8-K
Katapult Holdings, Inc. (KPLT)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 10, 2021
| KATAPULT HOLDINGS, INC. | ||
|---|---|---|
| (Exact name of registrant as specified in its charter) | ||
| Delaware | 001-39116 | 81-4424170 |
| --- | --- | --- |
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br>Identification No.) |
| 5204 Tennyson Parkway, Suite 500<br>Plano, TX | 75024 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (833) 528-2785
| (Former name or former address, if changed since last report.) |
|---|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on<br>Which Registered |
|---|---|---|
| Common Stock, par value $0.0001 per share | KPLT | The Nasdaq Stock Market LLC |
| Redeemable Warrants | KPLTW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On August 10, 2021, Katapult Holdings, Inc., a Delaware corporation, issued a press release and held a conference call regarding its financial results for the three and six months ended June 30, 2021. Copies of the press release and the transcript of the conference call are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K, and each is incorporated herein by reference.*
Item 9.01 Financial Statements and Exhibits.
(d)
| Exhibit No. | Exhibit |
|---|---|
| 99.1 | Press Release of Katapult Holdings, Inc. dated August 10, 2021 |
| 99.2 | Transcript of conference call conducted on August 10, 2021 |
*The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: | August 10, 2021 | /s/ Orlando Zayas | |
|---|---|---|---|
| Name: | Orlando Zayas | ||
| Title: | Chief Executive Officer |
Document
Katapult Announces Second Quarter 2021 Financial Results
PLANO, TEXAS – August 10, 2021 – Katapult Holdings, Inc. (“Katapult” or the “Company”) (NASDAQ: KPLT), an e-commerce focused financial technology company, today announced financial results for the second quarter ended June 30, 2021.
“We are pleased to report second quarter 2021 results and are confident in our strategy to deliver value to our business partners and consumers and are excited about the growing interest in Katapult from both merchants, e-commerce platforms, and prime partners” said Orlando Zayas, CEO of Katapult. “Looking to the remainder of 2021 and beyond, we are excited about the opportunities available to us to continue to expand financial possibilities for consumers that are left behind and looking for items that they need.”
Second Quarter 2021 Financial and Operating Highlights:
•Total revenue was $77.5 million, an increase of 27.6% year-over-year. Year-to-date revenue reached $158.1 million as compared to $103.6 million last year, an increase of 52.6% year-over-year.
•Gross Originations were $64.4 million, up 1% compared to the first quarter of 2021, and down 17% year-over-year. Our compound annual growth rate for Gross Originations was 75.4% from the second quarter of 2019 through the second quarter of 2021.
•Onboarded 31 new retailers.
•Net loss was $8.1 million, down from $5.1 million of net income in the second quarter of 2020. Adjusted net income was $1.5 million, down 70.4% from $5.2 million in the second quarter of 2020.
•Adjusted EBITDA was $3.9 million, down 64.8% from $11.1 million in the second quarter of 2020, primarily reflecting our increased investment in growth initiatives, more normalized, and therefore lower, seasonal lease payment performance, new hire costs and incremental public company costs.
Guidance
•Since our Q1 earnings call and continuing to date, many new developments emerged that have an impact to our business. We observed meaningful changes in both e-commerce retail sales forecasts and consumer spending behavior, and in the past few weeks, the onset of new policies from the COVID-19 variants. Given the current macro trends and uncertainty to accurately predict our consumer’s buying behaviors for the remainder of the year, we believe it is best to remove explicit guidance for the remainder of 2021. While the short-term outlook may not be 100% clear, we do continue to believe in our mission, our core business fundamentals, and are extremely pleased with the progress of our strategic investments that will drive long term growth. We expect to have more insight into these new and evolving patterns by our third quarter earnings call.
Conference Call and Webcast
Katapult will host a conference call and webcast at 8:00 AM ET on August 10, 2021 to discuss the company’s financial results and current outlook.
A live audio webcast of the event will be available on the Katapult Investor Relations website at http://ir.katapultholdings.com/.
A live dial-in will be available at (888) 302-0680 (domestic) or (281) 962-4859 (international). The conference ID number is 1768299. Shortly after the conclusion of the call, a replay of this conference call will be available through 11:00 AM ET on August 24, 2021 at (855) 859-2056 (domestic) or (404) 537-3406 (international). The replay passcode is 1768299.
About Katapult
Katapult is a next generation platform for digital and mobile-first commerce for the nonprime consumer. Katapult provides point of sale lease purchase options for consumers challenged with accessing traditional financial products who are seeking to obtain everyday durable goods. The Company has developed a sophisticated end-to-end technology platform that enables seamless integration with merchants, underwriting capabilities that exceed the industry standard, and exceptional customer experiences.
Forward-Looking Statements
Certain statements included in this Press Release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding our estimates and forecasts of financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Press Release, and on the current expectations of Katapult’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Katapult. These forward-looking statements are subject to a number of risks and uncertainties, including general economic conditions in the markets where Katapult operates, the cyclical nature of consumer spending, and seasonal sales and spending patterns of customers; failure to realize the anticipated benefits of the transaction with FinServ; risks relating to factors affecting consumer spending that are not under Katapult’s control, including, among others, levels of employment, disposable consumer income, prevailing interest rates, consumer debt and availability of credit, pandemics (such as COVID-19), consumer confidence in future economic conditions and political conditions, and consumer perceptions of personal well-being and security; risks relating to uncertainty of Katapult’s estimates of market opportunity and forecasts of market growth; risks related to the concentration of a significant portion of Katapult’s business among a limited number of merchants, or type of merchant or industry; the effects of competition on Katapult’s future business; the impact of the COVID-19 pandemic and its effect on Katapult’s business; the ability of Katapult to issue equity or equity-linked securities or obtain debt financing in the future or any impacts related to raising additional capital, and those factors discussed in FinServ’s prospectus dated May 18, 2021 and FinServ’s registration statement on Form S-4 which was declared effective by the Securities and Exchange Commission (“SEC”) on May 14, 2021, and Katapult’s registration statement on Form S-1 initially filed with the SEC on June 30, 2021 and amended on July 29, 2021, in each case, under the heading “Risk Factors,” and other documents of FinServ or Katapult filed, or to be filed by Katapult, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Katapult does not presently know or that Katapult currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Katapult’s expectations, plans or forecasts of future events and views as of the date of this Press Release. Katapult anticipates that subsequent events and developments will cause Katapult’s assessments to change. However, while Katapult may elect to update these forward-looking statements at some point in the future, Katapult specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Katapult’s assessments as of any date subsequent to the date of this Press Release. Accordingly, undue reliance should not be placed upon the forward-looking statements.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions, which may also be useful to an investor: Gross Originations, Total Revenue, Unearned Revenue, Bad Debt Recoveries and Gross Profit.
Gross Originations are defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period through the Katapult platform. Gross Originations do not represent revenue earned. However, we believe this is a useful operating metric for both the Company and investors to use in assessing the volume of transactions that take place on our platforms.
Total revenue represents the summation of rental revenue, other revenue, and service fees. Unearned revenue represents our liability for cash received from customers prior to the related revenue being earned, and bad debt recoveries represent customer payments for receivables that had previously been written off. Bad debt recoveries represent a reduction to bad debt expense in the period in which they are collected. We measure these metrics to assess the total view of paythrough performance of our customers. We believe looking at these components is useful to an investor as it helps to understand the total payment performance of customers.
Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with GAAP. See the “Non-GAAP Financial Measures” section below for a presentation of this measure alongside adjusted gross profit, which is a non-GAAP measure utilized by management.
Non-GAAP Financial Measures
To supplement the financial measures presented in this press release and related conference call or webcast in accordance with generally accepted accounting principles in the United States (“GAAP”), we also present the following non-GAAP and other measures of financial performance: adjusted gross profit, adjusted EBITDA, and adjusted net income.
Adjusted gross profit represents gross profit less variable operating expenses, which are servicing costs, underwriting fees, and bad debt expense. We believe that adjusted gross profit provides a meaningful understanding of one aspect of our performance specifically attributable to total revenue and the variable costs associated with total revenue.
Adjusted EBITDA is a non-GAAP measure that is defined as net income (loss) before interest expense and other fees, change in fair value of warrant liability, (provision) benefit for income taxes, depreciation and amortization on property and equipment, impairment of leased assets, stock-based compensation expense, and transaction costs associated with the merger. Adjusted net income is a non-GAAP measure that is defined as net (loss) income before change in fair value of warrant liability, stock-based compensation expense and transaction costs associated with the merger.
Adjusted gross profit, adjusted EBITDA and adjusted net income are useful to an investor in evaluating our performance because these measures:
• Are widely used to measure a company’s operating performance;
• Are financial measurements that are used by rating agencies, lenders and other parties to evaluate our credit worthiness; and
• Are used by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting.
Management believes the use of non-GAAP financial measures, as a supplement to GAAP measures, is useful to investors in that they eliminate items that are either not part of our core operations or do not require a cash outlay, such as stock-based compensation expense. Management uses these non-GAAP financial measures when evaluating operating performance and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures help indicate underlying trends in the business, are important in comparing current results with prior period results, and are useful to investors and financial analysts in assessing operating performance. However, these non-GAAP measures exclude items that are significant in understanding and assessing Katapult’s financial results or position. Therefore, these measures should not be considered in isolation or as alternatives to revenue, net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You
should be aware that Katapult’s presentation of these measures may not be comparable to similarly titled measures used by other companies.
Contacts
Katapult Vice President of Investor Relations
Bill Wright
917-750-0346
bill.wright@katapult.com
Press Inquiries:
Tribe Builder Media
Kristen Shea
929-367-8993
press@tribebuildermedia.com
KATAPULT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(amounts in thousands, except share and per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenue | ||||||||
| Rental revenue | $ | 77,237 | $ | 59,986 | $ | 157,862 | $ | 102,564 |
| Other revenue | 232 | 708 | 242 | 972 | ||||
| Service fees | — | 23 | — | 69 | ||||
| Total revenue | 77,469 | 60,717 | 158,104 | 103,605 | ||||
| Cost of revenue | 55,922 | 42,248 | 108,804 | 69,581 | ||||
| Gross profit | 21,547 | 18,469 | 49,300 | 34,024 | ||||
| Operating expenses: | ||||||||
| Servicing costs | 1,072 | 999 | 2,210 | 1,979 | ||||
| Underwriting fees | 477 | 850 | 944 | 1,329 | ||||
| Professional and consulting fees | 1,324 | 426 | 2,858 | 648 | ||||
| Technology and data analytics | 2,601 | 1,419 | 4,316 | 3,247 | ||||
| Bad debt expense | 8,026 | 3,252 | 12,913 | 6,640 | ||||
| Compensation costs | 14,755 | 1,798 | 17,337 | 2,868 | ||||
| General and administrative | 2,246 | 902 | 3,263 | 1,755 | ||||
| Total operating expenses | 30,501 | 9,646 | 43,841 | 18,466 | ||||
| Income (loss) from operations | (8,954) | 8,823 | 5,459 | 15,558 | ||||
| Interest expense and other fees | (4,146) | (3,624) | (8,286) | (6,609) | ||||
| Change in fair value of warrant liability | 3,169 | — | 2,811 | — | ||||
| Income (loss) before provision for income taxes | (9,931) | 5,199 | (16) | 8,949 | ||||
| Benefit (Provision) for income taxes | 1,828 | (111) | 3 | (190) | ||||
| Net income (loss) and comprehensive income (loss) | $ | (8,103) | $ | 5,089 | $ | (13) | $ | 8,760 |
| Net income (loss) per share: | ||||||||
| Basic | $ | (0.17) | $ | 0.17 | $ | — | $ | 0.29 |
| Diluted | $ | (0.17) | $ | 0.09 | $ | — | $ | 0.16 |
| Weighted average shares used in computing net income (loss) per share: | ||||||||
| Basic | 46,989,376 | 30,596,076 | 39,274,794 | 30,595,291 | ||||
| Diluted | 46,989,376 | 54,175,089 | 39,274,794 | 54,174,304 |
KATAPULT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share amounts)
| June 30, | December 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| ASSETS | (Unaudited) | |||
| Current assets: | ||||
| Cash | $ | 109,785 | $ | 65,622 |
| Restricted cash | 2,635 | 3,975 | ||
| Accounts receivable, net of allowance for doubtful accounts of $5,241 and $4,372 at June 30, 2021 and December 31, 2020, respectively | 2,198 | 1,636 | ||
| Property held for lease, net of accumulated depreciation and impairment | 68,390 | 66,737 | ||
| Prepaid expenses and other current assets | 5,918 | 1,248 | ||
| Total current assets | 188,926 | 139,218 | ||
| Property and equipment, net | 465 | 330 | ||
| Security deposits | 91 | 91 | ||
| Capitalized software and intangible assets, net | 555 | 188 | ||
| Total assets | $ | 190,037 | $ | 139,827 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 7,501 | $ | 1,688 |
| Accrued liabilities | 11,451 | 12,967 | ||
| Unearned revenue | 2,973 | 2,652 | ||
| Total current liabilities | 21,925 | 17,307 | ||
| Revolving line of credit | 72,355 | 74,316 | ||
| Long term debt | 38,563 | 36,413 | ||
| Other liabilities | 41,103 | 12,740 | ||
| Total liabilities | 173,946 | 140,776 | ||
| COMMITMENTS AND CONTINGENCIES | ||||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||||
| Common stock, $.0001 par value-- 250,000,000 shares authorized; 96,821,615 and 31,432,477 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively | 10 | 3 | ||
| Additional paid-in capital | 74,143 | 57,097 | ||
| Accumulated deficit | (58,062) | (58,049) | ||
| Total stockholders' equity (deficit) | 16,091 | (949) | ||
| Total liabilities and stockholders' equity (deficit) | $ | 190,037 | $ | 139,827 |
KATAPULT HOLDINGS, INC.
RECONCILIATION OF NON-GAAP MEASURES AND CERTAIN OTHER DATA (UNAUDITED)
(AMOUNTS IN THOUSANDS)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| Adjusted Gross Profit | 2021 | 2020 | 2021 | 2020 | ||||
| Total revenue | $ | 77,469 | $ | 60,717 | $ | 158,104 | $ | 103,605 |
| Cost of revenue | 55,922 | 42,248 | 108,804 | 69,581 | ||||
| Gross profit | 21,547 | 18,469 | 49,300 | 34,024 | ||||
| Less: | ||||||||
| Servicing costs | 1,072 | 999 | 2,210 | 1,979 | ||||
| Underwriting fees | 477 | 850 | 944 | 1,329 | ||||
| Bad debt expense | 8,026 | 3,252 | 12,913 | 6,640 | ||||
| Adjusted gross profit | $ | 11,972 | $ | 13,367 | $ | 33,233 | $ | 24,075 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Adjusted EBITDA | 2021 | 2020 | 2021 | 2020 | ||||
| Net (loss) income | $ | (8,103) | $ | 5,089 | $ | (13) | $ | 8,760 |
| Add back: | ||||||||
| Interest expense and other fees | 4,146 | 3,624 | 8,286 | 6,609 | ||||
| Change in fair value of warrant liability | (3,169) | — | (2,811) | — | ||||
| (Provision) benefit for income taxes | (1,828) | 111 | (3) | 190 | ||||
| Depreciation and amortization on property and equipment | 70 | 39 | 118 | 58 | ||||
| Impairment of leased assets | (15) | 2,135 | (640) | 1,890 | ||||
| Stock-based compensation expense | 10,140 | 121 | 10,221 | 198 | ||||
| Transaction costs associated with merger | 2,675 | — | 3,350 | — | ||||
| Adjusted EBITDA | $ | 3,916 | $ | 11,118 | $ | 18,508 | $ | 17,704 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Adjusted Net Income | 2021 | 2020 | 2021 | 2020 | ||||
| Net (loss) income | $ | (8,103) | $ | 5,089 | $ | (13) | $ | 8,760 |
| Add back: | ||||||||
| Change in fair value of warrant liability | (3,169) | — | (2,811) | — | ||||
| Stock-based compensation expense | 10,140 | 121 | 10,221 | 198 | ||||
| Transaction costs associated with merger | 2,675 | — | 3,350 | — | ||||
| Adjusted net income | $ | 1,543 | $ | 5,210 | $ | 10,747 | $ | 8,958 |
CERTAIN KEY PERFORMANCE METRICS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Total revenue | $ | 77,469 | $ | 60,717 | $ | 158,104 | $ | 103,605 |
| Bad debt recoveries1 | $ | 650 | $ | 507 | $ | 2,051 | $ | 1,005 |
1Bad debt recoveries represent 8% and 16% of total bad debt expense for the three months ended June 30, 2021 and 2020, respectively and 16% and 15% of total bad debt expense for the six months ended June 30, 2021 and 2020, respectively.
KATAPULT HOLDINGS, INC.
GROSS ORIGINATIONS BY QUARTER
| Gross Originations by Quarter | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ millions) | Q1 | Q2 | Q3 | Q4 | ||||
| FY 2021 | $ | 63.8 | $ | 64.4 | ||||
| FY 2020 | $ | 37.2 | $ | 77.6 | $ | 60.5 | $ | 61.1 |
| FY 2019 | $ | 13.5 | $ | 20.9 | $ | 27.9 | $ | 40.2 |
Document
Q2 2021 Earnings Call Transcript
Company Participants
a.Orlando Zayas, CEO
b.Derek Medlin, COO
c.Karissa Cupito, CFO
d.Bill Wright, VP of Investor Relations
Other Participants
Anthony Chukumba, Analyst
Kyle Joseph, Analyst
Ramsey El-Assal, Analyst
Presentation
Operator
Good day, ladies and gentlemen. And welcome to the Katapult Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded.
I would now like to turn the conference over to Mr. Bill Wright, Vice President of Investor Relations. Sir, you may begin.
Bill Wright
Thank you and good morning. Welcome to the Katapult's second quarter 2021 earnings conference call. With me today are Orlando Zayas, Chief Executive Officer; Derek Medlin, Chief Operating Officer; and Karissa Cupito, Chief Financial Officer. We will all 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, including statements regarding our market opportunity, impact of our growth initiatives and our future financial performance and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. 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.
During today's discussion of our financial performance, we will provide certain 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 GAAP results. 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.ir.katapult.com. This call is being recorded and a webcast will be available for replay on our Investor Relations website.
I would now like to turn the call over to Orlando.
Orlando Zayas
Thanks, Bill. Good morning and thank you for joining us. On today's call, we'll review our second quarter 2021 results Cheryl we're seeing in the current macro environment and provide an update on our near-term outlook. Lastly, we will go into greater detail on our long-term growth strategy in this addressable market we are enthusiastic about our market leading technology that is delivering on our mission of financial inclusion for the nonprime consumer. We believe it's extremely powerful to enable this customer base to get the items they need and for e-commerce and omnichannel merchants to access new market.
Karissa, our CFO, will provide more details on our second quarter performance in a few minutes. But let me give you some second quarter highlights. Total revenue for Q2 2021 was $77.5 million, an increase of 28% year-over-year. Revenue year-to-date reached $158.1 million versus $103.6 million last year, an increase of 53% year-over-year. Gross Originations were $64.4 million in Q2 2021, up 1% compared to Q1 2021 and down 17% year-over-year. Our compound annual growth rate for Gross Originations is 75% from Q2 2019 to Q2 2021. As we previously indicated in our first quarter earnings call, the second quarter represented a difficult comp due to the pandemic related surge in demand for e- commerce durable goods in the spring of 2020. Nevertheless, Originations were roughly flat sequentially versus Q1 2021 and have been steady in the $60 million to $65 million range over the past four quarters.
Our adjusted EBITDA for Q2 2021 was $3.9 million, down 65% from $11.1 million in Q2 2020. Reflecting our increased investment in growth initiatives more normalized seasonal lease, payment performance, new higher costs and incremental public company costs.
On the macro front, it is a rapidly changing and complex environment that we have not previously faced in our business, which makes forecasting difficult. Since our Q1 earnings call and continuing today many new developments emerge that have impact on our business.
Starting in late June and noticeably picking up during the July 4th weekend, we began seeing macro headwinds consistent what you've heard from several retailers. First, we observed our consumer shift their focus towards new spending categories and away from durable goods as summer activities increased and restrictions abated. Coupled with this consumer category expenditure external data has become available suggesting e- commerce sales will likely slow for the balance of the year. The combination of these two factors created uncertainty regarding our expectations for Gross Originations in the critical seasonal windows and for the balance of the year.
Another key market factor that we monitor is activity of prime credit and financing providers that offer solutions to consumers with higher quality credit or repayment histories. With historically high savings rate and low delinquency rates some consumers buoyed by stimulus and a recovering jobs market, we are observing prime providers stretching further down the credit spectrum to capture consumer transactions and our highest score bands, which is negatively impacting our volume. We are optimistic that this competitive dynamic in the prime segments to be temporary and will subside as credit environments normalize. However, it is difficult to have certainty in the timing of these changes.
On the Retail side, our merchants continued to be impacted by supply chains and strengths, stock levels that are reduced or bottlenecked. These produces longer wait times for consumers and depress conversion rates in certain categories and transaction types.
Though, we are optimistic that these industry trends to be transitory, we think that will continue throughout 2021. Finally, COVID-19 and the recent announcement of new restrictions virus variance and vaccination activities as further complicating an already incredibly dynamic macro environment. As we sit here today, there is just too much uncertainty and multiple macro cross currents to accurately predict our consumer's buying behaviors for back-to-school and the remainder of the year, which are important drivers in our 2021 forecast. We expect to have more insight into these new and evolving patterns by our November earnings call, but for now we feel it's best to remove explicit guidance for the balance of 2021.
While the short-term outlook may not be 100% clear, we do continue to believe in our mission and our core business fundamentals. We are extremely pleased with the progress of our strategic investments that will drive long-term growth. Despite this current market uncertainty, we believe there is tremendous opportunity to serve the needs of the nonprime consumer with our best-in-class technology and customer-centered approach. We believe we are in excellent position to continue our mission to serve the true e- commerce and omnichannel needs of this consumer segment. You see Katapult technology is delivering pull click to ship capability for our customers and merchant community. This seamless experience reduces friction, enabled a transparent and customer friendly approach to the shopping process. We believe these capabilities in our ongoing platform enhancements are truly market-leading and we are excited to elaborate further on our progress
Specifically, the second quarter marked several milestones for Katapult resulting from recent growth investments. During the second quarter, we added 31 merchants to our platform, bringing our total to 57 new merchants for the first half of the year. As discussed on our last earnings call, we started investing in our sales and marketing organization to expand product awareness and availability thousands of online and omnichannel merchants offering durable goods. This momentum is continuing in July. And I am thrilled to share that we have launched 15 new merchants last month bringing up year-to-date total through July to 72. Since the end of the year, we doubled the number of merchants that are partnered with both Katapult and Affirm through the Affirm Connect waterfall solution. Despite the recent merchant deal sizes being on the smaller size, we are closing more of them and more quickly.
Make no mistake, we are still engaged with larger merchants, but these deals are taking longer to move partially due to IT constraints, competing priorities and temporary inventory logistics issues that these merchants currently face. We have high confidence in our technology and expect ongoing traction as these factors are resolved. On the customer side our clear and transparent approach is resonating and our Net Promoter Score was 60 as of July 2021, up from 53 in January 2021 and 46 in July 2020. We have built a rich and rapidly growing database of nearly 2 million approved customers. This is just beginning. As we are focused on understanding all the ways they can spot their financial progress to access the things they need. We are confident in our strategy to deliver value to our business partners and consumers and are excited about the growing interest in Katapult from both merchants, e-commerce platforms and prime partners. In fact, we are pleased with all the expansion of point-of-sale solutions, the buy now, pay later providers focused on the prime consumer segments. This wave of exposure to merchants and consumers is increasing the awareness that there are more opportunities in the checkout experience than ever before which accrues to our benefit. Katapult with our leading technology platform is perfectly positioned to take share of this expansion of BNPL adoption reaches the nonprime customer.
Our vision is to expand financial possibilities for consumers that are left behind and looking for the items they need. Financial inclusion of the nonprime consumer drives us to continue innovating and delivering new solutions to this market. And while there may be some variability in the near term macro trends, we are steadfast in our business model. In fact, we believe the time is now to accelerate our investment, access the market opportunity in front of us.
With that, I'll turn it over to Derek to elaborate on our growth activities and platform advancements over the quarter. Derek?
Derek Medlin
Hello, this is Derek Medlin, Chief Operating Officer here at Katapult. As Orlando mentioned, we are confident in the progress of our platform, our distribution and the offering. As you can see from our new merchant results, our platform is scaling smoothly with the arrival of new merchants across diverse integration platforms and methods. This flexibility that is inherent to our platform allows us to quickly react to merchant needs and activate the Katapult solution across all kinds of retail environments. It also gives us operational leverage as more volume has come on the platform in our automation matures. This has led to improved sourcing cost margins. We believe that this will continue to be a strategic advantage as we reinvest our earnings for customers and merchants.
In terms of distribution, as Orlando called out, we are pleased to see that our investments in sales and marketing are attracting new retailers at a faster pace. Comparing Q2 2021
versus Q2 2020, our active merchant base increased by 89% and the progress continued in July with another 15 ads. We're finding great adoption in categories such as outdoor, sporting goods and automotive related goods, which both more than doubled in merchant count year-over-year. And as Orlando mentioned before, our partnership with the firm continues to expand having also doubled our mutual merchants year-over-year. We have been able to activate dozens of new channel partners as well expanding our footprint of distribution and allowing us to access a wider net of omnichannel opportunities for long-term growth. These new partners are seizing the opportunity to provide expanded payment options for nonprime consumers and our platforms make it easy for merchants corporate Katapult and checkout option on our website. That said, we are a FinTech company where we focus most of our investment dollars on growth in technology. As Orlando mentioned, we are accelerating our investment cadence to prepare for long-term growth and deliver on customer and merchant opportunities. In terms of our core offering, we continue to innovate how we go to market serve our customers with relevant and attractive offers that drive conversion.
First, we are supporting investments in merchandising, promotional collaborations and search to drive growth of new and repeat customer origination rates. While our repeat rate reached 50% in Q2 2021, we still see incremental opportunities to drive this number higher. We plan on investing further in lifecycle marketing to enhance our promotions and increase consumer loyalty.
Next we are going to continue investing in our go-to-market strategies with sales, marketing and channel relationships. Given the size of the opportunity and higher deal close rates we have and will continue to scale our sales force. Since Q2 of last year, we brought the head count to 30 professionals versus 14 year-over-year. We expect to continue investments and resources for the remainder of 2021 and into 2022. All in all, we see the momentum is mounting across merchant segments, sizes and integration types and we believe the time is now to push forward.
Lastly, we are advancing investments in new capabilities and offerings that are aimed at merchants and customers. We recently launched new testing and segmentation capabilities that lay the groundwork for even more targeted approaches to customer offers. Our data rich environment and approach is helping us to be more targeted and relevant, which is what our customers care about. We know that our focus on the lifetime value of customer benefits, our retailer segment as they come back to the Katapult community for items again and again. These expanded capabilities will allow us to make our interactions with customers more personalized drive repeat originations and maintain the relevance of the Katapult solution to our important and growing customer base. We couldn't be more excited to deliver more value to our customers.
Now, I will hand it on to Karissa Cupito, our CFO to discuss the financials.
Karissa Cupito
Thank you, Derek. Q2 2021 Gross Originations of $64.4 million were down 70% year-over- year, which was consistent with our previous expectation that we provided in the Q1 2021 earnings call. As a reminder, in the second quarter of 2020, Gross Originations were positively impacted by a combination of COVID-19 stay-at-home orders and temporary closures of physical retail stores that shifted consumer spending online.
These consumer spending trends coupled with the Cares Act stimulus checks surge online transaction better merchants and ultimately our Gross Originations. As a result, Q2 2020 with our highest Gross Originations quarter last year and not followed the traditional retailers is now we typically see. In Q2 2021, we are pleased with our progress as the Wayfair and the continued development of our other valuable merchants. Wayfair continues to be a strong partner and we completed a direct integration with their system during the quarter that deepens our relationship. While we did observe a lower Wayfair US sales penetration rate this quarter as a result of the prime providers stretching down to the credit spectrum to capture volume in our highest bands, we do believe we are continuing to maintain or grow our position in the nonprime brand.
Turning to revenue. Total revenue grew $16.7 million or 28% year-over-year as we continued to the strong payment performance. Gross profit margin for Q2 2021 was 28% versus 30% in Q2 of 2020. Gross profit percentage was 260
basis points lower year-over- year due to a combination of factors, including investments in various customer acquisition offers and an acceleration of our depreciation curve. As part of our deployment of growth investment capital, we are testing various unique offers with our consumers. As Derek discussed in his comments, we see tremendous opportunity to differentiate ourselves with personalized offers that drive loyalty and repeat business. As for the change in our depreciation curve with further accelerate curve to account for the increased early buy activity spurred by the last round stimulus checks in late March plus early April this year, which increased our cost of revenue.
Moving down to P&L. We continue to show improvements in our variable expense margins as we scale and focus on greater efficiency. Servicing costs were $1.1 million in Q2 2021 or 1.4% of revenue versus 1.6% in Q2 of 2020. Underwriting fees for Q2 2021 were 477,000, representing 0.6% of revenue versus 1.4% in Q2 2020. In Q2 2021 professional and consulting fees included one-time transaction cost of $482,000 and employee recruiting costs of $191,000. When you remove these costs normalized professional and consulting fees were $651,000 for the quarter versus $402,000. This $249,000 increase is related to public company costs for audit and legal services.
Technology and data analytics costs increased by $1.2 million in Q2 2021 from higher headcounts, including expanding data science personnel to enhance our proprietary underwriting model in additional IT resources to build out new product functionality. Bad debt expense increased $4.7 million year-over-year. This is the reserve we put on our lease payments earned but not collected at the end of each quarter. The growth accounts receivable balance was $7.4 million as of June 30, 2021 versus only $4 million as of June 30, 2020 due to our larger lease space. On the whole, our loss rates continue to be within our acceptable ranges.
Compensation costs were $14.8 million in Q2 2021 and included $11.6 million for one-time transaction expenses that related to the completion of the merger with Finserv putting vesting of stock options and RSUs plus transaction related bonuses for employees. On apples-to-apples basis when you back out these one-time costs, compensation expenses close to $3.1 million which is $1.5 million higher than our Q2 2020 number. This increased compensation costs will be ongoing and includes the additional headcount for sales and marketing.
General and administrative costs are up $1.3 million in Q2 2021. This increase is made up of our new D&O insurance premiums, franchise taxes and increased spend in marketing. Interest expense and other fees in Q2 2021 were $4.1 million, an increase of $522,000 versus Q2 2020, which is your sort of a higher average debt balance. Interest expense as a percentage of revenue declined from 6% to 5.4% year-over-year. Our lower interest expense margin is a result of reaching profitability milestones in August of 2020, which stepped down our funding cost by 200 basis points on a revolving line of credit. We also refinanced $37.5 million of high interest debt last December to lower interest rates. The change in fair value of our warrants contributed $3.2 million of income in Q2 of 2021. We will book the gain or loss relative to the change in the fair value of our warrants each quarter. We also booked a benefit for income taxes of $1.8 million in Q2 2021 compared to a provision of $111,000 in Q2 2020.
Turning to our other non-GAAP metrics. Adjusted EBITDA was $3.9 million for Q2 2021 versus $11.1 million in Q2 2020. The $7.2 million decline reflects our increased investment in growth initiatives, more normalized and therefore lower seasonal lease payment performance, new higher costs and incremental public company costs. Adjusted net income was $1.5 million in Q2, 2021 is down from $5.2 million in Q2 2020.
Moving to the balance sheet and liquidity. At June 30, 2021, we had $110 million in available cash. Our total debt outstanding netted debt issuance costs and warrants with $111 million. With over $100 million of cash on our balance sheet, we have the financial flexibility and strength to continue to invest in organic growth initiatives. Earlier this year, we outlined spending $10 million in fiscal 2021 for targeted growth investments. Based on the encouraging early results of these investments and given the tremendous potential we see in large addressable market, we plan to increase our investment spending beyond just $10 million for this year. As Derek outlined, we see a great opportunity to widen our competitive move, capture more market share and ultimately accelerate revenue in 2022 and beyond.
Turning to outlook. We are in a very complex macroeconomic environment to say the least. Since our last call, we observed meaningful changes in both e-commerce and retail sales forecast and consumer spending behavior, and in the past few weeks, the onset of new policies from the COVID-19 variants. Beginning with the data that became available after our earnings call we then validated as many online retailers released earnings over the past few
weeks. The consensus in the market suggests e-commerce sales will likely slow for the balance of the year. Coupled with developments, consumer spending in July appear to be shifting away from durable goods categories and favor travel clothing and entertainment.
To add further complexity to these trends, many merchants are now dealing with rising inflation and supply chain challenges, including inventory shortages as well as facing IT resource constraints and competing priorities. This has delayed many opportunities into the future. From a consumer perspective, the environment is still quite dynamic with multiple factors to consider. Monthly child tax care credit payments commenced on July
- The federal rent addition moratorium expired on July 31 and was then subsequently extended for certain parts of the nation and enhanced unemployment benefits are set to expire in those states by September. How these events impact our originations and revenue remains to be same as we only have a few weeks of data available and we're monitoring our portfolio performance and adjusting our models in real time.
Coupled with all of these factors the backdrop of COVID-19 and the emergence of new variance and there is uncertainty of how the federal and state governments will respond. On our previous earnings call, we believed our guidance for the year was appropriate and reasonable, but a lot has changed since that call. But it is especially challenging for our projections at the current time is that the visibility of strange and there are multiple conflicting factors at play. When looking forward to the balance of the year, there is just too much uncertainty right now that try to predict Gross Originations and revenue in a highly specific way. We expect to have more insight into these new and evolving trends by our November earnings call, but for now we feel it's best to remove explicit guidance the rest of 2021.
What we think it's prudent to offer you is what we've seen thus far in Q3 and provide some additional color to help frame how things might develop. To be clear, this is not guidance, but instead is intended to give you a directional sense. While we expected significant year-over-year growth, July 2021 Gross Originations were flat from the same period last year, as our existing merchants experienced larger than anticipated declines in retail transaction volume. On a positive note, we have been able to offset these outsized declines that are new merchant additions and we are cautiously optimistic that as the summer winds down, people return from their vacation and school begin, the demand will increase.
Looking ahead to Q4, the holiday season is normally our largest quarter from a volume perspective, tracking to retail promotions and consumer purchasing trends. While we originally forecasted a typical Q4 holiday trend for 2021, at this point, it is difficult to be definitive about how things will play out based on the uncertainty we see in the market. Through Q2 2021 trailing 12-month Gross Originations were $250 million in trailing 12- month revenue was $302 million, well above pre-pandemic level. As we've increased our sales and marketing investments new merchant ads have also accelerated reflected by the 72 new merchants on boarded through July. Our efforts at cultivating customer loyalty are also paying off as our customer repeat rate continues to grow. Our merchant pipeline is larger than ever before and as macroeconomic conditions change and merchants resolve the variety of near-term challenges and constraints that they are facing such as IT resources, we anticipate our growth trajectory to accelerate over time.
While we can't control many of the macroeconomic factors that we are currently faced with today, we can control how we use our resources to serve our customers, partner with our merchants and prepare for long-term growth. Accordingly, we plan to leverage our strong balance sheet, and significantly increase our spend on initiatives that will expand our presence and the merchant community better serve our consumers and grow our competitive advantage. While this will reduce near-term net income and adjusted EBITDA, we are resolved that this is the right decision at this time.
And while there may be some near-term headwinds as we navigate this dynamic macroeconomic environment, we do believe we are best positioned to deliver on our mission of financial inclusion, but also delivering long-term value for our shareholders.
And with that, I will turn it back over to our CEO, Orlando for closing remarks.
Orlando Zayas
To wrap up, we want to reiterate our sincere appreciation for all our stakeholders. We appreciate our shareholders' support, our merchants' trust and our customers' business and loyalty. And while we are operating within an environment of uncertainty, we remain focused on a much bigger future and are convinced that our market leading position, strategic investments and long-term focus will equate to continued strong growth and an improving profitability for many years to come.
Derek, Karissa and I will be happy to take your questions. Operator, please go ahead.
Questions and Answers
Operator
(Operator Instructions) Our first question comes from Ramsey El-Assal with Barclays. Your line is open.
Q - Ramsey El-Assal
Hi, thanks for taking my question this morning. I wanted to ask about the competitive environment. And I guess, specifically about the -- your comments about prime providers sort of moving down market into the original -- and your traditional kind of lower prime base. What is your view about the degree to which is a more sort of permanent shift? I guess, in other words, has the competitive environment become more challenging on a lasting basis? I know that's a bit of a crystal ball question, but what's your view there?
A - Orlando Zayas
Hi, Ramsey, it's Orlando. Thanks for the question. If you look at what has happened in the last year even beginning at COVID, many of the prime lenders tightened up pretty dramatically, they -- which -- we were the benefit up because of the waterfall down to us. And I think right now the prime lenders and -- you try few of them. So you know that their delinquency rates are at all time lows and they've opened up to try to get volume. So we think its temporary not knowing what's going to happen in the fall, obviously, that's a question. But this is not -- I don't think it's sustainable necessarily as kind of things get back to normal.
Q - Ramsey El-Assal
Okay. And I also wanted to ask about the bad debt expense is stepping up in the quarter. I think you mentioned it was related to an increase in Gross Originations, and forgive me if
I missed it, but something to do with account receivable balances. I'm just trying to understand here whether we should be modeling a higher kind of loss rate going forward or whether there was a bit of an anomaly in the quarter. If you could just elaborate on the drivers there would be great.
A – Karissa Cupito
Sure. Yeah. Ramsey, this is Karissa. So bad debt expense, it's definitely seasonal. In Q1 it was at 6% In March, in Q4 was 8.8. So it really depends on the seasonality. But in general, in Q2, we had a few different dynamics. One, it was the bad debt expense as a percentage of revenue was just on a lower denominator because we have been testing customer promotions and pricing offers. So our revenue was a little bit -- intentionally, a little bit less than normal. And then our growth -- they are just continues to grow as our base grows. And so that's what the bad debt expense is really a function of it reserving and our lease payments that have come to you that we have not collected quite yet. So as they grow, AR grows. We're going to see that bad debt expense grow in proportion. But I would say a good
bad debt expense run rate, if you wanted to build one that covers all the seasonality in all the quarters probably be around 8% to 9% at this point.
Q - Ramsey El-Assal
Okay. Terrific. May sneak one last one, and I was just curious, are the headwinds you're seeing -- and I understand sort of a macro overlay. Is it really manifesting itself mostly at Wayfair, your largest partner, or is this something that you're seeing across the board, sort of more broad-based across the business?
A – Derek Medlin
Hi, Ramsey, this is Derek. I will take that one. So certainly our largest retailer not providing our new guidance and having some headwinds in the frontend of the durable goods space is certainly one area. We are seeing the impacts of inflation and other pricing that is impacting some conversion rates and other categories. But I think, in general, our view is that some uncertainty in the market right now, people are shifting us there, they are spending to other categories and we're just expecting its come back as soon as things settle down.
A – Orlando Zayas
And Ramsey if I can add, if you look at some of the e-commerce lenders and retailers that have announced recently included one of the largest ones, they've all signaled that e- commerce has slowed. And so we're seeing that across the board with many of our retailers because we are focused on e-commerce and 90 something percent of our businesses is e-commerce. And I think it is a shift of spending. It started in the mid-June was when summer vacation started. We see the airports crowded as it can be, people are spending money on travel and getting together again and durable goods and e- commerce sales have slowed and the stores are open. And so these are shifts that we believe are temporary, and that will get back to normal, hopefully, depending on what happens with the Delta variant some time either later this year or early next year.
Q – Ramsey El-Assal
Okay. Got it. Thanks so much. I appreciate it.
A - Orlando Zayas
Thanks, Ramsey.
Operator
Our next question comes from Kyle Joseph with Jefferies. Your line is open.
Q – Kyle Joseph
Hey, good morning guys. Thank you. Thanks for taking my questions. I just wanted to follow up on Ramsey's question on kind of -- on the prime kind of stretching a bit deep. Would you say that's kind of traditional providers or more of like the new entrants into the prime financing market that you're seeing stretched?
A – Orlando Zayas
I would say -- hi, Kyle. This is Orlando. Thanks for the questions. I would definitely say it's more of the traditional providers. Yeah, and you're right, some of the BNPLs have jumped into the space, but I think they're focused on a much different customer. They're really not that -- while you can stretch out the payments over four, for example, with Afterpay or others, we don't really think we are competing with that because our ALV is higher. And that's not something usually as somebody split over for, but we definitely see it -- and some of the retailers, where we have a waterfall with -- at Wayfair at Citi. We obviously have the affirm partnership on the waterfall. And we've looked --
starting in the spring, we looked at our score bands and how many score bands are flowing to us, especially in the waterfall. And we're seeing that the higher score bands are minimized a little bit. So we have evidenced that they're definitely buying deeper because some of our higher score bands are not -- I don't want to say disappearing, but they've been minimized. And so it's clear evidence that they've gone deeper. And I think if you just look at any of the major prime providers, they've all talked about delinquencies being down and their profitability going up and they've released some of the COVID restrictions that they've had before. So again, we think it's temporary. We will get back to normal probably at the end of this year or into next year depending on what happens. I mean there's a lot going on.
Q – Kyle Joseph
Understood. Helpful. Thank you. And then one follow-up, just wanted to get a sense for really kind of portfolio performance on the yields of stimulus also recognizing in child tax credit started to go out last month. So just walk us through whether it's payment rates or early buyout activity kind of any trends you've seen kind of on the heels of stimulus, but in front of child tax credits?
A – Karissa Cupito
Sure. So I mentioned in my comments that we had accelerated depreciation curve because the last round stimulus at the end of March did spur a bit of early buyout activity, so accelerated our curves accordingly. For the child tax credit payments that started on July 15, we didn't see a big of an impact and we think that's probably because as you mentioned, starting in July -- especially July 4 weekend we did see consumers probably spending their money in other categories. So rather than coming and making a self- service payment to buyout or to pay down their lease, we think they're spending that in other and other avenues at this point. So we didn't see as big of an impact with these child tax credit spur, but it'll be interesting to see, obviously, these are coming out monthly now how that trend evolves going forward.
A – Derek Medlin
Kyle, this is Derek. I'll add one more thing to it. So we have seen a slight uptick in delinquency over the last couple of months that it is very typical during the seasonal period. And so nothing out of the ordinary. Again, taking into account all the different ways of government stimulus and the supply and demand activities and shifting consumer behaviors, everything is on the portfolio front operating within expectations.
Q – Kyle Joseph
Got it. Thanks very much for taking my questions.
A – Orlando Zayas
Thanks Kyle.
Operator
Our next question comes from Anthony Chukumba with Loop Capital Markets. Your line is open.
Q – Anthony Chukumba
Good morning and thanks for taking my question. Not to beat a dead horse with this issue of prime lenders sort of dropping down. But I cover Aaron's and Progressive and Rent-A-Center. And they haven't said anything about that phenomenon. So I guess I'm trying to understand why is that unique to Katapult when Aaron's, Progressive and Rent-A- Center are seeing no such phenomenon?
A – Orlando Zayas
Hi, Anthony. One thing that's really unique about the Katapult solution is that in many of our environments -- we're in a waterfall environment where we are receiving declines from prime providers and that allows us additional insight as we can see trending and detail analytics as to what's happening in our base through application flow all the way through conversion. And really simply and there have been various outside stimulus, the trends in supply and demand have changed was as they needed -- the change -- the character of what those above us are approving. And just like last year when we saw a tightening during uncertainty, but for stimulus, we have seen that loosening occur. And this is something that we've seen before often on throughout the years. I think this is fairly common, but in our position in the waterfall, we have more visibility into it.
Q – Anthony Chukumba
Got it. That's helpful. And then my second question, I understand there are a lot of moving parts here and a lot of uncertainty, but when you talk about the COVID-19 variant, I would think there would be a positive for your business, right. I mean you had your best ever lease originations in the second quarter of last year because of widespread shutdowns in the shift e-commerce. So why wouldn't people getting freaked out about the COVID-19 Delta variant be good for your business and not bad for your business?
A – Derek Medlin
Hi, Anthony. This is Derek. I'll continue on that and maybe Orlando jump in. So on that front, there are puts and takes. And so when we talk about the uncertainty associated with COVID-19 and what that has done, one of the areas I'd like to emphasize is I think impacting some of our retailer rollouts. Their ability to get IT support to be able to do integrations as well as the priorities that they have in a response to what's going in the macro environment is just shifting priorities for our releases. And so, what's great is that still heavy amount of interest and a lot of activity on that front. Many of these rollouts have been delayed. And so that's one impact on our business. Now on the consumer, if there were more extreme activities, that does tend to favor the e-commerce activity, our purchasing behaviors. That said -- that's not something we're modeling in for the last half of the year.
A – Orlando Zayas
Yeah, Anthony. This is Orlando. If I can add, many of the discussions and I think I've mentioned this on our previous call that July and August are our biggest months in terms of retailer additions and preparation for the holiday. And resoundingly what we've heard and, I'll give an example. I was speaking with one pretty large retailer, who is requiring everybody to come back to work soon, and many of their IT resources have quit because they have moved to another area, they can work from home. And so there seems to be across the board at many of these retailers just an IT constraint issue that is up -- that is unforeseen and that they can't get enough resources on the tech front and that the ones that they are leaving for work from home, if necessary. And so, well we normally see a really big uptick on new retailer additions and we've had quite a few smaller ones, some of the larger ones are a little bit tougher to get done because of those IT constraints.
Q – Anthony Chukumba
Got it. That's very helpful. Thank you.
Operator
There are no further questions at this time. Please proceed with any closing remarks.
A – Orlando Zayas
All right. I want to thank everyone for listening today. We're excited about the long-term growth aspects of Katapult. We continue to work hard to get the retailer integrations that we need and enjoy the strong pipeline that we have. There are constraints, but we're working hard to try to help alleviate some of those issues by simplifying our integrations with the retailers. And I think we're looking forward to the second half of the year and into next year as some of these retailers get back to normal. And they can integrate our platform pretty quickly. So again, thanks everybody for listening and have a good day.
Operator
Ladies and gentlemen, this does conclude the conference. You may now disconnect. Everyone have a great day.