Katapult(KPLT)2024-11-06 14:46Financial Data and Key Metrics - Gross originations grew 3.3% to 60.3 million in Q3 2024, reflecting improved productivity and efficiencies [43] - Gross profit for Q3 2024 was 600,000, in line with expectations, while year-to-date adjusted EBITDA was 7.4 million improvement compared to the same period in 2023 [49] - Cash flow from operations improved by 16 million in gross originations in Q3 2024, representing 31% of total gross originations [24] - Automotive category grew more than 25% in Q3 2024, with an average order value higher than the home furnishings category [17] - The company added 40 new merchant pathways in Q3 2024, with 40% of launches involving existing merchant partners [19] - KPay applications nearly doubled in Q3 2024, and the company added seven merchants to KPay year-to-date, bringing the total to 30 [25] Market Performance - More than 58% of total Q3 gross originations (excluding Wayfair) grew 37% year-over-year, up from 20% growth in Q2 [9] - Applications for the non-Wayfair portion of the business grew by more than 50% year-over-year [9] - The home furnishings category, particularly Wayfair, underperformed, with Wayfair application flow down significantly [9] Strategic Direction and Industry Competition - The company is focusing on diversifying gross originations through direct and waterfall merchant integrations, as well as expanding KPay [13][17] - Katapult is leveraging its app to deepen customer relationships, with app downloads increasing by 83% year-over-year and unique app users growing by 52% [26] - The company is expanding referral networks and expects to launch new partnerships in Q1 2025, which could deliver gross originations comparable to a large enterprise merchant annually [28] Management Commentary on Operating Environment and Future Outlook - Management highlighted the challenging macroeconomic environment, particularly in the home furnishings category, but remains optimistic about growth opportunities [52] - The company expects Q4 2024 gross originations growth of 6% to 8%, with revenue growth of 5% to 7% and roughly breakeven adjusted EBITDA [55] - Full-year 2024 gross originations are expected to grow 2% to 4%, with revenue growth of at least 10% and positive adjusted EBITDA of 3 million, with 1.5 million paid in Q4 2024 and the remainder to be paid over the next two years [47] - Katapult signed a non-binding letter of intent for a new revolving line of credit, working capital line of credit, and term loan to refinance its existing credit facility [50] Q&A Session Summary Question: What would it take to see a material change in home furnishings demand? - Orlando Zayas stated that a recovery in home purchases, driven by declining interest rates, could lead to a turnaround in the home furnishings category [58] Question: What is the average origination size today versus 12 months ago? - Nancy Walsh confirmed that the average origination size remains in the 600 to $700 range, with no material change [59] Question: What is driving demand in KPay? - Derek Medlin explained that KPay demand is diversified across multiple retailers, with no single merchant dominating the volume [61][62] Question: How long does it take for referral partnerships to mature? - Derek Medlin noted that while some partnerships can start quickly, the company takes a diligent approach to ensure quality and performance before fully scaling [65][66] Question: Any update on the Synchrony waterfall integration? - Orlando Zayas mentioned that Synchrony has only released pre-approval waterfall flow so far, with broader functionality expected in 2025 [68] Question: What are the terms and timing of the new credit facility? - Nancy Walsh indicated that the company is pursuing favorable market conditions but could not provide specific details or timing [69] Question: What is the impact of the Delaware Litigation Settlement on shares outstanding? - Nancy Walsh explained that 168,000 shares were released as part of the settlement, with additional shares or cash settlements possible over the next 12 months [71][72] Question: What percentage of Q4 originations come from the Thanksgiving to Cyber Monday period? - Nancy Walsh stated that a significant portion of Q4 originations typically comes from this period due to retailer promotions [76] Question: Any comments on the patent infringement lawsuit? - Orlando Zayas stated that the company is evaluating the lawsuit and intends to vigorously defend itself, with no current financial impact [77]