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Katapult (KPLT) 6 Nov 24 2024 Q3 Earnings call transcript

AInvestWednesday, Nov 6, 2024 9:31 pm ET
2min read

In the latest earnings call, Katapult Holdings, a leading player in the lease-to-own market, showcased resilience and strategic moves to navigate the challenging macroeconomic environment while maintaining a focus on growth opportunities. Orlando Zayas, CEO, and his team discussed key drivers of the company's performance and outlined strategic initiatives that are expected to position Katapult for continued growth and profitability.

Strong Third Quarter Performance and Strategic Initiatives

Katapult reported an eighth consecutive quarter of gross originations growth, marking a 3.3% increase to $51.2 million in Q3 2024. Despite facing challenges in the home furnishings category, particularly with Wayfair, the company managed to drive growth in its overall business, with a 37% increase in gross originations excluding Wayfair. This achievement highlights Katapult's ability to adapt and execute on initiatives that are within its control.

One of the notable strategic initiatives is the diversification of its gross origination base. The company successfully added new direct and waterfall merchants, such as PayTomorrow and BB Wheels, expanding its reach and leveraging the power of strategic pricing promotions and precise underwriting. This diversification strategy has been instrumental in offsetting the challenges faced in the home furnishings category.

Innovation and Partnerships

Katapult's focus on innovation is evident in its KPay product, which has outpaced early expectations with $46 million of gross originations year-to-date. The company's strategic marketing efforts and app development have contributed to KPay's growth, with an 110% year-over-year increase in gross originations. These initiatives reflect Katapult's commitment to providing consumers with a seamless shopping experience and driving demand for its market-leading LTO product.

The company's marketing strategy has also been a key driver of growth, with a 37% increase in originations coming through its app. Katapult's partnerships with merchants, such as PayTomorrow, have proven beneficial, with the potential to deliver gross originations in the range of a large enterprise merchant on an annual basis.

Looking Ahead: Challenges and Opportunities

Despite the challenges in the home furnishings category, Katapult remains optimistic about the future. The company is well positioned for the holiday season, with a diversified merchant base and strategic marketing initiatives aimed at unleashing the power of KPay. Katapult's focus on expanding its referral networks and deepening relationships with existing merchant partners is expected to drive further growth and profitability.

Financial Health and Outlook

Financially, Katapult reported a 10% revenue growth to $60.3 million in Q3 2024, with a solid adjusted EBITDA performance. The company's disciplined approach to expense management, coupled with its top line growth, has allowed it to achieve positive adjusted EBITDA of $600,000 for the quarter, marking a significant milestone.

Looking ahead, Katapult expects to see gross originations growth of 6% to 8% in Q4 2024, with revenue growth in the range of 5% to 7%. The company is reiterating its 2024 revenue outlook for growth of at least 10%, with positive adjusted EBITDA of $5.5 million for the full year. These projections underscore Katapult's confidence in its strategic initiatives and its ability to navigate the macroeconomic environment.

Conclusion

Katapult Holdings' Q3 2024 earnings call highlighted the company's resilience and strategic moves to navigate challenges while positioning for growth. With a focus on innovation, strategic partnerships, and a disciplined approach to expense management, Katapult is well positioned for the holiday season and beyond. The company's ability to adapt to changing market dynamics and leverage its diverse merchant base and strategic marketing initiatives will be key drivers of its continued growth and profitability.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.