Katapult Holdings, Inc. Q3 FY2024 earnings call

Orlando Zayas highlighted Q3 progress including eight consecutive quarters of gross originations growth and diversification of the gross originations base. Derek Medlin introduced his role as Chief Growth Officer, focusing on increasing application flow. Nancy Walsh walked through financial results, noting revenue growth, solid gross profit, and adjusted EBITDA performance. Merchant strategy involved integrating new direct and waterfall merchants, adding over 40 new merchant pathways, and deepening relationships with existing merchants via marketing collaborations. Katapult Pay grew 86.1% in Q3 to $16 million, representing 31% of total base. Marketing efforts saw 83% year-over-year increase in app downloads and 52% increase in unique app users. Tech-wise, a pilot of product-based search feature was launched.

Gross originations in Q3 grew 3.3% to $51.2 million. Over 58% of total Q3 gross originations (excluding Wayfair) grew more than 37% year-over-year, with applications up over 50% year-over-year. Revenue reached $60.3 million, a 10% increase. Gross profit for Q3 was approximately $11.9 million, an increase of nearly 4%. Q3 gross margin was 19.8%. Adjusted EBITDA in Q3 was $600,000. For the full year 2024, Katapult expects gross originations to grow 2%-4%, revenue to grow at least 10%, and positive adjusted EBITDA of $5.5 million.

Q4 gross originations growth is expected to be 6%-8%, with gross originations excluding Wayfair growing faster. Revenue growth is projected in the range of 5%-7% and adjusted EBITDA is roughly breakeven. For the full year 2024, gross originations are expected to grow 2%-4%, revenue is reiterated to grow at least 10%, and adjusted EBITDA is forecasted to be $5.5 million.

There is a patent infringement lawsuit against the company, and the company is evaluating it while intending to vigorously defend. Uncertainty exists regarding the potential credit facility refinancing as there's no assurance of closing with the lender or any other lender. Also, there are uncertainties related to the litigation settlement and potential secondary offerings over the next 12 months.

Q: What would it take to see a material change in home furnishings demand?

A: Orlando Zayas said it's as simple as more home purchases, with interest rates coming down and home purchases picking up.

Q: What is average origination size today versus 12 months ago?

A: Nancy Walsh said still in the $600 to $700 range.

Q: Any update on the Synchrony waterfall integration?

A: Orlando Zayas said Synchrony has released pre-approval waterfall flow with a handful of merchants and they're excited to partner closely.

Q: Why were shares outstanding up?

A: Nancy Walsh said it's part of the Delaware Litigation Settlement, with 168,000 shares released as of October 24.

Q: On fourth quarter seasonality, what percentage of quarters' originations come from Thanksgiving, Black Friday to Cyber Monday?

A: Nancy Walsh said a fair component as Q4 is important for retailers.

Q: Comments on patent infringement lawsuit?

A: Orlando Zayas said the company is evaluating it and intends to vigorously defend.