Q4 2021 Katapult Holdings Inc Earnings Call
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Good day and thank you for standing by. Welcome to the Catapult fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Wright, Vice President, Investor Relations. Please go ahead.
Good day, and thank you for standing by and welcome to the catapult fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today's conference.
Is being recorded I would now like to hand, the conference over to your speaker today, they'll write Vice President Investor Relations. Please go ahead.
Okay.
Bill Wright: Thank you and good morning. Welcome to Catapult's fourth quarter and full year 2021 earnings results and investor update conference call. With me today are Orlando Zayas, Chief Executive Officer, Carissa Cupido, Chief Financial Officer, and Derek Menlon, Chief Operating Officer.
Thank you and good morning, welcome to catapult us fourth quarter and full year 2021 earnings results and Investor Update conference call with me today are Orlando Dance, Chief Executive Officer, Chris have Cupid, though.
<unk> financial officer, and Derek mainland Chief operating officer.
Bill Wright: We issued our earnings release and corresponding investor presentation this morning, and we will be referencing these during the call.
We issued our earnings release and corresponding Investor presentation. This morning, and we will be referencing these during the call.
Bill Wright: Both can be found on the Investor Relations section of our website. We will be available for Q&A following today's prepared remarks.
Both can be found on the Investor Relations section of our website, we will be available for Q&A. Following today's prepared remarks.
Before we begin I would like to remind everyone. This call will contain forward looking statements regarding future events and our financial performance, including statements regarding our market opportunity the impact of our growth initiatives and our future financial performance.
Bill Wright: Before we begin, I would like to remind everyone this call will contain forward-looking statements regarding future events and our financial performance, including statements regarding our market opportunity, the impact of our growth initiatives, and our future financial performance.
Bill Wright: These should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports, including our Form 10-K for the year ended December 31st, 2021.
Should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports, including our Form 10-K for the year ended December 31 2021.
Bill Wright: These statements reflected 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. Except 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.
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 except 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.
Lies.
During today's discussion of our financial performance, we will provide certain financial information that constitute non-GAAP financial measures under SEC rules. These include measures such as adjusted EBITDA and adjusted net income. These non-GAAP financial measures should not be considered replacements for and should be read together with our GAAP results.
Bill Wright: During today's discussion of our financial performance, we will provide certain financial information that constitute non-GAAP financial measures under SEC rules. These include measures such as adjusted EBITDA and adjusted net income. These non-GAAP financial measures should not be considered replacements for and should be read together with our GAAP results.
Bill Wright: Reconciliations to GAAP measures and certain additional information are also included in today's earnings release, which is available on the investor relations section of our website.
Reconciliations to GAAP measures and certain additional information are also included in today's earnings release, which is available on the Investor Relations section of our website.
This call is being recorded and a webcast will be available for replay on the Investor Relations section of our website I will now turn the call over to Orlando.
Bill Wright: This call is being recorded and a webcast will be available for replay on the investor relations section of our website. I will now turn the call over to Orlando.
Orlando Zayas: Thanks, Bill. Good morning, everyone, and thank you for joining us. On today's call, we'll review our fourth quarter and full year results for 2021. In addition, we're going to provide a deeper dive regarding what we're seeing in the current macro environment, as well as provide an update on our growth strategy.
Thanks, Bill Good morning, everyone and thank you for joining us on today's call, we'll review our fourth quarter and full year results for 2021. In addition, we're going to provide a deeper dive regarding what we're seeing in the current macro environment as well as provide an update on our growth strategy.
Orlando Zayas: We realize many of you are new or potential investors to Catapult, so we'd like to begin today with a brief overview of what Catapult is all about, starting on slide six.
We realize many of you are new or potential investors to catapult. So we'd like to begin today with a brief overview of what catapult is all about starting on slide six.
Orlando Zayas: We are a company that first and foremost is focused on bringing financial inclusion to underserved, non-prime consumers.
We are a company that first and foremost is focused on bringing financial inclusion to underserved non prime consumers.
Orlando Zayas: At Catapult, we provide an attractive solution for these non-prime consumers to access the essential products they need for everyday living.
At catapult, we provide an attractive solution for these non prime consumers to access the essential products they need for everyday living.
Orlando Zayas: Our highly scalable proprietary technology enables us to provide both merchants and consumers with a clear, transparent lease purchase solution that facilitates transactions directly at the online checkout or point of sale.
Our highly scalable proprietary technology enables us to provide both merchants and consumers with a clear transparent lease purchase solution that facilitates transactions directly at the online checkout or point of sale.
Orlando Zayas: Slide seven details some of the key attributes about Catapult's leading e-commerce lease-to-own platform. We believe that our focus on non-prime consumers positions us to capture significant share of the large virtual lease-to-own market.
Slide seven details some of the key attributes about catapult, leading ecommerce lease to own platform. We believe that our focus on non prime consumers positions us to capture significant share of the large virtual lease to own market.
Orlando Zayas: Our proprietary technology platform, along with our sophisticated risk and decision modeling, is designed to enable us to deliver value-added solutions to our merchants and consumers.
Our proprietary technology platform, along with our sophisticated risks and decision modeling is designed to enable us to deliver value added solutions to our merchants and consumers.
We have a robust suite of <unk> solutions across a variety of integrated point of sale options that is designed to enable merchants to efficiently promote and sell incremental inventory.
Orlando Zayas: We have a robust suite of merchant solutions across a variety of integrated point-of-sale options that is designed to enable merchants to efficiently promote and sell incremental inventory.
Orlando Zayas: We believe Catapult's seamless customer experience wins repeat customer business due to our simple application process, flexible and transparent payment options, and innovative lease financing solution.
We believe catapult seamless customer experience wins repeat customer business due to our simple application process flexible and transparent payment options and innovative lease financing solutions.
Orlando Zayas: Turning to slide nine, as you can see from these highlights, our team continues to navigate the difficult macro environment for both our merchants and consumers.
Turning to slide nine as you can see from these highlights our team continues to navigate the difficult macro environment for both our merchants and consumers.
Orlando Zayas: As we have mentioned on past calls, the current macro challenges, including ongoing supply chain headwinds, the end-of-government stimulus, and changes in consumer spending continues to impact the consumer and merchant environment.
As we have mentioned on past calls the current macro challenges, including ongoing supply chain headwinds the end of government stimulus and changes in consumer spending continues to impact the consumer and merchant environments.
We are confident in our ability to navigate these challenges and remain focused on delivering our long term objectives to capture new volume opportunities and create value for shareholders.
Orlando Zayas: We are confident in our ability to navigate these challenges and remain focused on delivering our long-term objectives to capture new volume opportunities and create value for shareholders.
Looking back at 2021, some important takeaways to mentioned our number one.
Orlando Zayas: Looking back at 2021, some important takeaways to mention are, number one, fiscal year 2021 revenue grew 23% year over year.
Fiscal year 2021 revenue grew 23% year over year.
Orlando Zayas: Number two, despite the ongoing macro challenges noted, we added 20 new merchants in the fourth quarter, bringing our total to 102 new merchants in 2021, up 127% from 45 new merchants in 2020. Number three,
Number two despite the ongoing macro challenges noted we added 20, new merchants in the fourth quarter, bringing our total to 102, new margins in 2020 , one up 127% from 45, new merchants in 2020.
Number three.
Orlando Zayas: Our satisfaction metrics remain strong. Our net promoter score was 54 as of December 31st, 2021, and has grown to 59 as of the end of February , 2022, and repeat customers made up 53% of our Q4 2021 origination.
Our satisfaction metrics remains strong our net promoter score was 54 as of December 31, 2021, and has grown to 59 as of the end of February 2022, and repeat customers made up 53% of our Q4 2021 originations. We also have strong merchant retention.
Orlando Zayas: We also have strong merchant retention as demonstrated by our deepening relationships with key merchants during 2021.
Demonstrated by our deepening relationships with key merchants during 2021.
Orlando Zayas: Number four, we are accelerating our investment in initiatives that support our long-term growth strategy. We are adding critical personnel to our organization to facilitate execution of our strategy, as well as bring new leaders in key areas of growth opportunity.
Number four we are accelerating our investment in initiatives that support our long term growth strategy. We are adding critical personnel to our organization to facilitate execution of our strategy as well as bring new leaders in key areas of growth opportunity we.
Orlando Zayas: We are planning to invest in strategic product and technology initiatives that are designed to enable us to capture more market share. As we build our already solid operating foundation, we believe we're in the initial stages of creating a sizable, durable, and scalable business, which I will discuss in more detail later in the presentation.
We are planning to invest in strategic product and technology initiatives that are designed to enable us to capture more market share as we build our already solid operating foundation. We believe are in the initial stages of creating a sizeable durable and scalable business, which I will discuss in more detail later in the presentation.
Orlando Zayas: I will now turn it over to Carissa, our CFO , who will provide more details on our financial performance.
I will now turn it over to Chris <unk>, our CFO , who will provide more details on our financial performance.
Carissa Cupido: Thank you, Orlando. As detailed on slide 10, Q4 largely played out in line with our quarter-to-date update, which is released on December 1st after Cyber 5.
Thank you Orlando as detailed on slide 10 keys for largely played out in line with our quarter to date update which was released on December 1st after cyber files.
Carissa Cupido: Total revenue for the fourth quarter of 2021 was $73.3 million, which was flat year-over-year.
Although revenue for the fourth quarter of 2021 was $73 3 million, which was flat year over year.
Carissa Cupido: Gross originations were down slightly year over year as our retailers continue to face supply chain challenges, shifts in consumer spending habits, and with stimulus dollars exhausted, our consumers slowed down major purchases.
Originations were down slightly year over year as our retailers continue to face supply chain challenges shift in consumer spending habits, and what stimulus dollars exhausted, our consumer slowdown major purchases.
Carissa Cupido: Growth profit was down $1.2 million year-over-year due to lower lease margins driven in part by customer pricing offers and promotions that we offered throughout the holiday season, as well as credit normalization to higher pre-pandemic levels. Our net income for fourth quarter was $7.5 million compared to $3.9, and adjusted EBITDA for the fourth quarter of 2021 decreased by $10.3 million as we continued to invest for growth and incurred ongoing public company costs.
Gross profit was down one 2 million year over year due to lower lease margin driven in part by customer pricing offers information that we offered throughout the holiday season, as well as credit normalization to higher pre pandemic levels. Our net income for fourth quarter was $7 5 million compared to $3 nine and adjusted EBITDA for the fourth quarter of 2021 decreased.
$10 3 million as we continue to invest for growth and incurred ongoing public company costs.
Carissa Cupido: Turning to slide 11, overall operating expenses were up 7.8 million year-over-year. This operating expense growth is largely due to three factors. One, increased bad debt expense due to continued credit normalization. I will discuss the treatment of bad debt expense going forward on slide 15. Two, higher compensation costs from the addition of 36 full-time employees during the year as part of our strategic growth plan. And three, increased general and administrative expenses related to public company costs and higher marketing spend.
Turning to slide 11 overall operating expenses were up $7 8 million year over year. This operating expense growth is largely due to three factors one increased bad debt expense due to continued heightened obligation I will discuss the treatment of bad debt expense going forward on slide 15, Q higher compensation cost from the addition of 36.
Full time employees during the year as part of our strategic growth plan and three increased general and administrative expenses related to public company costs and higher marketing spend.
Full year financial results are presented on slide 12, gross originations increased 5% to $248 million in the face of a challenging macro backdrop during 'twenty one.
Carissa Cupido: Full year financial results are presented on slide 12. Growth originations increased 5% to 248 million in the face of a challenging macro backdrop during 21.
Total revenue for the full year 2021 was $3 $3 1 million up 23% year over year net income was modestly lower at $21 2 million in 2020, and adjusted EBITDA for 2021 decreased to $17 3 million, which reflects the addition of new employees throughout the air other investments in growth initiatives aimed at increasing.
Carissa Cupido: Total revenue for the full year of 2021 was $303.1 million, up 23% year-over-year. Net income was modestly lower at $21.2 million than 2020. And adjusted EBITDA for 2021 decreased to $17.3 million, which reflects the addition of new full-time employees throughout the year, other investments and growth initiatives aimed at increasing market penetration, and public company costs.
Market penetration and public company costs.
Carissa Cupido: Turning to slide 13, effective January 1, 2022, the company has adopted a revised standard for accounting for leases as required by GAAP, ASD 842 leases.
Turning to slide 13 effective January one 2022, the company has adopted the revised standard for accounting for leases as required by GAAP ASC 842 leases. This is a leasing standard that for catapult dictate the timing of the recognition of lease in revenue and AUM.
Carissa Cupido: This is a leasing standard that for Catapult dictates the timing of the recognition of leasing revenue and will modify the accounting treatment of bad debt expense within the income statement.
Modify the accounting accounting treatment, our bad debt expenses in the income statement.
Carissa Cupido: As a result of this adoption this year, going forward, the company will record leased revenues on a cash basis and will no longer record rental revenue arising from leased receivables or any corresponding bad debt expense.
As a result of this adoption this year going forward the company will record lease revenues on a cash basis and will no longer record rental revenue arising from lease receivables or any corresponding bad debt expense.
Carissa Cupido: We will adopt the accounting standard for the three-month ending March 31st, 2022, using the modified retrospective approach and plan to adopt the optional transition method in which reporting entities are permitted to not apply ASC 842 for comparative periods in the year of adoption. Therefore, we will not recast or restate 2021 or prior periods to conform to the new standard.
We will adopt the accounting standard for the three months ending March 31, 2020 can easily.
Using the modified retrospective approach and plan to adopt the optional transition method and wage reporting entities are permitted to not apply ASC 840, Q for comparative periods in the year of adoption. Therefore, we will not recast our restate 2021, our prior periods chicken farm.
The new standard.
Carissa Cupido: On slide 14, for illustrative purposes only, we are disclosing here non-GAAP revenue. The elimination of bad debt expense and non-GAAP income is for provision for income taxes, as if the lesser accounting impacts of ASC 842 were in effect for the years ended December 31, 2021, and 2020, respectively.
On slide 14 for illustrative purposes, only we are disclosing here non-GAAP revenue the elimination of bad debt expense and non-GAAP income before provision for income taxes as if the lessor accounting impact of ASC eight 2018, where in effect for the years ended December 31st 2021 and 2020.
Respectively.
Carissa Cupido: As you can see, on a non-GAAP basis, applying the impact of ASD age 42, rental revenue is reduced as compared to our historical results, which reflects the timing of past receipts, and the corresponding bad debt expense is eliminated as compared to our as-reported numbers.
As you can see on a non-GAAP basis applying the impact of ASC 842 rental revenue is reduced as compared to our historical results, which reflects the timing of cash receipts.
And the corresponding bad debt expense is eliminated as compared to our as reported numbers.
Carissa Cupido: Since that expense will no longer be reported starting in the quarter ending March 31, 2022, due to our adoption of ASC 842, in order to evaluate lease portfolio performance, we point you to the impairment charges related to property health release that we book each quarter, which we have detailed on the next slide.
Since bad debt expense will no longer be reported starting in the quarter ending March 31, 2022 due to our adoption of ASC 842 in order to evaluate lease portfolio performance. We point you to the impairment charges related to property held for these that we book each quarter, which we've detailed on the next slide.
Looking at slide 15 impairment charges related to property held for lease as a percentage of gross originations was five 9% in Q4 2021 as.
Carissa Cupido: Looking at slide 15, impairment charges related to property health release as percentage of gross origination was 5.9% in Q4 2021.
Carissa Cupido: As we have previously detailed, the stimulus payments that occurred during 2020 and early 2021 in response to COVID-19 led to historically favorable credit performance for both prime and non-prime consumers. Beginning in the third quarter of 2021, the credit environment started to normalize, and heading into Q4 2021, a significant increase in inflation coupled with an absence of stimulus funds further pressured performance.
As we have previously detailed the stimulus payments that occurred during 2020 and early 2021, and our response to COVID-19 led to historically favorable credit performance for both prime and non prime consumers beginning of the third quarter of 2021, the credit environment started to normalize and heading into Q4 2021, a significant increase in inflation, coupled with an absence of.
Stimulus funds further pressured performance.
Carissa Cupido: In response to these new data trends and a deterioration in credit quality, we initiated proactive tightening of our underwriting in Q4 2021, and we have continued to do so into 2022.
In response to these new data trends and a deterioration in credit quality.
Initiated proactive tightening of our underwriting Q4, 2021 and we are continuing to do so into 2022.
Carissa Cupido: We do anticipate impairment charges as a percentage of gross origination to trend up to higher pre-pandemic levels for the first half of 2022. I will now turn it over to Orlando to discuss.
We do anticipate impairment charges as a percentage of gross origination to trend up to higher pre pandemic levels for the first half of 2020 two.
I'll now turn it over to Orlando to discuss our strategic investments.
Orlando Zayas: Slide 16 details the strategic investments we made in 2021 that position us to capture the large growth opportunity ahead. In sales and marketing, we expanded the total sales and marketing team from 21 to 46 full-time employees, all focused on capturing and onboarding new merchants.
Slide 16 details the strategic investments, we made in 2021 that position us to capture the large growth opportunity ahead in sales and marketing we expanded the total sales and marketing team from 21% to 46 full time employees, all focused on capturing and Onboarding new merchants.
Orlando Zayas: We also partnered with our merchants on co-promotion and messaging, leading to insightful learnings on what marketing tactics we believe work best to attract new customers and improve lifetime value. In addition, we expanded digital marketing efforts and customer acquisition channels.
We also partnered with our merchants on co promotion messaging, leading to insightful learnings on what marketing tactics, we believe work best to attract new customers and improve lifetime value and.
In addition, we expanded digital marketing efforts and customer acquisition channels.
Orlando Zayas: In product, we hired and onboarded additional strategic product roles, which are intended to allow us to launch our innovative enhancements and capabilities at a faster pace.
In product, we hired and on boarded additional strategic product rolls, which are intended to allow us to launch our innovative enhancements and capabilities at a faster pace. We also built and deployed dynamic testing environment for real time conversion flow and individualized offers this powerful tool is designed to be instrumental in Mac.
Orlando Zayas: We also built and deployed dynamic testing environment for real-time conversion flow in individualized offering.
Orlando Zayas: This powerful tool is designed to be instrumental in maximizing our conversion rates and we believe is a competitive differentiator for how we go to market.
<unk>, our conversion rates and we believe is a competitive differentiator for how we go to market and.
Orlando Zayas: In addition, our team developed proof of concepts for next generation lease to own capabilities, which we anticipate launching in 2022.
In addition, our team developed proof of concepts for next generation lease to own capabilities, which we anticipate launching in 2022.
Orlando Zayas: We also hire key roles at the management level in technology, data science, and analytics. We continue to integrate with more e-commerce platforms and point-of-sale systems that will drive future volumes.
We also hired key roles at the management level in technology data science and analytics, we continue to integrate with more e-commerce platforms and point of sale systems that will drive future volume.
Orlando Zayas: We also made a sizable investment in infrastructure and security to ensure we can scale effectively.
We also made a sizable investment in <unk>.
Restructure and security to ensure we can scale effectively.
Orlando Zayas: All these investments, which we characterize as core investments, have created a solid foundation, which we believe will enable us to accelerate growth in the future.
All of these investments, which we characterize as core investments have created a solid foundation, which we believe will enable us to accelerate growth in the future.
Speaker Change: I would now like to step back and provide an overall investor update, beginning with market overview on slide 18.
I would now like to step back and provide an overall investor update beginning with market overview on slide 18.
Speaker Change: We play in a virtual lease-to-own market estimated to be approximately $40 to $50 billion.
We play in the virtual lease to own market estimated to be approximately $40 billion to $50 billion. We believe we have captured less than 1% of this addressable market. So our opportunity is vast.
Speaker Change: We believe we have captured less than 1% of this addressable market, so our opportunity is vast.
As you can see on slide 19, we believe we have a competitive advantage that differentiates us from our peers. We're the only E Commerce L. T. O company that is focused solely on serving non prime consumers. We view the prime focus lenders not as competition, but as partners or.
Speaker Change: As you can see on slide 19, we believe we have a competitive advantage that differentiates us from our peers. We're the only e-commerce LTO company that is focused solely on serving non-prime consumers.
Speaker Change: we view the prime focus lenders not as competition, but as partners.
Speaker Change: Our product serves a different type of consumer from the prime lenders, given it is a lease, not a loan, and has different requirements, regulations, and benefits.
Our product serves a different type of consumer from the prime lenders given it is a lease not alone and has different requirements regulations and benefits given these differences prime lenders look to us as a solution and strategic partner for this particular segment of the durable goods e-commerce market.
Speaker Change: Given these differences, prime lenders look to us as a solution and strategic partner for this particular segment of a durable goods e-commerce market.
Speaker Change: We are also differentiated by our focus on e-commerce as other lease-to-own businesses that serve non-prime consumers are largely based in brick-and-mortar stores.
We are also differentiated by our focus on e-commerce as other leased to owned businesses that serve non prime consumers are largely based in brick and mortar stores.
Speaker Change: As a result, we believe we are well positioned to capture a significant share of the addressable market as we focus on our strategic growth plan.
As a result, we believe we are well positioned to capture a significant share of the addressable market as we focus on our strategic growth plans I will now turn it over to Derek to discuss our business in more detail.
Speaker Change: I will now turn it over to Derek to discuss our business in more detail.
Derek Menlon: Thank you, Orlando. On slide 21, you can see that Catapult provides value to merchants through our proprietary and differentiated technology and highly predictive risk model, which is designed to give merchants the opportunity to access a large segment of underserved non-prime consumers.
Thank you Orlando on.
On slide 21, you can see that catapult provides value to merchants through our proprietary and differentiated technology and highly predictive risk model, which is designed to give merchants the opportunity to access a large segment of underserved non prime consumers.
Derek Menlon: We believe that many of the lease sales enabled by Catapult are incremental to our merchant.
We believe that many of the lease sales enabled by accountable our incrementals are our merchant.
Derek Menlon: as this segment of consumers would have otherwise been declined by traditional financing options.
As this segment of consumers would have otherwise been declined by traditional financing options.
Derek Menlon: Our simple and straightforward application process and strong customer service focus is designed to lead to high conversion rates and more repeat transactions.
Our simple and straightforward application process and strong customer service focus is designed to lead to higher conversion rates and more repeat transactions.
Derek Menlon: Our proprietary tech solution is entirely merchant-focused, designed for quick and efficient integration of our platform using a variety of options, including Platform, Direct, and Waterfall. Each of these options is intended to provide a seamless experience for our merchant partners and position them to increase their sales capture. Let me touch upon a few examples and success stories over the next few slides.
Our proprietary tech solution is entirely merchant focused designed for quick and efficient integration of our platform using a variety of options, including platform direct and waterfall. Each of these options is intended to provide a seamless experience for our merchant partners and position them to increase their sales capture let.
Let me touch upon a few examples of success stories over the next few slides.
Derek Menlon: Slide 22 provides detail on our platform and direct integration options.
Slide 22 provides detail on our platform and direct integration options. Our platform integration allows catapult creative payment solution in the form of a plug in our extension for merchant.
Derek Menlon: Our platform integration allows Catapult to create a payment solution in the form of a plug-in or extension for a merchant.
Derek Menlon: This provides a streamlined experience for the merchant since no development is required.
This provides a streamlined experience for the merchant since no development is required.
Derek Menlon: We're integrated with e-commerce platforms like Magento and Shopify. If a merchant is on this platform where we are integrated, it can be as quick as 30 minutes to complete an integration and be a payment option in their shopping cart.
Our integrated with e-commerce platforms like magenta on Shopify, if a merchant is honest platform, where we're integrated it can be as quick as 30 minutes completed integration and be a payment option on the shopping cart.
Derek Menlon: We also offer direct custom integrations via APIs. This provides merchants the flexibility to integrate with Catapult if they utilize a proprietary shopping platform.
We also offer direct custom integrations via a P. S. This provides merchants the flexibility to integrate with catapult if they utilize a proprietary shopping platform.
We are also partnering with select prime lenders to offer a waterfall integration a waterfall is where the consumers declined application will flow from the prime lender to others automatically giving the consumer the best option for their credit situation.
Derek Menlon: We are also partnered with select prime lenders to offer a waterfall integration. A waterfall is where the consumer's declined application will flow from the prime lender to others automatically, giving the consumer the best option for their credit situation.
Derek Menlon: Our first waterfall partner realized that having a solution for their declines was important to their retailer.
Our first waterfall partner realize that having a solution for their declines was important to there is retailers they chose to integrate with us, creating a waterfall where the consumer only has to submit the application once.
Derek Menlon: They chose to integrate with us, creating a waterfall where the consumer only has to submit the application once.
Derek Menlon: If the prime lender declines the application, the data is electronically transmitted to us and we have the opportunity to approve this customer.
It's the prime lender declines the application the data electronically transmitted to us and we have the opportunity to improve this customer.
Derek Menlon: e-commerce retailers understand that when a consumer is searching for financing and payment flexibility, it's important to give them the best offer for their credit situation or they may lose that customer to another retailer.
e-commerce retailers understand that when a consumer is searching for financing and payment flexibility, it's important to give them the best offer for their credit situation.
They lose that customer to another retailer.
Derek Menlon: We believe we offer a clear and compelling value proposition to consumers, as you can see on slide 24.
We believe we offer a clear and compelling value proposition to consumers as you can see on slide 24.
Derek Menlon: Our platform is designed to remove financial barriers to increase inclusion, affordability, and access for underserved consumers in order to give them options to purchase the durable goods that they need for their daily lives.
Our platform is designed to remove financial barriers to increase inclusion affordability and access for underserved consumers in order to give them options to purchase the durable goods that they need for their daily lives.
Derek Menlon: We offer the consumer a way to make purchases without the need for a credit score and without worrying about late fees.
We offer the consumer a way to make purchases without the need for a credit score and without worrying about late fees.
Derek Menlon: But perhaps most importantly, we offer flexible and fully transparent payment options.
But perhaps most importantly, we offer flexible and fully transparent payment options.
Derek Menlon: The application process is transparent with no hidden fees or charges since we are communicating directly with the consumer online.
The application process is transparent with no hidden fees or charges. Since we are communicating directly with the consumer online.
Derek Menlon: We offer the consumer the option to get to ownership if that's their goal. Our most cost-effective option is to buy out the item in 90 days or less, charging a 5% fee. After 90 days, we'll discount the remaining lease payments versus the full contractual cost to help facilitate ownership. Our goal is to be there for our consumer time and time again as their needs arise.
We offer the consumer the option to get to the ownership that that their goal. Our most cost effective option is to buy out the item in 90 days or less charge and a 5% fee.
After 90 days will discount remaining lease gains versus the full contractual cost to help facilitate ownership.
Our goal is to be there for our consumer time and time again as their needs arise.
Derek Menlon: Being upfront about how the lease works and communicating along the way is important to us as we work to increase financial inclusion for these underserved, non-crime communities.
Being upfront about how the lease works in communicating along the way is important to us as we work to increase financial inclusion for these underserved non prime consumers.
Derek Menlon: Our customers also appreciate the ease of use of the Catapult platform and our customer-centered approach.
Our customers also appreciate the ease of use of catapult platform and our customer centric approach.
Derek Menlon: Slide 25 demonstrates our application and checkout process. We provide consumers with a seamless and intuitive experience.
Slide 25 demonstrates our application and checkout process, we provide consumers with a seamless and intuitive experience our three step lease application as fast simple and discrete with only 14 builds to Phil Phil No requirement to provide employment information or personal references and importantly, no FICO hard credit Bureau check.
Derek Menlon: Our three-step lease application is fast, simple, and discreet, with only 14 fields to fill out, no requirements to provide employment information or personal references, and importantly, no FICO hard credit bureau checks.
Derek Menlon: Once our consumers have completed the application process, they're given transparent lease terms before any money is collected.
Once our consumers have completed the application process, there given transparent lease terms before any monies collected.
Derek Menlon: Customers can pay by payment card and their item is immediately shipped after the initial payment is made.
Customers can pay by payment card in their item is immediately shipped after the initial payment is made.
Derek Menlon: Finally, we offer our customers on-demand access to a lease management portal for their convenience.
Finally, we offer our customers on demand access to our lease management portal for their convenience.
Derek Menlon: As part of our mission of financial inclusion for all, we empower our customers to understand more about their financing options, make changes to their account, and communicate with us through chat, text, and email. For those who wish to call, our support teams are using digital tools to rapidly solve the consumer's questions and get them back to enjoying their items. I'll now turn it back to Orlando to discuss our strategy for growth.
As part of our mission of financial inclusion for all we empower our customers to understand more about their financing options make changes to their account and communicate with us through chat text and email.
For those who wish to call. Our support teams are using digital tools to rapidly solve the consumer's questions and get them back to enjoying their items I will now turn it back to Orlando to discuss our strategy for growth.
Orlando Zayas: Thanks, Derek. Turning to slide 27, I'd like to share with you our vision for the future of Catapult. We are well positioned for the growth opportunities ahead of us as a result of our available cash and strategic investments that we made in 2021.
Thanks, Derrick turning to slide 27, I'd like to share with you our vision for the future of catapult, we are well positioned for the growth opportunities ahead of us as a result of our available cash and strategic investments that we made in 2021.
Orlando Zayas: While the macro environment is challenging today, the elements for success in our category remain the same, and in 2022, we are deliberately continuing to pursue growth initiatives that we believe will set us up for success over many years to come.
While the macro environment is challenging today the elements for success in our category to remain the same and in 2022, we are deliberately continuing to pursue growth initiatives that we believe will set us up for success over many years to come.
Orlando Zayas: Based on our experience in this industry, we anticipate the current macro backdrop conditions will have the potential to increase the number of consumers who need our product and expand the number of merchants looking to capture incremental sales.
Based on our experience in this industry, we anticipate the current macro backdrop conditions will have the potential to increase the number of consumers who need our products and expand the number of merchants looking to capture incremental sales as a result, our belief is that companies who make investments today are going to be in the best position.
Orlando Zayas: As a result, our belief is that companies who make investments today are going to be in the best position to take advantage of these long-term secular trends.
To take advantage of these long term secular trends.
Orlando Zayas: We anticipate that the investments outlined on this slide will best position us to capture market share and grow our company.
We anticipate that the investments outlined on this slide will best position us to capture market share and grow our company.
Orlando Zayas: We recognize that we have only scratched the surface of this $40 to $50 billion virtual LTO market and that the opportunity ahead of us is significant.
We recognize that we have only scratched the surface of this $40 billion to $50 billion virtual L. T O market led the opportunity ahead of us is significant.
For the past year, we've invested to build a solid core foundation for growth with that in place. We can now look ahead at the near and medium term initiatives that we have laid out on this slide.
Orlando Zayas: For the past year, we've invested to build a solid core foundation for growth. With that in place, we can now look ahead at the near and medium-term initiatives that we have laid out on this slide.
Orlando Zayas: In the expansion category, we are focused on hiring strategic leadership talent that can drive execution.
And the expansion category, we are focused on hiring strategic leadership talent that can drive execution. In addition, we are laser focused on upgrading sales and marketing processes and output while at the same time building capabilities across our product tech and data functions.
Orlando Zayas: In addition, we are laser-focused on upgrading sales and marketing processes and output, while at the same time building capabilities across our product, tech, and data functions.
Orlando Zayas: Our goal for these investments is to pave the way for our optimized category. In this category, we are focusing our investment dollars on the following. Number one, ensuring our customer gets the offer that is right for them. Number two, maximizing conversion rates and originated lease volume. And three, accelerating the merchant flywheel and setting ourselves up to win larger enterprise accounts.
Our goal for these investments is to pave the way for our optimized category in this category, we are focusing our investment dollars on the following number one ensuring our customer gets the offered that is right for them number two maximizing conversion rates and originated lease volume and three accelerating the merchant fly.
Wheel and setting ourselves up to win larger enterprise accounts.
Orlando Zayas: Turning to slide 28, we plan on investing $15 to $21 million in growth initiatives in 2021. These initiatives are intended to focus on opportunities to access more consumers and convert more merchants for this purpose driving growth. While this is our current plan, given the inputs we see today, I would like to note that our investment spent is discretionary, and the team and I will continue to monitor the macro environment and adjust this spend if we deem necessary.
Turning to slide 28, we plan on investing $15 million to $21 million and growth initiatives. In 2021. These initiatives are intended to focus on opportunities to access more consumers and convert more merchants for this purpose driving growth. While this is our current plan given the inputs we see today.
I would like to note that our investment spend is discretionary and the team and I will continue to monitor the macro environment and adjust the spend that we deemed necessary.
Orlando Zayas: At a high level, hiring for strategic leadership roles has been a huge focus for us, and I am pleased to announce that we have been successful in this area.
At a high level of hiring for strategic leadership roles has been a huge focus for us and I am pleased to announce that we have been successful in this area.
Orlando Zayas: So far in 2022, we have onboarded a Chief Marketing Officer, Chief Human Resources Officer, VP of Strategy, VP of Sales, and VP of Partnerships, all with extensive experience at companies such as Klarna, Edgen, UBS, Verizon, and Morgan Stanley .
So far in 2022, we have on boarded a chief marketing officer, Chief Human Resources Officer, VP of strategy VP of sales and VP of partnerships all with extensive experience at companies such as Florida at Gen UBS Verizon in Morgan Stanley .
Orlando Zayas: These leaders will be instrumental in moving the company forward to help execute on the initiatives detailed on this slide.
These leaders will be instrumental in moving the company forward to help execute on the initiatives detailed on this slide.
Orlando Zayas: When it comes to sales initiatives, we are laser-focused on adding new merchants. We believe there are thousands of eligible merchants offering durable goods that could benefit from access to our platform, and we plan to target with an optimized sales process developed by our new VP of Sales, Marino Ruiz.
When it comes to sales initiatives, we are laser focused on adding new merchants. We believe there are thousands of eligible merchants offering durable goods that could benefit from access to our platform and we plan to target with an optimized sales process developed by our new VP of sales Marino Ruiz.
Orlando Zayas: Marino comes to us from Shopkeep, where he implemented a structure plan around sales processes, which utilized data-driven decisions to accelerate the merchant flywheel.
Arena Comstock from shop, keep where he implemented a structure plan around sales processes, which utilize data driven decisions to accelerate the merchant flywheel. He.
Orlando Zayas: He is partnering with our new Chief Marketing Officer, Colleen Gorski, to expand our B2B marketing opportunities, leveraging her experience at Clark.
He is partnering with our new Chief marketing officer, choline Gorski to expand our b to b marketing opportunities leveraging her experience at corner.
Orlando Zayas: We are also dedicated to deepening the relationships with our existing merchants, where we see opportunity to grow volume through increased sales penetration.
We are also dedicated to deepening the relationships with our existing merchants, where we see opportunity to grow volume through increased sales penetration.
Orlando Zayas: Currently, our lease originations represent a modest percentage of total sales volume of our merchants.
Currently our lease originations represent a modest percentage of total sales volume of our merchants. We believe we can increase our penetration rate of merchants overall total sales by collaborating with merchants to target a new an engaged customer base that is looking for solutions to acquire the items they need for everyday living.
Orlando Zayas: We believe we can increase our penetration rate of merchants' overall total sales by collaborating with merchants to target a new and engaged customer base that is looking for solutions to acquire the items they need for everyday living.
Our marketing investments focused around expanding brand awareness and positioning initiatives. In addition, we plan to expand our customer reach through targeted customer promotions and cross shopping and product. We are building new functionality that is designed to increase customer conversion rates and repeat business through new product capabilities.
Orlando Zayas: Our marketing investments focus around expanding brand awareness and positioning initiatives. In addition, we plan to expand our customer reach through targeted customer promotions and cross-shopping. In product, we are building new functionality that is designed to increase customer conversion rates and repeat business through new product capabilities and enhanced propensity data models.
Abilities and enhanced propensity data models, we're also focusing on expanding our partnership network to provide new solutions to both consumers and merchants.
Orlando Zayas: We are also focusing on expanding our partnership network to provide new solutions to both consumers and merchants.
Orlando Zayas: Our technology focus is on building out new digital and omni-channel experiences, as well as continue to integrate with additional e-commerce platforms and lenders to further expand our footprint.
Our technology focus is on building out new digital and Omnichannel experiences as well as continue to integrate with additional e-commerce platforms and lenders to further expand our footprint.
Moving to slide 29, as we turn to 2022 many of the recent macro headwinds from Q4 2021 have carried into Q1 2022.
Orlando Zayas: Moving to slide 29, as we turn to 2022, many of the recent macro headwinds from Q4 2021 have carried into Q1 2022.
Q1, 2022 represents our most difficult comp this year as consumers were bolstered by two stimulus tax last year during the first quarter.
Orlando Zayas: Q1 2022 represents our most difficult comp this year as consumers were bolstered by two stimulus checks last year during the first quarter, one in January and one in March, that drove spending and, consequently, our gross origination volume.
One in January and one in March that drove spending and consequently, our gross origination volume are.
Orlando Zayas: Our key merchant partners are experiencing lower sales volumes than a year ago. In addition, we have continued to tighten underwriting as we remain prudent in our lease portfolio risk management, leading to fewer approvals. The combination of
Our key merchant partners are experiencing lower sales volumes than a year ago. In addition, we have continued to tighten underwriting as we remain prudent in our lease portfolio risk management, leading to fewer approvals.
The combination of these factors.
Orlando Zayas: is resulting in originations trending down approximately 25% year-over-year through February .
Is resulting in originations trending down approximately 25% year over year through February .
Orlando Zayas: We expect the challenging macro environment to persist, and that we will have tough comps through Q2, but our expectation is that our largest merchant partners will be able to return to growth in the second half of the year.
We expect the challenging macro environment persist and that we will have tough comps through Q2, but our expectation is that our largest merchant partners will be able to return to growth in the second half of the year.
Orlando Zayas: We also anticipate impairment charges returning to pre-pandemic levels as lower performing lease vintages work through the lifecycle.
We also anticipate impairment charges, returning to pre pandemic levels as lower performing lease vintages worked through the lifecycle.
Our management team has been working with the non prime consumer for over a decade and have observed that as the credit environment becomes weaker it leads to prime focused lenders that previously expanded their underwriting due to record low delinquencies will tightened their underwriting.
Orlando Zayas: Our management team has been working with the non-prime consumer for over a decade and have observed that as the credit environment becomes weaker, it leads to prime-focused lenders that previously expanded their underwriting due to record low delinquencies will tighten their underwriting.
Orlando Zayas: This will drive the volume of applications as well as increase the credit quality of customers looking to us for payment solutions.
This will drive the volume of applications as well as increased the credit quality of customers looking to us for payment solutions.
We believe we have the tools and available cash to withstand what we anticipate our near term macro headwinds our proprietary risk model is calibrated for a dynamic credit environment. Our focus is to underwrite conservatively now in order to have the capacity to add more leases later this year to the extent.
Orlando Zayas: We believe we have the tools and available cast to withstand what we anticipate are near-term macro headwinds.
Orlando Zayas: our proprietary MISP model is calibrated for a dynamic credit environment.
Orlando Zayas: Our focus is to underwrite conservatively now in order to have the capacity to add more leases later this year to the extent that historical trends bear out and higher quality customers start to come to us.
That historical trends bear out and higher quality customers start to come to us.
Orlando Zayas: As we look ahead, we are planning to seize the opportunity to invest in our business now so we remain the leader in the e-commerce non-prime finance segment.
As we look ahead, we are planning to seize the opportunity to invest in our business now. So we remain the leader in the E Commerce non Prime finance segment.
Slide 30 lays out our growth plan over the next three years, we have built a solid platform and ecosystem for non prime consumers to access high quality merchants and expand their e-commerce product choice.
Orlando Zayas: three years. We have built a solid platform and ecosystem for non-prime consumers to access high-quality merchants and expand their e-commerce product choice.
Orlando Zayas: Near term, our plans are to continue to grow our merchant base deep in relationships with existing merchants and partners and build out a robust pipeline.
Near term our plans are to continue to grow our merchant base deepen our relationships with existing merchants and partners and build out a robust pipeline product and technology enhancements that are designed to improve conversion rates by keeping the control of the transaction in the customers' hands are in the works the improvements are intended to.
Orlando Zayas: Product and technology enhancements that are designed to improve conversion rates by keeping the control of the transaction in the customer's hands are in the works.
Orlando Zayas: The improvements are intended to empower consumers with the knowledge that enable more informed and quicker purchasing decisions.
Empower consumers with the knowledge that enabled more informed and quicker purchasing decisions.
Orlando Zayas: We believe this flow will aid consumers' ability to purchase high-quality goods at retailers where they had previously been unable to qualify for financing.
We believe this flow will aid consumers ability to purchase high quality goods at retailers, where they had previously been unable to qualify for financing.
Orlando Zayas: Looking out further, we are developing additional ways to connect our merchants and non-prime consumers with solutions that are intended to drive lifetime value. We believe our platform and merchant integrations position us to be able to eventually expand to other financial products.
Looking out further we are developing additional ways to connect our merchants and non prime consumers with solutions that are intended to drive lifetime value.
We believe our platform and merchant integration position us to be able to eventually expand to other financial products.
Orlando Zayas: as our customers improve their credit scores and desire lower cost financing options.
As our customers improve their credit scores and desire lower cost financing options. We also plan to look to diversify our revenue by monetizing our data product platform and proprietary risk models.
Orlando Zayas: We also plan to look to diversify our revenue by monetizing our data, product platform, and proprietary risk models.
Orlando Zayas: Our goal of these efforts is to create a high-margin, transaction-based revenue and expand our share of the addressable market.
Our goal of these efforts, it's great a high margin transaction based revenue and expand our share of the addressable market.
Orlando Zayas: In conclusion, as we look ahead to the rest of the year, we are proud of our ability to provide high levels of both customer and merchant satisfaction.
In conclusion as we look ahead to the rest of the year. We are proud of our ability to provide high levels of both customer and merchant satisfaction. We believe our customers are well positioned to take advantage of strong long term trends in digital commerce and alternative payment solutions and strategically grow our company.
Orlando Zayas: We believe our customer is well-positioned to take advantage of strong, long-term trends in digital commerce and alternative payment solutions, and strategically grow our company per the investment strategy that we have laid out today. With that,
The investment strategy that we have laid out today.
With that I will now take questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Speaker Change: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key.
Speaker Change: Our first question comes from Josh Siegler with Cantor Fitzgerald. Your line is open.
Our first question comes from Josh <unk> with Cantor Fitzgerald. Your line is open.
Josh Siegler: Yes, hi, good morning. Thanks for taking my question. I was wondering if you could start by providing a little more color on the sales team build out. Specifically, do you expect this initiative to materially contribute to your revenue growth in 2022?
Yes, hi, good morning. Thanks for taking my question I was wondering if you could start by providing a little more color on that.
Politically do you expect it to mature.
Really contribute to.
Right.
Good.
Okay.
Orlando Zayas: Thanks for asking the question. Yeah, this is Orlando. We have been very aggressive in hiring the team. I think we've gone from 721 to
Hi, Josh Thanks for asking the question Yeah. This Orlando.
We have been very aggressive in hiring the team I think we've gone from 21 to 40.
Orlando Zayas: 47, there are 40, sorry, got the number wrong. They're in the process of getting onboarded. We also hired a new VP of sales, Marina Ruiz, who came from ShopKey.
<unk> 47, or 40, sorry, I got the number one.
They're in the process of getting on boarded we also hired a new VP of sales Marino Ruiz, who came from shop keep.
Orlando Zayas: And he's doing a great job on the data analytics around sales, lead generation, and we're starting to see the fruits of that labor. We also see from a sales—and then we also hired a chief marketing officer.
And he's doing a great job on kind of the data analytics around sales lead generation and we're starting to see the fruits of that labor. We also see from a sales and then when we also hired a chief marketing officer.
Speaker Change: who, you know, has experience in BNPL and merchant,
Who has experience and B N P L and merchant.
Orlando Zayas: financing, and she's doing some really interesting things around how to drive the leads that are appropriate for our business and get them through the sales funnel as quick as possible. I think all these things are starting to come together with the new ads that we have, plus the new headcount that we had. So we're starting to see the merchant count tick up, but the lead generation is definitely on track to, I believe, have a successful second half of the year.
Financing and she she is doing some really interesting things around how to drive the leads that are appropriate for our business and get them through the sales funnel as quick as possible I think all these things are starting to come together.
The new ads that we have less the new head count that we had so now we're starting to see the merchant count tick up but the lead generation is definitely on track.
I believe have a successful second half of the year.
Excellent that's very helpful. And then as you mentioned you on boarded more than 100, new merchant.
Speaker Change: Excellent. That's very helpful. And then, as you mentioned, you know, you onboarded more than 100 new merchants this year. Do new customers typically generate a material contribution immediately, or is there a significant grant period that could provide a tailwind heading into 2022? Thank you.
New customers typically generate a material contribution immediately or very significant ramp period that should provide a tailwind heading into claims.
Thank you.
Hi, Josh this is Derrick I'll take that question.
Speaker Change: We see a variety of different ramp times depending on the size and the experience with financing by different retailers.
We see a variety of different ramp times, depending on the size and the experience with financing by different retailers.
Speaker Change: So the answer is that it depends. However, our team has been working closely again with the new resources that we brought on board and the new toolkits to ramp those new merchants much more quickly.
So.
The answer is that it depends however, our team has been working closely again with the.
The new resources that we brought onboard in the new tool kit to ramp those new merchants much more quickly.
Speaker Change: And typically, we'll see anywhere between three months to six months to see the full cycle come through as retailers get their merchandising established.
And typically you'll see anywhere between three months to six months to see the full cycle come through ads.
Retailers that the merchandising established and their consumer base.
Speaker Change: and their consumer base becomes more aware that this option is available. So we do expect to see some pull-through from those 100 retailers this year, and then as we continue to add more, the wedge just continues to grow. And Josh, this is Orlando. If I can add...
It becomes more aware that this option is available. So we do expect to see some pull through from those 100 retailers in this year and then as we continue to add more the wedge just continues to grow and Joshua propose Orlando if I can add.
Orlando Zayas: When we onboard a merchant, usually it's through either a waterfall or possibly a direct channel. It depends on where they come to us. And usually that's, you know, one of the two or the first integration. And then if they have stores, that would be the third. So the way we look at it is, you know, we want to get the integration done as quick as possible. Usually the waterfall integration comes first, then the direct integration into their shopping cart. So we're an option in their shopping cart and maybe on their finance page.
When we onboard a merchant.
It's through either a waterfall or possibly a direct channel it depends on on where they come to us unusually that one of the two or the first integration minute. They have stores that would be the third so the way we look at it is we want to get the integration done as quick as possible usually the waterfall integration comes first then the direct.
The integration into their into their shopping carts that were an option in their shopping cart and maybe on refinance page.
Orlando Zayas: And then, finally, if they have any storefronts, you know, we have the capacity to do the storefront. So that's where you see the volume increasing over time as we integrate those three different channels.
And then finally, if they have any storefront we have the capacity to the storefront. So that's where you see the volume increasing over time as we integrate those three different channels.
Okay.
Great. Thank you very much.
Okay.
Thanks.
Thank you our next question comes from.
Speaker Change: Thank you. Our next question comes from Anthony Chikumba with Loop Capital Markets. Your line is open.
Anthony <unk> with loop capital markets. Your line is open.
Anthony Chikumba: Good morning, thank you so much for taking my question. I guess my question is on the quarter to date lease originations. You know, it might be a bit tough to parse this out, but how much of that do you think is due to, you know, some of those macro trends that you identified as opposed to, you know, decisions you've made in terms of tightening your credit? How should we think about that?
Good morning. Thank you so much for taking my question.
I guess my question is on the quarter to date lease originations.
Might be a bit tough to parse that parse this out but how much of that do you think is due to some of those macro trends that you identified as opposed to.
Since you've made in terms of tightening your credit how should we think about that.
Hi, Anthony This is Chris Great question. So when we look at it you know at the macro impact that we're seeing at our largest retailers are affecting their sales. So our top on all of that is coming in in terms of.
Speaker Change: Great question. So when we look at it, it's a macro impact that we're seeing on our largest retailers are affecting their sales. So our top funnel that's coming in in terms of applications in the teens. So you can parse it out. That's really a macro impact that our merchants are challenged with right now. And then remainder of that 25% would be us proactively tightening and being conservative in our approval rates because of the macro condition in terms of the credit.
Application and they earn a team he could parse it out that that's really a macro impact.
Our merchants are actually are challenged with right now and then remainder of that 25% would be us proactively tightening and being conservative and our approval rate because of the macro condition in terms of the credit.
Speaker Change: Another important thing, Anthony, for you to just be reminded of is that year over year, we're coming off stimulus that occurred.
And another important thing Anthony for you Doug.
Minded of it is that year over year, we're coming off stimulus that occurred.
Speaker Change: right after the first of the year. And so just the comps are a little bit different year over year. However, we are seeing kind of a turnaround.
Right after the the.
First of the year and so just the comps are a little bit different year over year. However.
We are seeing.
Kind of a turnaround at that as things equalize and attack.
Got it no that's helpful.
Speaker Change: Got it. No, that's that's helpful. And then, you know, just wonder if you give any update in terms of, you know, your largest retail partner Wayfair and, you know, how you how you're doing there. I mean, it looks like, you know, you're
And then.
I was just wondering if you could give any update in terms of.
No your largest retail partner wayfarer and.
How are you doing there I mean, it looks like your lease originations you know sort of outperformed in the fourth quarter relative to their.
Speaker Change: lease originations you know sort of outperformed in the fourth quarter relative to their uh... you know to to their u.s. revenue growth but uh... i don't think that they're you know sales gonna be down twenty five percent or anything close to that in the first course i'm just wondering you know if you can give us an update uh... you know in terms of how things are going there thank you
U S revenue growth, but.
Don't think that the sales are going to be down 25% or anything close to that in the first quarter. So I'm just wondering.
If you can give us an update.
In terms of how things are going there. Thank you.
Speaker Change: Thanks, Anthony. We don't comment specifically. We know that they called out to us on their call the other day, and we really appreciate the partnership that we have with them.
Thanks Anthony.
We don't comment specifically, we know that they called out.
To us on their call. The other day and we really appreciate the partnership that we have with them and they've got a great business over there and so our teams continue to lean in together and find the optimal way to help continue to grow their business and ours and deliver a great experience for our mutual customers and so.
Speaker Change: And they've got a great business over there. And so our teams continue to lean in together.
Speaker Change: and find optimal ways to help continue to grow their business.
Speaker Change: and ours and deliver a great experience for our mutual customers. And so things continue to be good and we, you know, we're optimistic on.
They continue to be good and we were optimistic on the secular shift that continues to have an e-commerce and <unk>.
Speaker Change: the secular shift that continues to have in e-commerce, and I think we're positioned to continue to gain, share, and grow alongside them.
We're positioned to continue to gain share and grow with alongside them.
Fair enough. Thanks.
Thanks Anthony.
Speaker Change: Thank you. And we have a question from Ramsey Elisal with Barclays. Your line is open. Hi. This is Ben. I'm for Ramsey. Thanks so much for taking the question. I wanted to kind of follow up on the quarter-to-date results, and I understand there's sort of
Thank you and we have a question from Ramsey El <unk> with Barclays. Your line is open.
Hi, This is Dan on for Ramsey. Thanks, so much for taking the question.
I wanted to kind of follow up on the quarter to date results and I understand there's sort of a lot of macro impacts that are difficult to forecast as well as challenging comps but.
So understanding why perhaps you didn't guide for the full year I'll ask anyway.
Speaker Change: I'll ask anyway and maybe I'll ask this way is there any way
And maybe I'll ask this way is there any way you can give us a sense of what you think the seasonality might look like there's <unk> 22 look like a normal <unk> 22 in terms of like the percentage the distribution of originations any color like that would be very helpful.
Speaker Change: seasonality might look like. Does 1Q22 look like a normal 1Q22 in terms of like the percentage, you know, the distribution of...
Okay. Randy this is Craig again.
Speaker Change: Thanks, Ramsey. This is Karissa again. For Q1 last year, obviously, was our toughest comp because there was abnormal seasonality with the two stimulus payments, one in January and one in March.
For Q for Q1 last year, obviously with that type of comp because they're wide abnormal seasonality with entertainment.
Interest payments when in January and when in March.
Karissa: So, we're hoping, but obviously the macro conditions remain very dynamic, so it's hard to, you know, provide near-term guidance. It's really challenging. But we are hoping we go back to a more normalized calendar by the end of the year, which ultimately Q4 would, you know, historically has been our highest origination volume quarter when, you know, the world is normal and the holiday season is strong. So...
We're hoping but obviously the macro.
Conditions remain very dynamic so it's hard to provide near term guidance, it's really challenging but we are hoping we go back to a more normalized calendar and by the end of the year, which ultimately too far away and historically has been our highest origination volume quarter.
Quarter Wang.
World as normal in that holiday season is strong so.
Karissa: And we would anticipate that returning, but obviously, everything remains very dynamic at this point in the macro environment. So that's why we're not providing any near-term guidance.
We would anticipate that returning but obviously everything remains very dynamic at this point in the macro environment now that's why we're not providing any near term guidance.
Sure.
Speaker Change: Sure. Very understandable. And then just one follow-up. On the sort of the new... Thank you.
Right understandable and then just one follow up.
The sort of the new merchants in Q4, and perhaps the initiatives you've got with some of the new hires is there any color you can share around either the pipeline or characteristics around the new merchant is it SMB, it's enterprise get anything like that.
Speaker Change: we've got with some of the new hires. Is there any color you can share around either the pipeline or some characteristics around the new merchants? Is it SMB, is it enterprise, anything like that?
Yeah Ramsey this Orlando and thanks for the question.
Speaker Change: So what we're seeing this year compared to mid last year, let's just say, is that the retailers have gone past the BNPL shine that we had last year or the excitement around BNPL. I think we're seeing a lot of mergers.
So what we're seeing this year compared to lap mid last year, let's say is that the retailers have gone past the B N P. L <unk>.
<unk> that we had last year or the excitement around the NPL I think we're seeing a lot of mergers and acquisitions happening on the NPL side I think they penetrated many of the retailers by now and so we're starting to see a shift.
Speaker Change: and acquisitions happening on the BNPL side. I think they've penetrated many of the retailers by now. And so we're starting to see a shift.
Speaker Change: in retailers saying, okay, I've done the BNPL, now what's the next step? And our pipeline has been building pretty nicely, now it's a matter of just executing those leads into deals and getting them integrated as quick as possible. So, and then with the addition of the added sales team, we're getting a lot more coverage out there, reaching out to these retailers.
And retailers, saying, Okay I've done the B N P. L. Now what's the next step in our pipeline has been building pretty nicely now it's a matter of just executing those leads into deals.
Getting them integrated as quick as possible so.
And then with the addition of the added sales team, we're getting a lot more coverage out there reaching out to these retailers but.
Speaker Change: But, you know, I guess compared to last year, you know, the one way I would describe it is they're answering the phone now, where last year they were like, talk to me later.
I guess compared to last year.
The one one way I would describe it as they're answering the phone now.
Where last year. They were like talk to me later, so it gives me.
Speaker Change: So it gives me great hope in the year that we'll be able to execute the plans and getting these retailers integrated as quick as possible and starting to produce.
Great hope in the year that we will be able to execute the plans and getting these retailers integrated as quickly as possible and starting to produce.
Okay, great. Thanks for taking my questions.
Thank you we have a question from.
Speaker Change: HowlGhost with Loop Capital, your line is open.
How gauche with loop capital your line is open.
HowlGhost: Hi there, with so many more retailers on board and more to come.
Hi, there with the with so many more.
Retailers are on board and board of calm in the job market being materially better than it was in 2022.
HowlGhost: and the job market being materially better than it was in early 2021.
2021.
HowlGhost: you would think that there's more, you know, more people coming into your funnel or more qualifiable people than before.
You would think that theres more and more people coming into your funnel or more qualifiable people than before.
HowlGhost: and so with that being said like are your applications still growing and you're not improving as many and what is your outlook for kind of application growth with more stores and probably more qualifiable hours because of an improving job market?
And.
So with that being said like all your applications still growing and you're not putting as many.
What is your outlook for kind of application growth.
More stores and probably more qualified more powers because.
Improving job market. Thank you.
Yeah, I think there is.
Speaker Change: Yeah, I think there's a few answers there. One, obviously, you know,
Your answers there one obviously you know.
Speaker Change: short-term, near-term with the macro challenges going on that our merchants are facing. The applications, like we mentioned, especially with the year-to-date or the through February numbers we gave you, the application funnel has
Short term near term with the just the macro challenges going on at that our merchants are facing applications like we mentioned actually with the year to date through February numbers to give you the application funnel has.
Speaker Change: shrunk a little, but ultimately, yeah, the long-term viability of this business and some of the secular trends and counter cyclicality that we would face, especially if
Frank Little but ultimately the long term viability of this business and some of that secular trend and counter cyclicality that we would face, especially.
If credit markets continue.
Speaker Change: credit markets continue, um, you know, we anticipate that prime will have to tighten and response to increase delinquencies, which would widen that funnel for us. Um, and then in terms of our sales pipeline and incremental merchants
Anticipate that prime will have the Titan and respond.
Delinquencies, which would widen that funnel for us.
And then in terms of our sales pipeline and incremental merchant, yes, as we onboard more merchant that obviously create more application flow.
Speaker Change: Yes, as we onboard more merchants, that obviously creates more application flow.
Speaker Change: So I think it's a function of we'll continue to execute on our side from a merchant onboarding which will increase applications coming to us but then also
So I think it's a function of we will continue to execute on our side.
Onboarding, which well increased applications coming to us, but then also there could be a tailwind as prime tightened the bot and then more decline from the Prime come to act in the form of application.
Speaker Change: there could be a tailwind as prime tightens above us.
Speaker Change: and then more declines from the prime come to us in the form of applications.
Thank you.
Thank you and there are no other questions in the queue. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Speaker Change: Thank you, and there are no other questions in the queue. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
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Yeah.
Okay.
Yes.
Okay.