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01/10 16:38
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Application Growth Applications grew by 76% year-to-date in 2025, with a 47% growth in Q3 alone. This growth is attributed to increased top-of-the-funnel activity and enhanced customer engagement.
Unique New Customers Unique new customers grew by 35% year-to-date in 2025, with a 47% growth in Q3. This growth is driven by application growth and high repeat rates.
Total Customer Base The total customer base grew by over 30% in Q3 2025, supported by new customer acquisition and strong repeat rates.
Monthly Active Users (MAUs) MAUs grew nearly 49% in Q3 2025 compared to Q3 2024, driven by increased engagement and application growth.
Net Promoter Score (NPS) NPS increased to 64 in Q3 2025, up year-over-year, reflecting strong customer satisfaction and loyalty.
Repeat Customer Contribution 55.3% of gross originations in Q3 2025 came from repeat customers, with a 5% increase in lifetime value (LTV) for this cohort.
Gross Originations Gross originations grew 25.3% year-over-year in Q3 2025 to $64.2 million. Excluding the home furnishings and mattress category, growth was 50%. This growth was supported by application growth and targeted marketing strategies.
Revenue Revenue grew 22.8% year-over-year in Q3 2025 to $74 million, marking the tenth consecutive quarter of growth. This growth was driven by increased gross originations and customer engagement.
Adjusted EBITDA Adjusted EBITDA was $4.4 million in Q3 2025, exceeding the outlook range of $3 million to $3.5 million. This improvement was due to disciplined expense management and top-line growth.
Gross Profit Gross profit increased by 21.8% year-over-year in Q3 2025 to $14.6 million, with a gross margin of 19.7%. This was slightly lower than the 19.8% margin in Q3 2024 due to higher write-offs.
Write-offs as a Percentage of Revenue Write-offs were 9.9% of revenue in Q3 2025, up 60 basis points from Q3 2024, but within the target range of 8% to 10%. This increase was attributed to macroeconomic factors.
Cash Generated from Operations Cash generated from operations was $800,000 in Q3 2025, a significant improvement from $4.1 million cash used in Q3 2024, driven by changes in working capital.
KPay feature: KPay originations grew 66% year-over-year in Q3, representing 41% of total gross originations. KPay has become a significant driver of the business, with unique customer count growing by 76% year-over-year.
Katapult app: The app has been downloaded over 1.2 million times in 2025, with more than 11 million openings. Monthly active users grew nearly 49% year-over-year in Q3.
New features: Introduced higher lease lines for certain customers, an auto-pay feature, and a PayPal payment option to enhance user experience.
Customer base expansion: Unique new customers grew by 35% in the first three quarters of 2025, with a 47% increase in Q3 alone. Total customer base grew by over 30% in Q3.
Merchant partnerships: Added 46 new direct or waterfall merchants or merchant pathways in Q3. Gross originations from top 25 merchants grew 25% year-over-year.
Capital investment: Secured $65 million from Hawthorn Horizon Credit Fund, used to pay off term loan, reduce revolving line of credit, and invest in growth opportunities.
Cost management: Total operating expenses decreased by 26.3% in Q3. Fixed cash operating expenses were reduced by 21.4% year-over-year.
Revenue and profitability: Revenue grew 22.8% year-over-year in Q3, marking the 10th consecutive quarter of growth. Adjusted EBITDA was $4.4 million, exceeding the outlook range.
Underwriting adjustments: Tightened underwriting decisions in targeted areas, leading to improved credit quality of preapproved consumers and converted customers.
Focus on profitability: Shifted focus to optimizing top-of-funnel growth and implementing strategies to make growth more profitable.
Macroeconomic Trends: The company is closely monitoring inflation and general market delinquency data, which suggest non-prime U.S. consumers are finding it more challenging to meet financial commitments. This includes car loan repayment trends and potential impacts from a government shutdown.
Application Quality: The credit quality of applications has trended slightly downward over the last few months, which could impact conversion rates and overall financial performance.
Underwriting Adjustments: Recent tightening of underwriting decisions in targeted areas has been implemented to address credit quality concerns. While this has shown early positive results, it may create a minor headwind to growth.
Home Furnishings and Mattress Category: Gross originations in this category have been excluded from growth metrics due to underperformance, which could impact overall growth figures.
Debt and Capital Structure: The company has recently refinanced its debt, including a $65 million investment from Hawthorn Horizon Credit Fund. While this improves the capital structure, it also introduces new financial obligations and potential risks if growth targets are not met.
Consumer Financial Health: The financial health of non-prime consumers, the company's core customer base, is under pressure due to macroeconomic factors, which could impact their ability to engage with Katapult's offerings.
Operational Costs: While operating expenses have been reduced, the company faces challenges in maintaining fiscal discipline while investing in growth initiatives.
Competitive Pressures: The company is working to optimize its top-of-funnel growth and conversion strategies, but competitive pressures in the non-prime consumer market could impact its ability to sustain growth.
Gross Originations Growth: Expected to grow in the 15% to 20% range for Q4 2025, with a 1 percentage point headwind due to recent tightening measures. Excluding the home furnishings and mattress category, growth is expected to be faster than overall gross originations.
Revenue Growth: Projected to grow in the range of 21% to 23% for Q4 2025.
Adjusted EBITDA: Expected to be approximately $2 million for Q4 2025. For the full year 2025, adjusted EBITDA is projected to be between $8 million and $9 million, representing 60% to 80% year-over-year growth.
2025 Full-Year Projections: Gross originations are expected to grow between 20% and 23%. Revenue is projected to grow in the range of 18% to 20%.
2026 Preliminary Outlook: Gross originations are projected to grow by at least 20% for the full year 2026.
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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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