Good day, ladies and gentlemen, and welcome to the Katapult First 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..

Thank you, and good morning. Welcome to the Katapult's first 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 be available for Q&A following today's prepared remarks.

Before we begin, I would like to remind everyone that this call will contain forward-looking statements regarding future events and financial performance and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports.

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. 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.

Please refer to the Investor Relations section of our website to obtain a copy of our earnings release, which contains descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures.

This call is being recorded, and a webcast will be available for a replay on our Investor Relations website. I would now like to turn the call over to Orlando..

Thanks, Bill. We are thrilled to be hosting our first call as a public company today. This is a major milestone in the history of Katapult. I want to thank the entire Katapult team for their hard work and dedication during our journey to become a public company as well as our investors old and new who have supported us throughout the process.

We are thrilled about Katapult's unique position to serve a very large e-commerce market for durable goods purchased by nonprime consumers. Today, we estimate the market to be approximately $40 billion to $50 billion annually with less than 1% penetration. As a result, we see a significant greenfield opportunity for continued long-term growth.

On today's call, we are excited to discuss our first quarter 2021 results, which featured strong revenue growth and solid profitability and also talk about our plans for continued expansion through year-end and beyond. But first, I'd like to kick off the call today by providing a brief overview of Katapult.

The Katapult story began in 2012 with a mission to break down financial barriers. We provide disruptive technology that empowers underserved consumers and simplifies the shopping experience to help them secure essential items for their daily lives.

Through our proprietary platform, our consumers can shop at the same high-quality retailers as prime consumers leveling the playing field. Market data tells us that approximately 38% of consumers struggle to get the things they need like furniture, appliances and laptops. This lack of access can be due to low credit scores, thin files or lack of data.

Here's where Katapult steps in. As a lease-to-own for nonprime consumers, we use proprietary underwriting models to approve customers that others decline while they're shopping online. We provide flexible and transparent payment options, whereby consumers pay a nominal fee at checkout, followed by recurring lease payments.

And at the end of the lease, the consumer owns the item. At any time, the consumer can cancel the lease and return the item or exercise discounted early purchase options. The consumer chooses this option that best fits their budget, and we never charge a late fee ever.

This clear and transparent experience is how we partner with big name retailers like Wayfair, Lenovo, Purple Mattress and others. Our integration with retailers is key to our success.

We have developed partnerships with leading shopping platforms like Magento and Shopify, waterfall partners with select time credit providers like Affirm and have the strong capabilities to customize an integration directly with any proprietary platform.

Our goal is to open the market opportunity for merchants and consumers, enabling transactions that would not have happened in the past.

Not only do our customers love the ease and transparency of the platform, but our merchants see us as a strong strategic partner because we bring them incremental shoppers and a massive new addressable consumer base that could not effectively access in the e-commerce world.

One of our core values is to enhance the lives of our consumers and retail partners by providing transparent, innovative and empowering financial products. It's also why we're looking at consumers -- what consumers have to say about us and how we're helping them get the things they want and need.

For example, one of our consumers recently told us she had gone 4 years without sleeping in a bed because she didn't have the ability to afford a large ticket item. She said to us, "I would never have been able to buy a mattress outright, so Katapult gave me the opportunity to be able to sleep in a bed again." This is the heart of our mission.

We enable underserved consumers to obtain the items that they need. Another satisfied customer wrote, "I really needed an air conditioner for my upstairs room. My budget is fixed, and I wasn't able to pay full price for a portable one. Katapult was there for me, and now I can sit my room comfortably and give this review.

Thank you." We receive many more testimonies like this, which not only inspires and motivates us but also validates our mission. Karissa, our CFO, will provide more details on our first quarter performance in a few minutes, but let me give you some first quarter highlights.

Total revenue for Q1 2021 was $80.6 million, an increase of 88% year-over-year, driven by strong growth in originations as we continue to add new merchant relationships and expand with our existing merchants.

Our adjusted EBITDA in Q1 2021 was $14.7 million, up 122% from $6.6 million in the Q1 2020, reflecting the operating leverage inherent in our business model as revenue growth is outpacing our operating expense growth. And our net income was $8.1 million in Q1, up 120% year-over-year. In summary, our first quarter was strong.

And what is extraordinary about the business we have built is that we have demonstrated the ability to rapidly grow our top line while at the same time being profitable. We believe that the combination of both high growth and attractive margins is what differentiates Katapult.

My vision is that our growth will continue through building more relationships with high-quality retailers, offering new financial solutions in addition to our current lease purchase program and increasing our customer repeat rate.

Financial inclusion of the nonprime consumer drives us to continue innovating and delivering new solutions for this market. Like many of you, we are eager to see the world move post pandemic and expect the microeconomic environment to be especially dynamic in 2021.

As a result, we will be closely monitoring consumer spending trends, government stimulus programs as well as credit conditions for the balance of the year.

We are confident in our strategy to deliver value to our business partners and consumers and excited about the growing interest in Katapult from both merchants, e-commerce platforms and prime partners.

It is important to note that the length it takes for these merchants and partners to onboard and ramp up will impact the timing of originations and revenue. So while there may be some variability, we know that we've created a solid foundation and business model, and we anticipate growth will continue.

Katapult's focus will remain squarely on financial inclusion and enabling customers to obtain durable goals that they need through a transparent consumer experience, while at the same time driving shareholder value. With that, I'll turn it over to Derek Medlin, our Chief Operating Officer, to discuss our growth strategy.

Derek?.

first, deepening our relationships with existing merchants and consumers. Every year, we will look to identify new opportunities to engage our mutual customers and outpaced same-store sales by a strong multiple at our merchant sites; second, we will continue adding new merchants, e-comm and omnichannel platforms and expanding our channel partners.

We want to make it as easy as possible for merchants to make Katapult available where consumers want to shop; third, we will continue to launch new capabilities and offerings that are aimed at optimizing the opportunities for all parties at the table.

We'll continue to use our data insights to open avenues of new growth for our merchants and develop attractive product programs for our consumers. As part of our merger with FinServ, the company received $50 million in incremental capital. We plan to use this capital to invest in initiatives that will expand our moat and accelerate our growth.

For 2021, we have earmarked $10 million for this investment. Related to this investment, we have begun the process of expanding our sales, marketing and technology teams with strategic resources and targeted new talent hires.

We are also testing new programs and offers that we believe will accelerate our merchant pull-through rate and increase consumer and merchant loyalty.

These include improving our commercial offerings so that we make an integration with Katapult and merchants top priority and speed of access to the Katapult program; also, doubling down on our life cycle marketing strategies to enhance our promotions, increase consumer loyalty and merchant sales; lastly, we'll be investing in technology initiatives to expand our competitive advantage and continuously improve the consumer and merchant experience.

These initiatives include integrations with additional e-commerce platforms and lender waterfalls, new product functionality and expansion of our digital consumer experience.

For example, we recently added the Salesforce Commerce Cloud to our roster of integrations, another e-commerce point-of-sale platform that will provide a great opportunity for growth. Now I will hand it off to Karissa to discuss our financials..

servicing costs, which represent our call center operations for customer service and collections were $1.1 million in Q1 2021, up only 16% versus Q1 2020 despite revenue increasing 88%.

This is a testament to the scalability of our business and the ongoing digital transformation of our call center, continuously improving how we communicate with and service our consumers. Underwriting fees were $467,000 in Q1 2021, down from $479,000 in Q1 2020, despite volume being up.

This is the result of our ability to continue to favorably renegotiate third-party costs as we scale the business. Professional and consulting fees were $1.5 million in Q1 2021, up significantly from Q1 2020, primarily due to transaction costs directly associated with the FinServ merger which totaled $676,000 for the period.

As a reminder, these costs are onetime in nature and are not expected to reoccur. Technology and data analytics expense was $1.7 million in Q1 2021, decreasing 6% year-over-year from $1.8 million in 2020.

This was due to a greater proportion of software development activities qualifying for capitalization in 2021 as we continue to enhance our product capabilities. Bad debt expense was $4.9 million for Q1 2021 compared to $3.4 million in Q1 2020, an increase of 44%.

Bad debt expense primarily consists of provisions for uncollectible accounts receivable net of recovery. This increase was primarily driven by the proportional increase in revenue over this period, which was offset by decreased charge-off rates due to better underwriting and payment collection performance.

Bad debt expense as a percentage of total revenue decreased to 6.1% for Q1 2021 compared to 7.9% in Q1 2020. General and administrative expense was $3.6 million in Q1 2021 compared to $1.9 million in Q1 2020. This increase is related to added headcount to support the growth trajectory of the company.

General and administrative expenses as a percentage of total revenue were flat at 4.5% for both Q1 2021 and Q1 2020 due to the company achieving scale. Interest expense and other fees was $4.1 million for Q1 2021, up 39% compared to $3 million in Q1 2020.

This was primarily due to an increase in total principal balance on our debt during Q1 2021, which is a result of increased origination volume as well as closing a $50 million term note in December 2020. Interest expense and other fees as a percentage of total revenue decreased to 5.1% for the 3 months ended March 31, 2021 compared to 7% in 2020.

This reduction was primarily driven by the lower interest rates that we were able to negotiate on our debt facilities in the second half of 2020. Provision for income taxes was $1.8 million in Q1 2020 compared to $79,000 in Q1 2020.

This increase was primarily due to stating of taxes on the company's estimated taxable income for the year ending December 31, 2021. Taxable income is expected to be generated in certain states where accelerated federal tax depreciation is disallowed.

The primary driver of provision of income taxes for Q1 2021 was the state of California, where net operating loss carryforwards have been temporarily suspended for companies generating over $1,000 of taxable income. Our GAAP net income for the first quarter was $8.1 million, an increase of 120% from $3.7 million in the first quarter of 2020.

Turning to our other non-GAAP metrics. Adjusted EBITDA for the first quarter of 2021 was $14.7 million, representing a 122% increase over Q1 2020. Adjusted EBITDA margin was 18.2%, an increase of 280 basis points compared to 15.4% in the first quarter of 2020.

Adjusted EBITDA is defined as net income before interest expense, income tax expense, depreciation and amortization expense, stock-based compensation expense, changes in warrant liability valuation, onetime transaction costs and investor-related matter costs, provision cost benefit for impairments and employee recruiting costs.

Adjusted net income for Q1 2021 was $9.3 million, up from $3.8 million in the first quarter of 2020. Adjusted net income is defined as net income before stock-based compensation expense, changes in warrant liability valuation, onetime transaction costs and investment-related matter costs and employee recruiting costs.

Moving to the balance sheet and liquidity at March 31, 2021. We had $67.8 million in available cash and positive net cash provided by operating activities of $7.3 million. Our total debt outstanding net of debt issuance costs and warrants was $105.9 million.

Our cash balance in Q2 2021 will be increased by an incremental $50 million cash infusion as part of the FinServ merger, bringing our current cash balance to approximately $100 million, which enhances our financial flexibility and capital structure. Looking ahead to Q2 results.

While we don't plan to formally issue quarterly guidance on a regular basis as a public company, we do anticipate there will be some noise in the numbers as a result of the FinServ transaction that we just completed and also the unique period that we are comping to from last year.

Thus, we want to give you some color on how we believe the second quarter is shaping up. First, as it relates to the transaction, the completion of merger last week triggered the vesting of stock options RSUs plus transaction-related bonuses for employees that will be recognized in Q2 in general and administrative expense.

In total, we are estimating a one-time charge of $12 million that will impact GAAP net income but will be added back to our non-GAAP metrics of adjusted net income and adjusted EBITDA. In relation to our business KPIs, Q2 2020 was a very unique period. A year ago, the nation, for the most part, was under stay-at-home orders.

Many brick-and-mortar retail stores were closed and the government was providing assistance via the Cares Act stimulus checks. The combination of these unique circumstances in 2020 led to a surge and online transactions at our merchants and ultimately, our growth originations.

As a result, Q2 2020 resulted in the highest gross origination quarter for last year and did not follow the traditional retailer seasonality that we typically see. In 2021, we anticipate a more normalized retail calendar when it comes to volume, and as a result, we are expecting lower gross originations year-over-year for Q2 2021.

Also in Q2 2021, we started deploying investment capital marketing, sales and technology initiatives, which will reduce adjusted EBITDA in Q2 2021 as previously communicated in our April Analyst Day presentation. We first introduced annual guidance for 2021 in April of this year.

Given the data we have today, we continue to believe that this guidance is reasonable and appropriate, and we plan to provide a more detailed update on our Q2 earnings release.

To reiterate, the guidance is to achieve originations of $375 million to $425 million, revenue of $425 million to $475 million and adjusted EBITDA of $50 million to $60 million. And as we have said previously, we anticipate the majority of our growth to be concentrated in the second half of the year with a heavy weighting to Q4 2021.

Thank you very much, and I'll pass it back to Orlando for final comments..

Thanks, Karissa. To wrap up, I'll reiterate what I said at the beginning of this call.

Though some volatility this year is unavoidable as the world begins to transition to a post-pandemic new normal, we are all focused on a much bigger future and are convinced that our market-leading position, our strategic investments and our long-term focus will equate to a continued strong growth and improving profitability for many years to come.

Derek, Karissa and I will be happy to take your questions. Operator, please go ahead..

[Operator Instructions] Our first question will come from the line of Vincent Caintic from Stephens. You may begin..

Moving to the first question. Just on -- maybe a follow up on the commentary for the second quarter. So first quarter, great results, and it seems to have been strong for the majority of the lease-to-own players. And with that strength, I guess, there was -- we saw significant help from government stimulus, tax refunds and so forth.

And so I'm wondering when you're thinking about the rest of 2020, does the expiration of those stimulus tax refunds and so on have an effect on your model or how you're thinking?.

Yes. Thanks for the question, Vince. We don't think that the stimulus changes are going to affect our year. The consumer is obviously really strong right now, and they have been pretty resilient, thanks to the government stimulus as well as obviously, unemployment is dropping and people are going back to work.

So we don't think there's going to be any effect. And as you remember, we're -- during recessionary times, we actually performed pretty well. And we've seen that obviously happen, but we don't really think there's going to be any impact. But we're going to monitor things for the rest of the year and see how things play out..

Okay. Great. Second question. So you highlighted your various partnerships. And I was wondering if you could talk about how we should think about the lift in your originations from your partnerships. You highlighted Magenta and Shopify and Affirm.

So like for example, if we take Shopify does over $100 billion of merchandise volume annually and Affirm, I think, is on track to do $8 billion this year.

When you think about kind of what your partners are doing, how much -- how should we think about how much of that could flow to you? Like if you could size maybe the opportunity for Shopify?.

Vincent, this is Derek. I'll take that question. So generally, we don't expect to give that granular level of detail in terms of merchant base or growth projections by platform or partner. However, we are continuing to develop our strategy and collaboration with various partners, and we're seeing really strong numbers.

The waterfall solution, combined with our direct offerings and partnerships, is really resonating with online retailers on the whole.

I would also just add that partners like Affirm, Magento and others, we're just getting started, and it's really exciting to see the volume and the interest as the word gets out that Katapult is available and easy to add. And so we're just really optimistic. We'll be continuing to give more flavor as to what that means for us.

But you're also going to see us adding new partners in the future..

Yes. I think if I can add, Vincent, I would say we're just scratching the surface..

Our next question will come from the line of Ramsey El-Assal from Barclays. You may begin..

I wanted to ask you to give us a little more color on the drivers of the full year origination guide, which I think is coming in around like 108% growth at the midpoint. 1Q originations, I think, grew 71%. I think comps get a little bit easier, if I'm not mistaken, in the back half.

But you also have line of sight to new merchants onboarding or merchants signed last year annualizing? Just trying to get a little more color behind the acceleration there versus the result this quarter..

Sure, Ramsey. This is Karissa. Yes, in terms of the growth, you nailed it on the head. We saw pretty strong growth in Q1. Q2, we -- as I mentioned on the call, we're going to anticipate year-over-year decline in originations just because last year, Q2 was unseasonably high for us.

But in the second half, the comps get easier, and that's where our growth is really concentrated. So as we onboard merchants now and in the first half of the year, we anticipate the new merchants driving volume next year and in the second half of the year.

And then also holiday season, we saw a very flat holiday season last year, which was definitely out of the ordinary for us. So we're really excited about the holiday season returning. And as we onboard new merchants and then see that seasonal uptick that we normally do, that's where we're seeing the growth..

Okay.

And then separately, are you seeing any impact on sales from some of the delayed shipping, delayed logistics times that we've been reading about and some of us experiencing when we try to buy a couch or [Indiscernible], is that impacting your business at all?.

Ramsey, this is Derek. I'll take that one. So the answer is yes. We definitely have seen some delays that has been impacting the customer experience and leading to higher cancellation rates or abandonment.

That said, we do believe that our approach to expand communication with these customers and partnering well with our retailers, we were able to retain that consumer relationship and possibly get that transaction later when things are more widely available.

So we have seen some fluctuations, but we continue to monitor and it looks like things are doing that..

Okay. Last one for me is I just wanted to ask for an update on the Wayfair concentration. I think I recall -- as I recall, the expectation for that was for it to decline quite a bit in 2021. I know the world is obviously atypical right now. I'm just curious about how that's trending.

Is that kind of expectation still on track?.

Yes. We saw a decline in the first quarter as far as concentration, and that's what we expected. And so while we continue to grow along with them, while it's really about the new retailers and the new pipeline that we have coming into the second half of the year..

I'll put an additional point on that. So at the end of the year, we're in the mid-70s of concentration. We've dropped down to the mid-60s through the end of the first quarter.

And that is then because of the decrease in expectations on the Wayfair side, that's more just seeing the growth that we've had from the other areas of our business, which we're really excited about..

Our next question will come from the line of Anthony Chukumba from Loop Capital Markets. You may begin..

I guess two questions.

First question, I don't know if you want to give the exact number, but maybe I mean just sort of directionally with the year-over-year change in your write-offs like the way you, I guess, the way you sort of calculate that or think about that? Would love to just get a little more color on that or like I said, if not the actual number, just what the change or direction what the change was year-over-year?.

Yes.

When you're speaking of write-offs, is that to my comment of why gross profit margin went down slightly?.

No, I'm just talking about like write-offs, right? Like somebody leases something from you, but then they disappear, right? And you have to write it off..

Yes, yes. Yes, absolutely. Just wanted to confirm that. So from a credit perspective and a write-off perspective, we're really seeing steady state write-offs. Prior to the pandemic and COVID hitting, we had seen very consistent loss rates and write-offs for the past mid 12 months prior. So we're at those same levels.

We're not seeing any changes materially one way or the other..

Okay. And then -- so second question, you had a question earlier about federal stimulus and the fact that the checks are probably pretty much spent at this point. But we do have this expanded child tax credit that kicks in, in July. I guess I just love how you're sort of thinking about that in the context of your full year guidance..

Yes. I mean I think that's something that we'll definitely be monitoring. When stimulus does hit, we do see -- within this hit, we did see some increase in volume and also in terms of paper.

We also will be checking the trends or closely monitoring the trends on early buybacks because that's something once -- when our consumers receive stimulus checks or tax refund checks, we do see that they go and proactively buy out their lease. So I think there'll be a lot of dynamics at play.

So we'll see how it turns out, and we'll go on during that closely throughout the summer..

And the next question comes from the line of Kyle Joseph from Jefferies. You may begin..

Congratulations on getting the transaction done, and thanks for having me on. Yes, a quick follow up there. We said the last round of stimulus in March.

How long does it take for 90-day buyout activity to kind of normalize after around the stimulus given we've seen kind of 3 rounds at this point?.

Kyle, I'll take that. So the quick answer is it is roughly in that 90 to 120 days that we really see things season out. That said, part of our approach is that we're always looking to communicate with consumers so that they can understand how they can get the best deal.

And after these stimulus moments, we've seen a variety of different responses, right? So early in the stimulus era, we did see some increase in our early purchase option activity and some of the other events that happened, for example, later last year, we didn't see as much activity. It looked more just like a typical tax season.

So typically, you see it within three months or so. And then -- but the behavior of consumers has been a little bit dynamic, as we mentioned on the call..

Got it. And then just one one follow up for me. As we think about your pipeline of retail partners, obviously, you guys have a leg up on the e-commerce side of the business.

Longer term, would you imagine your business stays very focused on e-comm, but with the balance of brick-and-mortar? And then also from a vertical perspective, talk about potential for vertical diversification? Or is there a big enough white space in your existing verticals? But just some pipeline color would be helpful..

Sure. I'll take that. We are -- in the pipeline, We see a number of omnichannel retailers, which I think we have not only the experience and the knowledge for this business originally kind of floated towards brick-and-mortar a little bit more than it did e-commerce, and we moved it to e-commerce over the last several years.

We want a player who is doing both, because we think we can add value from a marketing perspective and capturing this consumer that is shopping online and might not be visiting the store, but maybe wants to fulfill in the store. So we're talking to a few retailers now that have that. And building that capability, I think, is relatively easy.

One of our sales leaders, for example, does have that background. He ran a field sales team. So I think that part is relatively easy. It just depends on the scale of the retailer. So we're not afraid of it, but I think we've got some technology ideas around driving a better experience at the store for the consumer. So the consumer is in control.

And then on the vertical side?.

Yes, I'll take that, Orlando. So on the vertical side, Kyle, it's a good question. We tend to stay really close to those essential items. We believe that that's the sweet spot for our lease purchase product. We're focusing on those essential items like furniture, appliances, auto and core electronics.

That also helps us to certainly access the growth opportunities that are happening in this space, but we're constantly evaluating new opportunities, and we're seeing where consumer demand takes us. And some of them are really interesting, and we'll be excited to talk more.

If you look at the new retailers we brought on, you'll see increasing interest in areas like gaming and other electronic capabilities that we're seeing really great performance out of and we're excited about..

[Operator Instructions] We have a follow up from Vincent Caintic from Stephens. You may begin..

So just, I guess, a broader question. But -- when you think about your pipeline, maybe if you could talk about how the sales cycle typically works when you're talking to a merchant. We have -- you've had tremendous origination growth, and that looks like it's going to continue, especially with your online focus.

But I guess when you engage with the retailer or try to engage with the retailer, how does the process typically work? What are there -- what are they looking for? And what are they -- so whatever the friction points? And one of the things we've heard from some of the -- some of your competitors, so Katapult has done really well on the e-comm and the online side, seems like the other guys are trying to add e-comm and online capabilities as well and trying to reach parity.

So maybe when the -- when you're engaging a retailer, is the competitive pressure, are they searching around for other competitors? Just sort of wondering if you could talk about how the sales cycle and that process works..

Vincent, let me break down that question into a few different areas. So on the competitive side, I'll start there, which is just that this market is huge and really untapped. So we're not surprised at all to see competitive interest in the space.

We've been developing our solution, and we continue to enhance our strategic moat content consistently, number one, to deliver more value for the retailer and for the consumer, and we're not going to stop doing that. We want to make it -- we want to be the easiest to work with on both sides is that and have a really compelling solution.

So we have things underway that we're really excited about that are going to really continue to be differentiated. In terms of how the sales cycle works, it depends, and this is where I think we also see a lot of encouraging signs.

One is on the SMB side, which is a huge part of our business is that we've made it extremely easy for a retailer to say yes.

And to be able to onboard a retailer very, very simply with a waterfall solution, a direct solution or both, we think that's really powerful and it delivers really the most value that a retailer can see that match with our existing base and our marketing approach.

On the midsize to large size, the friction is greater only because of prioritization in our IT side. As you go up the scale, you see retailers that have custom solutions are proprietary web care environments or omnichannel POS solutions. And really, a lot of it is about prioritization.

What's really exciting, though, overall is that due to the pandemic and some of the testimonials and more information that we've been able to share, retailers are really getting it. But this is an untapped market that the nonprime consumer base is a viable and attractive market segment for them.

And we're getting really good signs that the interest is increasing very quickly..

Our next question will come from the line of Anthony Chukumba from Loop Capital Markets. You may begin..

So you mentioned your pipeline, you have a number of omnichannel retailers. I guess my question there, I guess the way I've always understood your sort of special sauce is that you only really service e-commerce retailers. And obviously, there's a lot of sales and merchant support that's involved with servicing brick-and-mortar retailers.

So should we expect that if you're going to be going after omnichannel retail that's going to be investments or going to be necessary to service those retailers that will bring down your profitability?.

Anthony, that's a good question. And I would point you to our Analyst Day deck, where we talked about some of the new investments that we're making. But first, let me just talk a little bit more about our strategic approach, and Orlando mentioned that we're digital, mobile and e-commerce first.

And like you said, we focus on those omnichannel retailers that are actively looking to grow their e-commerce penetration and their e-commerce sales and/or already have a really nice e-commerce business. Because you're right, that is our number one area of strategic advantages that we can deliver value on.

And increasingly, the interest in trying to make sure that they tap those markets is there. However, right, customers are multichannel. They shop in different places. And so retailers have asked us that have an in-store experience, hey, can you do in store as well? And the answer is yes.

But we wouldn't do it the same way as you've seen in other areas, right? We're definitely oriented to using digital means to communicate with consumers to make the checkout seamless.

And so yes, if we will be making investments that should make that digital experience smooth and have a lighter touch in terms of the financial impact of doing in-store experiences, but there will be investments that we have tied to it..

Got it. And then just one follow-up question. So I was looking through your press release and your calculation of adjusted EBITDA. I see you're backing out employee recruiting costs. Now I mean these numbers are pretty small, so I'm not terribly concerned about them, but I've just never seen that.

So I guess why would you be adjusting for that? I would just think that, that would be a cost of doing business, particularly for a growing company..

Yes, I'll take that. It's really -- these were just onetime costs that we were isolating for some of the uplift to become a public company. So we don't use recruiting firms normally. We're actually really great at recruiting talent on our own.

But for some of these onetime positions that we needed like a Chief Accounting Officer, et cetera, we did utilize recruiting firms, because we wanted to get the best talent out there. But yes, going forward, good call out.

We won't be adding those back on a regular cadence, but that's something we just wanted to isolate in the interim just because we were hiring some big roles that we're using recruiting firms for..

And I'm not showing any further questions in the queue. I'd like to turn the call back over to the speakers for any closing remarks..

Well, thanks, everyone, for your time today. Hopefully, we're able to answer your questions and look forward to continuing our conversations with many of the investors over the next couple of days.

We really appreciate your time and appreciate the support that you've given us through this journey into being a public company, and great things are coming. So thanks again..

This concludes today's conference call. Thank you for participating. You may now disconnect..