Katapult Holdings, Inc. Q4 FY2024 earnings call

Business Transformation

• Transformed from a single input driven business to a multi-dimensional growth engine. Launched Katapult app with KPay feature, moving from relying solely on merchants for traffic to creating an app marketplace for consumers.

Consumer Engagement

• In Q4, $46 million in gross originations started in the app (total app originations grew 32% YOY), and approximately $31 million of gross originations were transacted using KPay (up ~52% YOY). Added 8 merchants to the marketplace based on customer feedback in 2024 and will continue to add features, functionality, and merchants in 2025.

Merchant Engagement

• Direct and waterfall merchants accounted for ~68% of total gross originations in 2024. Added over 30 new direct or waterfall merchants or merchant pathways in Q4. Engaged in co-granted marketing campaigns with merchants, leading to strong growth during holidays. Also, entered into new partnerships with companies like Self Financial Technology Company, a global market leader, and a Fintech, to expand reach and application pool.

In Q4, growth originations grew more than 11% year-over-year, and fourth quarter revenue was up more than 9%. For 2024, approximately $127 million of gross originations began in the app, and KPay enabled nearly $77 million of those gross originations. Direct and waterfall merchants accounted for approximately 68% of total gross originations in 2024. In Q4, excluding the home furnishings and mattress category, direct and waterfall gross originations grew approximately 44% year-over-year, and for full-year 2024, this metric was up 16%. The largest merchant, Wayfair, represented 27% of total gross originations in Q4 2024, down from 43% in Q4 2023.

Q1 2025

• Expect gross originations growth of approximately 11%, revenue growth of approximately 10%, and approximately $3 million in positive adjusted EBITDA.

2025 Full-Year

• Expect gross originations growth of at least 20%, revenue growth of at least 20%, and at least $10 million in positive adjusted EBITDA. Full-year gross profit is expected to stay in the 18% to 20% range.

Risks surrounding the ability to secure refinancing of the revolving credit facility and to continue as a going concern, as disclosed in the 10-K filed, with no assurance of consummating a new credit facility.

Q: Kyle Joseph asked about margin outlook and consumer behavior changes due to tariffs.

A: Nancy Walsh said full-year gross profit is expected to stay in 18% - 20% range. Orlando Zayas and Derek Medlin mentioned no direct impact of tariffs on consumer behavior seen yet, but merchants are looked at for how tariffs affect pricing.

Q: Anthony Chukumba asked about lease merchandise write-offs and EBITDA margin improvement.

A: Nancy Walsh said write-offs fluctuate within target range. She explained EBITDA margin improvement is due to diligent expense management and investment in growth areas like technology and marketing.

Q: Scott Buck asked about merchant acquisition in uncertain macro environment and first quarter seasonality and OpEx investment.

A: Derek Medlin said merchants are looking for growth avenues and our app is resonating. Nancy Walsh said first quarter seasonality was consistent with prior years. She mentioned SG&A increases related to technology and marketing investments for growth.