8-K: Katapult Holdings Reports Strong Q1 2024 Results, Revenue Up 18% Year-Over-Year

Katapult Holdings, Inc. announced a strong first quarter of 2024 with an 18% year-over-year increase in revenue and positive adjusted EBITDA.

Summary

• Katapult Holdings reported its financial results for the first quarter of 2024, showing significant growth.
• Total revenue reached $65.1 million, an 18.1% increase compared to the same period last year.
• Gross originations were $55.6 million, a 1.6% increase year-over-year.
• Non-Wayfair gross originations grew by 9%, while Katapult Pay gross originations surged by more than 150%.
• The company's repeat purchase rate remained strong at 56%.
• Net loss improved significantly to $0.6 million, compared to a $10.5 million loss in the first quarter of 2023.
• Adjusted net income was $1.0 million, a $9.6 million improvement from the adjusted net loss of $8.6 million in the first quarter of 2023.
• Adjusted EBITDA improved to a positive $5.6 million, compared to a loss of $1.0 million in the same quarter last year.
• Write-offs as a percentage of revenue were 8.4%, at the low end of the company's 8% to 10% long-term target range.
• The company ended the quarter with $37.6 million in cash and cash equivalents, including $6.3 million of restricted cash, and $68.0 million of outstanding debt.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong revenue growth, improved profitability, and positive future outlook. The company is showing signs of recovery and growth, which is encouraging for investors.

Positives

• Revenue grew by 18.1% year-over-year, indicating strong sales performance.
• Adjusted EBITDA turned positive, showing improved profitability.
• Katapult Pay is experiencing rapid growth, with gross originations up over 150%.
• The repeat customer rate is high at 56%, suggesting customer loyalty.
• Net loss significantly decreased, demonstrating improved financial health.
• Fixed cash operating expenses decreased by 20.6%, indicating better cost management.
• Write-offs are at the low end of the target range, showing good credit quality.
• The company has a solid cash position of $37.6 million.

Negatives

• Gross originations only increased by 1.6% year-over-year, indicating slower growth in the overall volume of transactions.
• The company still reported a net loss of $0.6 million, although it is a significant improvement from the previous year.
• The company has $68.0 million of outstanding debt on its credit facility.

Risks

• The company is navigating an evolving macro environment with uncertainty around interest rates and inflation.
• There are ongoing headwinds in the home furnishings retail category, which could impact future growth.
• The company's performance is subject to general economic conditions and consumer spending patterns.
• The company is exposed to risks related to competition and the reliability of its platform.
• The company is subject to risks related to data security breaches and other information technology incidents.
• The company is subject to risks related to litigation and regulatory matters.

Future Outlook

Katapult expects a 3 to 5% year-over-year increase in gross originations and an 8 to 10% year-over-year increase in revenue for the second quarter of 2024. For the full year 2024, the company reiterates its outlook for at least 10% growth in both gross originations and revenue. They also expect continued improvement in Adjusted EBITDA performance.

Management Comments

• We were able to deliver gross originations and revenue growth above our expectations, despite a challenging retail environment, said Orlando Zayas, CEO of Katapult.
• We continue to execute against the core tenets of our merchant and customer strategies, and our progress is showing up in our financial results.
• We believe we are well positioned for continued growth and we are looking forward to a great year.
• During the first quarter we faced retail headwinds, but as expected, we picked up momentum as the quarter progressed, said Nancy Walsh, CFO of Katapult.
• Each month we improved year-over-year gross originations growth and this performance, coupled with our strong revenue growth, lease portfolio quality, and our disciplined expense management, allowed us to improve Adjusted EBITDA substantially year-over-year.
• We are on track to deliver a minimum of 10% gross originations and revenue growth for 2024 as we continue to scale our financial model.

Industry Context

The announcement reflects a positive trend for Katapult in the lease-to-own space, particularly in the e-commerce sector. The company's growth in Katapult Pay and repeat customer rate indicates a strong market position. The company is also expanding its partnerships and integrations, which is a key strategy in the competitive fintech landscape.

Comparison to Industry Standards

• Katapult's 18% revenue growth is strong compared to some traditional retailers and financial institutions, but it is important to compare it to other fintech companies in the lease-to-own space.
• Companies like Affirm and Klarna, while not direct competitors in the lease-to-own space, have seen varying growth rates in the buy-now-pay-later sector, which is a related market.
• Katapult's adjusted EBITDA improvement to $5.6 million is a positive sign, as many fintech companies struggle with profitability in their early stages.
• The company's write-off rate of 8.4% is within the expected range for the lease-to-own industry, but it is important to monitor this metric closely.
• The company's focus on non-prime consumers is a key differentiator, as many other fintech companies focus on prime or near-prime customers.

Stakeholder Impact

• Shareholders will likely view the results positively due to the strong revenue growth and improved profitability.
• Employees may be encouraged by the company's positive performance and growth prospects.
• Customers will benefit from the continued expansion of the Katapult platform and its offerings.
• Merchants will benefit from the company's growing customer base and increased transaction volume.
• Creditors will be reassured by the company's improved financial health and ability to manage debt.

Next Steps

• The company will continue to expand its customer base and acquire new customers.
• The company expects gross originations to improve sequentially in the second half of 2024.
• The company will continue to enhance its risk modeling and onboard high-quality new merchants.
• The company will continue to execute its disciplined expense management strategy.

Key Dates

Keywords

Katapult, Lease-to-own, E-commerce, Fintech, Financial Results, Gross Originations, Revenue, Adjusted EBITDA, Katapult Pay, Non-Prime Consumers