8-K: Katapult Reports Double-Digit Gross Originations Growth in Q4, Exceeding Expectations; Sets Positive Outlook for 2025

Katapult Holdings, Inc. announced strong Q4 2024 results with double-digit gross originations growth and provided an optimistic outlook for continued growth and profitability in 2025.

Summary

• Katapult Holdings, Inc. reported its financial results for the fourth quarter ended December 31, 2024.
• Gross originations increased by 11.3% to $75.2 million in Q4 2024.
• Excluding the home furnishings and mattress category, gross originations grew by 50% year-over-year.
• Total revenue increased by 9.4% to $63.0 million.
• The net loss improved to $9.6 million compared to a net loss of $14.6 million in Q4 2023.
• Adjusted EBITDA loss was $1.1 million, compared to a loss of $0.3 million in the same period last year, driven by higher cost of sales.
• For the full year 2024, gross originations increased by 4.7% to $237 million.
• Total revenue for 2024 increased by 11.6% to $247 million.
• The net loss for the year improved to $26 million from $37 million in 2023.
• Adjusted EBITDA was $5 million, a significant improvement from a $2 million loss in 2023.
• The company expects approximately 11% year-over-year increase in gross originations and approximately 10% year-over-year increase in revenue for the first quarter of 2025.
• Katapult anticipates at least 20% growth in gross originations and revenue for the full year 2025.
• The company expects to deliver at least $10 million in positive Adjusted EBITDA for 2025.
• Write-offs as a percentage of revenue were 9.6% in Q4 2024 and 9.2% for the full year, within the company's target range of 8% to 10%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong growth in key metrics and a focus on profitability. While there are risks associated with the macroeconomic environment, the overall tone is optimistic and suggests a positive trajectory for the company.

Positives

• The company successfully transitioned its business model to a two-sided marketplace.
• Customer satisfaction remained high, with a Net Promoter Score of 58 as of December 31, 2024.
• Repeat customers accounted for 61.5% of gross originations in Q4 2024.
• Lease applications grew 50% year-over-year in Q4.
• Total operating expenses decreased 37.4% in Q4 2024.
• The company generated its first full year of Adjusted EBITDA profitability since 2021.
• The company is projecting strong top-line growth and Adjusted EBITDA for 2025.

Negatives

• Adjusted EBITDA loss was $1.1 million for Q4 2024, compared to a loss of $0.3 million in Q4 2023, driven by higher cost of sales related to rapid gross originations growth.
• The company is navigating a challenging macro environment, particularly within the home furnishings category.
• The outlook assumes that the gross originations for the home furnishings and mattress category does not improve materially from the 2024 performance.

Risks

• The company's ability to refinance its indebtedness and continue as a going concern is a risk.
• Macroeconomic headwinds and the cyclical nature of customer spending could impact performance.
• The concentration of transaction volume with a single merchant partner or type of merchant poses a risk.
• Data security breaches and other information technology incidents could disrupt operations.
• The company's ability to meet the minimum requirements for continued listing on the Nasdaq Global Market is a risk.

Future Outlook

The company expects continued growth in 2025, with at least 20% growth in gross originations and revenue, and at least $10 million in positive Adjusted EBITDA. The outlook assumes no material improvement in the home furnishings category and no significant changes to the macro environment.

Management Comments

• Orlando Zayas, CEO, stated that the company had a great fourth quarter with stronger-than-expected gross originations growth and 50% growth in application volume.
• Nancy Walsh, CFO, stated that the company delivered strong top-line growth while continuing to lean into fiscal discipline, resulting in the first full year of Adjusted EBITDA profitability since 2021.

Industry Context

Katapult operates in the financial technology sector, providing lease-to-own solutions for non-prime consumers. The company's performance is influenced by macroeconomic conditions, consumer spending patterns, and competition from other financing options. The growth in e-commerce and the increasing demand for flexible payment solutions are driving the company's growth.

Comparison to Industry Standards

• Katapult's focus on the underserved, non-prime consumer market aligns with the broader trend of fintech companies targeting niche segments.
• Companies like Affirm and Klarna also offer alternative financing options, but Katapult differentiates itself with its lease-to-own model.
• Katapult's growth in gross originations and revenue is comparable to other fintech companies in the consumer lending space.
• The company's Adjusted EBITDA profitability target for 2025 is a positive sign, as many fintech companies struggle to achieve profitability in their early stages.

Stakeholder Impact

• Shareholders can expect continued growth and profitability in 2025.
• Employees can anticipate a stable and growing company with opportunities for advancement.
• Customers will benefit from a wider selection of merchants and enhanced app features.
• Merchants will gain access to a larger pool of potential customers and increased sales.
• Creditors can expect the company to maintain strong credit quality and meet its debt obligations.

Next Steps

• The company will continue to focus on expanding its two-sided marketplace and increasing platform velocity.
• Katapult will continue to add new merchants to the Katapult App Marketplace during 2025.
• The company will continue to enhance its risk modeling and onboard high-quality new merchants.
• Katapult will host a conference call and webcast on March 28, 2025, to discuss the financial results.

Key Dates

Keywords

Katapult, e-commerce, lease-to-own, financial technology, gross originations, Adjusted EBITDA, KPay, marketplace, non-prime consumers, financial results