Q1 2021 Finserv Acquisition Corp Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the catapult first quarter 'twenty 'twenty 1 earnings conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance.
Please press Star and then zero on your Touchtone telephone.
Question answer session will follow the formal presentation. As a reminder, this conference call is being recorded.
I'd like to turn the conference over to Mr. Bill right, Vice President of Investor Relations, Sir you may begin.
Thank you and good morning, welcome to the catapult first quarter 2021 earnings Conference call with me today are of language Ziad, Chief Executive Officer, Dirk Mcmahon, Chief operating officer, and Krista Peto cheap.
Chief Financial Officer, we will be available for Q&A following today's prepared remarks.
Before we begin I would like to remind everyone that this call will contain forward looking statements regarding future events and financial performance and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report. These statements reflect management's current beliefs assumptions and.
Expectations and are subject to a number of factors that may cause actual results to differ materially from those statements.
As required by law, we undertake no obligation to publicly update or revise any of these statements whether as a result of any new information future events or otherwise.
During today's discussion of our financial performance, we will provide certain information that constitute non-GAAP financial measure under SEC rules. These include measures such as adjusted EBITDA and adjusted net income the non-GAAP financial measures should not be considered replacements for and should be read.
Together with GAAP results reckon.
Reconciliations to GAAP measures and certain additional information are also included in today's earnings release, which are available in the Investor Relations section of our company website at Www Dot IR dot catapult dot com.
Please refer to the Investor Relations section of our website to obtain a copy of of our earnings release, which contains descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures.
This call is being recorded on a webcast will be available for a replay on our investor Relations website.
I would now like to turn the call over to Orlando.
Thanks, Bill we are thrilled to be hosting our first call of the public company. Today. This is a major milestone in the history of catapult, but I want to thank the entire catapult team for their hard work and dedication during our journey to become a public company as well as our investors all of the new hub, who have supported us throughout the process. We are thrilled about cash.
<unk> unique position to serve a very large e-commerce market for durable goods purchased by non prime consumers today.
Today, we estimate the market to be approximately $40 billion to $50 billion annually with less than 1% penetration as a result, we see significant greenfield opportunity for continued long term growth.
On today's call. We are excited to discuss our first quarter 2021 results, which features strong revenue growth and solid profitability and also talk about our plans for continued expansion through year end and beyond.
But first I'd like to kick off the call today by providing a brief overview of accountable.
The catapult story began in 2012 with the mission to breakdown financial barriers, we provide disruptive technology that empowers underserved consumers and simplifies the shopping experience to help them secure the central items for their daily lives.
Through our proprietary platform our consumers can shop at the same high quality retailers as prime consumers leveling the playing field.
Market data tells us at approximately 38% of consumers struggled to get the things they need like furniture appliances and laptops.
This lack of access can be due to low credit scores than files or lack of data, here's where catapult stepson.
As a lease to own for non prime consumers, we use proprietary underwriting models to improve customers the others decline, while they're shopping online.
We provide flexible and transparent payment options whereby consumers pay of nominal fee of checkout, followed by recurring lease payments and at the end of the lease the consumer owns them owns the item.
At any time, the consumer can cancel the lease and return the item or exercise of discounted early purchase options. The consumer chooses this option that best fits their budget and we never charge of late fee.
This clear and transparent experiences how we partnered with big name retailers like Wayfarer, Lenovo purple mattress and others.
Our integration with retailers is the key to our success, we have developed partnerships with leading shopping platforms like the magenta and Shopify waterfall partners with select time credit providers like a firm and have the strong capabilities to customize on integration directly with any proprietary platform.
Our goal is to open the market opportunity for merchants and consumers, enabling transactions that would not have happened in the past not only do our customers love the ease and transparency of the platform, but our merchants see us as a strong strategic partner, because we bring them incremental shoppers and a massive new addressable consumer base that could not effect.
The access and the E Commerce World.
1 of our core values as the enhance the lives of our consumers and retail partners by providing transparent innovative and empowering financial products. It's also why we're looking at consumers.
What consumers have to say about us and how we are helping them get the things they want and need for.
For example, 1 of our consumers recently told US she had gone on for years without thinking of bad because she didn't have the ability to afford of large ticket item.
She said to us I would never had been able to buy of mattress outright. So catapult gave me the opportunity to be able to sleep in a bed again. This is the heart of our mission, we enable underserved consumers to obtain the items that they need.
Another satisfied customer row, I really needed an air conditioner from my upstairs room, My budget is fixed and I wasn't able to pay full price of our portable 1 cash.
But was there for me and now I can sit on my room comfortably and give this review thank you.
We received many more testimony was like this which not only inspires and motivates us, but also validates our mission.
Chris our CFO will provide more details on our first quarter performance in a few minutes, but let me give you. Some first quarter highlights total revenue for Q1, 'twenty 'twenty, 1 was $86 million, an increase of 88% year over year driven by strong growth in originations as we continue to add new merchant relationships and expand.
With our existing merchants.
Our adjusted EBITDA in Q1, 2021 was $14.7 million up 122% from $66.6 million in the Q1.2020 rich.
Reflecting the operating leverage inherent in our business model as revenue growth is outpacing our operating expense growth.
And our net income was $8.1 million in Q1.
120% year over year and.
In summary, our first quarter was strong and what is the extraordinary about the business. We have built is that we have demonstrated the ability to rapidly grow our top line while at the same time being profitable we've.
We believe that the combination of both high growth and attractive margins is what differentiates catapult.
My vision is that our growth will continue through building more relationships with high quality retailers offering new financial solutions. In addition to our current lease purchase program and increasing our customer repeat rate.
Financial inclusion of the non prime consumer drives us to.
To continue innovating and delivering new solutions from this market like.
Like many of you we are eager to see the world move post pandemic and expect the micro economic environment to be especially dynamic in 2020.1.
As a result, we'll be closely monitoring consumer spending trends government stimulus programs as well as credit conditions for the balance of the year.
We are confident in our strategy to deliver value to our business partners and consumers and excited about the growing interest in catapult from both merchants the ecommerce platforms and Prime partners. It is important to note that the length of text of these merchants and partners to onboard and ramp up will impact the timing of originations and revenue. So while there may be some variability we know that we have.
The solid foundation and business model and we anticipate growth will continue kind of.
<unk> focus will remain squarely on financial inclusion and enabling customers to obtain durable goods that they need to of transparent consumer experience while at the same time.
Driving shareholder value.
With that I'll turn it over to Derek Medland, our chief operating officer to discuss our growth strategy Derek.
Thanks, Orlando and you can see from our financial results, we executed well against our key growth strategies in Q1.
On the first quarter, we on boarded 26, new merchants, including names you know like Motorola on simply Mac on the other e-commerce retailers that are seizing the opportunity to provide expanded payment options for non prime consumers.
Our platforms make it easy for merchants to incorporate catapult the checkout option on the web site and our pace of adding new merchants is really excited and.
In addition to the new merchants coming on board during the first quarter of 2021, we saw our top 10 existing merchant originations growth of 75% year over year.
This growth is built on our technology first collaboration model.
This includes things like using our digital assets on data capabilities to attract new consumers.
Engage existing catapult consumers and deliver award winning service.
This technology and data centric focus typically allow us the growth rate of the catapult lease purchase solution to outpace our merchants general sales growth rate.
And the penetration rate of sales on total transaction volume, which are merchants love.
Like Orlando mentioned earlier, we are maniacal about serving our consumers, while we continue to invest and focus our efforts on delivering an incredible experience that will build long term relationships with our consumers and of the concrete example of the results of this focus I'm excited to report that we have improved our net promoter score from the high Forty's at year end 2020.
The 63 as of the end of the first quarter.
The on gigahertz metrics to share our consumer oriented approach is the driver to generate additional volume for our merchants.
Our existing consumer base continues to grow on our current average lease per consumer as 1.9, the strong sign that consumers continue to trust us for the online shopping activities.
The strategy for catapult looking forward over the next several years is that our growth will be driven by 3 key initiatives first deepening our relationships with existing merchants to consumers every year, we will look to identify new opportunities to engage on mutual customers on the outpaced same store sales by strong multiple auto merchant sites.
Second we will continue adding new merchants E comm and omni channel platforms on expanding our channel partners, we want to make it out the easiest possible for merchants to make the catapult available where consumers want of shop third we will continue to launch new capabilities and offerings that are aimed at optimizing the opportunities for all parties at the table.
We'll continue to use our data insights to open the avenues of new growth of our merchants and develop the attractive product programs for our consumers.
As part of our merger with center of the company received $50 million.
The incremental capital the plan to use the capital to invest in initiatives that will expand our moat and accelerate our growth for 'twenty 'twenty, 1 we had earmarked $10 million for this investment.
Related to this investment we have begun the process of expanding our sales marketing and technology teams with strategic resources on targeted new talent hires. We're also testing new programs and offers that we believe will accelerate our merchant pull through rate on increased consumer and merchant loyalty. These include.
Improving our commercial offerings, so that we're making on integration with catapult the merchants top priority speed of access to the catapult program on.
Also doubling down on our lifecycle marketing strategies to enhance our promotions increased consumer loyalty and merchant sales.
Lastly, we.
We will be investing in technology initiatives to expand our competitive advantage and continuously improve the consumer and merchant experience.
These initiatives include integrations with additional ecommerce platforms and lender waterfalls, new product functionality on expansion of our digital consumer experience.
For example, we recently added the Salesforce commerce cloud to our roster of integrations.
The other E Commerce point of sales platform that will provide a great opportunity per growth now.
Now I will hand, it off the curse of <unk> to discuss our financials.
Thanks, Darren before I begin, let me Echo orlando's excitement about the paycheck catapult and my appreciation for everyone's support over the past couple of months now turning to our results.
The first quarter of total revenue of $86 million, an increase of 88% year over year versus the $42.9 million in Q1 of 2020.
Our revenue growth was driven by continued strongly kind of performance and a 71% increase in volume as the credit origination otherwise with parts of the industry in the GMT on.
Merchandise volume were $63.7 million up from $37.2 million in Q1 'twenty 'twenty.
Starting in 2020 line on claim part really of reporting growth origination as the latest metric is more representative of the underlying growth of our business as net.
Originations are continuously your guidance over subsequent periods can merchandise return and have greater seasonal fluctuation of.
Of the recording credits origination is in line of consistent with how our public carriers required volume growth.
Originations are defined as the retail price of the merchandise associated the fleet purchase agreements entered into during the period cash.
Catapult platform credit origination do not represent revenue earnings. However, we believe the useful operating metric for both the company and investors to use in assessing the volume of transactions that take place on our platform.
Gross originations of $63.7 million per the quarter were in line of our expectations and followed the traditional retailer seasonality on which key line of historically, the lowest volume quarter of the air and keep our at the Hyatt driven by holiday shopping gross profit was 27.8 million per Q1, 2021 and increased $78.
4% year per year.
Q1, 2021 gross margin of 34, 4% decline of 190 basis points, primarily due to a slight acceleration in our property held for the depreciation correct.
Continuously reevaluate needs depreciation curves of every quarter and on accelerated them slightly in Q1, 2020 lines of cap or increase consumer by a trend attributed to the competition.
Total operating expenses were $13.3 million in Q1.2021.
51% compared to $8.8 million on the prior year period.
<unk> expenses are solid.
Servicing cost, which represent our call center operations for customer service and collections were $1.1 million in Q1.2021 of only 16% versus Q1.2020. Despite revenue increasing 88%. This is a testament of the scalability of our business and the ongoing digital transformation of our call Center.
Continuously improving how we communicate with in service occupancy of ours.
Underwriting fees were 465000 in Q1.2021 down from 479000 in Q1.2020, despite volume being up. This is the result of our ability to continue to favorably renegotiate third party cost at the scale of it.
Professional and consulting fees of $1.5 million in Q1, 2021 up significantly from Q1.2020, primarily due to transaction costs directly associated with the 10 certain of our chart, which totaled $676000 for the period as a reminder of the costs are onetime in nature and are not expected to reoccur.
Technology and data analytics expense was $1.7 million in Q1, 2021, decreasing 6% year over year from 1.8 million of 2020.
This was due to a greater proportion of software development activity the qualifying for capital efficiency in 2021, as we continue to enhance our product capability.
Bad debt expense of $4.9 million for team on 2021 compared to $3.4 million in Q1.2020, an increase of 44% bad debt expense primarily consist of provisions for uncollectible accounts receivable net of recovery. The increase was primarily driven by the proportional increase in revenue for the period, which was offset by the.
The decrease charge off rate better underwriting and payment collection for women.
Bad debt expense as the percentage of total revenue decreased to 6 point of 1% from Q1, 'twenty 'twenty, 1 compared to 7.9% on Q1.2020.
General and administrative expense of $3.6 million in Q1, 'twenty 'twenty, 1 compared to $1.9 million in Q1.2020. This increase is it related to adding head count to support the growth trajectory of the company general and administrative expenses as a percentage of total revenue were flat at 4.5% the best Q1.2021.
In Q1.2028 of the company achieving scale.
Interest expense and other fees was $4.1 million for Q1, 'twenty 'twenty, 1 up 39% compared to 3 million of Q1.2020. This was primarily due to an increase in put us of any principal balance on our debt. During Q1.2021, which is 3 thought of the increased origination volume as well on the closing of $50 million term note in December.
2020.
Interest expense and other fees as a percentage of total revenue decreased 5.1% in the 3 months ended March 31, 2021 compared to 7% in 2020. This reduction was primarily driven by the lower interest rate that we were able to negotiate on the debt facility in the second half of 2020.
Provision for income taxes was 1.8 million of Q1.2020 compared to 79000 in Q1.2020.
This increase was primarily due to state income taxes on the company's estimated taxable income for the year ending December 31.2021.
First of all income is expected to be generated in certain states of our accelerated federal tax depreciation it does allow the.
The primary driver of activation of income taxes for Q1, 'twenty 'twenty, 1 with the state of California, where net operating loss carry forwards have been temporarily suspended the company generating over $1000 of taxable income.
Our GAAP net income for the first quarter with $8.1 million, an increase of 120% from $3.7 million in the first quarter of 2020.
Turning to our other non-GAAP metrics.
Adjusted EBITDA for the first quarter of 2021 was $14.7 million, representing a 122% increase of our Q1.2020 adjusted.
The adjusted EBITDA margin was 18, 2% an increase of 280 basis points compared to 15, 4% in the first quarter of 2020.
Adjusted EBITDA is defined as net income before interest expense income tax expense depreciation and amortization expense stock based compensation expense changes in warrant liability valuation 1 time transaction cost of investor related matter of cost provision plus benefit from impairment on it.
The recruiting.
Adjusted net income for Q1, 2021, with $9.3 million up from $3.8 million of the first quarter of 2020.
Adjusted net income is defined as net income before stock based compensation expense changes in warrant liability valuation onetime transaction costs and the best as it related matter of comp and employee recruiting cost.
Maybe you could of balance sheet and liquidity at March 31, 2021, we had $67.8 million in available cash and positive net cash provided by operating activities of $7.3 million. Our total debt outstanding net of debt issuance cost of the warrants with $105.9 million.
Our cash balance in Q2, 2021 will be increased by an incremental $50 million cash infusion as part of the sensor merger, bringing our current cash balance of approximately 100 million, which enhances our financial flexibility and capital structure.
Looking ahead to Q2 results, while we don't plan of formerly issue quarterly guidance on a regular basis of the public company. We do anticipate there'll be some noise in the numbers at the result of the Pentair transaction and we just completed and also the unique period that we are comping the tail from last year that's the.
I wanted to give you from color on Halle building of the second quarter of shaping up.
First as it relates to the transaction the completion of the merger last week triggered the vesting of stock options on RSV is plus transaction related benefits for employees that will be recognized in Q2 and general and administrative expense. In total we are estimating of onetime charge of $12 million that will impact GAAP net income, but will be added back to our non-GAAP metrics of.
Adjusted net income and adjusted EBITDA.
In relation to our business Kpis Q2, 2020 of the very unique period, a year ago. The nation for the most part with understand how martyrs, many brick and mortar retail stores were closed and the governor of providing assistance via the cares Act stimulus checks the.
The combination of these unique circumstances from 2020 led the surge in online transactions on our margin and ultimately our growth origination.
The results Q2, 2020 and resulted in the highest gross origination quarter for last year and did not follow the traditional retailers seasonality that we typically see.
In 2021, we anticipate a more normalized retail calendar when it comes to volume and as a result, we are expecting lower gross originations year over year for Q2 in 2021.
Also on Q2 'twenty 'twenty, 1 we started the Hawaii investment capital marketing sales and technology initiatives with reduced adjusted EBIT in Q2.2021 as previously communicated in our April analyst day presentation.
The first introduced annual guidance for 2021 in April of this year.
Given the data we have today, we continue to believe that this guidance is reasonable and appropriate and we plan to provide a more detailed update on our Q2 earnings release.
Reiterate the guidance is to achieve originations of $375 million to $425 million revenue of $425 million to $475 million and adjusted EBITDA of $50 million to $60 million and as we've said previously we anticipate the majority of our growth to be concentrated in the second half of the year with the heavy weighted to Q4 of 2021.
Thank you very much I'll pass it back from Orlando for final comments, thanks, Chris to wrap up I'll reiterate what I said at the beginning of this call. The some volatility this year is unavoidable as the world begins the transition to on a post pandemic new normal we are all focused on a much bigger future on are convinced that our market leading position our strategic.
<unk> and our long term focus will equate to a continued strong growth and improving profitability for many years to come.
Derek Chris and I will be happy to take your questions. Operator. Please go ahead.
As a reminder to ask a question you will need to press star 1 on your telephone.
To withdraw your question Chris pound key.
Based on borrowing compile the Q&A roster.
The first question on comes from the line of Vincent <unk> from Stephens you may begin.
Okay. Thanks for taking my question on good morning, guys.
Many of the first question good morning, just on.
Maybe a follow up on the commentary for the second quarter. So first quarter, great results and it seems to have been strong for the majority of the leased on players.
Players.
Yeah.
With that strength of I guess there was.
We saw significant help from government stimulus tax refunds, and so forth and so I'm wondering when youre thinking about.
The rest of 2020 does the exploration of those.
Stimulus tax refunds on so on.
Having the effect on.
On your model or how youre thinking.
Yeah. Thanks, Thanks for the question of instant message or talk to you again I guess.
We don't we don't think the.
Stimulus changes are going to affect.
Our year.
The consumers, obviously really strong right now.
<unk> had been pretty resilient, thanks to the government stimulus as well as.
Obviously unemployment is dropping and people are going back to work so.
We don't think there's going to be any effect and as you remember.
We're during recessionary times, we actually performed pretty well.
And.
We've seen that obviously happen, but we don't really think theres going to be any impact, but we're going to monitor things for the rest of the year and see how things play out.
Okay, great. Thank you second question. So you highlighted your.
Various partnerships and I was wondering if you could talk about how we should think about the lift in your originations from your partnerships you at the <unk>.
I left at Magenta and Shopify on the Perm. So like for example, if we think shopify does over $100 billion of merchandise volume of annually from.
I think Andre is on track with the $8 billion this year.
When you think about kind of what your partners are doing how much how should we think about how much of that could flow to you like if you could size, maybe the opportunity for Paul Thank you.
Yes.
I mentioned this is Derrick I'll take that question.
So generally we don't expect to give the granular level of detail in terms of merchant base, our growth projections by the platform of partner. However, we are continuing to develop our strategy and collection and collaboration with various partners and we're seeing really strong numbers. The waterfall solution combined with our direct offerings and partnerships is really resonating with the online retailers on the whole.
I would also just add debt.
Partners like of firm Magenta on others.
Just getting started and it's really exciting to see the volume and the interest as the as the word gets out the capital to their will on easy to add.
And so we're just really optimistic we'll be continuing to give more flavor as to what that means for us, but but youre also going to see us adding new partners.
And the in the future, yes, I think if I could add.
I would say we're discretion of the surface.
Great. Thank you I'll get back in the queue. Thank you. Thanks, that's it.
Our next question on comes from the line of Ramsey El <unk> from Barclays.
Good.
Hi, Thanks for taking my question this morning.
I wanted to ask you to give us a little more color on the drivers of that of the.
Of the full year origination guide, which I think is coming in around the 108% growth of at the midpoint of <unk> originations I think grew 71% I think comps get a little bit easier if I'm not mistaken on the back half, but you also have line of sight to new merchants Onboarding or merchant signed last year annualized thing just trying to get a little more color behind the acceleration there versus.
The result this quarter.
Sure Hi, Randy this is Chris.
In terms of.
The growth any of it on the head, yes, we saw pretty strong growth in Q1 Q2, we as I mentioned on the on the call we're going to anticipate year over year decline in originations just because last year Q2 was unseasonably high for us, but in the second half of the comps get easier and Thats, where our growth is really concentrated and so as we onboard merchants now in.
And as the first half of the year.
The paid the new venue.
The merchants driving volume next year in the index in the second half of the year and then also holiday season, we saw a very slight holiday season last year, which was definitely on the debt ordinary for us So where we're really excited about the holiday season of returning and as we onboard new merchants and then see that seasonal uptick that we normally do and Thats where were seeing the growth.
Okay.
And then separately are you seeing any impact on on sales from some of the delayed shipping delayed logistics times that we've been reading about in some of its experiencing when we try to buy a couch.
Furniture is that impacting your business at all or.
Hey, Ramsey this is Eric I'll take that 1 so the answer is yes, we definitely have seen some.
Some delays that has been impacting the customer experience and leading to higher cancellation rates or abandonment.
We do believe that our approach to the extent communication with those customers on partnering well with our retailers.
It means that we'll be all of a retain that consumer relationship and possibly get that transaction later when things are more widely available. So we have seen some fluctuations, but we continue to monitor on it looks like things of visa.
Okay.
Last 1 from me as I just wanted to ask for an update on the way fair concentration.
Concentration I think I recall as I recall, the expectation for that was it for it to decline quite a bit in 2021 I know the world is.
Obviously, the atypical right now I'm just curious about how that's trending is that does that kind of expectation still on track.
Yes, yes, we saw a decline in the first quarter as far as the concentration and Thats, what we expected.
And so while we continue to grow along with them well, it's really about the new retailers in the new pipeline that we have coming into the second half of the year.
Put on additional points on that so at the end of the year, where on the mid Seventy's of concentration we have dropped down to the mid <unk> through the end of the first quarter and that isn't because of the decrease.
On expectations on the wafer side, that's more of just seeing the growth that we've had from the other.
Areas of our business, which we're really excited about.
Okay terrific. Thanks for taking my questions great. Thanks Ramsey.
Thank you. Our next question on comes from the line of Anthony Cucumber from loop capital markets you may begin.
Good morning, and thanks for taking my question I guess 2 questions first question.
I don't know if you want to give the exact number but maybe you can just sort of directionally with the year over year change.
On your write offs like the way you I guess the way you sort of calculate better think about that.
You would love to just kind of walk from a color on that or like I said, if not the actual numbers just what the change for the.
Directly what the change was the year over year.
Okay.
Yes. When you when you are speaking of write offs of that can my comment of why gross profit margin went down slightly.
So on making no no I'm just talking about like the write offs right like if somebody leaves the something from you, but then they disappear right and you have to write it on Oh, Yes, yes, yes, absolutely just wanted to confirm that so from a credit perspective, an array of perspective, we're really seeing steady state right off.
The prior to.
The pandemic and Covid heading we had seen very consistent loss rates and write offs for the past the 12 months. Prior so we're at the same levels, we're not seeing any changes materially 1 way or the other.
Okay, and then sort of <unk>.
Second question.
The other question earlier about.
About the better.
The federal stimulus and the fact that checks are probably pretty much the spend at this point, but we do have the expanded child tax credit debt.
The kicks in in July and I guess Im just luck.
How you're sort of thinking about that in the context of your full year guidance. Thank you.
Yes, I mean, I think that's something that we'll definitely be monitoring.
When stimulus does hit we do see the.
What's the net that hit we did see.
Some increase in volume and also in terms of Patriot.
We also will be checking the trends are closely monitoring the trends on early buyback because that's something 1 off.
The consumers receive.
Stimulus checks or tax refund checks.
Do you see the Banco and proactively by other lease so I think there'll be lots of dynamics at play so well see how it turns out and we've gotten very net closely throughout the summer.
Thank you.
Thank you Anthony.
And the next question comes from the line of kind of.
Joseph from Jefferies moving again.
Hey, good morning, congratulations on getting the transaction done and thanks for having me on.
Thanks Scott.
Quick follow up there.
We said the last time in March.
Long does it take for 90 day buyout activity to kind of kind of normalize after around the stimulus given we've seen kind of 3 rounds of at this point.
Kind of I'll take that so the.
Quick answer is it is roughly in the 90 to 120 days that we really see things season out.
That said part of ours. Our approach is that we're always looking to communicate with consumers so that day.
I can understand how they can get the best deal and after the stimulus moments, we've seen a variety of different responses right. So so early in the stimulus era, we did see some some increase on our early purchase option activity.
And some of the other.
The events that happened for example, the later last year, we didn't see as much activity. It look more of just like a typical tax season. So.
Typically you see within 3 months of ourselves.
And then.
But the behavior of the consumers has been a little bit dynamic as we mentioned in our call.
Yeah.
Got it. Thank you and then just 1 follow up from me.
As we think about your pipeline of retail partners.
Obviously, you guys have out of a leg up on the e-commerce side of the business.
The longer term.
Would you imagine your business day.
Very focused on E comm, but with the balance of brick and mortar and also from a vertical perspective to talk about.
Potential per vertical.
Most of the case in or is there a big enough.
A white space in your existing verticals, but just the pipeline color would be helpful. Thanks.
Sure I'll take the.
We are in.
The pipeline.
We see a number of omni channel retailers, which I think we have not only the the experience and knowledge because this business of originally kind of floated towards brick and mortar of little bit more of that ecommerce and we moved it to ecommerce over the last several years, we want a player who is doing both.
Because we can we think we can add value from a marketing perspective, and capturing the consumer that is shopping online and might not be visiting the store, but maybe wants to fulfill on the store. So.
We're talking of a few retailers now that have that in.
Building that capability I think is relatively easy.
1 of our sales leaders for example does have that background. He ran the field sales team. So I think.
Debt part is relatively easy it just depends on the scale of the retailers. So were not afraid of it but I think we've got some technology ideas around driving a better experience at the store for the consumer so that the consumer is in control.
And then on the vertical side.
Yes, I'll take that Orlando is on the vertical guidance side Kyle its a good question, we tend to stay really close to those essential items, we believe that that's the sweet spot.
For our lease purchase product is focusing on those the central items like furniture appliances auto.
And the core electronics that also helps us.
Certainly access the growth opportunities that are happening in the space, but we're constantly evaluating new opportunities and we're seeing more consumer demand takes us.
And.
Some of them on a really interesting and we'll be excited to talk more if you look at the new retailers, who brought on Youll see.
Increasing interest in areas like gaming and other electronic capabilities that we're seeing really great performance out of and we're excited about.
Got it very helpful. Thanks for answering my questions.
So.
Talk to you soon.
And once again as a reminder of Thats star 1 for question Sterling.
And a follow up from the Vincent can't take from Stephens you may begin.
Okay. Thanks for taking my follow up so just the I guess of broader question, but.
When you think about your pipeline, maybe if you could talk about how the sales cycle. Typically works. When you are when you are talking to a merchant.
You've had tremendous origination growth.
That looks like it's going to continue, especially with your online focus, but I guess when you engage with the retailer or try to engage with the retailer.
How does the process typically work with what are there.
What are they looking for and what are they sort.
1 of the friction points in the ones.
1 of the things we've heard from some of the some of your competitors sort of.
What that has done really well on the E comm in the online side. It seems like the other guys are trying to add E com and online.
Capabilities is what I'm trying to reach parity so maybe when.
When the when you're engaging of retailer is the competitive pressure or the searching around for other competitors just sort of wondering if you could talk about how the sales cycle on that.
Process works.
Thanks, Vincent let me, let me break down that question on a few different areas. So so on a competitive side I'll start there, which is just that this market is huge and really on top so we're not surprised at all to see competitive interest in the space.
We've been developing our solution and we continue to enhance our strategic moat.
The content of consistently number 1 to deliver more value for the retailer and per the consumer and we're not going to stop doing that we want to make the we wanted the easiest to work with on both sides of the and have a really compelling solution. So we of things underway that we're really excited about that that are going on.
Really the continue.
Continue to be differentiated.
In terms of how the sales cycle works.
It depends and this is where I think we also see a lot of encouraging signs 1 is on the SMB side, which is a huge part of our business is that we have made it extremely easy for a retailer to say yes.
To be able to on board of retailer very very simply with a waterfall solution of direct solution or both.
We think that's really powerful on the delivery is really the most value of the retailer can see.
Matched with our existing base on our marketing approach.
On the midsize to large size side of the.
The friction is greater only because of the prioritization and the it side as you go up the scale you see retailers that have customer solutions of proprietary what's cart and environments or omni channel solutions.
And really a lot of it is about prioritization, what's really exciting the overall is that due to the pandemic and.
Some of the testimonials and more information that we've been able to share retailers are really getting at that this is an untapped market that the non prime consumer base is is a viable and attractive market segment for them and we're getting really good signs that debt. The interest is increasing very quickly.
Okay, Great. That's very helpful. Thank you.
Thanks, Joe.
Our next question will come from the line of Anthony <unk> from loop capital markets you may begin.
Alright, thanks for allowing me to ask the second question.
So you mentioned your pipeline you have a number of omni channel.
The retailers.
I guess my question there.
I guess the way I've always understood your sort of.
The special sauces that you only really service e-commerce retailers, and obviously theres a lot of <unk>.
Sales and merchant support that's involved with servicing brick and mortar retailers. So should we expect that if youre going to be going after omnichannel retailers of it is going to be on investments that are going to be necessary to service those retailers that will bring down your profitability. Thanks.
Thanks.
And that's a good question.
Point, you to our analyst day deck, where we've talked about some of the new investments that we're making but first let me just talk a little bit more about our strategic approach in Orlando mentioned that where digital mobile and E Commerce first and.
Like he said we focus on those omni channel retailers that are actively looking to grow their ecommerce penetration in there.
E Commerce sales.
And or already have a really nice ecommerce business. Because you are right that is our number 1 area of us.
<unk> strategic advantages that we can deliver value on.
And increasingly the interest in trying to make sure that they tap those markets as Theyre However, right.
Customers are multi channel they shop in different places and so retailers have asked us the Avon in store experience, Hey can you do in store as well on the answer is yes, but.
But we wouldn't do it the same way as <unk> seen in other areas, we're definitely more oriented to the.
So using digital means to communicate with the consumer to make the checkout seamless.
And.
And so yes.
We will be making advance investments that should make that digital experience smooth and have a lighter touch in terms of the financial impact of doing in store experiences, but there will be investments that we have tied to it.
Got it and then just 1 follow up quest.
The question so as I was looking through your on press release on your calculation of adjusted EBITDA I see you're backing out employee recruiting costs now I mean, these numbers are pretty small so I'm not terribly concerned about them, but I've just never seen that so I guess what.
Why would you be adjusting for that I would just think that that would be up.
Cost of doing business, particularly for our growing company.
Okay.
Yes, I'll take that it's really these are just 1 time costs that we were isolating for some of the uplift to become a public company. So we don't use recruiting firms normally.
Actually really great average, creating talent on our own but for some of these 1 time positions that we needed like the chief accounting officer et cetera, we did utilize recruiting firms because we wanted to get the best talent out there, but yes of course historic going forward.
I'd call out we won't be adding those back on a regular cadence.
But that's something we just wanted to isolate and the.
In the interim just because of your hiring some bake rolls that where you're using current recruiting firm transport.
That makes sense, thanks for the clarification share.
No problem.
And I'm not showing any further questions in the queue I'd like to turn the current back over to the speakers for any closing remarks.
Well thanks, everyone for your time today, hopefully, we're able to answer your questions and look forward to continuing our conversations with many of the investors over the next couple of days, we really appreciate your time and appreciate the support that you've given us through this journey.
And to being a public company and the.
Great things are are coming so thanks again.
This concludes today's conference call. Thank you for participating you may now disconnect.
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