Katapult (NasdaqGM:KPLT) Q3 2025 Earnings Call November 12, 2025 08:00 AM ET Speaker2Thank you for standing by. At this time, I'd like to welcome everyone to Katapult Holdings' third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Jennifer Kull, Vice President, Head of Investor Relations. You may begin.Speaker0Welcome to Katapult's third quarter 2025 conference call. On the call with me today are Orlando Zayas, Chief E ...

Financial Data and Key Metrics Changes - In Q2 2025, gross originations grew by 30.4% year over year to $72.1 million, exceeding the top end of the outlook range [6][29] - Revenue for Q2 2025 increased by 22.1% to $71.9 million, surpassing the expected growth of 17% to 20% [6][31] - Adjusted EBITDA was slightly above breakeven at over $300,000, compared to expectations of breakeven [6][34] Business Line Data and Key Metrics Changes - Total app originations grew by 56% to $43.1 million, with approximately 60% of gross originations starting in the app marketplace [9][29] - KPay originations accelerated to approximately 81% year over year, totaling $28.3 million [9][20] - Unique new customers increased by approximately 40%, contributing to a total customer base growth of about 32% [10][13] Market Data and Key Metrics Changes - Gross originations for the top 25 merchants grew by 28% in Q2, with a notable 65% growth when excluding the largest merchant, Wayfair [30][31] - Direct and waterfall merchants accounted for approximately 61% of total gross originations, with a growth of about 11% [22][23] - Excluding home furnishings and mattress categories, gross originations grew by 62% year over year [29][30] Company Strategy and Development Direction - The company aims to build a successful two-sided marketplace for lease-to-own consumers, focusing on consumer engagement, merchant engagement, referral partnerships, and improving unit economics [11][28] - The strategy includes enhancing the consumer journey and experience to drive engagement and conversion [15][19] - The company is actively working on partnerships to drive top-of-funnel traffic and referrals [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of customers despite macroeconomic factors and expects write-offs to remain within the targeted range of 8% to 10% [44][45] - The company is raising its 2025 outlook for gross originations to a growth range of 25% to 30% [41][42] - Management is closely monitoring macroeconomic headwinds and is prepared to adapt to changes in economic policies [27][41] Other Important Information - The company completed a refinancing agreement that increased liquidity and reduced interest rates on its revolving line of credit [38][39] - Cash used for operations in Q2 2025 was $3.2 million, compared to $1.4 million generated in Q2 2024 [40] Q&A Session Summary Question: What drove the year-over-year increase in lease merchandise charge-off rate? - Management noted fluctuations in quarterly results are not concerning as they remain within the targeted range [44][45] Question: What does the pipeline look like for new partners? - The pipeline is strong, with interest from various segments, including auto and home furnishings [47][48] Question: What strategies are being implemented to drive higher application activity? - The company has focused on digital marketing and customer referral strategies to attract new customers [52][54] Question: What is the competitive environment like regarding pricing and credit? - Management indicated stability in the competitive landscape and emphasized optimizing pricing for conversion and repeat rates [55][57]

Financial Data and Key Metrics Changes - Gross originations grew 15.4% year over year to $64.2 million in Q1 2025, marking the tenth consecutive quarter of growth [26][27] - Revenue for Q1 2025 was $71.9 million, reflecting a 10.6% increase year over year, and this was the eighth consecutive quarter of year-over-year growth [27] - Gross profit for Q1 was approximately $14.3 million, with a gross margin of 19.9%, down from $16.5 million the previous year [28][29] - Write-offs as a percentage of revenue were 9%, an improvement from Q4 performance and within the target range of 8% to 10% [29] Business Line Data and Key Metrics Changes - KPay originations increased by approximately 57% to $22.8 million, representing 35% of total gross originations [12][9] - Total app originations grew 42% to $37.9 million, with 59% of gross originations starting in the app marketplace [9][7] - The number of customers with more than one active lease grew nearly 60% year over year, with over 28% of the customer base having multiple leases [11] Market Data and Key Metrics Changes - Gross originations for the top 25 merchants grew 13% in Q1 2025, despite challenges faced by the largest merchant, Wayfair, which reported $17 million in gross originations [22][44] - Excluding home furnishings and mattress categories, gross originations grew 51% year over year [27] Company Strategy and Development Direction - The company is focused on four top initiatives: consumer engagement, merchant engagement, referral partnerships, and improving unit economics and capital structure [7] - New partnerships and marketing strategies are being developed to drive sales and enhance the customer experience [24][19] - The company is exploring new pathways for partnerships to expand customer engagement and brand awareness [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year goals despite macroeconomic headwinds, emphasizing strong Q1 results and positive growth momentum [6][23] - The company anticipates gross originations growth of at least 20% for the full year 2025, with revenue growth expected to be at least 20% as well [38][37] Other Important Information - The company is actively negotiating a maturity extension amendment for its credit facility, with a temporary waiver of certain covenant breaches in place [35][36] - Cash generated from operations for Q1 2025 was $3.4 million, an increase from $2 million in Q1 2024 [36] Q&A Session Summary Question: Clarification on EBITDA expectations - Management explained that despite breakeven expectations in Q2, they anticipate strong growth in the second half of the year, leading to a total of $10 million in EBITDA [40][42] Question: Performance of Wayfair - Management confirmed that Wayfair faced challenges, reporting $17 million in gross originations for Q1 2025 [44][45] Question: Credit facility maturity - Management stated they are negotiating with existing lenders for a comprehensive maturity extension amendment [47] Question: KPay growth and customer engagement - Management highlighted that KPay is driving significant growth and customer engagement, with higher lifetime value from KPay users [51][54] Question: Second quarter performance expectations - Management indicated that they expect gross originations growth in Q2 to be between 25% to 30% [60][61]