Results
Katapult Holdings Inc.
11/12/2025 | Press release | Distributed by Public on 11/12/2025 08:03
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere in this Quarterly Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included on our Annual Report on Form 10-K filed with the SEC on March 28, 2025. All dollar amounts are in thousands, unless otherwise specified.
OVERVIEW(dollars in thousands)
Katapult Holdings, Inc. ("Katapult" or the "Company") is a technology driven lease-to-own platform that integrates with omnichannel retailers and e-commerce platforms to power the purchase of everyday durable goods for underserved U.S. non-prime consumers. Through the Company's point-of-sale ("POS") integrations and innovative mobile app featuring Katapult Pay, consumers who may be unable to access traditional financing can shop a growing network of merchant partners.
Key Performance Metrics
We regularly review several metrics, including the following U.S. 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. 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 originations (on average over an 8 month period). Historically, we recognized approximately 70-75% of revenue from gross originations two quarters after the quarter in which the origination occurred. We believe this is a useful operating metric for investors as it provides insight into the volume of transactions that take place on our platform.
The following tables present gross originations for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Gross Originations | $ | 64,187 | $ | 51,210 | $ | 12,977 | 25.3 | % | |||||||||||||||
Gross originations through Katapult Pay represented 41% and 31% of gross originations during the three months ended September 30, 2025 and 2024, respectively.
Wayfair represented 25% and 48% of gross originations during the three months ended September 30, 2025 and 2024, respectively.The gross originations from Wayfair exclude transactions through Katapult Pay and only include transactions directly through the Wayfair waterfall platform.
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Gross Originations | $ | 200,524 | $ | 162,151 | $ | 38,373 | 23.7 | % | |||||||||||||||
Gross originations through Katapult Pay represented 39% and 19% of gross originations during the nine months ended September 30, 2025 and 2024, respectively.
Wayfair represented 26% and 48% of gross originations during the nine months ended September 30, 2025 and 2024, respectively.The gross originations from Wayfair exclude transactions through Katapult Pay and only include transactions directly through the Wayfair waterfall platform.
Total Revenue
Total revenue represents the sum of rental revenue and other revenue. 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.
Historically, our revenue is typically strongest during the first quarter primarily due to higher gross originations during the fourth quarter holiday season. 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. In 2025, revenue was highest in the third quarter driven by growth of gross originations and timing. Adverse and other events that occur could have a disproportionate effect on our financial results throughout the year.
See "-Results of Operations" section below for total revenue amounts.
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. 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.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure that is defined as net loss before interest expense and other fees, stock-based compensation expense, debt refinancing costs and loss on extinguishment of term loan, change in fair value of warrants and derivative liability, transaction related costs, depreciation and amortization on property and equipment and capitalized software, litigation settlement and other related expenses, provision (benefit) for income taxes, interest income, and provision for impairment of leased assets. See "-Non-GAAP Financial Measures" section below for a reconciliation of adjusted EBITDA, which is a non-GAAP measure utilized by management, to net loss.
RESULTS OF OPERATIONS(amounts in thousands, except per share data)
Three Months Ended September 30, 2025 compared to the Three Months Ended September 30, 2024:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Rental revenue | $ | 72,778 | $ | 59,609 | $ | 13,169 | 22.1 | % | |||||||||||||||
| Other revenue | 1,266 | 698 | 568 | 81.4 | % | ||||||||||||||||||
| Total revenue | 74,044 | 60,307 | 13,737 | 22.8 | % | ||||||||||||||||||
| Cost of revenue | 59,492 | 48,358 | 11,134 | 23.0 | % | ||||||||||||||||||
| Gross profit | 14,552 | 11,949 | 2,603 | 21.8 | % | ||||||||||||||||||
|
Operating expenses
|
12,089 | 16,396 | (4,307) | (26.3 | %) | ||||||||||||||||||
|
Income (loss) from operations
|
2,463 | (4,447) | 6,910 | (155.4 | %) | ||||||||||||||||||
| Interest expense and other fees | (5,900) | (4,801) | (1,099) | 22.9 | % | ||||||||||||||||||
| Interest income | 11 | 332 | (321) | (96.7 | %) | ||||||||||||||||||
| Change in fair value of warrants and derivative liability | (1,573) | 75 | (1,648) | NM | |||||||||||||||||||
| Loss before income taxes | (4,999) | (8,841) | 3,842 | (43.5 | %) | ||||||||||||||||||
| Benefit (provision) for income taxes | 50 | (47) | 97 | (206.4 | %) | ||||||||||||||||||
| Net loss | $ | (4,949) | $ | (8,888) | $ | 3,939 | (44.3 | %) | |||||||||||||||
| Weighted average common shares outstanding - basic and diluted | 5,278 | 4,341 | 937 | 21.6 | % | ||||||||||||||||||
| Net loss per common share - basic and diluted | $ | (0.94) | $ | (2.05) | $ | 1.11 | (54.1 | %) | |||||||||||||||
Revenue
Total revenue is comprised of rental revenue and other revenue. 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.
The increase in total revenue of $13.7 million, or 22.8%, during the threemonths ended September 30, 2025as compared to the same period in 2024 was primarily a result of gross originations growth and healthy customer payment collections. We saw gross originations growth during the threemonths ended September 30, 2025as compared to the same period in 2024 primarily as a result of our mobile app featuring Katapult Pay and growth from our direct merchants. Write-offs as a percentage of total revenue was 9.9% and 9.5% during the threemonths ended September 30, 2025 as compared to the same period in 2024 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.
Cost of Revenue
Cost of revenue consists primarily of depreciation expense related to property held for lease, accelerated depreciation for impairment of property held for lease, accelerated depreciation of early lease-purchase options (buyouts), payment processing fees, and other costs associated with offering lease-purchase transactions to customers.
The increase in cost of revenue of $11.1 million, or 23.0%, during the three months ended September 30, 2025 as compared to the same period in 2024 was a result of higher gross origination growth and capitalized property held for leases. The increase in the property held for lease portfolio and the 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. 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.
Gross Profit
Gross profit as a percentage of total revenue remained relatively flat at 19.7% for the three months ended September 30, 2025 compared to 19.8% for the same period in 2024.
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. Servicing costs include permanent and temporary call center support. Underwriting fees primarily consist of data costs related to inputs for customer underwriting models. Professional and consulting fees include corporate legal, transaction related costs and accounting costs. 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. 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 consist of agreed upon settlement amounts that are probable and estimable and associated legal fees. Transaction related costs consist of professional fees and other expenses incurred in connection with financing and strategic activities. See Note 12 Subsequent Events for more details.
The decrease in total operating expenses of $4.3 million, or 26.3%, during the three months ended September 30, 2025 as compared to the same period in 2024 was primarily due to a decrease in litigation settlement expenses of $3.2 million and a decrease in personnel costs of $2.1 million partially offset by an increase in transaction related costs of $1.0 million.
Interest Expense and Other Fees.
Interest expense increased $1.1 million during the three months ended September 30, 2025 as compared to the same period in 2024. The increase in interest expense for the three months ended September 30, 2025, was primarily attributable to higher average outstanding principal balances under the Existing and New Revolving Facility as well as changes in the interest-rate structure associated with the refinancing completed in June 2025. In connection with the refinancing, the New Term Loan transitioned to a fixed 18% payment-in-kind ("PIK") interest rate, replacing the variable SOFR-based rate that applied to the Existing Term Loan during the prior-year period. These increases were partially offset by a decline in the average SOFR rate and the overall effective interest rate on the Company's debt period-over-period.
Nine Months Ended September 30, 2025 compared to Nine Months Ended September 30, 2024:
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Rental revenue | $ | 214,572 | $ | 181,947 | $ | 32,625 | 17.9 | % | |||||||||||||||
| Other revenue | 3,304 | 2,284 | 1,020 | 44.7 | % | ||||||||||||||||||
| Total revenue | 217,876 | 184,231 | 33,645 | 18.3 | % | ||||||||||||||||||
| Cost of revenue | 177,807 | 145,866 | 31,941 | 21.9 | % | ||||||||||||||||||
| Gross profit | 40,069 | 38,365 | 1,704 | 4.4 | % | ||||||||||||||||||
|
Operating expenses
|
39,552 | 41,633 | (2,081) | (5.0 | %) | ||||||||||||||||||
| Income (loss) from operations | 517 | (3,268) | 3,785 | (115.8 | %) | ||||||||||||||||||
| Loss on extinguishment of term loan | (1,040) | - | (1,040) | - | % | ||||||||||||||||||
| Interest expense and other fees | (16,405) | (14,002) | (2,403) | 17.2 | % | ||||||||||||||||||
| Interest income | 94 | 1,015 | (921) | (90.7 | %) | ||||||||||||||||||
| Change in fair value of warrants and derivative liability | (1,598) | 22 | (1,620) | NM | |||||||||||||||||||
| Loss before income taxes | (18,432) | (16,233) | (2,199) | 13.5 | % | ||||||||||||||||||
| Benefit (provision) for income taxes | (40) | (113) | 73 | (64.6 | %) | ||||||||||||||||||
| Net loss | $ | (18,472) | $ | (16,346) | $ | (2,126) | 13.0 | % | |||||||||||||||
| Weighted average common shares outstanding - basic and diluted | 4,906 | 4,289 | 617 | 14.4 | % | ||||||||||||||||||
| Net loss per common share - basic and diluted | $ | (3.77) | $ | (3.81) | $ | 0.04 | (1.0 | %) | |||||||||||||||
Revenue
The increase in total revenue of $33.6 million, or 18.3%, during the ninemonths ended September 30, 2025as compared to the same period in 2024 was primarily a result of gross origination growth and strong collection efforts. We saw gross origination growth during the nine months ended September 30, 2025as compared to the same period in 2024 primarilyas a result of our mobile app featuring Katapult Pay and growth from our direct merchants. Write-offs as a percentage of total revenue was 9.6% and 9.1% during the nine months ended September 30, 2025 as compared to the same period in 2024 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.
Cost of Revenue
The increase in cost of revenue of $31.9 million, or 21.9%,during the ninemonths ended September 30, 2025as compared to the same period in 2024 was a result of higher gross origination growth and historical collection results of our lease portfolio period-over-period, which impacts the associated depreciation expense, buyout reserves, and impairment charges related to property held for lease. The increase in the property held for lease portfolio and the 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. 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.
Gross Profit
Gross profit as a percentage of total revenue decreased to 18.4% for the ninemonths ended September 30, 2025 compared to 20.8% for the same period in 2024 primarily due to the increase in cost of revenue during the ninemonths ended September 30, 2025 compared to the same period in 2024. Cost of revenue is impacted by higher gross originations growth causing an increase to property held for lease and accelerated depreciation expense as outlined in the Cost of Revenue section above.
Operating Expenses
The decrease in total operating expenses of $2.1 million, or 5.0% during the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily due to lower litigation settlement expenses of $2.7 million, and lower stock-based compensation expense of $1.7 million, partially offset by $1.0 million of transaction related costs and $1.4 million of debt refinancing related costs during the nine months ended September 30, 2025 as compared to the same period in 2024.
Interest Expense and Other Fees
Interest expense increased $2.4 millionduring the nine months ended September 30, 2025 as compared to the same period during 2024. The increase in interest expense and other fees during the ninemonths ended September 30, 2025as compared to the same period in 2024 was primarily attributable to higher average outstanding principal balances under the Existing and New Revolving Facility and Term Loan as well as changes in the interest-rate structure associated with the refinancing completed in June 2025. In connection with the refinancing, the New Term Loan transitioned to a fixed 18% payment-in-kind ("PIK") interest rate, replacing the variable SOFR-based rate that applied to the Existing Term Loan during the prior-year period. These increases were partially offset by a decline in the average SOFR rate and the overall effective interest rate on the Company's debt period-over-period.
Non-GAAP Financial Measures
In addition to gross profit and net loss, which are measures presented in accordance with U.S. 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. 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 metrics such as gross profit, operating loss, net 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.
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 gross profit represents gross profit less variable operating expenses related to lease originations, which are servicing costs and underwriting fees. We believe that adjusted gross profit provides a meaningful understanding of one aspect of our performance specifically attributable to total revenue and the variable costs associated with total revenue. The reconciliations of gross profit to adjusted gross profit for the three and nine months ended September 30, 2025 and 2024are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Total revenue | $ | 74,044 | $ | 60,307 | $ | 217,876 | $ | 184,231 | |||||||||||||||
| Cost of revenue | 59,492 | 48,358 | 177,807 | 145,866 | |||||||||||||||||||
| Gross profit | 14,552 | 11,949 | 40,069 | 38,365 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Servicing costs | 1,184 | 1,160 | 3,396 | 3,433 | |||||||||||||||||||
| Underwriting fees | 753 | 490 | 2,355 | 1,490 | |||||||||||||||||||
| Adjusted gross profit | $ | 12,615 | $ | 10,299 | $ | 34,318 | $ | 33,442 | |||||||||||||||
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that is defined as net loss before interest expense and other fees, stock-based compensation expense, debt refinancing costs and loss on extinguishment of term loan, change in fair value of warrants and derivative liability, transaction related costs, depreciation and amortization on property and equipment and capitalized software, litigation settlement and other related expenses, provision (benefit) for income taxes, interest income, and provision for impairment of leased assets.We believe that adjusted EBITDA provides a meaningful understanding of our operating performance.
The reconciliations of net loss to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss | $ | (4,949) | $ | (8,888) | $ | (18,472) | $ | (16,346) | |||||||||||||||
| Add back: | |||||||||||||||||||||||
| Interest expense and other fees | 5,900 | 4,801 | 16,405 | 14,002 | |||||||||||||||||||
| Stock-based compensation expense | 801 | 1,485 | 2,731 | 4,428 | |||||||||||||||||||
|
Debt refinancing costs and loss on extinguishment of term loan(1)
|
413 | - | 2,529 | - | |||||||||||||||||||
| Change in fair value of warrants and derivative liability | 1,573 | (20) | 1,598 | 33 | |||||||||||||||||||
| Transaction related costs | 1,031 | - | 1,031 | - | |||||||||||||||||||
| Depreciation and amortization on property and equipment and capitalized software | 258 | 403 | 903 | 932 | |||||||||||||||||||
| Litigation settlement and other related expenses | 173 | 3,352 | 610 | 3,385 | |||||||||||||||||||
| Provision (benefit) for income taxes | (50) | 47 | 40 | 113 | |||||||||||||||||||
| Interest income | (11) | (332) | (94) | (1,015) | |||||||||||||||||||
| Provision for impairment of leased assets | (722) | (295) | (301) | 307 | |||||||||||||||||||
| Adjusted EBITDA | $ | 4,417 | $ | 553 | $ | 6,980 | $ | 5,839 | |||||||||||||||
(1)For the three months ended September 30, 2025, debt refinancing costs consist of expenses associated with the Special Meeting of Stockholders held on August 6, 2025, to obtain shareholder approval for the issuance of convertible shares and warrants as required by the Refinancing Agreement.
Adjusted Net Loss
Adjusted net loss is a non-GAAP financial measure that is defined as net loss before stock-based compensation expense, debt refinancing costs and loss on extinguishment of term loan, change in fair value of warrants and derivative liability, transaction related costs, and litigation settlement and other related expenses.
The reconciliations of net loss to adjusted net loss for the three and nine months ended September 30, 2025 and 2024 are as follows
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss | $ | (4,949) | $ | (8,888) | $ | (18,472) | $ | (16,346) | |||||||||||||||
| Add back: | |||||||||||||||||||||||
| Stock-based compensation expense | 801 | 1,485 | 2,731 | 4,428 | |||||||||||||||||||
|
Debt refinancing costs and loss on extinguishment of term loan(1)
|
413 | - | 2,529 | - | |||||||||||||||||||
| Change in fair value of warrants and derivative liability | 1,573 | (20) | 1,598 | 33 | |||||||||||||||||||
| Transaction related costs | 1,031 | - | 1,031 | - | |||||||||||||||||||
| Litigation settlement and other related expenses | 173 | 3,352 | 610 | 3,385 | |||||||||||||||||||
| Adjusted net loss | (958) | (4,071) | (9,973) | (8,500) | |||||||||||||||||||
(1)For the three months ended September 30, 2025, debt refinancing costs consist of expenses associated with the Special Meeting of Stockholders held on August 6, 2025, to obtain shareholder approval for the issuance of convertible shares and warrants as required by the Refinancing Agreement.
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, stock-based compensation expense, debt refinancing costs, transaction related costs, depreciation and amortization on property and equipment and capitalized software, and litigation settlement and other related expenses. We believe fixed cash operating expenses illustrate the ongoing expenses that we control. The reconciliations of operating expenses to fixed cash operating expenses for the three and nine months ended September 30, 2025 and 2024 are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
Operating expenses
|
$ | 12,089 | $ | 16,396 | $ | 39,552 | $ | 41,633 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Servicing costs | 1,184 | 1,160 | 3,396 | 3,433 | |||||||||||||||||||
| Underwriting fees | 753 | 490 | 2,355 | 1,490 | |||||||||||||||||||
|
Stock-based compensation expense
|
801 | 1,485 | 2,731 | 4,428 | |||||||||||||||||||
|
Debt refinancing costs(1)
|
413 | - | 1,489 | - | |||||||||||||||||||
| Transaction related costs | 1,031 | - | 1,031 | - | |||||||||||||||||||
| Depreciation and amortization on property and equipment and capitalized software | 258 | 403 | 903 | 932 | |||||||||||||||||||
| Litigation settlement and other related expenses | 173 | 3,352 | 610 | 3,385 | |||||||||||||||||||
| Fixed cash operating expenses | $ | 7,476 | $ | 9,506 | $ | 27,037 | $ | 27,965 | |||||||||||||||
(1)For the three months ended September 30, 2025, debt refinancing costs consist of expenses associated with the Special Meeting of Stockholders held on August 6, 2025, to obtain shareholder approval for the issuance of convertible shares and warrants as required by the Refinancing Agreement.
LIQUIDITY & CAPITAL RESOURCES (dollars in thousands)
The Company's financing is generally comprised of cash from leases and borrowings from the Refinancing Agreement, which is fully collateralized by our assets. As of November 7, 2025, we had a principal balance outstanding of approximately $70.0 million related to the New Revolving Facility.
Restricted cash consists primarily of customer lease payments received in a collection account pending release by the Company's lender. Restrictions are released on a weekly basis pursuant to completion of waterfall and borrowing base requirements.
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).
The following table presents cash used in operating, investing, and financing activities during the nine months ended September 30, 2025 and 2024:
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | $ | 16,552 | $ | 28,811 | |||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 796 | (4,070) | |||||||||
| Investing activities | (961) | (656) | |||||||||
| Financing activities | (7,431) | 6,208 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 8,956 | $ | 30,293 | |||||||
The change in cash provided by / used in operating activities of $4.9 million for the 2025 period compared to the 2024 period is primarily driven by changes in net loss, adjusted for non-cash charges and higher spending on property held for lease; partially offset by changes in working capital.
The increase in cash used in investing activities of $0.3 million for the 2025 period compared to the 2024 period is primarily due to an increase in capitalized software additions.
The change in cash used in / provided by in financing activities of $13.6 million in the 2025 period compared to the 2024 period is primarily driven by a $6.6 million increase in principal repayments on the Existing and New Revolving Credit Facilities and a $3.7 million increase in deferred financing costs, and a $3.2 million decrease in net proceeds from the Existing Revolving Facility.
In the nine months ended September 30, 2024, we received $9.6 million due to a timing error in our third-party loan processor validation process for the three months ended December 31, 2023, causing proceeds to be higher during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2025.
In the nine months ended September 30, 2025, we corrected our borrowing base calculation, which resulted in a $5.8 million principal repayment to our lender and represents the primary driver of the increase in principal repayments in the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. Additionally, we paid $3.7 million in deferred financing costs in connection with the Refinancing Agreement during the period.
Going Concern
The financial statements are prepared in accordance with U.S. GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The terms of the New Revolving Credit Facility, including the rigorous covenants thereunder, raise substantial doubt about the Company's ability to continue as a going concern for one year following the issuance of these financial statements.
We plan to continue to work closely with Blue Owl to mitigate any potential adverse impact from the covenant provisions of the New Revolving Credit Facility. We anticipate that we will not have sufficient cash available to repay the New Revolving Credit Facility in the Event of Default.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern. Borrowings on the New Term Loan and New Revolving Credit Facility are classified as current liabilities in the September 30, 2025 condensed consolidated balance sheet.
Financing Arrangements
Refinancing Agreement
For information on our obligations under the Refinancing Agreement, see Note 5to our Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Pledge and Guaranty
Pursuant to the Pledge Agreement, dated as of May 14, 2019, between Katapult Group, Inc. (f/k/a Cognical, Inc.) and Midtown Madison Management, LLC, Katapult Group, Inc. pledged and granted a first priority security interest in all equity interests of the Borrower and any investment property and general intangibles evidenced by or related to such membership interests. 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 Existing Credit Agreement. In connection with the Refinancing Agreement, the respective obligations under each of the Pledge Agreement and Corporate Guaranty and Security Agreement were reaffirmed and all references to the Existing Credit Agreement in each such agreement thereafter were deemed to refer to the Refinancing Agreement.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. We evaluate our significant estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.
There have been no significant changes to our critical accounting policies and estimates included in our Annual Report on Form 10-K filed with the SEC on March 28, 2025.
Recently Issued and Adopted Accounting Pronouncements
See Note 2 to our Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our condensed consolidated financial statements.
Smaller Reporting Company
We are a "smaller reporting company" as defined in the Exchange Act. 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.
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