8-K: Katapult Holdings Reports 9% Revenue Growth in Q2 2024, Reaffirms Positive Outlook

Katapult Holdings, an e-commerce-focused financial technology company, announced a 9% year-over-year increase in revenue for the second quarter of 2024, alongside continued growth in gross originations.

Summary

• Katapult Holdings reported its financial results for the second quarter ended June 30, 2024, showing a 9% increase in revenue year-over-year, reaching $58.9 million.
• Gross originations grew by 1.1% to $55.3 million.
• The company's non-Wayfair gross originations increased by nearly 20%, representing 52% of their base.
• Katapult Pay gross originations more than doubled, accounting for 28% of total gross originations.
• The net loss for the quarter was $6.9 million, an improvement from the $7.4 million loss in the same quarter of the previous year.
• Adjusted EBITDA loss improved to $0.4 million, compared to a $1.5 million loss in the second quarter of 2023.
• Write-offs as a percentage of revenue were 9.3%, within the company's long-term target range of 8% to 10%.
• Katapult ended the quarter with $38.4 million in cash and cash equivalents, including $4.6 million of restricted cash, and $69.7 million in outstanding debt.
• The company is reiterating its full-year 2024 outlook for at least 10% growth in both gross originations and revenue, and expects to achieve positive Adjusted EBITDA for the full year.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the revenue growth, improved profitability metrics, and reaffirmed positive outlook. However, the company is still operating at a loss and faces macroeconomic challenges, which tempers the overall sentiment.

Positives

• Revenue increased by 8.7% year-over-year, indicating strong growth.
• The company saw a significant increase in non-Wayfair gross originations, demonstrating diversification.
• Katapult Pay is experiencing rapid growth, more than doubling year-over-year.
• Net loss improved compared to the same quarter last year.
• Adjusted EBITDA loss improved significantly, moving closer to profitability.
• Write-offs are within the company's target range, indicating effective risk management.
• The company has successfully integrated with new partners, expanding its reach.
• Customer satisfaction remains high, as indicated by a Net Promoter Score of 62.
• The company is reiterating its full-year outlook for at least 10% growth in both gross originations and revenue, and expects to achieve positive Adjusted EBITDA for the full year.

Negatives

• The company still reported a net loss of $6.9 million for the quarter.
• Adjusted EBITDA is still negative, although significantly improved.
• The company is navigating a challenging macro environment with potential impacts from inflation and interest rates.
• The company has $69.7 million of outstanding debt on its credit facility.

Risks

• The company is navigating a challenging macro environment, including potential impacts from inflation and interest rates.
• There is uncertainty about the impact of these economic factors on the company's core customer and consumer demand.
• The company's performance is dependent on the home furnishings retail category returning to growth.
• The company faces risks related to its ability to refinance its indebtedness.
• The company is exposed to risks related to general economic conditions, consumer spending, and competition.
• The company is exposed to risks related to data security breaches and other information technology incidents.
• The company is exposed to risks related to litigation and regulatory matters.
• The company is exposed to risks related to the concentration of a significant portion of transaction volume with a single merchant partner.

Future Outlook

Katapult expects to deliver an 8 to 10% year-over-year increase in gross originations and a 7 to 8% year-over-year increase in revenue for the third quarter of 2024, with breakeven or better Adjusted EBITDA. For the full year 2024, the company is reiterating its outlook for at least 10% growth in both gross originations and revenue and expects to achieve positive Adjusted EBITDA.

Management Comments

• We grew the business across our key financial and operating metrics year-over-year gross originations, revenue and Adjusted EBITDA and continued to make strong progress on our growth strategy, said Orlando Zayas, CEO of Katapult.
• We delivered another strong quarter of financial performance and expect to build momentum during the second half of 2024, said Nancy Walsh, CFO of Katapult.
• We are on track to deliver a minimum of 10% gross originations and revenue growth for 2024, and for the first time since 2021, we expect to achieve positive Adjusted EBITDA for the full year.

Industry Context

The announcement reflects Katapult's efforts to expand its reach in the e-commerce financial technology sector, particularly in the lease-to-own space. The company's focus on non-prime consumers and its integration with various merchant platforms aligns with the broader trend of providing alternative financing options in the market. The company is also navigating the challenges of the current macro economic environment, which is impacting the entire industry.

Comparison to Industry Standards

• Katapult's 9% revenue growth is a positive sign, but it is important to compare this to other fintech companies in the lease-to-own space. Companies like Affirm and Upstart have seen varying growth rates, and a detailed comparison would be needed to assess Katapult's relative performance.
• The company's adjusted EBITDA loss of $0.4 million is an improvement, but it is still not profitable. Other companies in the sector may have achieved profitability or have a clearer path to profitability.
• Katapult's write-off rate of 9.3% is within its target range, but it is important to compare this to industry benchmarks for similar types of lending. Companies with lower write-off rates may be seen as having better risk management.
• The company's focus on waterfall integrations is a positive strategy, but it is important to see how these integrations compare to other companies' partnerships and integrations. Companies with more successful integrations may have a competitive advantage.
• The company's Net Promoter Score of 62 is a good indicator of customer satisfaction, but it is important to compare this to other companies in the sector to see how Katapult is performing relative to its peers.

Stakeholder Impact

• Shareholders will be encouraged by the revenue growth and improved profitability metrics.
• Employees may be motivated by the company's positive performance and growth prospects.
• Customers will benefit from the company's continued focus on providing accessible financing options.
• Merchants will benefit from the company's growing network and integration capabilities.
• Creditors will be reassured by the company's improved financial performance and outlook.

Next Steps

• The company will host a conference call and webcast on August 14, 2024, to discuss the financial results.
• The company will continue to execute on its growth initiatives and focus on fiscal discipline.
• The company will continue to expand its customer base and acquire new customers.
• The company will continue to enhance its risk modeling and onboard high-quality new merchants.

Key Dates

Keywords

Katapult, e-commerce, financial technology, lease-to-own, gross originations, revenue, Adjusted EBITDA, non-prime consumers, waterfall integrations, Katapult Pay