DEF: Katapult Reports Profit, Announces Major Merger & Capital Raise

Katapult Holdings, Inc. reports a return to net profitability in 2025, secures $65 million in new capital, and details a transformative merger with Aarons and CCFI Holdings.

Summary

• The 2026 Annual Meeting of Stockholders will be held virtually on Thursday, April 30, 2026, at 10:00 a.m. Eastern Time.
• Stockholders will vote on the election of Derek Medlin as a Class II director, the ratification of Grant Thornton LLP as the independent registered public accounting firm for fiscal year 2026, and a non-binding advisory resolution on named executive officer compensation.
• Katapult entered into a Merger Agreement on December 11, 2025, to acquire Aarons Intermediate Holdco, Inc. and CCFI Holdings LLC.
• Post-merger, existing Katapult stockholders are expected to hold approximately 6.0%, CCFI unitholders 79.9%, and Aarons stockholders 14.1% of the combined company on a fully diluted basis.
• The Board of Directors will expand to nine members post-merger, with most current directors resigning, except Orlando Zayas and Gregory L. Zink, and new directors from CCFI and Aarons being appointed, including Kyle Hanson as executive chair.
• On November 3, 2025, Katapult raised $65.0 million in gross proceeds through the issuance of Series A ($35.0 million) and Series B ($30.0 million) Convertible Preferred Stock to HHCF Series 21 Sub, LLC.
• Proceeds from the capital raise were used to repay the company's term loan, partially prepay the revolving loan, and for general corporate purposes.
• A default on the Minimum Trailing Three-Month Originations covenant for August, September, and October 2025 was waived, and the loan agreement was amended to adjust financial covenants and reduce the revolving loan advance rate.
• Net income for 2025 was $1,365 thousand, a significant improvement from a net loss of $(25,915) thousand in 2024 and $(36,666) thousand in 2023.
• Several Section 16(a) beneficial ownership reports (Form 3s and Form 4s) for key individuals and entities were not timely filed in 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as moderately positive due to the return to net profitability in 2025 and the significant capital injection from the Hawthorn Investment, which addressed debt. However, the substantial dilution for existing shareholders from the proposed merger and the compliance issues with Section 16(a) reporting temper the overall sentiment.

Positives

• Achieved net income of $1,365 thousand in 2025, a substantial turnaround from losses of $(25,915) thousand in 2024 and $(36,666) thousand in 2023.
• Successfully raised $65.0 million in new capital through preferred stock issuances, strengthening the balance sheet and enabling debt repayment.
• Secured a waiver for a loan agreement default and amended terms, indicating lender support and financial restructuring.
• Maintains strong corporate governance practices, including a majority of independent directors, regular executive sessions, and independent committees.
• Implemented robust equity ownership guidelines for executives and non-employee directors, aligning interests with shareholders.
• Adopted policies prohibiting hedging, short sales, short-term trading, and pledging of common stock, enhancing governance and reducing speculative behavior.

Negatives

• Existing Katapult stockholders face significant dilution, expected to hold only approximately 6.0% of the combined company post-merger with Aarons and CCFI.
• The company defaulted on its Minimum Trailing Three-Month Originations covenant for three consecutive months (August, September, October 2025), requiring a waiver.
• The revolving loan advance rate was reduced as part of the amended loan agreement, potentially limiting future liquidity or borrowing capacity.
• Multiple instances of untimely Section 16(a) beneficial ownership reporting were identified for several directors, executive officers, and a significant stockholder in 2025.

Risks

• The proposed merger with Aarons and CCFI is subject to various terms and conditions, including Katapult stockholder approval for the stock issuance and a new incentive plan, which if not obtained, could impact the transaction.
• Conversion of the newly issued Preferred Stock to Common Stock is subject to an Ownership Limitation until Requisite Stockholder Approval is obtained, with a deadline of February 27, 2026, which if missed, could affect the Purchaser's conversion rights.
• Forward-looking statements regarding business outlook, ability to scale, leverage the platform, build merchant relationships, consumer reach, grow topline, and generate cash flow and profitability are not predictions of actual performance and involve inherent uncertainties.
• General risks and uncertainties are discussed in greater detail in the 'Risk Factors' section of the Annual Report on Form 10-K for the year ended December 31, 2025.

Future Outlook

The company anticipates scaling its business, leveraging its platform, and continuing to build merchant relationships and consumer reach to grow its topline and generate cash flow and profitability. The proposed mergers with Aarons and CCFI are expected to have a significant impact on the company's future structure and operations. A shareholder meeting is planned by February 27, 2026, to approve the removal of an ownership limitation on preferred stock conversion. Performance cash awards from 2024 are tied to revenue growth targets through 2026, with payouts expected after December 31, 2026.

Management Comments

• We are cordially inviting stockholders to attend the 2026 Annual Meeting, which will be held in a virtual format to provide a consistent experience regardless of location.
• It is important that shares are represented at the Annual Meeting, and we appreciate stockholders' consideration and action on the matters presented.
• We believe the separation of our CEO and Chair of the Board is currently optimal for the company and stockholders, as it strengthens Board independence while leveraging the experience of non-employee directors.
• Our compensation programs are designed to attract, retain, motivate, and reward employees to achieve results aligned with shareholder interests.
• We believe equity awards provide executive officers with a strong link to long-term performance, foster an ownership culture, and align interests with stockholders.

Industry Context

StockSavvy.ai notes that Katapult's strategic merger with Aarons and CCFI Holdings signals a significant consolidation or expansion within the lease-to-own and financial technology sectors. This move could position the combined entity for enhanced market presence and operational synergies in a competitive landscape. The company's return to profitability and capital raise occur amidst a broader trend of financial technology firms seeking stability and growth through strategic partnerships and improved financial discipline. The adoption of virtual annual meetings and updated corporate governance policies, including a clawback policy, reflects a continued alignment with modern corporate practices and investor expectations for transparency and accountability.

Comparison to Industry Standards

• The company's corporate governance structure, with 3 out of 5 directors being independent, meets Nasdaq listing standards requiring a majority of independent directors.
• The adoption of a Compensation Recoupment Policy (Clawback Policy) and updated Insider Trading Policy (including Rule 10b5-1 plan requirements) aligns with recent SEC rules and Nasdaq listing standards, demonstrating adherence to evolving global governance benchmarks.
• Executive compensation practices are benchmarked against 'similarly situated companies' and a 'peer group,' though specific comparable companies or projects are not detailed in this filing.

Management Changes

Corporate Governance

Related Party Transactions

• On November 3, 2025, HHCF Series 21 Sub, LLC, a beneficial owner of more than 5% of the company's voting stock, purchased $35.0 million in Series A Convertible Preferred Stock and $30.0 million in Series B Convertible Preferred Stock from Katapult.
• CURO Group Holdings Corp (and its subsidiaries), which previously held 20.6% beneficial ownership of common stock as of December 10, 2021, is a related party due to Don Gayhardt's former role as CEO of CURO Group Holdings Corp.

Stakeholder Impact

• Shareholders: Will experience significant dilution from the proposed merger (expected to hold ~6.0% of the combined company) but may benefit from potential merger synergies and the company's return to profitability. Will vote on key governance matters.
• Employees/Executives: Subject to new equity ownership guidelines and a clawback policy. Executive compensation is tied to performance, and a new incentive plan is proposed post-merger.
• Creditors: The $65.0 million capital raise was used to repay debt and partially prepay revolving loans, improving the company's debt profile. Loan agreement defaults were waived, and terms amended, indicating ongoing lender relations.
• Customers: The merger with Aarons and CCFI could lead to expanded offerings or changes in service, though direct impacts are not detailed in this filing.
• Suppliers: Potential for changes in business relationships or scale of operations post-merger, but not directly addressed.

Next Steps

• Stockholders will vote on the election of a Class II director, ratification of the independent registered public accounting firm, and approval of named executive officer compensation at the Annual Meeting on April 30, 2026.
• The company will file a registration statement on Form S-4 seeking stockholder approval for the Katapult Stock Issuance and a new 2026 incentive plan related to the merger.
• A shareholder meeting will be held by February 27, 2026, to obtain approval to remove the Ownership Limitation for Preferred Stock conversion.
• The company has agreed to file a registration statement covering the resale of Common Stock issuable upon conversion of Preferred Stock within 45 days following the closing of the Preferred Stock Issuances.
• Performance cash awards granted in 2024, if earned based on revenue growth targets through 2026, will be paid out after December 31, 2026.
• Stockholder proposals for the 2027 Annual Meeting to be included in the proxy statement must be received by November 20, 2026.
• Stockholder proposals not for proxy statement inclusion and director nominations for the 2027 Annual Meeting must be received between December 31, 2026, and January 30, 2027.

Key Dates

Recommendation

While the return to net profitability in 2025 and the recent capital injection are positive developments, the impending merger with Aarons and CCFI introduces significant uncertainty and substantial dilution for current Katapult shareholders, who are expected to hold only 6.0% of the combined entity. The strategic rationale for such a large dilution needs to be thoroughly evaluated, and the integration risks are considerable. The compliance issues with Section 16(a) reporting also raise minor governance concerns. Investors should hold to assess the full details and implications of the merger, including the Form S-4 filing, and monitor the combined entity's performance and integration success before making further investment decisions.

Keywords

Proxy Statement, Annual Meeting, Merger Agreement, Capital Raise, Preferred Stock, Corporate Governance, Executive Compensation, Net Income, SEC Filings, Shareholder Vote, Board of Directors, Financial Performance, Debt Repayment, Dilution