KPLT - Earnings call transcript Q4 2023

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Operator

Greetings, and welcome to the Katapult Holdings Fourth Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Kull, Vice President of Investor Relations. Thank you, Jennifer.

You may begin.

Jennifer Kull

to Quarter welcome Conference and you, Katapult's XXXX Fourth Call. Thank

Chief are call Financial Chief Medlin, with the Orlando Officer; Officer. me Derek Chief On Walsh, today Zayas, Nancy Executive and Operating Officer;

which Investor may beliefs, any at AI of statements on call we this future Form statements results is have by and as these and call relationships that any undertakes everyone assumptions, XX-K acquire intend are current a results are include from events required December information and and website, contained optimize subject from we publicly forward-looking obligation on These to the cautionary and company update otherwise. our the and that For only be the materially your subsequent based those would number with with in information, differ future the of accurate and as file files our cause to and SEC. to generative financial These whether factors no the current significant or of this management's or year the to the Relations reflect current be ability The retain like expectations performance our the Except posted company the of beliefs, found result actual reference, in section date in statements. processes. existing of statements, new can partnerships and law, as year, as conjunction should new XXXX, that discussed. days revise forward-looking on with I subject our for to today's in contained statements financial to our XX, coming reports ended periodic statements expectations customers will as for materials and well release assumptions to which merchants, call and considered contain the ir.katapultholdings.com. and earnings from uncertainties growth which remind the Katapult to of quarter risks use a

non-GAAP During non-GAAP read SEC company be These should provide with for today's be should financial our of GAAP A available the certain is under measures non-GAAP measures not the that financial financial to website. of with constitute reconciliation release is discussion, the comparable financial today's and most rules. company's measures Investor together results. will considered measures directly earnings section the information Relations on included and replacements GAAP financial

all stated will that, year-over-year comparisons the unless With otherwise. I to over turn are Orlando. Finally, call

Orlando Zayas

year. what year XXXX on provide far outlook more the to performance, of We're you and landscape you we us of during will for only our fourth originations areas excited growth who exceeded $X.X year. adjusted fourth and on our million, progress adjusted prioritize by of achieved insights our morning. gross to $XX.X the the the EBITDA. XX% on the to comments on just second in I'll originations quarter, drivers and fourth financial quarter focus seeing year-over-year. intend finally, delivered our and Today, ever, initiatives we with you a also highest then give represented And Nancy, macro gross we of to did so positive $XX.X growth competitive performance, line customer brief which million growth Not our my EBITDA million, year-over-year. and discuss Revenue improved will a expectations. strategies turn thank quarter top and tech full our performance brief our over fourth update position. we're merchant environment our and I'll focus drive the XX% below joining breakeven volume our record everyone Jennifer, XXXX We double-digit in this this call for outperformance revenue quarter of you, this growth to and quarter Thank which overview representing and our greatly top for that

I Before strong I performance, jump we've QX back and take on year reflect want into had. to a step the very quick

delivered growth highly business in the period revenue belief during strong the not competitors saw only we consumers. underscores both of we most our This gross for merchants originations are but contract. we the to First, are that offering and their product right and our offering which a market, differentiated

Pay the accounted our Second, future of gross XXXX, forward we applications. by and XX% Katapult of this XXXX. during significantly our of path we total for originations very about trajectory game-changing changed in enhancing Pay the approximately are excited Katapult

accomplished our adjusted improve we we strategy, which line. grew within of allows all the rigor top EBITDA substantially as to expense disciplined Finally, this us the

we are proud so of the that of of entire team. potential, of on would them without be our and of strong their the our With had work which behalf year to neither management team, for Katapult am hard grateful future during the our backdrop, We for the I performance strong about talk quarter. contributions. let's to And our success. I their dedication want thank possible

macro believe an the we the quarter, As fourth impact environment consumer. on have entered our could uncertain we core nonprime

we repayments direct Pay. While we creating savings low controls saw benefited our were quarter. was risk approval points as basis was in Within was rates our loan This that by from which our our XXX as well And balances down, than fourth below credit achieved dynamic believe from rate. integrations we and coming the originations strength XXXX come model channel, an had driven strong growth to own originations importantly, tires. Katapult and merchant growth during uncertain gross included strength environment. during This the categories approval in and we across core inflation high, volume macro campaigns were and our and our retail in led discounting, driving resumed, demand. extended Despite more marketing underwriting an electronics, year rate card steady had leverage in student better-than-expected this, automotive, furniture which originations advertising increase direct gross

important direct during well such the new merchants Pay PC. of as performance driver Grown was as XOTIC from quarter. and benefited we addition, Brilliance In an Katapult

into the to continue fourth the customers new were XX leases First, marketplace in with to quarter. than originate more leverage heading our merchants that available feature

big a believe driver to that Walmart very sooner one Second, We Walmart. X% of merchants we this destination. reaping Pay of the a integration Katapult than demonstrated offering pay. in drive the shopping our to in we response want our are and really true saw durable transforming our step the leases demand capabilities direct this by Katapult was our and performance. we ability of to We benefits that into marketplace and are Overall, from our quarter approximately investments customers added our closer from robust goods our anticipated. Katapult We originated a customers fourth were

goal grow Our base and our both overall these to leverage is reach. channels consumer to merchant

executing offer our strategy, our areas: which dive into are market two, one, I'll on X merchants; gross by originations merchants; that ensuring key variety start goods, we now few customers and we've in the with rooted share anchor a durable our three, our direct to Let's new integration. with updates customer made growing looking integrating growing the are merchant of progress sustainable with demand. drive

are highlight the Lenovo. we've of merchants first, that few pleased To a the We with quality merchants, quarter. integrated during very the

Since opted fills to a While relationship with waterfall consumers. to worked since XXXX, well as that XXXX. gap process as them that having LTO a option a a pursue time, process the in meaningful we've demonstrate patented Lenovo we they for direct only waterfall with

Lenovo on we've options. result, They back LTO a supporting quarter. us includes merchant only with a the are As their marketing financing page, as fourth direct as which added already during their Katapult

we as we the quarter, We them Grown been also excited the are have season. on Customers year. announced during brand, during and Brilliance the board launched engagement November have last to in bracing

finally, kicked as a crafts with and one laptops has have professionals. While excited trusted custom both not we equipment so presence of with our They for some off goods. of familiar fourth relationship option direct in the our and the with to PC that medical brick-and-mortar company creators, fourth be stores, our gamers nationwide. PCs you been recognize names the merchants online as very engaged And we are XX far, one PC, customers integrated they their well LTO as Medmark may them quarter, Medmark, in quarter. most XOTIC top also of are a during and and

Beyond new direct on have that pipeline continue robust a direct only can integration stories, But of is XXXX. success quarter we opportunities part we bringing fourth growth throughout merchants we of strategy. believe to our merchant one steadily convert our

leveraging successfully done lead on on ways platform. that Lenovo their which focused LTO into and with are merchants with with Katapult get are it We website Katapult other are we've relationships position operators. working and can other on deepen to the already merchants versus adding And in our we

help to leverage ways In merchants addition, marketing we're our exploring with our their efforts. to data new

merchants. spend share can we been which in that ways piloting customer to lease are our a preapproved has we example, For the amount with

protecting more targeted we data to consumers, a we can marketing merchants of create privacy efforts the drive While conversion. our believe to allow

We initiatives we control already can flow. it we types merchant the seen of of Throughout with within multiple have our the Wayfair's our customer these XXXX, largest understand completed how well Wayfair. to work journey testing enhance partner, better of rounds checkout parts directly

make even good our experience. Our effort journey our pricing remove focus better consumers and fully example, that an and products are sure doing a was educating terms transparency ensure, to friction, trying job customers about and for we making customer an in and on understand to increase their

XXXX. Our hard paid work in with off Wayfair

year, grew gross Wayfair continuing faster which important indicating than sales full are by with share we full we this partner. was year, growth originations the Wayfair's take the for For X.X%, U.S. merchant to

take points. by take approximately by Wayfair leases XXX same-day points expanded During applications and for by XXXX, increased XXXX more X%. basis XXX rates rate than Further, basis grew overall in

are our softness to originations, our compared down factors, driven believe Wayfair this quarter, by was a some and they however, in saw we few During gross slightly softness including XXXX. We seasonality. fourth

at engaged customers on that their business grew more quarter like of several terms results for lease that more highlight sales performance is furniture believe variable. us fourth we that convert efforts our our positive a from driver are Same-day metrics. provide within I'd points rate with improve QX our There who overall to historically rate one category. basis to shows transparencies to XXX we even take a are not holiday ready basis have and XXX to in Wayfair furniture While receive able lease and customers Wayfair across offer their key grew and points, the take were been us, which

was product. part originations by customers a price allow then, in such which the with calculator, as seeing LTO Wayfair, December key also they fourth customers' This to tool the fourth large only goods our et would quarter. XX% their full on Excluding volumes price exercise are direct has we launched which if veterans, added meaningful early to in for use Since but durable a we're payments gross the had monthly, choose one-stop a also cetera, as success they the viewing, an we've the in shows quarter. be in grew should also XXXX. This the driven user purchase This see features pricing impact merchant not they weekly, options.

are generally and category our and with traction deliver behind and Katapult technology even a marketing journey. furniture specifically. to pleased mutually partnership enhancing products an customer our together valued are the while Wayfair better hard and in to with working have improving We take we rates the our grow Wayfair by partnership,

into a And to tailoring we to bottom drive experience important, needs the its the we of to these product again can enhancing year. doing work across lessons and growth. we are we them we the we equally capture and leverage As take learn merchants, existing believe strategy also merchant line our from we base customers deploy and more drive is our so share complement talk on are look The focused our about this this from can fit lessons customers rest we're new in doing growth continue the that our Wayfair customers. out can I'll as of product we working. our our how attracting to is with To wallet XXXX, moment.

our that for customers us. in continue repeat an same more increase which an across of we translated and of into XXXX. underscore, an than of than application resulting we rate total This XX% needs active as a new XXXX, new NPS almost of did customers fourth XX% love, customers that points the our is December more volume XX% And originations, we December in growth grew feel lease quarter about product approximately the high same approved At with the we XXX,XXX in number to time we XX, had confident of XX the of at XX%, delivering lease-to-own customers. offer XX%, meets these customer XX, During we are XXXX, the time, all-time data a in experience And leases. score approximately U.S. as

Pay. So demand virtual directly to allows machine is which about about a a app AI feature proprietary are talked continue this is is to learning Katapult part of our we financial their merchants to already and that great driver but to access new a what determine portfolio We've XX others, how the is marketplace. population unlike integrated direct like Walmart, grow, our our that allow not our lease-to-own fueled unique purchase to talk than Katapult requiring Pays integration, is that Katapult in merchants not resources how merchants Best what is business and to without our and from on technology, credit invest that of and from shop use doing This have allows our how us this? them gives robust card our steady we leverages Like goods. solution integration. leasable But who, Katapult capability driving not. Amazon, might integration, new us customer let's to to Depot if also onboard expect direct and is merchants Pay durable Katapult nonprime customer merchants for for had to Target our among a Buy, direct Pay Home conveniently business our more us by

more Pay future their mobile becomes a tool transaction are in a In This acquisition us. habits specifically, customers consumers has a and our low-cost control visibility shopping that our that to channel most. where But a and our start more create Currently, into over allowed customer the Pay can destiny. it's Katapult addition, for existing customer using can envision Katapult Katapult Katapult have journey with consumer that we means us we starts app.

driven data points. by is several confidence Our

a First, us. Pay Katapult become has lease for with customers to channel trusted start a

our XX, initiated current December than Pay. of through XX% of more As leases Katapult were

million quarter, Second, this led total the to for gross month representing feature the Katapult for December gross came through month usage for ever $XX million originations fourth in Pay originations our $XX XX% and originations Katapult in Nearly strong came the being best through the the quarter. during Pay. of

For year full gross generated XXXX, originations million the $XX Pay. of were through Katapult

landscape. or the XXXX unique competitive We interactions app apart app started downloads, we more XXX,XXX a app. our the with downloads experience from believe customers And a their XXX,XXX actually were XXX,XXX more these XX% that integrated app in than through tool also customer customer Katapult of is itself our our In XX% customers access began the had our In engagement most merchant, in Third, directly the has interact in initiated roughly from for Katapult ended Pay XXXX. Pay than leases in the become from were merchant with assesses terrific app. used XXXX. Whether brand-new interactions finally, December, to Katapult channel has and lease users with we created app. to short, information. a of through And up

push In to on Katapult marketing merchants. we Similar ROI significantly of to positive, the volume within and testing reactivation. addition in continue and XXX% and the do customer independent us and us of grew in a structure Pay, our and can our help communication capability. and to believe We fourth place sent number addition marketing we learning concert resources acquisition focused scaling notification of marketing and begin Pay, during increase strategy we a allow e-mails to consumer lot SMS drive quarter. with we the put demand XXXX, Throughout to of in with Katapult

open also indicates we saw our touch As rates and click this and our rates believe increase, our points we are consumers, resonating. that campaigns with marketing we increased

build we prudent within we While industry considerable. to are is continue market being LTO marketing believe very with to that spend, our opportunity the share our underserved our

requirements. to strict We will ROI continue and to investment marketing learn tie test and our

to about grow opportunity summary built. ecosystem strong we've customer feel about we a base, As our the our good

our scale strategy customer in over bedrock has our of to All this technology support progress progress has new and amplify Pay direct a in technology. time. that customer repeat prudently are to we're less forefront strength merchants And to decision keep to repeat information Katapult We that these steady we this acquisition in fundamental seamless ability testing a stream strong merchant Pay within at blossom have an growth get mind is an and All a consumer making Katapult the of of market our and our creating of deliver that us autonomously sustainable a both reliable, finally, that learning rate our personal to channels channel. that Pay doing emerging growth that the believe algorithms customer to can contributor new an into our supported in important customers. to on seconds average into competitive industry. partners low-cost of our is our option of marketing direct platform to strategy. to sits advantage potential from underwriting we're a Katapult and use of integrations have direct top technology X onboard by LTO or our We the help continued our will back

quickly ingenuity. opportunities that nimble been our to new upon has lean, and low-cost, tech scale us that addition, built on allows tech require capitalize advantage to solutions In infrastructure tax move growth

good spectrum For Walmart, onboard powered These to eligible determine for a available LTO many for are proprietary allow Pay like including purchase, retailers broad of that example, leasable. products not by us is is transaction. that models a durable Katapult if models has which an

very without like would this customers. impossible, SKUs, technology-driven if their of our not be to models, to bring Given retailers the breadth these and difficult, market-leading depth it

Last a AI and talked technology to we our tech we Looking about it across deploy edge. our landscape, bit opportunities cutting our competitive quarter, stack. and our unique is believe generative within

listed generative are us customers minor eliminating quarter to there differences fourth to are what was of in if was experiencing the this manual source their tool AI they now and to automate help our database. launch quickly were We previously excited can address in what use case customer to in to provided frustration. update of addresses generative process the the first created a address address We merchant some friction use a AI We validation.

AI further to and this, generative Beyond we're marketing Pay, ways exploring in Katapult other integrate areas.

I thoughts areas for a I want to focus XXXX. turn few on Nancy, over to our Before provide it

the we which we offer why we the our pricing front, lowest the they they that customer and experience remain deal-seekers in and and pricing offering continue the customers. believe customers focused We our On industry our best and need the on the value understand deserve. that those giving are on focus is to to savings transparent on customers passing will

make As fees to it you in landscape. competitive best for our apply. lengthy ever. now, is and never late we know easy process We require We the bank account information, the history, by don't application our a charge customers credit

to retention relationships. to customer and it drives while in we strategy our This approach better also delivering for fostering our our business rate. long-term expect see sets value continue increases to XXXX, our reflect So in us significantly apart commitment market, to not the performance only

to with product-based research, and we making destiny can demand. to Right to another we're searches way to the enhancing also their exploring now, search. will at We they'd shopping durable customers easier One journey think unlock shop but to and shopping that We product-based shop level, understand control our big retail in the help drive in our even is experience effort marketplace us. the better. their start for is our customer options we We are is and help and have dedicating customers us it goods area we for they're turn, consumers marketing. directly In can better this create or they're lease. do their to make believe actual ability where like journey, what the shopping why targeted can for for more eventually

customers product direct ways repeat base that durable merchant compelling and levers engagement. leverage unique XXXX, round increasing with focus and customer sure to problems, want are our to In to merchants we bring this further conversion. proposition. Pay, the adoption merchants that use can channels the aim of onboarding for focus customers experience. XXXX, out which Katapult that a both customer be to and To our partners. new the and we for XXXX, hallmark Regarding for sustain we out loyal focus opening we'll marketing are pleased new we opportunities our of exploring experience customer rate personalize differentiator, will customer our very continue piece to high and our customer pull growth our rates. believe including in strategy, we'll means shop user we'll This to our base. Within continue help believe can In engaged is we'll are with other want our for round LTO repeat market-leading out a our rates and There platform both on our value look including need. can customer making merchant well goods we our positioned referral of execute marketing the believe channels, merchant look multiple sustaining all continue high strategic is on to to up Katapult they ROI-focused solve build our strategy, and we our shopping grow a our opportunities partnerships continuing to We to

continue And be proprietary opportunities for grow the one also looking such we leverage with our will will referral to in our to at also data technology business. look finally, created We build pipelines and we new to Synchrony. further opportunities as merchant XXXX to

and drivers technology will customer to be merchant the of our fundamental and I've focus areas First, insights data outlined. continue

too integrating resources I will us offer results. even by our into to look to go we we and to new I'll fraud while data it leases ways And signals that, Nancy many and to allow allow to for more growing fourth to customers. specifics also new over to quarter revenue more today, we underwriting that that capture that Second, us want while streams. customer competitive extend underserved our create With to won't from lead big can discuss leverage a turn advantages exploring our monetize base these Nancy? better picture are perspective, ways

Nancy Walsh

I'm talk of growth. Orlando. today our results, which quarter our have to Thank excited you, to you track strong added record to about fourth

quarters, which the originations growth was year-over-year. growth revenue consecutive from we X XX.X%, fourth in have grown accelerated the we And third For revenue in our gross rate our the achieved quarter, quarter.

We revenue. a as our management, XXXX. and percent our financial $X.X highlights me delivered write-off expense on EBITDA also fourth to fourth for let quarter of reduced And as disciplined improvement adjusted year some during million the we year-over-year focus with a full with that you context, quarter. provide the With

to Before payable I sales of payable. to be mention cash discuss out-of-period on our balance and in sheet. held million and for I correct that to tax the a will tax made associated related of property P&L, impacted rental There with impact P&L. we revenue revenues our immaterial also our $X.X rest lease errors This adjustments wanted sales cost also

for I'm reference. adjusted these We present reconciliation of reflect the adjustments and revenue out-of-period a EBITDA revenue write-offs your press adjustments. in that percent release also data have table these about reflected to The EBITDA our in adjusted as

As increased $XX.X our fourth I than quarter Orlando gross came for consecutive were better touched now X Gross to And in XX% originations as we what originations quarters. have mentioned, results million. expecting. significantly we upon, grown

quarter fourth Our we expected. our our and Katapult ability during performance by the sooner with into to strength than existing onboard was merchants Pay Walmart driven

the higher-than-expected existing Pay Walmart originations. resulting New through customers gross Katapult during in and quarter, with engaged

digits also was period during originations driver, this Katapult this and the holiday we Pay a growth. key same performance with Gross period double driver of to Cyber-Five saw addition XXXX, during compared of of grew strong In a period this season. the the

up achieved For year $XXX.X gross million, approximately the XX%. we XXXX, originations of full

this business number a proud is While grew we XXXX. of, our during are even very headline result Wayfair excluding faster

gross Wayfair, XX%. nearly grew originations Excluding

with are our While gross originations partnership we with with of we revenue. and pleased pleased sources progress toward very are also our Wayfair, our diversifying

continue that gross leverage non-Wayfair from our Wayfair this in were XXXX, drive base, can we growth diversify believe we our as XXXX. origination to demonstrates XX% gross to of XX% even We For base. up originations

reflects to came XX.X% we high existing experience striving at customers give this is our all we from This believe best with an all-time for quarter, During the of originations our times. us, obsession and customers. can our the

For originations existing year, of came full our customers. the from XX.X%

we discussed, repeat to are through have of Katapult we to As continuing come customers a Pay. number see back us large

Pay who lease of their via will fact, first, third, another time, these the XX% or second within those In approximately Katapult days. through generate XX customers generated customers lease

We last the and performance XX% believe exceeding the trends volume and targeted the X million, to are XX.X% efforts continue drive XX% the performance revenue $XX.X to app to repeat that us engagement QX helping in strong with rate. very marketing growth our customer increased quarter. we growth outlook we first This efforts. strong provided gross the reflects driving originations, of saw the collection quarters year our

revenue target within range. compared continued to For full with a remained and our to XX% as of lease about improve year Write-off percent X% revenue grew XXXX, XXXX. X%

quarter, in XX metric For X.X%, the basis compared was with this QX XXXX. X.X% fourth lower points

Moving on profitability. to

to coupled top of with approach our line disciplined us expense to growth. substantial EBITDA adjusted deliver management, Our another allowed quarter growth

of savings at XXXX, the tail measures, now cost anniversary-ing As instituted number of a end a are we these and we reminder, late in benefits.

a since in be Delaware been Our fourth by York shares. operating New expenses expense impacted $X and pending and to of satisfied and combination the lawsuits settle in million connection two cash total that action XXXX quarter XXXX, may This with net we class were the with respectively. negotiations reported our have

approval total, million have liability settlement. with is these a recorded on York reach agreement the settlement payment. a insurance all. and New not In our million a I policy terms receivable have and subject Further, $XX addition, any for In that potential $X settlement or parties reported these for the connection yet not in by we may we we should Delaware to Court. at note court

talks, and not are given we settlement required the accrue for under of are negotiations the ongoing final, the Although settlement settlement. to GAAP status potential

provide will We the additional updates appropriate future. in as

fourth onetime by the primarily XX.X%, litigation operating expenses settlement driven estimated $X million the by total our expense. During quarter, net increased

by decreased year-over-year. this total XX.X% Excluding expense, QX have would OpEx for

and OpEx year For total expenses the full litigation decreased the full onetime by year-over-year, year, settlement we X.X% expense, estimated operating by XX%. XXXX our reduced excluding

fees and Based variable, expenses to compensation Excluding year. operating legal are to for consecutive performance million, sustainable our EBITDA and related and XX.X% $X.X performance expenses underwriting efficiency, to the line and last year-over-year benefits structural our from we servicing adjusted and stock down depreciation settlement the noncash our estimated were costs, onetime which we compared fixed our quarter. able our cash operating realizing on are the improve were fourth top expense,

quarter, $X.X breakeven fourth last year. below million quarter EBITDA, an the increase compared loss recorded of adjusted to reported in we million we the just fourth the $X For of

As expenses an are a adjusted our settlement related estimated back to add EBITDA. to our legal reminder,

our $X.X For the loss full approximately adjusted year XXXX, million. was EBITDA

$X.X $XX.X adjustment, EBITDA was approximately below This compared that million slightly XXXX. that out-of-period adjusted we breakeven. full to for EBITDA delivered year means million in immaterial approximately we delivered Excluding more adjusted

X, $XX.X of $X.X As restricted of million, December which million cash we equivalents total and cash. cash XXXX, had includes of

facility million had also We of credit debt. $XX.X

million and lending this vendor. quarter, and facility adjusted quarter been have issue, cash basis. that that levels. and to an On We with in cash on issue our $X.X lease in should cash debt million we would adjusted the $X.X our the cash quarter, verification led $XX.X debt should our This been debt excluding credit leases We during restricted cash. million the to Katapult $X.X use includes third-party meant $XX.X in have normalized been should During with have basis, the our recovered would during funded the we higher. have by which early lower million also on the of overfunding million, issue equivalents total of an This reflected ended and our XXXX, million partner. outstanding about fourth issue $X.X have quarter cash identified an corrected fourth our

explain Let me the more issue in detail.

This at leases funding led our in December validated error We us verification borrowing therefore, third-party leases a vendor not added which new our base. included have with new then not a a cash specific In where This, our XX%, validation of situation each XXX% timing and instead day that the number be this is leases to normal to a in turn, were their a base. verifies approves practice. XXXX, were of lease own and processes. had to created our vendor these borrowing in

impacted provides we advance the the facility lease. issue Our already This I underfunding. only have QX, rate as credit mentioned, XX% received from funding valid cash for a and each

our addition, in the implemented recurring together, we we In alerted once lease controls future. to and verification system processes vendor, prevent enhanced

are We navigate an macro continuing to environment. evolving

to stable, and dynamics lending remain still U.S. is While of saving an the traffic low consumers budgets habits inflation it these having core rates card is target interest access stable, will retail rates will remains what are on and usage Currently, unclear is U.S. elevated, have they high. the credit. affect spending consumers. down, is credit impact impact how while our standards on it prime and

EBITDA reduction about dynamics operating XX% cash flat fixed our of available. compared year-over-year sustained XXXX, expenses. quarter. in the quarter adjusted and growth in a that of with expenses our that expected for increase continue we Based on that growth addressable historically of in down approximately have place reflecting the improvement XX% of market first in have to a when these operating expect first XXXX, credit expectation year, the note first to full with last Year-over-year operating XX% be cash quarter solutions options Fixed consumers, revenue first We to revenue, meaningful the gross are year-over-year non-prime performance the underserved important quarter. compared to believe and is we for the less and year the lease-to-own origination a following become large plan it's prime benefited

anniversary mentioned year in versus partial QX a put see benefit QX year only XXXX a will and full I in last the we benefit earlier, As reduction XXXX. activities in cost we place

XXXX, year our gross acquire expect full the expand and of year For originations we to new customers, another to continue growth. base customer

of performance our the year, For be grow expect for at at a and low quarter the point full gross least full to originations XX% we year. should rate first the

merchant the improve first half compared XXXX, XXXX Katapult in originations to sequentially of driven originations in also coming Pay. through by gross second originations of to growth half the direct and We expect

does it the significantly. outlook from change environment tightening loosening any macro us, prime does creditors Our include assumes and above not not impact material that or

with repeat least modeling, quality strong risk portfolio. at This integration to maintain ongoing onboarding enhancements driven expected growth will our to be in is Pay. our new XX%, to Katapult engaging also be customer merchants and We expect credit Revenue by high-quality through direct XX%.

continued expense our strategy, with with Finally, EBITDA combined of disciplined year execution we growth. expect adjusted the to our line, top growing deliver of another

We we strong growth. for positioning and during We to results we we company the delivered the patterns believe seen also sustainable XXXX, that expect are and profitable seasonal follow EBITDA adjusted historically. have

investment pull built growth. we revenue, levers that significant We that gross and not drive does to have support have infrastructure originations multiple require both lean can a we and to continued

strategy providing the to believe transparent and where focus are compassionate and experience and allow is terms fair, market expand will continue clear, us share on our our to the and human Our with is best-in-class our approach customers business. LTO and build we

proud the performance. Q&A. I'll turn for of XXXX that, operator with And Operator? very to are We it our over

Operator

Thank you.

We the question from Siegler will Josh Our line [Operator with now Cantor be conducting the of first Instructions] session. question-and-answer Fitzgerald. comes

Joshua Siegler

to Nice first originations touch strong your to on wanted this guidance. quarter. see growth the I

implies So as progress guidance through we acceleration your in XXXX. originations

to really on new driven that with end, and penetration a bit acceleration merchants? merchant comment merchant if existing be could wondering was pipeline expect So by if to deepening you adds you that I or your

Orlando Zayas

things customers more the bring gone that have that of pipeline meaningful what retail incremental merchant like shipping constraints having like in being becoming issues obviously, more these continues is merchants especially robust. be away. and environment, our We're and Josh, and important past, was, had it more to with obviously in the conversations the we January some to

the the through we're tech standpoint would in getting of with normal our completed. I say their getting we're issue more stack integration merchants. operating is with merchants a The really and So

some that continue really well in identified current Wayfair to So the to grow other the with and do as the of we've in from merchant But our we as to Pay expect is the coming going already of most pipeline. growth with the Katapult merchants growth our growth from new business. come is that merchants what we've done

Joshua Siegler

And then helpful That's little it. wanted reinvestments. I Got talk to bit about a color.

about in your integrated more we're incremental lease store? pay allocating progressing traditional thinking kind or are through of either the up how towards owned model, So into plan as the dollars you company's or either website XXXX,

Nancy Walsh

the based deploying the biggest that and impact. So investment to we those will and provide to investments continue evaluate where it's return on all going we it have quickest think

continuing continuing marketing So technology. that our be testing, whether that in to whether our invest means

our have what business be into to things investment able for how that to do quickly. incorporating we're using are huge make us low-cost we not investments those drive of to basis have to forward. return and the really really the continue to All plan, but gives advantage do on scalable, as stack the a that We tech an

Orlando Zayas

this is add. Yes. And Josh, Orlando. I'll

of in Katapult a Pay things is a the that we see One from returns customer perspective. strong performance

that to but And we the direct. that It that going we to us dollars obviously, to We to put so -- continue bring best it's do on focus And grow what's important, we business. return. going where investment want mean want we're doesn't not really to we'll think both. think

Operator

the of Markets. with from next Chukumba Our Capital question line comes Loop Anthony

Anthony Chukumba

confused. number that I and saw unless I preannounced first you Congrats the was in a is your question, I revenue mean, my I which from was little your crazy, to had end what possible, saw year going on guess just revenues the thought different I entirely pre-announcement. -- as the I strong I'm today well. was

wondering you just if reconcile was I So that. can

Nancy Walsh

Nancy. it's Anthony, Sure.

announced We but adjustments are indicated, continued and and out-of-period result purely difference still very the to XX% our overall outlook But and not we preannounce that's with make we the between growth with XXXX. into a those growth, origination correct. what as pleased we that revenue as the we of gross impacted preannounced You what needed today. absolutely only onetime did revenue

Anthony Chukumba

to hear I'm Okay. Okay. not that crazy Great

be so thing, there's a your let's on any? there's with I love and your do just reduction you say obviously, most And that CFPB in -- to Would do in get thoughts all? going late mean first the credit litigation? of on fees second off, terms that this cards. reduced, it into think holds impact are The late guess fees guidance you up be you, would like I if building at what if importantly,

Derek Medlin

Anthony, this Derek. is take that I'll question.

the their approval of their there's returns, financial could any that a to stack So terms with cards and reduction their credit credit happening changes criteria financial cards see products near a and rates. us what's of what us in a underwriting change is prime in create time or that prime credit other that in in opportunity we the terms of for in above change

there is there. So potential a

savvy. general, have transparent see very of that that built They're them plans products are In they we what However, that that financial into our not is planning. for consumers can total understand are cost. we payment looking any the and to

I'd stance And of our to and happening, And so we all think take Katapult. in have someone general, increase say, though, as and see The as looking all in having and implement waterfall certainly overall this clear. a terms well to that to customers. we very credit the we terms of have, with we'll are being in out. insights stand transparent prime like providers these ways different by that space we up how we thing have serve in learnings them approval of our what's into shovels last And their how we these heightened is consumer partnership -- for partnerships rate

partnerships So we we we interest saw the announced, there in that think merchants. that overall for partnering already that to last is and Katapult options different year improve with with continued

Orlando Zayas

this just fees. is we of a want And Orlando. number haven't don't late to don't years. Anthony, we Yes, We reiterate, and for I charge

pretty and they our that advantage. we because see with customers we're so to try proud work And that as of

a ahead of start we're repeat But our down. from perspective I think to helps of going down lease kind the that regulatory rate. if they curve

Anthony Chukumba

but thinking then impact correctly. on guess Yes. And the I aware just didn't And I about helpful. Walmart last I you, guys was that's wanted more sure just I that question. Right. number make my was you late to fees. above guys charge I the heard just

for accounted X% leases? your you Is was Was So that fourth said Walmart gross What that of that total number originations? quarter. exactly?

Nancy Walsh

gross leases. the not origination dollars. Total leases, total It's

Anthony Chukumba

Got it.

did quarter in the impressive a I you them? I that very mean, onboard number. Okay. exactly Well, when mean, is

Orlando Zayas

had it's Week to trying right tech Cyber and they before get Five, were expectations Five. before got after before exceeded it was done the Cyber Cyber team done Five. We They Five. it expected Cyber done anticipating

the by X customers. the worth were quarter. response about And fourth our of surprised we so weeks' at very in happily business the really, it's And very,

Anthony Chukumba

we're And one Okay. boomer. thing Five, a am talking because just last before Cyber the Thanksgiving, week right? I about

Orlando Zayas

Yes, the days. Thanksgiving, X the

Nancy Walsh

Thanksgiving. Starting

So Thursday, going Friday it's Monday. Cyber through

Anthony Chukumba

Got it.

when day boomer. a learn new you're You every something

Operator

over There CEO, this would comments. like further floor time. at Zayas, back are Orlando the no turn closing to questions to I for

Orlando Zayas

looking how We believe positioned past while to expense line operator. about growth build for year. time growth everyone well To We XXXX, a the progress to very forward this our during you extending reiterate to record to grew I the are disciplined proud top had on listening, success philosophy. of Thanks, I a we the management competitors we adhering our made track hear our We when declined. want year. delivered team. our great just year. thank much of am to tuning and of over we've We in are

our are and growth that you and Thank merchants We our again customers lease-to-own a in channel transparent story. much potential. with while support grow with the accessible your has fair, to product for our our interest proving providing and ability

Operator

This concludes today's teleconference.

may lines You disconnect your at time. this

Katapult (KPLT) 14 Mar 242023 Q4 Earnings call transcript