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01/10 16:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance with revenue and gross originations exceeding expectations. The company achieved positive adjusted EBITDA despite a challenging macroeconomic environment. Concerns like increased lease depreciation costs and macroeconomic risks are mitigated by strong growth in new customers and partnerships. The Q&A session provided clarity on key issues, reinforcing confidence. Despite some risks, the overall sentiment is positive, suggesting a potential stock price increase in the short term.
Gross Originations Grew 30.4% year-over-year to $72.1 million. Excluding home furnishings and mattress gross originations, growth was 62%. This growth was driven by strong top-of-the-funnel activity, repeat customer activity, and cross-shopping.
Revenue Increased 22.1% year-over-year to $71.9 million. This growth reflects strong collection trends and was above the outlook range of 17% to 20%.
Adjusted EBITDA Reported slightly more than $300,000 in positive adjusted EBITDA, exceeding the breakeven expectation. This was achieved through disciplined expense management and top-line growth.
Gross Profit Increased 12.5% year-over-year to $11.2 million. Gross margin was 15.5%, down from 16.9% in Q2 2024, impacted by higher lease depreciation costs due to strong gross originations growth.
Write-offs as a Percent of Revenue 9.8%, up 50 basis points from Q2 2024, but within the target range of 8% to 10%.
Cash and Cash Equivalents $9 million as of June 30, 2025, including $5.3 million of restricted cash.
Outstanding Debt $80.6 million on the revolving credit facility as of June 30, 2025.
Top 25 Merchants Gross Originations Grew 28% year-over-year. Excluding Wayfair waterfall performance, the top 24 merchants grew more than 65%.
Unique New Customers Grew approximately 40% year-over-year in Q2, contributing to overall customer base growth of approximately 32%.
App Marketplace Gross Originations Grew approximately 72% year-over-year, driven by repeat customer activity, cross-shopping, and marketing campaigns.
KPay Gross Originations Grew 81% year-over-year, representing 39% of total gross originations, up from 28% in Q2 2024.
Operating Expenses Total operating expenses were essentially flat year-over-year, up only 0.2%, reflecting disciplined expense management.
App Marketplace Performance: Gross originations in the app marketplace grew approximately 72% year-over-year, driven by repeat customer activity, robust conversion, cross-shopping, and an increase in customers with more than one current lease.
KPay Feature: KPay gross originations grew 81% during Q2, representing 39% of total gross originations, up from 28% in Q2 2024. KPay unique customer count grew nearly 87% year-over-year.
New Features: Introduced 'Most Popular Products' feature in the app and launched three new KPay-enabled merchants: Qatar Center, Pottery Barn, and Sam's Club.
Merchant Partnerships: Added approximately 48 new direct or waterfall merchants or merchant pathways in Q2. Gross originations for direct and waterfall merchants grew 11%, and excluding home furnishings and mattress category, growth was 56% year-over-year.
Top 25 Merchants: Gross originations for the top 25 merchants grew 28% in Q2, with the top 24 merchants (excluding Wayfair) growing more than 65% year-over-year.
Gross Originations: Grew 30.4% year-over-year to $72.1 million in Q2, exceeding the outlook range. Excluding home furnishings and mattress, growth was 62%.
Revenue Growth: Revenue grew 22.1% year-over-year to $71.9 million in Q2, marking the ninth consecutive quarter of year-over-year growth.
Adjusted EBITDA: Reported $0.3 million in positive adjusted EBITDA for Q2, slightly above breakeven outlook.
Debt Refinancing: Entered a new refinancing agreement with Blue Owl Capital, increasing liquidity for the revolving line of credit by $20 million to $110 million, reducing the interest rate, and extending the maturity date to December 2026.
Growth Strategy: Focused on consumer and merchant engagement, referral partnerships, and improving unit economics and capital structure to enhance profitability and cash generation.
Macroeconomic Headwinds: Potential macroeconomic uncertainties such as increasing tariffs or rising inflation could impact the business. The company is working on scenario plans to mitigate these risks.
Conversion Rate Decline: While application growth is strong, the conversion rate has declined year-over-year, which could limit the potential upside in gross originations.
Category Challenges with Key Merchant: Wayfair, the company's largest merchant, continues to face category challenges, which could impact overall performance.
Debt Refinancing Terms: The new refinancing agreement includes a term loan with a fixed interest rate of 18% and a payment-in-kind structure, which could increase financial obligations if not managed carefully.
Cash Flow Usage: Cash used for operations increased to $3.2 million in Q2 2025 compared to $1.4 million generated in Q2 2024, primarily due to higher spending on property held for lease.
Front-Loaded Lease Depreciation: Rapid growth in gross originations has led to higher lease depreciation costs, which are front-loaded and impact gross profit and adjusted EBITDA.
Q3 2025 Gross Originations Growth: Expected to grow in the range of 25% to 30%. Excluding the home furnishings and mattress category, gross originations are expected to grow at a much faster pace.
Q3 2025 Revenue Growth: Projected to grow in the range of 20% to 25%.
Q3 2025 Adjusted EBITDA: Expected to be between $3 million and $3.5 million.
Full Year 2025 Gross Originations Growth: Revised outlook to grow between 20% and 25%, an increase from the original outlook of at least 20% growth. Excluding the home furnishings and mattress category, gross originations are expected to grow at a much faster pace.
Full Year 2025 Revenue Growth: Reiterated outlook for at least 20% growth.
Full Year 2025 Adjusted EBITDA: Reiterated outlook for at least $10 million in positive adjusted EBITDA.
The selected topic was not discussed during the call.
The company has shown strong financial performance with a 22.8% revenue growth and exceeded EBITDA expectations. While there are macroeconomic risks and a slight decline in credit quality, the company has managed to improve its capital structure and maintain customer satisfaction with a high NPS. The optimistic guidance for 2025 and the significant growth in applications and customer base indicate a positive outlook, likely leading to a stock price increase.
The earnings call indicates strong financial performance with revenue and gross originations exceeding expectations. The company achieved positive adjusted EBITDA despite a challenging macroeconomic environment. Concerns like increased lease depreciation costs and macroeconomic risks are mitigated by strong growth in new customers and partnerships. The Q&A session provided clarity on key issues, reinforcing confidence. Despite some risks, the overall sentiment is positive, suggesting a potential stock price increase in the short term.
The earnings call summary indicates mixed signals: while revenue and originations growth are positive, operational challenges, debt refinancing risks, and declining margins are concerning. The Q&A section reveals uncertainty in credit negotiations and lack of clear guidance, offset by expected strong growth in originations. The absence of a share buyback program and operational losses further neutralize the sentiment. Given these factors, the stock price is likely to remain stable in the short term, resulting in a neutral rating.
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