8-K: Katapult Holdings Reports 10% Revenue Growth in Q3, Raises Full Year Outlook

Katapult Holdings, Inc. announced a 10% year-over-year revenue increase for the third quarter of 2024, exceeding expectations and updating its full-year gross originations outlook.

Summary

• Katapult reported a 10% increase in revenue for the third quarter of 2024, reaching $60.3 million.
• Gross originations grew by 3.3% year-over-year to $51.2 million.
• The company's Katapult Pay (KPay) product saw an 86% year-over-year increase in gross originations, representing 31% of total gross originations.
• Operating expenses increased by 37.7%, but excluding litigation settlement expenses, they rose by 9.5%.
• The net loss for the quarter was $8.9 million, compared to a $4.1 million loss in the same period last year.
• Adjusted EBITDA for the quarter was $0.6 million, down from $0.9 million in the prior year.
• Katapult ended the quarter with $30.3 million in cash and cash equivalents, including $4.4 million of restricted cash, and $67.3 million in outstanding debt.
• Write-offs as a percentage of revenue were 9.5%, within the company's long-term target range of 8% to 10%.
• The company expects a 6% to 8% year-over-year increase in gross originations and a 5% to 7% increase in revenue for the fourth quarter of 2024.
• For the full year 2024, Katapult anticipates a 2% to 4% growth in gross originations and at least 10% revenue growth, with approximately $5.5 million in Adjusted EBITDA.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with positive revenue growth and KPay performance, but also increased losses and a challenging macro environment. The potential credit facility is a positive development, but the company still faces risks.

Positives

• Revenue grew by 10% year-over-year in the third quarter of 2024.
• KPay is a significant growth driver, with an 86% increase in gross originations.
• The company has diversified its gross originations base, with 58% now excluding Wayfair.
• Customer satisfaction remains high, with a Net Promoter Score of 61.
• The company is expecting to deliver its first full-year of Adjusted EBITDA profitability since 2021.
• Katapult is expanding its merchant base and product offerings, including product-based search.
• The company is maintaining an efficient expense structure.

Negatives

• The net loss for the third quarter of 2024 was $8.9 million, a significant increase from the $4.1 million loss in the same period last year.
• Adjusted EBITDA decreased to $0.6 million from $0.9 million in the third quarter of 2023.
• Total operating expenses increased by 37.7% year-over-year, although this was partially due to litigation settlement expenses.
• The company is navigating a challenging macro environment, particularly within the home furnishings category.

Risks

• The company faces risks related to its ability to refinance its debt.
• Macroeconomic headwinds, particularly in the home furnishings category, could impact future performance.
• The company's performance is subject to general economic conditions, consumer spending patterns, and the availability of credit.
• There is a risk of data security breaches and other information technology incidents.
• The company's ability to meet minimum requirements for continued listing on the Nasdaq Global Market is a risk.
• The company has identified material weaknesses in its internal control over financial reporting.

Future Outlook

Katapult expects a 6% to 8% year-over-year increase in gross originations and a 5% to 7% increase in revenue for the fourth quarter of 2024, with breakeven Adjusted EBITDA. For the full year 2024, the company anticipates a 2% to 4% growth in gross originations, at least 10% revenue growth, and approximately $5.5 million in Adjusted EBITDA.

Management Comments

• We are continuing to grow across key financial and operating metrics including gross originations and revenue, and we believe we are laying the foundation for the long-term success of Katapult, said Orlando Zayas, CEO of Katapult.
• We continue to execute our growth strategy and are focused on influencing the drivers that are within our control, said Nancy Walsh, CFO of Katapult.
• We are grateful for our teams hard work and are looking forward to giving our customers and merchants alike a great holiday season.

Industry Context

This announcement comes as the e-commerce and fintech sectors continue to evolve, with companies focusing on providing flexible payment solutions to non-prime consumers. Katapult's growth in KPay and its diversification away from a single major partner like Wayfair are indicative of a broader trend towards more diversified and customer-centric financial technology offerings.

Comparison to Industry Standards

• Katapult's 10% revenue growth in Q3 is a positive sign, but it is important to compare this to other companies in the lease-to-own and fintech space.
• Companies like Affirm and Upstart, while not direct competitors, provide a benchmark for growth in the consumer finance sector.
• Katapult's adjusted EBITDA of $0.6 million is relatively low compared to more established fintech companies, but the company is projecting a full year profit.
• The 86% growth in KPay originations is a strong indicator of the product's success and potential for future growth.
• The company's write-off rate of 9.5% is within its target range, but it is important to monitor this metric against industry averages to ensure credit quality.

Stakeholder Impact

• Shareholders may be concerned about the increased net loss but encouraged by the revenue growth and positive outlook.
• Employees may be impacted by the company's focus on expense management and growth initiatives.
• Customers will benefit from the expansion of merchant partners and product offerings.
• Merchants will benefit from the company's efforts to drive customer traffic and sales.

Next Steps

• The company will host a conference call and webcast on November 6, 2024, to discuss the financial results.
• Katapult will continue to focus on expanding its customer base, enhancing its risk modeling, and onboarding new merchants.
• The company will work to finalize the potential credit facility to refinance its existing debt.

Key Dates

Keywords

Katapult, Lease-to-own, E-commerce, Fintech, Gross Originations, Revenue, Adjusted EBITDA, KPay, Non-prime consumers, Financial Results