Katapult Holdings, Inc. Q1 FY2025 earnings call

• Q1 financial results were strong with gross originations and revenue growth. - Success in marketplace strategy execution, including building the two-sided app marketplace. - High consumer engagement: NPS 66, repeat customer rate 57.4%, LTV up nearly 6%. - KPay originations grew 57% to $22.8 million, app originations grew 42% to $37.9 million, with app opened 3.6 million times in Q1, a 46% increase year-over-year. - Merchant engagement: Focus on being a partner of choice, adding new merchants, running co-branded marketing campaigns, and monitoring top 25 merchants' performance with 13% growth in gross originations for them. - Pricing strategies: Testing to make lower-cost leasing more palatable, resulting in more leases under $300 and good payment collections.

Gross originations grew 15.4% year-over-year to $64.2 million in Q1 2025, beating the outlook for 11% growth. Revenue came in at $71.9 million, a 10.6% increase, slightly above expectation. KPay originations were $22.8 million, up approximately 57%, representing 35% of total gross originations. Total app originations, which started in the app, grew 42% to $37.9 million, accounting for approximately 59% of gross originations. Consumer side: NPS score was 66 as of March 31st, repeat customer rate was 57.4%, both up year-over-year, and LTV was up nearly 6% in Q1 2025. Merchant side: Direct and waterfall merchants accounted for approximately 65% of total gross originations in Q1, with gross originations for this group growing about 1%. Excluding home furnishings and mattress category, direct and waterfall gross originations grew approximately 40% year-over-year. The percentage of leases under $300 in value increased to 31% in Q1 2025 from 24% last year.

• Q2 2025 outlook: Gross originations growth in the range of 25% to 30%; revenue growth in the range of 17% to 20%; approximately breakeven adjusted EBITDA. - 2025 outlook: Continue to expect gross originations growth of at least 20%; gross originations excluding home furnishings and mattress category to grow faster than overall; revenue growth of at least 20%; at least $10 million in positive adjusted EBITDA.

• Uncertainty regarding securing refinancing or maturity extension of the credit facility, with no assurance of consummating a new credit facility or getting a maturity extension grant. - Potential covenant breaches and other uncertainties surrounding debt negotiations. - Macro economic headwinds such as increasing tariffs or rising inflation that could impact the business.

Q: How does the adjusted EBITDA outlook work considering Q1 growth and Q2 guidance?

A: Nancy Walsh explained that 2024 had slower growth in first and second halves until late Q4, while 2025 has faster Q1 growth, strong Q2 outlook, and seasonality in Q4, anticipating to reach $10 million adjusted EBITDA despite Q2 being breakeven.

Q: What was the gross originations growth or decline for Wayfair specifically?

A: Nancy Walsh stated that Wayfair had $17.2 million of gross originations in the first quarter through the waterfall component, with challenges in the home furnishings and mattress category.

Q: What do you attribute to the momentum in KPay versus greenfield opportunities, share taking, or cannibalizing other business?

A: Derek Medlin said it's the greenfield opportunity in the large TAM, with growth across channels like adding new merchant pathways, direct acquisition activities, and increasing share of wallet with existing customers, facilitated by the app.

Q: Do you see a difference in the percentage of repeat customers coming through KPay versus other parts of the business?

A: Derek Medlin and Orlando Zayas mentioned that KPay users have a higher overall LTV and more rapid repeat cycle, with KPay driving repeat rate to a higher level compared to some other parts, as it allows customers to shop at different retailers.