, or are considering enacting, comprehensive data privacy laws that share similarities with the CCPA.
The CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages. A number of other U.S. states also have enacted, or are considering enacting, comprehensive data privacy and security laws that share similarities with the CCPA.
(1) The total cost a customer may pay in connection with our lease-purchase transaction depends on certain factors, including, but not limited to: (1) total cost limitations, which vary across states and generally range between 2.0 and 2.75 times, depending on the duration of the renewal periods, the cash price, referred to as the Lease Multiple, (2) the maximum length of the renewal periods (typically 12-18 months), (3) whether the early purchase option is exercised, and (4) whether the customer exercises their right to terminate the lease, without penalty if current, thereby ending additional renewal payment obligations.
(1) The total cost a customer may pay in connection with our lease-purchase transaction depends on certain factors, including, but not limited to: (1) total cost limitations, which vary across states and generally range between 2.0 and 2.5 times, depending on the duration of the renewal periods, the cash price, referred to as the Lease Multiple, (2) the maximum length of the renewal periods (typically 12-18 months), (3) whether the early purchase option is exercised, and (4) whether the customer exercises their right to terminate the lease, without penalty 2 if current, thereby ending additional renewal payment obligations.
Our platform is based on a quick three-step application and a fully automated approval process that generates a decision in five seconds or less. Our terms are flexible and transparent and we never charge our customers late fees.
Our platform is based on a quick three-step application and a fully automated approval process that generates a decision in five seconds or less on average. Our terms are flexible and transparent and we never charge our customers late fees.
Our campaign content focuses on the strength of our product offering, including its ease-of-use, convenience and transparency, as well as our competitive pricing and access to a variety of durable goods sold by leading retailers. We believe there is a large untapped consumer base that could benefit from our LTO offering but are unfamiliar with our brand.
Our campaign content focuses on the strength of our product offering, including its ease-of-use, convenience and transparency, as well as our competitive pricing and access to a variety of durable goods sold by leading retailers. We believe there is a large untapped consumer base that could benefit from our LTO offering that is unfamiliar with our brand.
See the section titled “Risk Factors” in this Annual Report on Form 10-K for additional information about the laws and regulations to which we are, or may become subject and about the risks to our business associated with such laws and regulations. 7 Intellectual Property Intellectual property and proprietary rights are important to the success of our business.
See the section titled “Risk Factors” in this Annual Report on Form 10-K for additional information about the laws and regulations to which we are or may become subject and about the risks to our business associated with such laws and regulations. Intellectual Property Intellectual property and other proprietary rights are important to the success of our business.
Operations We believe our LTO offerings are distinguished by the following core capabilities: • Advanced underwriting. Katapult’s proprietary technology enables frictionless underwriting with minimal customer inputs (seven required fields) and real-time decision-making (five seconds or less).
Operations We believe our LTO offerings are distinguished by the following core capabilities: • Advanced underwriting. Katapult’s proprietary technology enables frictionless underwriting with minimal customer inputs (seven required fields) and real-time decision-making (on average, five seconds or less).
If our lease offer is the best match for the potential customer credit profile it will be presented to the consumer at the point of sale. If the consumer decides to accept our offer, they can utilize a Katapult lease to pay for their durable goods purchase at checkout.
If our lease offer is the best match for the potential customer’s credit profile it will be presented to the consumer at the point of sale. If the consumer decides to accept our offer, they can utilize a Katapult lease to pay for their durable goods purchase at checkout.
Based on this we expect to continue scaling our marketing strategy while monitoring the return-on-investment (ROI) of our spending. We will do this by testing and learning from marketing campaigns before scaling our investment. 4 Our largest merchant partner is Wayfair, Inc. ("Wayfair").
Based on this we expect to continue scaling our marketing strategy while monitoring the return-on-investment (ROI) of our spending. We will do this by testing and learning from marketing campaigns before scaling any investment. Our largest merchant partner is Wayfair, Inc. ("Wayfair").
Some merchants can be accessed through more than one of our four acquisition channels. A direct integration is when we integrate with a merchant's digital point of sale ("POS") system to facilitate online transactions via Application Programming Interfaces or through third-party plug-ins such as Shopify, Magento and 1 BigCommerce, among others.
Some merchants can be accessed through more than one of our four channels. A direct integration is when we integrate with a merchant's digital point of sale ("POS") system to facilitate online transactions via Application Programming Interfaces or through third-party plug-ins such as Shopify, BigCommerce, WooCommerce, and Magento, among others.
Seasonality We experience seasonal fluctuations in our revenue as a result of consumer spending patterns. Historically, our revenue is moderately seasonal and strongest during the first quarter. This is primarily due to historically higher gross originations during the fourth quarter holiday season.
Seasonality We experience seasonal fluctuations in our revenue as a result of consumer spending patterns. Historically, our revenue is strongest during the first quarter. This is primarily due to historically higher gross originations during the fourth quarter holiday season.
In general, during the first ninety (90) days, our customers have the ability to purchase the good for the cash price of the item plus 5% and any applicable fees (including initial fees, where applicable) and taxes.
In general, during the first ninety (90) days, our customers have the ability to purchase the good for the cash price of the item plus an average of 5% and any applicable fees (including initial fees, where applicable) and taxes.
We believe these principles distinguish our offering from many of our competitors. We believe we provide an affordable path to leasing or purchasing the durable goods that non-prime customers need at a total cost of ownership that is lower than many competing lease-to-own products or other financing options that are available to them.
We believe these principles distinguish our offering from many of our competitors. We believe we provide an affordable path to leasing or purchasing the durable goods that non-prime customers need at a total cost of ownership that is lower than many competing LTO products or other financing options that are available to them .
The Wayfair Agreement continues for successive two-year terms and may be terminated by either party at any time and for any reason provided that the terminating party provides written notice sixty days prior to the date of termination. The Wayfair Agreement does not prohibit Wayfair from offering lease-to-own options from our competitors.
The Wayfair Agreement continues for successive two-year terms and may be terminated by either party at any time and for any reason provided that the terminating party provides written notice sixty days prior to the date of termination. The Wayfair Agreement does not prohibit Wayfair from offering LTO options from our competitors.
Available Information We make available on our website, free of charge, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”).
Available Information We make available on our website, free of charge, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S.
In addition, only 29% report having a prime credit score. The lease-to-own industry provides this large base of underserved consumers with an opportunity to economically acquire durable goods that they may not have otherwise had the resources to obtain.
In addition, only 29% report having a prime credit score. The LTO industry provides this large base of underserved consumers with an opportunity to economically acquire durable goods that they may not have otherwise had the resources to obtain.
The SEC maintains an internet site, www.sec.gov , containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 8
The SEC maintains an internet site, www.sec.gov , containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 9
Our app marketplace allows consumers to originate leases with merchants through direct or waterfall integrations on merchant websites or within the Katapult marketplace using KPay. Since we launched the app in late 2022, transactions that were completed using KPay have grown to represent 32% of our total gross originations for the year ended December 31, 2024.
Our app marketplace allows consumers to originate leases with merchants through direct or waterfall integrations on merchant websites or within the Katapult marketplace using KPay. Since we launched the app in late 2022, transactions that were completed using KPay have grown to represent 42% of our total gross originations for the year ended December 31, 2025.
Information contained on or accessible through our website is not a part of this Annual Report on Form 10-K, and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only.
Our website address is www.katapult.com . Information contained on or accessible through our website is not a part of this Annual Report on Form 10-K, and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only.
As of December 31, 2024, we had 94 employees located in the United States. We also engage consultants and contractors to supplement our permanent workforce. We have never experienced any work stoppages and maintain good working relationships with our employees.
As of December 31, 2025, we had 87 employees located in the United States. We also engage consultants and contractors to supplement our permanent workforce. We have never experienced any work stoppages and maintain good working relationships with our employees.
We have an agreement with Wayfair Inc., dated November 24, 2020, (the "Wayfair Agreement") whereby we provide Wayfair customers with lease-purchase options for certain Wayfair products directly on Wayfair’s customer website. Wayfair (1) represented 36% and 49% of our gross originations for the years ended December 31, 2024 and 2023, respectively through the Wayfair Agreement.
We have an agreement with Wayfair dated November 24, 2020, (the "Wayfair Agreement") whereby we provide Wayfair customers with lease-purchase options for certain Wayfair products directly on Wayfair’s customer website. Wayfair 1 represented 25% and 36% of our gross originations for the years ended December 31, 2025 and 2024, respectively through the Wayfair Agreement.
Katapult’s lease-to-own platform is differentiated from traditional installment loans, credit cards, and buy now, pay later options and we believe it can meet the needs of nonprime consumers in a way that traditional options cannot.
Katapult’s LTO platform is differentiated from traditional installment loans, credit cards, and buy now, pay later options and we believe it can meet the needs of nonprime consumers in a way that traditional options cannot.
There are no credit checks or requirements for bank account or payroll data. 3 Our proprietary, end-to-end technology platform has been designed and built to handle high volumes of data from e-commerce transactions. The system is non-FICO based, relying on internally developed scoring and analytics to identify appropriate customers for our LTO offering.
There are no credit checks or requirements for bank account or payroll data. • Our proprietary, end-to-end technology platform has been designed and built to handle high volumes of data from e-commerce transactions. The system is non-FICO credit score based, relying on internally developed underwriting models to identify appropriate customers for our LTO offering.
See the section titled “Risk Factors” in this Annual Report on Form 10-K for a more comprehensive description of risks related to our intellectual property and proprietary rights. Corporate Information Our principal executive offices are located at Katapult Holdings, Inc., 5360 Legacy Drive, Plano, TX 75024, and Katapult’s telephone number is (833) 528-2785. Our website address is www.katapult.com .
See the section titled “Risk Factors” in this Annual Report on Form 10-K for a more comprehensive description of risks related to our intellectual property and other proprietary rights. 8 Corporate Information Our principal executive offices are located at Katapult Holdings, Inc., 5360 Legacy Drive, Building 2, Plano, TX 75024, and Katapult’s telephone number is (833) 528-2785.
In late 2022, we launched the Katapult mobile app, which includes a feature called Katapult Pay TR ("KPay") that allows consumers to leverage our virtual credit card technology to shop with a variety of durable goods merchants featured in our app marketplace.
In late 2022, we launched our mobile app (the “Katapult App”), which includes a feature called KPay, that allows consumers to leverage our virtual credit card technology to shop with a variety of durable goods merchants featured in our app marketplace.
Although we take steps to protect our intellectual property and proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, infringement, misappropriation or other violation of our intellectual property and proprietary technology and information, including by third parties who may use our intellectual property or proprietary technology or information to develop services that compete with ours.
Although we take steps to obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, circumvention, infringement, misappropriation or other violation of our intellectual property and other proprietary rights, including by third parties who may use our intellectual property or other proprietary rights to develop services that compete with ours.
Our first quarter revenue is also impacted by the receipt of our customers in the first quarter of federal and state income tax refunds which historically has led to our customers more frequently exercising the early purchase option on their existing lease agreements or purchasing durable goods during the first quarter of the year.
Our first quarter revenue is also impacted because our customers receive federal and state income tax refunds in this period, which historically has led to our customers more frequently exercising the early purchase option on their existing lease agreements or purchasing durable goods during the first quarter of the year.
We are an e-commerce solution for customers and we believe we are the only non-prime customer lease-purchase platform focused on e-commerce. We offer a fully-digital, seamless and differentiated platform driven by proprietary technology and risk models that have been developed over several years.
We are an e-commerce solution for customers and we believe we are one of only a few non-prime customer lease-purchase platforms focused on e-commerce. We offer a fully-digital, seamless and differentiated platform driven by proprietary 4 technology and risk models that have been developed over several years.
Both our direct and waterfall options involve some integration support from direct merchant partners.We refer to merchants with whom we have a contractual arrangement to provide either a direct integration or a waterfall integration as “direct merchants”.
Both our direct and waterfall options involve some integration support from direct merchant partners. We refer to merchants with whom we have a direct integration or a waterfall integration as “direct merchants”.
We also make available on our website our Code of Business Conduct and Ethics, our corporate governance principles, and the charters for the Audit, Compensation and Nominating and Corporate Governance Committees of our board of directors.
Securities and Exchange Commission (the “SEC”). We also make available on our website our Code of Business Conduct and Ethics, our corporate governance principles, and the charters for the Audit, Compensation and Nominating and Corporate Governance Committees of our board of directors.
Approximately 54% of our 2024 gross originations started with an interaction in our mobile app, whereby the customer checked out either through Kpay or a waterfall transaction. We intend to continue to thoughtfully expand the breadth of merchants available in our marketplace as we continue to transform our Katapult app marketplace into a shopping destination.
Approximately 62% of our 2025 gross originations started in our Katapult App, whereby the customer checked out either through a KPay or a waterfall transaction. We intend to continue to thoughtfully expand the breadth of merchants available in our marketplace as we continue to transform our Katapult App marketplace into a shopping destination.
We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to establish and protect our intellectual property and proprietary rights, including our proprietary technology, software, know-how, and brand. However, these laws, agreements, and procedures provide only limited protection.
We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights, including our proprietary technology, software, know-how, and brand.
Our net promoter score ("NPS") and our repeat purchase rate, defined as the percentage of in-quarter originations from existing customers were 58 and 61.5% respectively, as of December 31, 2024.
Our net promoter score ("NPS") and our repeat purchase rate, defined as the percentage of in-quarter originations from existing customers, were 46 and 64% respectively, as of December 31, 2025.
Our technology platform supports our advanced underwriting as well as our integration capabilities, decisioning, payment collection and other Katapult systems that allow us to achieve operational efficiencies and that we believe will drive economies of scale as we continue to grow. • Marketing focused on enhancing the lifetime value of our customer base.
The platform also offers other key insights into customers’ shopping habits to help merchants optimize customer conversion and customer acquisition costs. • Our technology platform supports our advanced underwriting as well as our integration capabilities, decisioning, payment collection and other Katapult systems that allow us to achieve operational efficiencies and that we believe will drive economies of scale as we continue to grow. • Marketing focused on enhancing the lifetime value of our customer base.
While we hold required licenses, such licensing requirements could unexpectedly change which in turn could impact our results of operations, financial condition and earnings. 6 Regarding federal law, at the present time, no federal law specifically regulates the core lease-purchase transaction offered by us.
We are also required to be licensed in certain states in order to engage in lease-purchase transactions. While we hold required licenses, such licensing requirements could unexpectedly change which in turn could impact our results of operations, financial condition, and earnings. Regarding federal law, at the present time, no federal law specifically regulates the core lease-purchase transaction we offer.
We cannot predict whether any state attorneys general, state consumer protection agency, or federal regulatory agency will direct investigations or regulatory initiatives towards us or our industry in the future, or what the impact of any such future action(s) might be.
We cannot predict whether any state attorneys general, state consumer protection agency, or federal regulatory agency will direct investigations or regulatory initiatives towards us or our industry in the future, or what the impact of any such future action(s) might be. 7 In the ordinary course of our business, we collect, store, transfer and otherwise process personal data, including sensitive personal data.
We are mission-driven and focused on providing underserved, nonprime consumers, with a simple, quick, transparent and fair pathway to acquiring the durable goods they need, when they need them.
Many durable goods are eligible for LTO, including home furnishings, automotive goods, computers, electronics, and appliances, among others. We are mission-driven and focused on providing underserved, nonprime consumers, with a simple, quick, transparent and fair pathway to acquiring the durable goods they need, when they need them.
In the ordinary course of our business, we collect, store, transfer and otherwise process personal data, including sensitive personal data. Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, rules, guidance and standards related to data privacy and security.
Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, rules, guidance and standards related to data privacy and security.
As of December 31, 2024, we have one non-provisional patent application filed covering our Katapult Pay technology and we own three registered trademarks .
However, these laws, agreements, and procedures provide only limited protection. As of December 31, 2025, we have one non-provisional patent application filed covering our KPay technology and we own three registered trademarks .
Goods are leased in exchange for a weekly, bi-weekly, semi-monthly or monthly payment, and customers have the option to purchase or return the items at any point during the duration of the lease-purchase agreement. These goods are available immediately to our customers upon the consummation of their lease-purchase agreement with Katapult.
An LTO transaction is a flexible alternative for consumers to obtain and enjoy merchandise with no long-term obligation. Goods are leased in exchange for a weekly, bi-weekly, semi-monthly or monthly payment, and customers have the option to purchase or return the items at any point during the duration of the lease-purchase agreement.
Lease-purchase transactions, unlike credit or a loan, are not subject to variable interest rates and do not include finance charges. 2 Our Strategy Our strategy supports our mission to enable consumers to get the durable goods they need when they need them and connect retailers with a growing base of engaged and loyal consumers.
Our strategy supports our mission to enable consumers to get the durable goods they need when they need them and connect retailers with a growing base of engaged and loyal consumers.
This option does not require integration support from merchants and the consumer interaction begins and ends in the Katapult app. With the launch of this feature, customers can start and complete lease originations within our ecosystem.
This option does not require integration support from merchants and the consumer interaction begins and ends in the Katapult App.
The Wayfair Agreement allows us to benefit from Wayfair’s broad range of product offerings and market ourselves to a larger audience of customers who may seek alternative payment options.
The Wayfair Agreement allows us to benefit from Wayfair’s broad range of product offerings and market ourselves to a larger audience of customers who may seek alternative payment options. In addition to Wayfair, we have contractual arrangements with many of our other e-commerce partners, including Shopify, BigCommerce, WooCommerce, and Magneto among others.
As of December 31, 2024, we have integrated our leasing solution with more than 250 merchants and we offer customers the ability to shop with more than 30 merchants through our Katapult marketplace powered by Katapult Pay.
The arrangements typically do not prohibit our e-commerce partners from offering lease-to-own options from our competitors. As of December 31, 2025, we have integrated our leasing solution with more than 250 merchants and we offer customers the ability to shop with approximately 40 merchants through our Katapult marketplace powered by KPay.
Our LTO platform offers consumers, particularly those with nonprime credit, an alternative path to ownership compared with traditional financing, which may not be accessible to them due to credit or other financial constraints. Many durable goods are eligible for lease-to-own, including home furnishings, automotive goods, computers, electronics, and appliances, among others.
These goods are available immediately to our customers upon the consummation of their lease-purchase agreement with Katapult. Our LTO platform offers consumers, particularly those with nonprime credit, an alternative path to ownership compared with traditional financing, which may not be accessible to them due to credit or other financial constraints.
Our top ten merchants in the aggregate represented approximately 78% and 81% of our total gross originations for the years ended December 31, 2024 and 2023, respectively. (1) Wayfair gross originations exclude transactions through Katapult Pay and only include transactions directly through Wayfair's waterfall platform.
Our top ten merchants in the aggregate represented approximately 76% and 78% of our total gross originations for the years ended December 31, 2025 and 2024, respectively. Other than Wayfair, none of our e-commerce partners individually account for more than 10% of our total revenue for the years ended December 31, 2025 and 2024, respectively.
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Based on our 2024 gross originations, we believe that we currently capture less than 1% market share. A lease-to-own transaction is a flexible alternative for consumers to obtain and enjoy merchandise with no long-term obligation.
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Based on our 2025 gross originations, we believe that we currently capture less than 1% market share. We have entered into a definitive merger agreement with CCF Holdings LLC (“CCFI”), Aaron’s Intermediate Holdco, Inc. (“Aaron’s”), which, if completed, is expected to materially expand our business. See “Our Strategy” below.
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Our behavioral learning-based risk models are designed to effectively price risk and provide customized recommendations. The platform considers data beyond traditional credit scores, such as lease history, behavioral biometrics and mobile device information to predict repayment ability, and leverages this with real-time response data • Market-leading customer experience and service. Our customer experience is grounded in transparency, respect and fairness.
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Using Katapult’s internally developed, proprietary machine learning models that determine the eligibility of a product for lease in real-time, consumers are issued a virtual card from our issuing partner Marqeta, backed by their issuing bank Sutton Bank, that is used to complete the transaction on a merchant’s website.
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Our proprietary technology drives the Katapult app and Katapult Pay by giving us the unique ability to quickly and reliably differentiate between leasable and non-leasable items in a customer's cart without a direct or waterfall integration with a merchant. Our technology also creates many benefits for our merchant-partners.
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At the end of the transaction, consumers enter into a lease agreement with Katapult. The interaction begins and ends within the Katapult app ecosystem.
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The platform also offers other key insights into customers’ shopping habits to help merchants optimize customer conversion and customer acquisition costs.
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All integration with merchants, except for KPay enabled merchants, are governed by one to three year master service agreements, with our standard terms containing an auto-renewal feature. These individual agreements outline primary elements of the relationship, such as marketing responsibilities, technology and development requirements, exclusivity, and economics.
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We are also required to be licensed in certain states in order to engage in lease-purchase transactions.
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Katapult’s primary source of revenue is generated from recurring payment streams related to our contracted lease payments with consumers. Katapult’s primary costs, outside of the retail price of a lease purchased item, include interest costs associated with our asset backed revolver and total servicing costs inclusive of collection activities.
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Lease-purchase transactions, unlike credit or a loan, are not subject to variable interest rates and do not include finance charges.
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Our Strategy Pending Strategic Mergers with CCFI and Aaron’s On December 11, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CCFI and Aaron’s and two wholly owned indirect subsidiaries of the Company, Katapult Merger Sub 1, Inc. (“Merger Sub 1”) and Katapult Merger Sub 2, LLC (“Merger Sub 2”).
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Pursuant to the Merger Agreement, CCFI and Aaron’s will become wholly owned subsidiaries of the Company, and the Company will remain a publicly traded entity.
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Under the terms of the Merger Agreement, one subsidiary will merge with and into Aaron’s and another subsidiary will merge with and into CCFI (collectively, the “Mergers”), with CCFI and Aaron’s each surviving as a wholly owned subsidiary of the Company.
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In connection with the Mergers, certain equity interests of CCFI and Aaron’s, including management incentive plan equity interests, will be contributed to and exchanged for shares of the Company’s common stock pursuant to the terms of the Merger Agreement and related agreements.
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If completed, the Mergers are expected to enhance our scale and omni-channel capabilities by combining complementary platforms that serve non-prime consumers seeking access to durable goods and related financial solutions. The Mergers are subject to customary closing conditions, including receipt of required stockholder and regulatory approvals, and are expected to close during the second quarter of 2026.
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There can be no assurance that the Mergers will be completed on the anticipated timeline or at all. Additional information regarding the Merger Agreement and the transactions contemplated thereby is included in the notes to our consolidated financial statements.
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Our underwriting models are designed to drive disciplined growth by balancing customer access with portfolio risk performance. Leveraging both internal performance data and third-party data sources, these models make real time, data driven decisions that determine whether to approve an application, the appropriate lease line exposure, and applicable pricing.
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The decisioning framework is multi layered, combining rules based controls with predictive risk models to detect identity fraud, assess delinquency propensity, and estimate expected loss. • Market-leading customer experience and service. Our customer experience is grounded in transparency, respect and fairness.
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Our proprietary technology platform is built on a cloud-native architecture hosted on AWS, utilizing a combination of serverless computing (AWS Lambda and AWS ECS Fargate) and containerized microservices. This architecture supports real-time processing and enables our platform to render automated underwriting decisions in approximately five seconds or less on average.
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At the core of our underwriting platform is our proprietary decision engine (DE), which combines internally developed machine learning models with data from both internal and third-party sources to assess identity fraud risk and default risk for each lease application.
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Our DE requires only a few inputs from the applicant and supplements those inputs with approximately 2,000 data elements from third-party providers as well as internally generated data about the applicant. • Our technology also creates many benefits for our merchant-partners.
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These arrangements typically continue for successive one-year terms and may be terminated by either party at any time and for any reasons provided that the 1 Wayfair gross originations exclude transactions through KPay and only include transactions directly through Wayfair's waterfall platform. 5 terminating party provides written notice thirty days prior to the end of the term.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA failure to correctly calculate and pay such taxes, or an unfavorable outcome on uncertain tax positions we may record from time to time, may result in substantial tax liabilities and a material adverse effect on several aspects of our performance. • If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected. • We have previously identified control deficiencies that in the aggregate constituted material weaknesses. • We face risks related to the restatement of our previously issued consolidated financial statements and financial information as of and for the fiscal year ended December 31, 2022, as well as for the interim financial periods for 2022 and 2023, which may adversely impact our business. • Delayed filing of our Annual Report on Form 10-K has made us currently ineligible to use certain registration statements to register the offer and sale of securities, which could adversely affect our ability to raise future capital or complete acquisitions. • We have previously fallen out of compliance with Nasdaq’s requirements for continued listing, and any future failure to comply with Nasdaq’s listing requirements could result in our common stock being delisted from the Nasdaq Global Market, which could have a material adverse effect on us and our stockholders. • Changes to tax laws or exposure to additional tax liabilities may have a negative impact on our operating results. • We are subject to legal proceedings from time to time which seek material damages or otherwise may have a material adverse effect on our business.
Biggest changeA failure to correctly calculate and pay such taxes, or an unfavorable outcome on uncertain tax positions we may record from time to time, may result in substantial tax liabilities and a material adverse effect on several aspects of our performance. • If we fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected. • Changes to tax laws or exposure to additional tax liabilities may have a negative impact on our operating results. • We are subject to legal proceedings from time to time which seek material damages or otherwise may have a material adverse effect on our business. 11 Operational Risks Related to Our Business • Uncertain market and economic conditions have had, and may in the future have, a material adverse effect on our business, financial condition and share price. • Failure to effectively manage our costs could have a material adverse effect on our profitability. • Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation.
Our strategy to grow gross originations partially depends on our ability to maintain and grow our relationships with current direct merchants, and to attract select new direct merchants that will stimulate consumer demand on our platform.
Our strategy to grow our gross originations partially depends on our ability to maintain and grow our relationships with current direct merchants and to attract select new direct merchants that will stimulate consumer demand on our platform.
Further, our transactions are subject to various federal and state laws and regulations which may result in significant compliance costs as well as expose us to litigation. In particular, our rental-purchase transactions and the customer-facing operations related thereto, such as collections and marketing, are subject to various other federal, state and/or local consumer protection laws.
Further, our transactions and operations are subject to various federal and state laws and regulations which may result in significant compliance costs as well as expose us to litigation. In particular, our rental-purchase transactions and the customer-facing operations related thereto, such as collections and marketing, are subject to various other federal, state and/or local consumer protection laws.
These consequences may include: interruptions 25 to our operations (including availability of data), violation of applicable data privacy and security laws, regulations, rules, standards and contractual obligations; litigation (including class claims), damages, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing personal and other sensitive data; negative publicity; reputational damage; loss of customers and ecosystem partners; monetary fund diversions; financial loss; and other similar harms.
These consequences may include: interruptions to our operations (including availability of data), violation of applicable data privacy and security laws, regulations, rules, standards and contractual obligations; litigation (including class claims), damages, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing personal and other sensitive data; negative publicity; reputational damage; loss of customers and ecosystem partners; monetary fund diversions; financial loss; and other similar harms.
Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to data privacy and security, or any failure to protect the information that we collect from our customers and merchants, including personal information, from cyber-attacks, data security breaches or other security incidents, or any such actual or perceived failure by our originating bank partners, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to data privacy and security, or any failure to protect the information that we collect from our customers and merchants, including personal data, from cyber-attacks, data security breaches or other security incidents, or any such actual or perceived failure by our originating bank partners, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental 31 investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
In addition, some of our competitors may be willing to lease certain types of products that 13 we will not agree to lease, enter into customer leases that have services, as opposed to goods, as a significant portion of the lease value, or engage in other practices related to pricing, compliance, and other areas that we will not, in an effort to gain market share.
In addition, some of our competitors may be willing to lease certain types of products that we will not agree to lease, enter into customer leases that have services, as opposed to goods, as a significant portion of the lease value, or engage in other practices related to pricing, compliance, and other areas that we will not, in an effort to gain market share.
If our key merchant partners, in particular Wayfair, are unable to acquire new customers or retain existing customers or are otherwise negatively impacted by the macroeconomic and geopolitical conditions, our results of operations, financial condition and prospects will be negatively impacted. We also depend on continued relationships with key partners that assist in obtaining and maintaining our relationships with merchants.
If our key merchant partners, in particular Wayfair, are unable to acquire new customers or retain existing customers or are otherwise negatively impacted by the macroeconomic and geopolitical conditions, our results of operations, financial condition and prospects will be negatively impacted. 19 We also depend on continued relationships with key partners that assist in obtaining and maintaining our relationships with merchants.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable 35 securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. The increased costs will impact our financial position.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. The increased costs will impact our financial position.
Common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
Common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up 39 agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
In addition, others in our industry have defended class action lawsuits alleging various regulatory violations and have paid material amounts to settle such claims. If we are named in any such class action lawsuits or other legal proceedings, significant settlement amounts or final judgments could materially and adversely affect our liquidity and capital resources.
In addition, others in our industry have defended class action lawsuits alleging various regulatory violations and have paid material amounts to settle such claims. If we are named in any such class action lawsuits or other legal 35 proceedings, significant settlement amounts or final judgments could materially and adversely affect our liquidity and capital resources.
Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential consequences.
Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with 40 new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential consequences.
Any change in our presentation or positioning with a direct merchant could have a material and adverse effect on our business, results of operations, financial condition, and prospects. We rely on KPay enabled merchants to allow access to their stores through our mobile app and our desktop and mobile websites.
Any change in our presentation or positioning with a direct merchant could have a material and adverse effect on our business, results of operations, financial condition, and prospects. We rely on KPay enabled merchants to allow access to their stores through our Katapult App and our desktop and mobile websites.
If we are unable to successfully and timely innovate and continue to deliver a superior merchant and customer experience, the demand for our products and technologies may decrease and our growth, business, results of operations, financial condition, and prospects could be materially and adversely affected.
If we are unable to successfully and timely innovate and continue to deliver a superior 22 merchant and customer experience, the demand for our products and technologies may decrease and our growth, business, results of operations, financial condition, and prospects could be materially and adversely affected.
We are incorporated into the supply chain of a large number of companies worldwide and, as a result, if our products are compromised, a significant number of companies could be simultaneously affected. The potential liability and associated 24 consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm.
We are incorporated into the supply chain of a large number of companies worldwide and, as a result, if our products are compromised, a significant number of companies could be simultaneously affected. The potential liability and associated consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm.
These competitors may have significantly greater financial and operating resources, greater name recognition and more developed products and services, which may allow them to grow faster. Greater name recognition, or better public perception of a competitor’s reputation, may help the competitor take market share.
These competitors may have 21 significantly greater financial and operating resources, greater name recognition and more developed products and services, which may allow them to grow faster. Greater name recognition, or better public perception of a competitor’s reputation, may help the competitor take market share.
The impact of new laws and 27 regulations, or modifications by regulators concerning the interpretation or enforcement of existing laws, on our business is not known; however, any such changes could materially and adversely impact our business. The laws and regulations applicable to our operations are subject to agency, administrative and/or judicial interpretation.
The impact of new laws and regulations, or modifications by regulators concerning the interpretation or enforcement of existing laws, on our business is not known; however, any such changes could materially and adversely impact our business. The laws and regulations applicable to our operations are subject to agency, administrative and/or judicial interpretation.
The technologies underlying AI/ML and its uses are subject to a variety of 19 laws and regulations, including intellectual property, data privacy and security, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.
The technologies underlying AI/ML and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and security, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.
Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of 30 data and income, reputational harm, and diversion of funds.
Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and proprietary rights could harm our business, operating results and financial condition. O ur business depends on intellectual property and proprietary technology and information, the protection of which is crucial to the success of our business.
Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights could harm our business, operating results and financial condition. O ur business depends on intellectual property and proprietary technology and information, the protection of which is crucial to the success of our business.
The amount of shares of common stock issued in connection with an investment or acquisition could constitute a material portion of our then- 36 outstanding shares of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
The amount of shares of common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
Our overall leverage and the terms of our Credit Agreement could also: • make it more difficult for us to satisfy obligations; • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions; • limit our ability to service our indebtedness; • limit our ability to adapt to changing market conditions; 15 • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a significant portion of our cash flow from operations to paying the principal and interest on our indebtedness, thereby limiting our ability to reach profitability and the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and in our industry generally; and • place us at a competitive disadvantage compared with competitors that have a less significant debt burden.
Our overall leverage and the terms of our Loan Agreement could also: • make it more difficult for us to satisfy obligations; • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions; • limit our ability to service our indebtedness; • limit our ability to adapt to changing market conditions; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a significant portion of our cash flow from operations to paying the principal and interest on our indebtedness, thereby limiting our ability to reach profitability and the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and in our industry generally; and • place us at a competitive disadvantage compared with competitors that have a less significant debt burden.
Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Moreover, despite our efforts, our personnel or third parties upon whom we rely on may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
As a result, we may approve customers that are not able to perform, which would lead to increased customer payment delinquencies, increased lease merchandise write-offs and decreased gross margins.
As a result, we may approve customers that are not able to perform, which would lead to increased customer delinquencies, increased lease merchandise write-offs and decreased gross margins.
Our Amended and Restated Charter provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to us or our stockholders, (3) action asserting a claim arising pursuant to any provision of the DGCL or our Amended and Restated Charter or our Amended and Restated Bylaws, or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware.
Our Amended and Restated Charter provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to us or our stockholders, (3) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our Amended and Restated Charter or our Amended and Restated Bylaws, or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware.
The negative covenants limit our ability to: incur additional indebtedness; pay dividends, redeem stock or make other distributions; amend our material agreements; make investments; create liens; transfer or sell the collateral for the Credit Agreement; make negative pledges; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with affiliates.
The negative covenants limit our ability to: incur additional indebtedness; pay dividends, redeem stock or make other distributions; amend our material agreements; make investments; create liens; transfer or sell the collateral for the Loan Agreement; make negative pledges; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with affiliates.
Failure to comply with these covenants could result in an acceleration of repayment of the indebtedness under the Credit Agreement, which would have a material adverse effect on our business, financial condition and results of operations. The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants that restrict some of our activities.
Failure to comply with these covenants could result in an acceleration of repayment of the indebtedness under the Loan Agreement, which would have a material adverse effect on our business, financial condition and results of operations . The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants that restrict some of our activities.
Negative publicity about us or our industry, including the transparency, fairness, user experience, quality, and reliability of our platform or lease-to-own platforms in general, effectiveness of our risk model, our ability to effectively manage and resolve complaints, our data privacy and security practices, litigation, regulatory activity, misconduct by our employees, funding sources, service providers, or others in our industry, the experience of customers and investors with our platform or services or lease-to-own platforms in general, even if inaccurate, could adversely affect our reputation and the confidence in, and the use of, our platform, which could harm our reputation and cause disruptions to our platform.
Negative publicity about us or our industry, including the transparency, fairness, user experience, quality, and reliability of our platform or LTO platforms in general, effectiveness of our risk model, our ability to effectively manage and resolve complaints, our data privacy and security practices, litigation, regulatory activity, misconduct by our employees, funding sources, service providers, or others in our industry, the experience of customers and investors with our platform or services or LTO platforms in general, even if inaccurate, could adversely affect our reputation and the confidence in, and the use of, our platform, which could harm our reputation and cause disruptions to our platform.
As a result of these risks, we could experience increased 14 claims, reputational damage, or other adverse effects, which could be material.
As a result of these risks, we could experience increased claims, reputational damage, or other adverse effects, which could be material.
As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase now that we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended.
As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase now that we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.
Merchants could also develop their own in-house product that competes with our product. Furthermore, virtual lease-to-own competitors may deploy different business models, such as direct-to-consumer strategies, that forego reliance on merchant relationships that may prove to be more successful.
Merchants could also develop their own in-house product that competes with our product. Furthermore, virtual LTO competitors may deploy different business models, such as direct-to-consumer strategies, that forego reliance on merchant relationships that may prove to be more successful.
See “—We utilize AI/ML, which could expose us to liability or adversely affect our business” in “Risks Related to Our Technology and Our Platform” for more information. In addition, our dedication to incorporating technological advancements into our platform requires significant financial and personnel resources.
See “Risks Related to Our Technology and Our Platform—We utilize AI/ML, which could expose us to liability or adversely affect our business” for more information. In addition, our dedication to incorporating technological advancements into our platform requires significant financial and personnel resources.
We may not be able to register or enforce all of our trademarks and any of our trademarks or other intellectual property rights may be challenged by others. Further, we license certain technology, software, data and other intellectual property from third parties that are important to our business.
We may not be able to register or enforce all of our trademarks or other intellectual property and other proprietary rights, any of which may be challenged by others. Further, we license certain technology, software, data and other intellectual property from third parties that are important to our business.
In the event that any third-party from which we source information experiences a service disruption, whether as a result of maintenance, software bugs or failures, natural disasters, terrorism, other man-made problems, or data security breaches or other security incidents whether accidental or willful, or other factors, the ability to score and decision lease-to-own applications through our platform may be adversely impacted.
In the event that any third-party from which we source information experiences a service disruption, whether as a result of maintenance, software bugs or failures, natural disasters, terrorism, other man-made problems, or data security breaches or other security incidents whether accidental or willful, or other factors, the ability to score and decision LTO applications through our platform may be adversely impacted.
These summarized risks include, among others, the following: Risks Related to Our Business, Strategy and Growth • A meaningful percentage of our gross originations are concentrated with a single merchant, and any deterioration in the business of, or in our relationship with this merchant or any other key merchant relationship or partner could materially and adversely affect our business, results of operations, financial condition and prospects. • If we are unable to attract additional direct merchants and retain and grow our relationships with our existing direct merchants, our results of operations, financial condition, and prospects would be materially and adversely affected. • Unexpected changes to consumer behavior could cause our proprietary algorithms and decisioning tools used in approving customers to no longer be indicative of our customer's ability to perform. • Our success depends on the effective implementation and continued execution of our strategies. • If we fail to maintain customer satisfaction and trust in our brand, our business, results of operations, financial condition and prospects would be materially and adversely affected. • If we are unable to attract new customers and retain and grow our relationships with our existing customers, or if attracting or retaining customers is not cost-efficient, our results of operations, financial condition, and prospects would be materially and adversely affected. • Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves its forecasted growth, our business could fail to grow at similar rates, if at all. • The success and growth of our business depends upon our ability to continuously innovate and develop new products and technologies.
Risks Related to Our Business, Strategy and Growth • A meaningful percentage of our gross originations are concentrated with a single merchant, and any deterioration in the business of, or in our relationship with this merchant or any other key merchant relationship or partner could materially and adversely affect our business, results of operations, financial condition and prospects. • If we are unable to attract additional direct merchants and retain and grow our relationships with our existing direct merchants, our results of operations, financial condition, and prospects would be materially and adversely affected. • Unexpected changes to consumer behavior could cause our proprietary algorithms and decisioning tools used in approving customers to no longer be indicative of our customer’s ability to perform. 10 • Our success depends on the effective implementation and continued execution of our strategies. • If we fail to maintain customer satisfaction and trust in our brand our business, results of operations, financial condition and prospects would be materially and adversely affected. • If we are unable to attract new customers and retain and grow our relationships with our existing customers, or if attracting or retaining customers is not cost-efficient, our results of operations, financial condition, and prospects would be materially and adversely affected. • Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves its forecasted growth, our business could fail to grow at similar rates, if at all. • The success and growth of our business depends upon our ability to continuously innovate and develop new products and technologies.
Our business relies heavily on relationships with our merchants. Competitors undertaking these tactics could cause our merchants to cease to offer Katapult products in favor of our competitors, or to offer our product and the products of our competitors simultaneously, which could slow growth in our business and limit or reduce profitability.
Our business relies heavily on relationships with our merchants. Competitors undertaking these tactics could cause our merchants to cease to offer the Company’s products in favor of our competitors, or to offer our product and the products of our competitors simultaneously, which could slow growth in our business and limit or reduce profitability.
GAAP, and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income tax provisions and accruals.
GAAP”), and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income tax provisions and accruals.
Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition. 38 Item 1B.
Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our results of operations, financial condition, and prospects. We operate in a highly competitive industry. We face competition from a variety of businesses and new market entrants, including competitors with lease-to-own products for e-commerce goods and other types of digital payment platforms.
We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our results of operations, financial condition, and prospects. We operate in a highly competitive industry. We face competition from a variety of businesses and new market entrants, including competitors with LTO products for e-commerce goods and other types of digital payment platforms.
Our operating results have been below and could continue to be below the expectations of public market analysts and investors due to a number of potential factors, including: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • factors affecting consumer spending that are not under our control; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our common stock or other securities; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical conflict (including the conflict involving Russia and Ukraine and the conflicts in the Middle East), pandemics (including COVID-19), acts of terrorism or responses to these events.
Our operating results have been below and could continue to be below the expectations of public market analysts and investors due to a number of potential factors, including: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • factors affecting consumer spending that are not under our control; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales or issuances of our common stock (including upon the exercise of warrants, or upon conversion of the Katapult Convertible Preferred Stock) or other securities; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical conflict (including the conflict involving Russia and Ukraine and the conflicts in the Middle East), pandemics, acts of terrorism or responses to these events.
Our market opportunity estimates, including the size of the virtual lease-to-own market, and expectations about market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including our expectation with respect to the retail environment for home furnishings and other categories offered by our top merchant partners.
Our market opportunity estimates, including the size of the virtual LTO market, and expectations about market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including our expectation with respect to the retail environment for home furnishings and other categories offered by our top merchant partners.
While we take precautions to prevent customer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of the lease-to-own transactions facilitated through our platform. There is risk of fraudulent activity associated with our platform, customers, and third parties handling customer information.
While we take precautions to prevent customer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of the LTO transactions facilitated through our platform. There is risk of fraudulent activity associated with our platform, customers, and third parties handling customer information.
Our resources, technologies, and fraud prevention tools may be insufficient to accurately detect and prevent fraud. We bear the risk of loss for lease-to-own transactions facilitated through our platform. The level of fraud related charge-offs on the lease-to-own transactions facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase.
Our resources, technologies, and fraud prevention tools may be insufficient to accurately detect and prevent fraud. We bear the risk of loss for LTO transactions facilitated through our platform. The level of fraud related charge-offs on the LTO transactions facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase.
For information on data privacy and security laws, regulations, rules, standards and contractual obligations we are, or may in the future become, subject to, and the associated risks to our business, see the section titled “Risk Factors—Risks Related to Our Technology and Our Platform—We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business.” We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses.
For information on the laws, regulations, rules, and standards we are, or may in the future become, subject to, and the associated risk to our business, see the section titles “Business—Government Regulation” For information on data privacy and security laws, regulations, rules, standards and contractual obligations we are, or may in the future become, subject to, and the associated risks to our business, see the section titled “Risk Factors—Risks Related to Our Technology and Our Platform—We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business regulations.” We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses.
We depend on KPay enabled merchants to continue to allow our customers to utilize our platform, including our websites and mobile app, to access and buy goods at their stores. As a result, there can be no assurance that we will 20 be able to continue to offer our customers access to any particular KPay enabled merchant.
We depend on KPay enabled merchants to continue to allow our customers to utilize our platform, including our websites and Katapult App, to access and buy goods at their stores. As a result, there can be no assurance that we will be able to continue to offer our customers access to any particular KPay enabled merchant.
In the event that our issuer processor or the issuing bank partner become unable or unwilling to facilitate the disbursements to merchants and we are unable to reach an agreement with another third-party partner, such loans would no longer be able to be facilitated through our Katapult Pay platform.
In the event that our issuer processor or the issuing bank partner become unable or unwilling to facilitate the disbursements to merchants and we are unable to reach an agreement with another third-party partner, such loans would no longer be able to be facilitated through our KPay platform.
Economic downturns may impact our ability to comply with the covenants and restrictions in our Credit Agreement and to make payments on our indebtedness as they become due.
Economic downturns may impact our ability to comply with the covenants and restrictions in our Loan Agreement and to make payments on our indebtedness as they become due.
For example, Katapult Pay utilizes a third-party payment processor, the interruption of which could cause a decrease in the performance, reliability and availability of Katapult Pay. In addition, via Katapult Pay, certain leases are originated by our issuing bank partner and then disbursed to merchants via single-use virtual cards facilitated through our partnership with an issuer processor.
For example, KPay utilizes a third-party payment processor, the interruption of which could cause a decrease in the performance, reliability and availability of KPay. In addition, via KPay, certain leases are originated by our issuing bank partner and then disbursed to merchants via single-use virtual cards facilitated through our partnership with an issuer processor, Marqeta.
Violations by our employees, contractors or agents of policies and procedures we have implemented to ensure compliance with these laws could subject us to civil or criminal investigations in the U.S. and in other jurisdictions, could lead to substantial civil and criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could cause us to incur significant legal fees, and could damage our reputation.
Violations by our employees, contractors or agents of policies and procedures we have implemented to ensure compliance with these laws could subject us to civil or criminal investigations in the United States and in other jurisdictions, could lead to substantial civil and criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could cause us to incur significant legal fees, and could damage our reputation.
Our continued success depends on our ability to generate repeat use and increased gross originations from existing customers and to attract new consumers to our platform. Our ability to retain and grow our relationships with our customers depends on the willingness of customers to use our products and services, including our mobile app and Katapult Pay.
Our continued success depends on our ability to generate repeat use and increased gross originations from existing customers and to attract new consumers to our platform. Our ability to retain and grow our relationships with our customers depends on the willingness of customers to use our products and services, including our Katapult App and KPay.
Our business is subject to extensive federal, state and local laws and regulations and an increased risk of regulatory actions as a result of the highly regulated nature of our industry and the focus of state and federal enforcement agencies on the lease-to-own industry in particular.
Our business is subject to extensive federal, state and local laws and regulations and an increased risk of regulatory actions as a result of the highly regulated nature of our industry and the focus of state and federal enforcement agencies on the LTO industry in particular.
The failure by our merchants to effectively present, integrate, and support our platform, or to effectively explain lease-to-own transactions to potential customers, would have a material and adverse effect on our business, results of operations, financial condition, and prospects.
The failure by our merchants to effectively present, integrate, and support our platform, or to effectively explain LTO transactions to potential customers, would have a material and adverse effect on our business, results of operations, financial condition, and prospects.
Many of the fundamental statutes and regulations that impose these taxes were established before the growth of the lease-to-own industry and e-commerce and, therefore, in many cases it is not clear how existing statutes apply to our business.
Many of the fundamental statutes and regulations that impose these taxes were established before the growth of the LTO industry and e-commerce and, therefore, in many cases it is not clear how existing statutes apply to our business.
The inclusion of an explanatory paragraph in the audit opinion regarding substantial doubt about our ability to continue as a going concern and our lack of cash resources may materially 28 adversely affect our share price and our ability to raise new capital or to enter into critical contractual relationships with third parties.
The inclusion of an explanatory paragraph in the audit opinion regarding substantial doubt about our ability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relationships with third parties.
Our business depends on our employees, vendors, and service providers to process a large number of increasingly complex transactions, including transactions that involve significant dollar amounts and lease-to-own transactions that involve the use and disclosure of personally identifiable information and business information.
Our business depends on our employees, vendors, and service providers to process a large number of increasingly complex transactions, including transactions that involve significant dollar amounts and LTO transactions that involve the use and disclosure of personally identifiable information and business information.
In such event, if we are unable to negotiate with our Lender for a waiver or dispensation under the agreement, we would not be able to borrow under the Credit Agreement and our Lender would have the right to terminate the loan commitments under the Credit Agreement and accelerate repayment of all obligations under the Credit Agreement that would become due and payable immediately, which would have a material adverse effect on our business, results of operations and financial position.
In such event, if we are unable to negotiate with our Lenders for a waiver or dispensation under the Loan agreement, we would not be able to borrow under the Loan Agreement and our Lenders would have the right to terminate the loan commitments under the Loan Agreement and accelerate repayment of all obligations under the Loan Agreement, which would become due and payable immediately, and such an event would have a material adverse effect on our business, results of operations and financial position.
We, together with our wholly-owned subsidiary, Katapult Group, Inc., have guaranteed the obligations of the Borrower under the Credit Agreement.
We, together with our wholly-owned subsidiary, Katapult Group, Inc., have guaranteed the obligations of the Borrower under the Loan Agreement.
The application of indirect taxes, such as sales tax, continues to be a complex and evolving issue, particularly with respect to the lease-to-own industry generally and our virtual lease-to-own business more specifically.
The application of indirect taxes, such as sales tax, continues to be a complex and evolving issue, particularly with respect to the LTO industry generally and our virtual LTO business more specifically.
AI/ML is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states and other foreign jurisdictions are applying, or are considering applying, their platform moderation, cybersecurity, and data protection laws and regulations to AI/ML or are considering general legal frameworks for AI/ML.
AI/ML is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states and other foreign jurisdictions are applying, or are considering applying, their platform moderation, data privacy and security laws and regulations to AI/ML or are considering general legal frameworks for AI/ML.
If we fail to comply with the applicable requirements of Visa, Mastercard or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations which could have a material adverse effect on our business, results of operations, financial condition, and prospects. 9 Risks Related to Our Technology and Our Platform • Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects. • Our results depend on continued integration and support of our platforms, including our direct and/or waterfall integration technologies, by our merchant partners. • We rely on KPay enabled merchants to allow access to their stores through our mobile app and our desktop and mobile websites. • We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business regulations. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and prospects. • Data security breaches or other security incidents with respect to our information technology systems, networks or data, or those of third parties upon which we rely, could result in adverse consequences, including but not limited to regulatory investigations, litigation, fines and penalties, disruption of our business operations, reputational harm, loss of revenue or profits, and loss of customers. • Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and proprietary rights could harm our business, operating results and financial condition.
Risks Related to Our Technology and Our Platform • Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects. • Our results depend on continued integration and support of our platforms, including our direct and/or waterfall integration technologies by our merchant partners. • We rely on KPay enabled merchants to allow access to their stores through our Katapult App and our desktop and mobile websites. • We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business regulations. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and prospects. • Data security breaches or other security incidents with respect to our information technology systems, networks or data, or those of third parties upon which we rely, could result in adverse consequences, including but not limited to regulatory investigations, litigation, fines and penalties, disruption of our business operations, reputational harm, loss of revenue or profits, and loss of customers. • Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights could harm our business, operating results and financial condition.
We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to establish and protect our intellectual property and proprietary rights, including our proprietary technology, software, know-how, and brand.
We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights, including our proprietary technology, software, know-how, and brand.
Although we take steps to protect our intellectual property and proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, infringement, misappropriation or other violation of our intellectual property and proprietary technology and information, including by third parties who may use our intellectual property or proprietary technology or information to develop services that compete with ours.
Although we take steps to obtain, maintain, protect, defend and enforce our intellectual property and other proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, circumvention, infringement, misappropriation or other violation of our intellectual property and proprietary technology and information, including by third parties who may 32 use our intellectual property or other proprietary rights to develop services that compete with ours.
If we fail to maintain customer satisfaction and trust in our brand, our business, results of operations, financial condition, and prospects would be materially and adversely affected. We provide a lease-to-own financing option for qualified customers seeking to obtain durable goods from omnichannel and e-commerce merchants.
If we fail to maintain customer satisfaction and trust in our brand, our business, results of operations, financial condition, and prospects would be materially and adversely affected. We provide an LTO financing option for qualified customers seeking to obtain durable goods from omnichannel and e-commerce merchants.
In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness that we incur.
In addition, our ability to pay dividends on our common stock is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness that we incur.
Pursuant to our Credit Agreement, we are required to use a designated loan processor to validate customer purchases for funding our RLOC and, thus, in the operation of our platform. The performance and accuracy of said loan processor is essential to our operations and is critical to ensuring that loans are appropriately and timely funded.
Pursuant to the Loan Agreement, we are required to use a designated loan processor to validate customer purchases for funding our New Revolving Facility and, thus, in the operation of our platform. The performance and accuracy of said loan processor is essential to our operations and is critical to ensuring that loans are appropriately and timely funded.
We face competition from virtual lease-to-own companies, e-commerce retailers (including those that offer layaway programs, title or installment lending or buy now, pay later programs), online sellers of used merchandise, and various types of consumer finance companies that may enable our customers to shop at online retailers, as well as with online rental stores that do not offer their customers a purchase option.
We face competition from virtual LTO companies, e-commerce retailers (including those that offer layaway programs, other lending options or buy now, pay later programs), online sellers of used merchandise, and various types of consumer finance companies that may enable our customers to shop at online retailers, as well as with online rental stores that do not offer their customers a purchase option.
The process of developing new technologies and products is complex, and we build our own technology, using the latest in artificial intelligence and machine learning ("AI/ML"), cloud-based technologies, and other tools to differentiate our products and technologies.
The process of developing new technologies and products is complex, and we build our own technology, using the latest in artificial intelligence and machine learning (“AI/ML”), cloud-based technologies, and other tools to differentiate our products and technologies.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including heightened geopolitical tensions, imposition tariffs, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.
To the extent that we seek to grow through future acquisitions, or other strategic investments or alliances, we may not be able to do so effectively. We may in the future seek to grow our business by exploring potential acquisitions or other strategic investments or alliances.
Risks Related to Our Business, Strategy and Growth To the extent that we seek to grow through future acquisitions, or other strategic investments or alliances, we may not be able to do so effectively. We may in the future seek to grow our business by exploring potential acquisitions or other strategic investments or alliances.
Any real or perceived errors, failures, bugs, defects, or outages in the software we rely on could also subject us to liability claims, result in data security breaches or other security incidents, impair our ability to attract new customers, retain existing customers, or expand their use of our products and services, which would adversely affect our business, results of operations, financial condition, and prospects.
Any real or perceived errors, failures, bugs, defects, or outages in the software we rely on could also subject us to liability claims, result in data security breaches or other security incidents, impair our ability to attract new customers, retain existing customers, or expand their use of our products and services, which would adversely affect our business, results of operations, financial condition, and prospects. 26 Our results depend on continued integration and support of our platforms, including our integration with direct merchants.
Gross originations from Wayfair exclude transactions through Katapult Pay and only include transactions directly through the Wayfair waterfall platform. Our top ten direct merchants, which are merchants with whom we have a direct contractual arrangement, in the aggregate represented approximately 54% and 67% of our gross originations for the fiscal years ended December 31, 2024 and 2023, respectively.
Gross originations from Wayfair exclude transactions through KPay and only include transactions directly through the Wayfair waterfall platform. Our top ten direct merchants, which are merchants with whom we have a direct contractual arrangement, in the aggregate represented approximately 45% and 54% of our gross originations for the years ended December 31, 2025 and 2024, respectively.
If our decisioning tools are unable to accurately predict and respond to changes to consumer behaviors as a result of general economic or other factors, our ability to manage risk and avoid charge-offs may be negatively affected, which may result in insufficient reserves and materially and adversely impact our business, financial condition, results of operations and prospects.
If our decisioning tools are unable to accurately predict and respond to changes to consumer behaviors as a result of general economic or other factors, our ability to manage risk and avoid charge-offs may be negatively affected, which may result in insufficient reserves and materially and adversely impact our business, financial condition, results of operations and prospects. 20 Our success depends on the effective implementation and continued execution of our strategies.
Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. As a result, we may be required to develop alternative non-infringing technology, which could require significant effort and expense. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
As a result, we may be required to develop alternative non-infringing technology, which could require significant effort and expense. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.
For example, since we launched the app in late 2022, transactions that were completed using KPay 12 have grown to represent 32% of our total gross originations for the year ended December 31, 2024. Approximately 54% of our 2024 gross originations started with an interaction in our mobile app.
For example, since we launched the app in late 2022, transactions that were completed using KPay have grown to represent 42% of our total gross originations for the year ended December 31, 2025. Approximately 62% of our 2025 gross originations started with an interaction in our Katapult App.
Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change", generally defined as a greater than 50.0% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited or potentially significantly deferred compared to such ability in the absence of an “ownership change”.
Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50.0% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited or potentially significantly deferred compared to such ability in the absence of an “ownership change.” We believe that the completion of the de-SPAC transaction in June 2021 triggered such an “ownership change” resulting in limitations on our use of tax attributes from prior to the de-SPAC transaction.
Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services. 23 In addition, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services.
While we intend to refinance our indebtedness, there can be no assurance that we will be able to secure such financing or adequately fund our operations, and we may be forced to liquidate our assets or discontinue our operations.
While we intend to refinance our indebtedness or otherwise extend, replace or refinance our credit facility prior to its maturity, there can be no assurance that we will be able to secure such financing or adequately fund our operations, and we may be forced to liquidate our assets or discontinue our operations.
See "Commitments and Contingencies” in Note 10 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.
See Note 11 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for more information.
We depend on continued relationships with Wayfair and other key merchants. Our top merchant, Wayfair, represented approximately 36% and 49% of our gross originations (which we define as the retail price of the merchandise associated with lease-purchase agreements entered into and do not represent revenue earned) for the fiscal years ended December 31, 2024 and 2023, respectively.
Our top merchant, Wayfair, represented approximately 25% and 36% of our gross originations (which we define as the retail price of the merchandise associated with lease-purchase agreements entered into and do not represent revenue earned) for the years ended December 31, 2025 and 2024, respectively.
The warrant agreement, dated as of October 31, 2019, between the Company and FinServ Acquisition Corp. entitles each warrant holder thereof to purchase 1/25th of a share of our common stock at a price of $287.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of shares of common stock.
On October 31, 2019, we entered into a warrant agreement, with FinServ Acquisition Corp., which entitles each warrant holder thereof to purchase 1/25th of a share of our common stock at a price of $287.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of shares of common stock.
Our success depends on the effective implementation and continued execution of our strategies. We are focused on our mission to provide innovative lease financing solutions to non-prime customers and to enable essential transactions at the merchant point of sale.
We are focused on our mission to provide innovative lease financing solutions to non-prime customers and to enable everyday essential transactions at the merchant point of sale.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident.
Biggest changeIn 2025, we did not identify any cybersecurity threats or incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats or incidents, or provide assurances that we have not experienced an undetected cybersecurity threat or incident.
The audit committee is responsible for ensuring that management has processes in place designed to identify and evaluate cybersecurity risks to which the company is exposed and implement processes and programs to manage cybersecurity risks and mitigate cybersecurity incidents. The audit committee also reports material cybersecurity risks to our full board of directors.
The audit committee is responsible for ensuring that management has processes in place designed to identify and evaluate cybersecurity risks to which the company is exposed and implement processes and programs designed to manage cybersecurity risks and mitigate cybersecurity incidents. The audit committee also reports material cybersecurity risks to our full board of directors.
This framework includes steps for assessing the severity of a cybersecurity threat, identifying the source of a cybersecurity threat including whether the cybersecurity threat is associated with a third-party service provider, implementing cybersecurity countermeasures and mitigation strategies and informing management and our board of directors of material cybersecurity threats and incidents.
This framework includes steps for assessing the severity of a cybersecurity threat or incident, identifying the source of a cybersecurity threat or incident including whether the cybersecurity threat or incident is associated with a third-party service provider, implementing cybersecurity countermeasures and mitigation strategies and informing management and our board of directors of material cybersecurity threats and incidents.
For more information about these risks, please see “Risk Factors —Risks Related to Our Technology and Our Platform” in this annual report on Form 10-K. 39
For more information about these risks, please see “Risk Factors —Risks Related to Our Technology and Our Platform” in this annual report on Form 10-K. 43
Our cybersecurity programs are under the direction of our Chief Technology Officer, or CTO, who receives reports from our cybersecurity team and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents.
Our cybersecurity programs are under the direction of our Chief Technology Officer (“CTO”) who receives reports from our cybersecurity team and monitors the prevention, detection, mitigation, and remediation of cybersecurity threats and incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive office is located in Plano, Texas, consisting of approximately 4,300 square feet. The lease expires on June 30, 2031, subject to our option to extend for five years. Our New York, New York office consists of approximately 4,000 square feet of leased office space under a lease that expires i n June 2025.
Biggest changeItem 2. Properties Our principal executive offices are located at 5360 Legacy Drive, Building 2 Plano, Texas 75024, consisting of approximately 4,300 square feet. The lease expires on June 30, 2031, subject to our option to extend for five years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time we may become involved in various legal proceedings. Refer to Note 10 , Commitments and Contingencies, included in Part II, Item 8 of this Annual Report on Form 10-K for a description of current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 40 Part II
Biggest changeItem 3. Legal Proceedings From time to time we may become involved in various legal proceedings. Refer to Note 11 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for a description of current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 44 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDistrict Court for the Southern District of New York. We issued the shares without registration in reliance upon Section 3(a)(10) of the Securities Act. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 41
Biggest changeThe issuance was 45 approved by the applicable court following a hearing on the fairness of the settlement terms and was made in reliance upon Section 3(a)(10) of the Securities Act of 1933, as amended. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 46
Holders of Record As of March 24, 2025, there were 147 holders of record of our common stock and the closing price of our common stock was $13.49 as reported on the Nasdaq and there were 17 holders of record of our warrants and the closing price of our Public Warrants was $0.01 as reported on the Nasdaq.
Holders of Record As of March 9, 2026, there were 147 holders of record of our common stock and the closing price of our common stock was $6.06 as reported on the Nasdaq and there were 17 holders of record of our warrants and the closing price of our Katapult Public Warrants was $0.0039 as reported on the Nasdaq.
Recent Sales of Unregistered Equity Securities During the year ended December 31, 2024, we issued the following unregistered securities: • On October 24, 2024, we issued 167,797 shares of our common stock in connection with the settlement of a putative class action lawsuit, captioned Saunders v.
Recent Sales of Unregistered Equity Securities During the year ended December 31, 2025, we issued the following unregistered securities: • On December 13, 2025, we issued 29,793 shares of our common stock in connection with the settlement of a putative class action lawsuit captioned McIntosh v. Katapult Holdings, Inc., et al., filed in 2021 in the U.S.
Removed
Einbinder, et al., against directors and officers of FinServ Acquisition Corp. and FinServ Holdings LLC filed in 2022 in the Delaware Court of Chancery.
Added
In connection with the issuance of our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock during 2025, dividends accrue on the preferred stock in accordance with the terms of the respective preferred stock agreements. Such dividends are cumulative and are payable in-kind, subject to the terms and restrictions set forth in the preferred stock agreements.
Removed
We issued the shares without registration in reliance upon Section 3(a)(10) of the Securities Act. • On December 20, 2024, we issued 43,839 shares of our common stock in connection with the settlement of a putative class action lawsuit, captioned McIntosh v. Katapult Holdings, Inc., et al, filed in 2021 in the U.S.
Added
These dividend rights are contractual and are not dependent on the declaration of dividends on our common stock Holders of the Series A Convertible Preferred Stock and Series B Convertible Preferred are also entitled to participate in and receive any dividends declared or paid on the Katapult common stock on an as-converted basis, and no dividends may be paid to holders of Katapult common stock unless full participating dividends are concurrently paid to holders of the Series A Convertible Preferred Stock and Series B Convertible Preferred Stock.
Added
For further information regarding the dividends rights of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, see Note 7 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K.
Added
District Court for the Southern District of New York. The shares were issued as consideration in settlement of the litigation, and no cash proceeds were received by the Company.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 57 Consolidated Balance Sheets 61 Consolidated Statements of Operations and Comprehensive Loss 62 Consolidated Statements of Stockholders’ Deficit 63 Consolidated Statements of Cash Flows 64 Notes to Consolidated Financial Statements 65
Biggest changeFinancial Statements and Supplementary Data 61 Consolidated Balance Sheets 64 Consolidated Statements of Operations and Comprehensive Income (Loss) 65 Consolidated Statements of Mezzanine Equity and Stockholders’ Deficit 66 Consolidated Statements of Cash Flows 67 Notes to Consolidated Financial Statements 69
Item 6. [Reserved] 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8.
Item 6. [Reserved] 46 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 60 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “—Non-GAAP Financial Measures” section below for a reconciliation of adjusted EBITDA, which is a non-GAAP measure utilized by management, to net loss. 43 RESULTS OF OPERATIONS (amounts in thousands, except per share data) Year Ended December 31, 2024 compared to Year Ended December 31, 2023: Year Ended December 31, 2024 2023 $ % Revenue Rental revenue $ 243,978 $ 218,347 $ 25,631 11.7 % Other revenue 3,216 3,241 (25) (0.8 %) Total revenue 247,194 221,588 25,606 11.6 % Cost of revenue 201,423 179,881 21,542 12.0 % Gross profit 45,771 41,707 4,064 9.7 % Operating expenses: Servicing costs 4,589 4,311 278 6.4 % Underwriting fees 2,304 1,919 385 20.1 % Professional and consulting fees 5,201 6,694 (1,493) (22.3 %) Technology and data analytics 7,170 6,905 265 3.8 % Compensation costs 20,076 22,732 (2,656) (11.7 %) General and administrative 10,866 10,938 (72) (0.7 %) Litigation settlement 3,666 7,000 (3,334) (47.6 %) Total operating expenses 53,872 60,499 (6,627) (11.0 %) Loss from operations (8,101) (18,792) 10,691 (56.9 %) Loss on partial extinguishment of debt — (2,391) 2,391 (100.0 %) Interest expense and other fees (18,851) (17,822) (1,029) 5.8 % Interest income 1,163 1,697 (534) (31.5 %) Change in fair value of warrant liability 17 807 (790) (97.9 %) Loss before income taxes (25,772) (36,501) 10,729 (29.4 %) Provision for income taxes (143) (165) 22 (13.3 %) Net loss $ (25,915) $ (36,666) $ 10,751 (29.3 %) Weighted average common shares outstanding - basic and diluted 4,347 4,088 259 6.3 % Net loss per common share - basic and diluted $ (5.96) $ (8.97) $ 3.01 (33.6 %) Revenue Total revenue is comprised of rental revenue and other revenue.
Biggest changeSee “—Non-GAAP Financial Measures” section below for a reconciliation of adjusted EBITDA, which is a non-GAAP measure utilized by management, to net income (loss). 49 RESULTS OF OPERATIONS (amounts in thousands, except per share data) Year Ended December 31, 2025 compared to Year Ended December 31, 2024: Year Ended December 31, 2025 2024 $ Change % Change Revenue Rental revenue $ 287,161 $ 243,978 $ 43,183 17.7 % Other revenue 4,600 3,216 1,384 43.0 % Total revenue 291,761 247,194 44,567 18.0 % Cost of revenue 240,158 201,423 38,735 19.2 % Gross profit 51,603 45,771 5,832 12.7 % Operating expenses: Servicing costs 4,710 4,589 121 2.6 % Underwriting fees 3,204 2,304 900 39.1 % Professional and consulting fees 8,167 5,201 2,966 57.0 % Technology and data analytics 6,113 7,170 (1,057) (14.7 %) Compensation costs 17,867 20,076 (2,209) (11.0 %) General and administrative 11,242 10,866 376 3.5 % Litigation and settlement expenses 813 3,666 (2,853) (77.8 %) Total operating expenses 52,116 53,872 (1,756) (3.3 %) Loss from operations (513) (8,101) 7,588 (93.7 %) Gain on extinguishment of term loan and settlement of derivative liability, net 5,120 — 5,120 — % Interest expense and other fees (20,552) (18,851) (1,701) 9.0 % Interest income 197 1,163 (966) (83.1 %) Change in fair value of derivative liability and warrants 17,432 17 17,415 NM Income (loss) before income taxes 1,684 (25,772) 27,456 (106.5 %) Provision for income taxes (319) (143) (176) 123.1 % Net income (loss) $ 1,365 $ (25,915) $ 27,280 (105.3 %) Accumulated undeclared dividends on series A and B preferred stock (1,922) — (1,922) — % Net loss attributable to common stockholders $ (557) $ (25,915) $ 25,358 (97.9 %) Weighted average common shares outstanding - basic and diluted 5,027 4,347 680 15.6 % Net loss per common share attributable to common stockholders - basic and diluted $ (0.11) $ (5.96) $ 5.85 (98.2 %) 50 Revenue Total revenue is comprised of rental revenue and other revenue.
Our revenue and operating results depend significantly on gross originations, which is defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period. Gross originations are a 49 leading indicator of potential revenue streams. Revenue is recognized over a period of time subsequent to the gross origination date (on average over 8 months).
Our revenue and operating results depend significantly on gross originations, which is defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period. Gross originations are a leading indicator of potential revenue streams. Revenue is recognized over a period of time subsequent to the gross origination date (on average over 8 months).
GAAP and non-GAAP key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions, which may also be useful to an investor. Gross Originations We measure gross originations to assess the growth trajectory and overall size of our lease portfolio.
GAAP and non-GAAP key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions, which may also be useful to an investor. 47 Gross Originations We measure gross originations to assess the growth trajectory and overall size of our lease portfolio.
Recently Issued and Adopted Accounting Pronouncements 54 See Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements.
Recently Issued and Adopted Accounting Pronouncements See Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements.
Adjusted gross profit, Adjusted EBITDA, adjusted net loss and fixed cash operating expenses are supplemental measures of our performance that are neither required by nor presented in accordance with U.S. GAAP. Adjusted gross profit, adjusted EBITDA and adjusted net loss should not be considered as substitutes for U.S.
Adjusted gross profit, adjusted EBITDA, adjusted net income (loss) and fixed cash operating expenses are supplemental measures of our performance that are neither required by nor presented in accordance with U.S. GAAP. Adjusted gross profit, adjusted EBITDA and adjusted net income (loss) should not be considered as substitutes for U.S.
GAAP, we believe that adjusted gross profit, adjusted EBITDA, adjusted net loss and fixed cash operating expenses provide relevant and useful information which is widely used by analysts, investors, and competitors in our industry in assessing performance.
GAAP, we believe that adjusted gross profit, adjusted EBITDA, adjusted net income (loss) and fixed cash operating expenses provide relevant and useful information which is widely used by analysts, investors, and competitors in our industry in assessing performance.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company”, or “Katapult” refer to Katapult Holdings, Inc. and its subsidiaries. The following discussion contains forward-looking statements that involve risks and uncertainties.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company,” or “Katapult” refer to Katapult Holdings, Inc. and its subsidiaries. The following discussion contains forward-looking statements that involve risks and uncertainties.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. 55
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the fair value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and the fair value of our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. 59
The increase in property held for lease and historical lease portfolio collection patterns impact the associated depreciation expense, which includes accelerated depreciation for early lease-purchase options (buyouts), and accelerated depreciation for impairment charges related to property held for lease.
The increase in property held for lease and historical lease portfolio collection patterns impacted the associated depreciation expense, which includes accelerated depreciation for early lease-purchase options (buyouts), and accelerated depreciation for impairment charges related to property held for lease.
Revenues from leases that originated from merchants with a direct or waterfall integration are generally recorded net of sales taxes as sales tax is collected from each customer's lease payment and a sales tax payable is recorded for remittance to the respective state.
Revenues from leases that originated from merchants with a direct or waterfall integration are generally recorded net of sales taxes as sales tax is collected from each customer's lease payment and a sales tax payable is recorded for remittance to the respective state in accordance with the rules of each tax jurisdiction.
We record rental revenue in accordance with ASC 842, with revenue being recorded when earned and cash is collected. Other revenue is recorded in accordance with ASC 606, with revenue being recorded as performance obligations are satisfied. See “—Results of Operations" section below for total revenue amounts.
We record rental revenue in accordance with ASC 842, Leases , with revenue being recorded when earned and cash is collected. Other revenue is recorded in accordance with ASC 606, Revenue from Contracts with Customers, with revenue being recorded as performance obligations are satisfied. See “—Results of Operations" section below for total revenue amounts.
Smaller Reporting Company As of December 31, 2024, we are a “smaller reporting company” as defined in the Exchange Act.
Smaller Reporting Company As of December 31, 2025, we are a “smaller reporting company” as defined in the Exchange Act.
GAAP and may not be comparable to similar measures used by other companies. 46 Adjusted gross profit, adjusted EBITDA and adjusted net loss are useful to an investor in evaluating our 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 our credit worthiness; and • Are considered by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting.
Adjusted gross profit, adjusted EBITDA and adjusted net income (loss) are useful to an investor in evaluating our 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 our credit worthiness; and • Are considered by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting.
We saw gross origination growth in 2024 primarily as a result of our mobile app featuring Katapult Pay, which we launched in the third quarter of 2022 and growth from our direct merchants.
We saw gross origination growth in 2025 primarily as a result of our Katapult App featuring KPay, which we launched in the third quarter of 2022 and growth from our direct merchants.
General and administrative expenses include insurance, occupancy costs, travel and entertainment, and other general overhead costs, including depreciation and amortization related to office equipment and software. Litigation settlement expenses consists of agreed upon settlement amounts that are probable and estimable and associated legal fees.
Compensation costs consist primarily of payroll and related costs and stock-based compensation. General and administrative expenses include insurance, occupancy costs, travel and entertainment, and other general overhead costs, including depreciation and amortization related to office equipment and software. Litigation and settlement expenses consist of agreed upon settlement amounts that are probable and estimable and associated legal fees.
Write-offs as a percentage of total revenue was 9.2% and 9.2% during the year ended December 31, 2024 as compared to the same period in 2023 and remains within our 8% to 10% target range. The provision for write-offs represents estimated losses based on historical results. Actual write-offs may differ from this estimate.
Write-offs as a percentage of total revenue were 9.6% and 9.2% during the years ended December 31, 2025 and 2024 , respectively, and remains within our 8% to 10% target range. The provision for write-offs represents estimated losses based on historical results. Actual write-offs may differ from this estimate.
See Note 10 t o our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for more details.
S ee Note 12 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for more details.
Our first quarter revenue is also impacted by the federal and state income tax refunds that our customers receive in the first quarter which, in the past, has led to our customers more frequently exercising the early purchase option on their lease agreements. Adverse events that occur could have a disproportionate effect on our financial results throughout the year.
Our first quarter revenue is also positively impacted by the federal and state income tax refunds that our customers receive in the first quarter which, in the past, has led to our customers more frequently exercising the early purchase option on their lease agreements.
Gross originations from Wayfair exclude transactions through Katapult Pay and only include transactions directly through the Wayfair waterfall platform. Katapult Pay represented 32% and 19% of gross originations during the years ended December 31, 2024 and 2023, respectively. 42 Total Revenue Total revenue represents the sum of rental revenue and other revenue.
Wayfair represented 25% and 36% of gross originations for the years ended December 31, 2025 and 2024, respectively. The gross originations from Wayfair exclude transactions through KPay and only include transactions directly through the Wayfair waterfall platform. Total Revenue Total revenue represents the sum of rental revenue and other revenue.
The increase in cost of revenue of $21.5 million, or 12.0% , during the year ended December 31, 2024 as compared to the same period in 2023 was a result of higher gross origination growth and capitalized property held for lease.
The increase in cost of revenue of $38.7 million, or 19.2% , for the year ended December 31, 2025 as compared to 2024 was a result of higher gross origination growth and capitalized property held for lease.
The reconciliations of net loss to adjusted net loss for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Net loss $ (25,915) $ (36,666) Add back: Change in fair value of warrants (17) (807) Stock-based compensation expense 5,759 7,034 Litigation settlement and other related expenses, net 3,666 7,000 Adjusted net loss $ (16,507) $ (16,507) $ (23,439) Fixed Cash Operating Expenses 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, litigation settlement and other related expenses, net and variable lease costs such as servicing costs and underwriting fees.
The reconciliations of net income (loss) to adjusted net loss for the years ended December 31, 2025 and 2024 are as follows: Year Ended December 31, 2025 2024 Net income (loss) $ 1,365 $ (25,915) Add back: Transaction related costs 4,931 — Stock-based compensation expense 3,693 5,759 Debt refinancing costs 1,489 — Litigation and settlement expenses 813 3,666 Gain on extinguishment of term loan and settlement of derivative liability, net (5,120) — Change in fair value of derivative liability and warrants (17,432) (17) Adjusted net loss $ (10,261) $ (16,507) 54 Fixed Cash Operating Expenses Fixed cash operating expenses is a non-GAAP measure that is defined as operating expenses less variable lease costs such as servicing costs and underwriting fees, transaction related costs, stock-based compensation expense, debt refinancing costs, depreciation and amortization on property and equipment and capitalized software, and litigation and settlement expenses.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that is defined as net income/loss before interest expense and other fees, interest income, change in fair value of warrant liability, provision for income taxes, depreciation and amortization on property and equipment and capitalized software, impairment of leased assets, loss on partial extinguishment of debt, stock-based compensation expense and net litigation settlement expenses.
See “—Non-GAAP Financial Measures” section below for a reconciliation of gross profit to adjusted gross profit. 48 Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that is defined as net income (loss) before interest expense and other fees, transaction related costs, stock-based compensation expense, debt refinancing costs, depreciation and amortization on property and equipment and capitalized software, litigation and settlement expenses, provision for impairment of leased assets, interest income, gain on extinguishment of term loan and settlement of derivative liability, net, and change in fair value of derivative liability and warrants.
Commitments and Contingencies” for litigation related liabilities and timing of expected future payments. 52 Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
See Note 11 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for litigation related liabilities and timing of expected future payments. 56 Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The reconciliations of net loss to adjusted EBITDA for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Net loss $ (25,915) $ (36,666) Add back: Interest expense and other fees 18,851 17,822 Interest income (1,163) (1,697) Change in fair value of warrants (17) (807) Provision for income taxes 143 165 Depreciation and amortization on property and equipment and capitalized software 1,219 1,133 Provision for impairment of leased assets 2,227 1,727 Loss on partial extinguishment of debt — 2,391 Stock-based compensation expense 5,759 7,034 Litigation settlement and other related expenses, net 3,666 7,000 Adjusted EBITDA $ 4,770 $ (1,898) Adjusted Net Loss Adjusted net loss is a non-GAAP financial measure that is defined as net loss before change in fair value of warrants, stock-based compensation expense, and litigation settlement and other related expenses, net .
The reconciliations of net income (loss) to adjusted EBITDA for the years ended December 31, 2025 and 2024 are as follows: Year Ended December 31, 2025 2024 Net income (loss) $ 1,365 $ (25,915) Add back: Interest expense and other fees 20,552 18,851 Transaction related costs 4,931 — Stock-based compensation expense 3,693 5,759 Debt refinancing costs 1,489 — Depreciation and amortization on property and equipment and capitalized software 1,228 1,219 Litigation and settlement expenses 813 3,666 Provision for impairment of leased assets 738 2,227 Provision for income taxes 319 143 Interest income (197) (1,163) Gain on extinguishment of term loan and settlement of derivative liability, net (5,120) — Change in fair value of derivative liability and warrants (17,432) (17) Adjusted EBITDA $ 12,379 $ 4,770 Adjusted Net Loss Adjusted net loss is a non-GAAP financial measure that is defined as net income (loss) before transaction related costs, stock-based compensation expense, debt refinancing costs, litigation and settlement expenses, gain on extinguishment of term loan and settlement of derivative liability, net, and change in fair value of derivative liability and warrants .
GAAP metrics such as gross profit, operating loss, net loss, or any other performance measures derived in accordance with U.S.
GAAP metrics such as gross profit, operating income (loss), net income (loss), or any other performance measures derived in accordance with U.S. GAAP and may not be comparable to similar measures used by other companies.
For Katapult Pay transactions, all sales tax is paid by the Company upon purchase of the goods and is recorded in the cost basis of the capitalized property held for lease.
For KPay transactions, all sales tax is paid by the Company upon purchase of the goods and is recorded in the cost basis of the capitalized property held for lease. Revenue is recognized for leases originating through KPay in the period it is earned and cash is collected.
Our POS integrations and innovative mobile app, featuring Katapult Pay, makes it easier for U.S. non-prime consumers unable to access traditional financing to spend responsibility and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive. Key Performance Metrics We regularly review several metrics, including the following U.S.
Our POS integrations and innovative mobile app, featuring KPay, make it easier for U.S. non-prime consumers unable to access traditional financing to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.
We believe fixed cash operating expenses illustrates our controllable ongoing expenses. 48 The reconciliations of operating expenses to fixed cash operating expenses for the years ended ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Operating expenses $ 53,872 $ 60,499 Less: Depreciation and amortization on property and equipment and capitalized software 1,219 1,133 Stock-based compensation expense 5,759 7,034 Servicing costs 4,589 4,311 Underwriting fees 2,304 1,919 Litigation settlement and other related expenses, net 3,666 7,000 Fixed cash operating expenses $ 36,335 $ 39,102 LIQUIDITY, CAPITAL RESOURCES & GOING CONCERN (dollars in thousands) The Company’s financing generally consists of cash from leases and borrowings under the RLOC, which is fully collateralized by the Company’s assets.
The reconciliations of operating expenses to fixed cash operating expenses for the years ended December 31, 2025 and 2024 are as follows: Year Ended December 31, 2025 2024 Operating expenses $ 52,116 $ 53,872 Less: Servicing costs 4,710 4,589 Underwriting fees 3,204 2,304 Transaction related costs 4,931 — Stock-based compensation expense 3,693 5,759 Debt refinancing costs 1,489 — Depreciation and amortization on property and equipment and capitalized software 1,228 1,219 Litigation and settlement expenses 813 3,666 Fixed cash operating expenses $ 32,048 $ 36,335 LIQUIDITY & CAPITAL RESOURCES (dollars in thousands) The Company’s financing generally consists of cash generated from leases and borrowings under its revolving line of credit (“RLOC”), which is fully collateralized by the Company’s assets.
Gross Profit Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with U.S. GAAP. See “—Results of Operations” section below for gross profit amounts. Adjusted Gross Profit Adjusted gross profit is a non-GAAP measure utilized by management representing gross profit less variable operating expenses, which are servicing costs and underwriting fees.
See “—Results of Operations” section below for gross profit amounts. Adjusted Gross Profit Adjusted gross profit is a non-GAAP measure utilized by management representing gross profit less variable operating expenses, which are servicing costs and underwriting fees. We believe that adjusted gross profit provides a meaningful understanding of profitability when variable lease origination costs are included.
Servicing costs include permanent and temporary call center support. Underwriting fees primarily consist of data costs related to inputs from customer underwriting models. Professional and consulting fees include corporate legal and accounting costs.
Operating Expenses Operating expenses primarily consist of servicing costs, underwriting fees, professional and consulting fees, technology and data analytics expense, compensation costs, general and administrative expense and litigation and settlement expenses. Servicing costs include permanent and temporary call center support. Underwriting fees primarily consist of data costs related to inputs for customer underwriting models.
We experience moderate seasonal fluctuations in our revenue as a result of consumer spending patterns. Historically, our revenue is strongest during the first quarter primarily due to higher gross originations during the fourth quarter holiday season.
Historically, our revenue is typically strongest during the first quarter primarily due to higher gross originations during the fourth quarter holiday season.
Other revenue consists primarily of the sale of property held for lease (and lease agreements) to third parties and other immaterial sources of income from third party relationships, and is recognized as performance obligations are satisfied. 44 The increase in total revenue of $25.6 million, or 11.6%, during the year ended December 31, 2024 as compared to the same period in 2023 was primarily a result of gross origination growth becoming more efficient and healthy customer collections.
The increase in total revenue of $44.6 million, or 18.0%, during the year ended December 31, 2025 as compared to the same period in 2024 was primarily a result of gross origination growth becoming more efficient and healthy customer collections.
For additional information on our loan obligations, see Note 6 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K. Pledge and Guaranty Pursuant to the Pledge Agreement, dated as of May 14, 2019, between Katapult Group, Inc.
Financing Arrangements For additional information on our loan obligations under the Loan Agreement, see Note 6 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K. Pledge and Guaranty Borrowings under the New Revolving Facility are secured by substantially all of the Company’s assets and the equity interests of certain subsidiaries.
The increase in cash used in investing activities of $0.3 million in 2024 compared to 2023 is primarily due to an increase in capitalized software additions.
Net cash used in investing activities decreased by $0.2 million in 2025 compared to 2024, primarily due to lower capitalized software additions.
Technology and data analytics expense includes technology costs and salaries and benefits for computer programming and data analytics employees that support our underlying technology and proprietary risk model algorithms. Compensation costs consist primarily of payroll and related costs and stock-based compensation.
Professional and consulting fees include corporate legal, transaction related costs and accounting costs. Transaction related costs consist of professional fees and other expenses incurred in connection with the Mergers. Technology and data analytics expense includes technology costs and salaries and benefits for computer programming and data analytics employees that support our underlying technology and proprietary risk model algorithms.
We define gross originations as the retail price of the merchandise associated with lease-purchase agreements entered into during the period through our platform. Gross originations do not represent revenue earned but are a leading indicator of forecasted revenue. Revenue is recognized over a period of time subsequent to the gross origination (on average over 8 months).
We define gross originations as the retail price of the merchandise associated with lease-purchase agreements entered into during the period through our platform.
The decrease in total operating expenses of $6.6 million, or 11.0% during the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to a decrease of $3.3 million in litigation settlement costs and a decrease of $2.7 million in compensation costs for the year ended December 31, 2024 as compared to the same period in 2023.
The decrease in total operating expenses of $1.8 million, or 3.3%, for the year ended December 31, 2025 as compared to 2024 was primarily due to lower litigation and settlement expenses of $2.9 million, and lower stock-based compensation expense of $2.1 million, partially offset by an increase of $3.0 million of transaction related 51 costs related to the Mergers included in professional and consulting fees for the year ended December 31, 2025 as compared to 2024.
Such property is provided to customers pursuant to a lease-purchase agreement with a minimum lease term; typically one week, two weeks, or one month. The renewal periods of the leases typically extend the duration to 12 or 18 months. Customers may terminate a lease agreement at any time without penalty.
The duration of the aggregated leases are typically 12 to 18 months. Customers may terminate a lease agreement at any time without penalty.
We record interest and penalties related to unrecognized tax benefits in the provision for income taxes. Property Held for Lease, Net of Accumulated Depreciation and Impairment Property held for lease consists of furniture, mattresses, customer electronics, appliances, and other durable goods offered for lease-purchase in the normal course of business.
Property Held for Lease, Net of Accumulated Depreciation and Impairment Property held for lease consists of furniture, mattresses, customer electronics, appliances, and other durable goods offered for lease-purchase in the normal course of business. Such property is provided to customers pursuant to a lease-purchase agreement with a minimum lease term; typically one week, two weeks, or one month.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.
Gross Profit The increase in gross profit of $4.1 million, or 9.7%, during the year ended December 31, 2024 as compared to the same period in 2023 was due primarily to higher gross originations year-over-year, healthy customer collections. 45 Operating Expenses Operating expenses primarily consist of servicing costs, underwriting fees, professional and consulting fees, technology and data analytics expense, compensation costs, general and administrative expense and litigation settlement expenses.
Gross Profit The increase in gross profit of $5.8 million, or 12.7%, for the year ended December 31, 2025 as compared to 2024 was due primarily to higher gross originations year-over-year and healthy customer collections.
The following tables present gross originations for the years ended December 31, 2024 and 2023 : Year Ended December 31, Change 2024 2023 $ % Gross Originations $ 237,311 $ 226,553 $ 10,758 4.7 % Gross originations from Wayfair represented 36% and 49% of gross originations for the years ended December 31, 2024 and 2023, respectively.
The following tables present gross originations for the years ended December 31, 2025 and 2024 : Year Ended December 31, Change 2025 2024 $ % Gross Originations $ 278,462 $ 237,311 $ 41,151 17.3 % Gross originations through KPay represented 42% and 32% of gross originations during the years ended December 31, 2025 and 2024, respectively.
See “Note 6. Debt & Liquidity” for future payments on the Company's debt facility, including outstanding borrowings and the applicable interest rate. See “Note 10.
See Note 6 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for future payments on the Company's debt facility, including outstanding borrowings and the applicable interest rate.
We believe that adjusted EBITDA provides a meaningful understanding of our operating performance.
Transaction-related costs consist primarily of professional fees incurred and retention bonus costs in connection with the Mergers. We believe that adjusted EBITDA provides a meaningful understanding of our operating performance.
The following table presents cash used in operating, investing, and financing activities during the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Cash, cash equivalents and restricted cash at beginning of period $ 28,811 $ 69,841 Net cash provided by (used in): Operating activities (32,569) (17,414) Investing activities (1,303) (974) Financing activities 21,613 (22,642) Cash, cash equivalents and restricted cash at end of period $ 16,552 $ 28,811 The increase in cash used in operating activities of $15.2 million in 2024 compared to 2023 is primarily driven by sales tax payments of approximately $5.9 million and litigation payments of $5.0 million .
The following table presents cash used in operating, investing, and financing activities for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Cash, cash equivalents and restricted cash at beginning of period $ 16,552 $ 28,811 Net cash provided by (used in): Operating activities (11,933) (32,569) Investing activities (1,105) (1,303) Financing activities 19,966 21,613 Cash, cash equivalents and restricted cash at end of period $ 23,480 $ 16,552 55 Net cash used in operating activities decreased by $20.6 million in 2025 compared to 2024, primarily driven by improved net income (loss), adjusted for non-cash charges, and higher spending on property held for lease, partially offset by changes in working capital, including accrued liabilities and litigation-related balances.
The reconciliations of gross profit to adjusted gross profit for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Total revenue $ 247,194 $ 221,588 Cost of revenue 201,423 179,881 Gross profit 45,771 41,707 Less: Servicing costs 4,589 4,311 Underwriting fees 2,304 1,919 Adjusted gross profit $ 38,878 $ 35,477 47 Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that is defined as net loss before interest expense and other fees, interest income, change in fair value of warrants, provision for income taxes, depreciation and amortization on property and equipment and capitalized software, provision for impairment of leased assets, loss on partial extinguishment of debt, stock-based compensation expense, and litigation settlement and other related expenses, net.
The reconciliations of gross profit to adjusted gross profit for the years ended December 31, 2025 and 2024 are as follows: Year Ended December 31, 2025 2024 Total revenue $ 291,761 $ 247,194 Cost of revenue 240,158 201,423 Gross profit 51,603 45,771 Less: Servicing costs 4,710 4,589 Underwriting fees 3,204 2,304 Adjusted gross profit $ 43,689 $ 38,878 53 Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure.
The change in cash from financing activities of $44.3 million in 2024 compared to 2023 is primarily due to the $25.0 million repayment on the Term Loan in 2023 and an increase in net proceeds from the RLOC of $19.3 million in 2024.
Net cash provided by financing activities decreased by $1.6 million in 2025 compared to 2024, primarily due to the $35.1 million repayment of the New Term Loan, lower borrowings and higher principal repayments under the RLOC resulting in a $26.0 million reduction in net financing inflows, and a $5.3 million increase in debt issuance costs.
Pursuant to the Corporate Guaranty and Security Agreement, dated as of December 4, 2020, by and among Katapult Group, Inc., Legacy Katapult and Midtown Madison Management, LLC, Katapult and Katapult Group, Inc. have granted a first priority security interest in all of their respective assets and Katapult and Katapult Group, Inc. guarantee payment of all obligations of the Borrower under the Credit Agreement. 51 Contractual Obligations and Commitments Refer to the descriptions of our material cash commitments, financing arrangements, and contractual obligations outlined below within the following notes to our consolidated financial statements.
Contractual Obligations and Commitments Refer to the descriptions of our material cash commitments, financing arrangements, and contractual obligations outlined below within the following notes to our consolidated financial statements.
Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company anticipates that it will not have sufficient cash available to repay the loans at maturity and is currently seeking to refinance the loans prior to maturity in June 2025, which raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to address this uncertainty by refinancing the loans.
As the maturity date falls within twelve months of the issuance date of these financial statements and the Company does not have sufficient cash on hand to repay the outstanding borrowings at maturity absent refinancing or extension, the upcoming maturity raises substantial doubt about the Company’s ability to continue as a going concern.
Removed
Revenue from gross originations have historically reached approximately 70-75% of total revenue within two quarters from when the originations occurred. We believe this is a useful operating metric for investors to use in assessing the volume of transactions that take place on our platform.
Added
Recent Developments Pending Strategic Mergers with CCFI and Aaron’s On December 11, 2025, we entered into the Merger Agreement pursuant to which CCFI and Aaron’s will become wholly owned subsidiaries of the Company, and the Company will remain a publicly traded entity.
Removed
We believe that adjusted gross profit provides a meaningful understanding of profitability when variable lease origination costs are included. See “—Non-GAAP Financial Measures” section below for a reconciliation of gross profit to adjusted gross profit.
Added
The Mergers, if completed, will create a premier omni-channel platform that provides non-prime consumers access to durable goods and a comprehensive suite of innovative financial solutions tailored to their specific needs.
Removed
Rental revenue is recognized in the period it is earned and cash is collected.
Added
We have agreed to various customary covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Mergers.
Removed
The decrease in litigation costs is due to $7.0 million incurred in 2023 as a result of the shareholder litigation settlement partially offset by approximately $3.3 million of costs incurred for the year ended December 31, 2024 related to the Daiwa Corporate Advisory LLC ("DCA") litigation settlement and legal fees.
Added
The Mergers are expected to close in the second quarter of 2026, following the receipt of the requisite stockholder and regulatory approvals and other customary closing conditions. We expect the Mergers, if completed, to significantly affect our future capital structure.
Removed
The decrease in compensation costs is mainly driven by a decrease in stock-based compensation related to a decline in the fair value of the stock awards granted in 2024 as compared to 2023, based on the Company's stock price on the dates of grant. Interest Expense and Other Fees.
Added
Immediately following the consummation of the Mergers, the existing Katapult stockholders, CCFI equity holders, and Aaron’s equity holders, on a fully diluted basis, are expected to hold approximately 6.0%, 79.9%, and 14.1%, respectively, of the issued and outstanding shares of the combined company.
Removed
The increase in interest expense and other fees during the year ended December 31, 2024 as compared to 2023 was primarily due to an increase in the average outstanding principal amount under the RLOC period over period. Non-GAAP Financial Measures In addition to gross profit and net loss, which are measures presented in accordance with U.S.
Added
Refer to “Risk Factors” in Item 1A of Part I of this Annual Report for further discussion about the risks related to the Mergers. Key Performance Metrics We regularly review several metrics, including the following U.S.
Removed
As of March 24, 2025, the Company had a combined principal balance outstanding of $108.8 million under the RLOC and term loan, both of which mature within 12 months of the date that these financial statements are issued. Both loans were previously refinanced on March 6, 2023 to extend the maturity date from December 4, 2023 to June 4, 2025.
Added
Gross originations do not represent revenue earned but are a leading indicator of forecasted revenue and is a useful operating metric for investors as it provides insight into the volume of transactions that take place on our platform. Revenue is recognized over a period of time subsequent to the gross origination (on average over an 8 month period).
Removed
As of March 24, 2025, the Company had total cash on hand of $14.5 million, including $7.3 million of unrestricted cash.
Added
Historically, we recognized approximately 70-75% of revenue from gross originations two quarters after the quarter in which the origination occurred.
Removed
No adjustments have been made to the carrying amounts of assets or liabilities, as the Company intends to refinance the loans prior to the maturity on June 4, 2025. However, there can be no assurance that the Company will be able to secure such financing prior to that date or at all.
Added
Revenue was highest in the third quarter driven by the strong growth of gross originations in the first half of 2025. Adverse and other events that occur could have a disproportionate effect on our financial results throughout the year. Gross Profit Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with U.S. GAAP.
Removed
Financing Arrangements Senior Secured Term Loan and RLOC On May 14, 2019, Katapult SPV-1 LLC, as borrower (the “Borrower”), and Katapult Group, Inc. (f/k/a Cognical, Inc.) entered into a Credit Agreement with Midtown Madison Management, LLC as agent for various funds of Atalaya Capital Management (“Atalaya”), for a RLOC.
Added
Rental revenue is recognized in the period it is earned and cash is collected. Other revenue consists primarily of the sale of property held for lease (and lease agreements) to third parties and other immaterial sources of income from third party relationships, and is recognized as performance obligations are satisfied.
Removed
As of September 30, 2024, Atalaya was acquired by Blue Owl Capital Inc. The RLOC had a commitment of $125 million that the lenders had the right to increase to $250 million. Total outstanding principal under the RLOC was $82.8 million and $60.7 million as of December 31, 2024 and 2023, respectively.
Added
As depreciation expense is accelerated for buyouts and impairment, the cost of sales is greater earlier in the property held for lease asset life. As a result, in periods of high gross origination growth with higher rates of property held for lease additions, cost of sales will be disproportionately higher as compared to revenue growth.
Removed
In December 2023, our third-party loan processor experienced a timing error in their validation processes. We alerted them to the error, temporarily covering the approved leases with $9.6 million of our cash and the issue was resolved in January 2024.
Added
Gain on Extinguishment of Term Loan and Settlement of Derivative Liability The Company recognized a gain of $5.1 million for the year ended December 31, 2025 related to extinguishment of term loans and settlement of the associated derivative liability, including the write-off of unamortized debt discount and issuance costs. No such gain or loss was recognized in 2024.
Removed
Excluding this payment delay, as of December 31, 2023, our outstanding debt under the RLOC would have been $70.4 million, as the RLOC has a 90% advance rate on eligible accounts receivable.
Added
S ee Note 6 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for more details. Interest Expense and Other Fees Interest expense increased $1.7 million for the year ended December 31, 2025 as compared to 2024.
Removed
In addition, in connection with a prior amendment to the Credit Agreement entered into on December 4, 2020, Atalaya also provided us with a senior secured term loan (the “Term Loan”) commitment of up to $50 million. We drew down the full $50 million of the Term Loan on December 4, 2020.
Added
The increase in interest expense for the year ended December 31, 2025 was primarily attributable to higher average outstanding principal balances under the Existing and New Revolving Facility as well as changes in the Company’s debt structure associated with the refinancing completed in June 2025.
Removed
The Term Loan bore interest at London Interbank Offered Rate ("LIBOR") plus 8.0% (with a 1% LIBOR floor) and an additional 3% interest per annum accrued to the principal balance as PIK interest.
Added
These increases were partially offset by a decline in the average Secured Overnight Financing Rate (“SOFR”) rate during the year. Change in Fair Value of Derivative Liability and Warrants The Company recognized a gain of $ 17.4 million for year ended December 31, 2025 compared to an immaterial change in 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−3 removed3 unchanged
Biggest changeOur Term Loan is a variable rate loan that accrues interest at a variable rate of interest based on SOFR, subject to a 3% floor, plus 8% per annum. The spread was unchanged in connection with the 15th amendment to the Credit Agreement.
Biggest changeIn connection with the Loan Agreement, the New Revolving Facility accrues interest at a rate per annum equal to SOFR, subject to a 3% floor and an applicable credit adjustment spread of 0.10%, plus 7.00% per annum. As of December 31, 2025 , the interest rate on our RLOC was 11.5%.
Inflation Risk Although we believe that inflation has indirectly impacted our business by negatively impacting consumer spending and the sales of our key merchants, we do not believe that inflation has directly had, or currently directly has, a material effect on our results of operations or financial condition. 56
Inflation Risk Although we believe that inflation has indirectly impacted our business by negatively impacting consumer spending and the sales of our key merchants, we do not believe that inflation has directly had, or currently directly has, a material effect on our results of operations or financial condition. 60
The effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the fair market value of our investments as of December 31, 2024 and December 31, 2023.
The effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the fair market value of our investments as of December 31, 2025 and 2024 . A 100 basis point change in interest rates would cause our RLOC to change by approximately $0.8 million .
Removed
In connection with the 15th amendment to the Credit Agreement, the spread on the RLOC was increased from 7.5% to 8.5% per annum. As of December 31, 2024 , the interest rate on our RLOC was 13.1%.
Removed
As of December 31, 2024 , the interest rate on our Term Loan was 18.6%, which includes 6.0% PIK interest. PIK interest was 4.5% through November 2024, and increased to 6.0% in December 2024 due to liquidity falling below $25 million. Further discussion is included in Note 6 , Debt & Liquidity.
Removed
A 100 basis point change in interest rates would cause our RLOC and Term Loan annual interest expense to change by approximately $0.8 million and $0.3 million , respectively.

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