Katapult Holdings’ Earnings Call: Growth Amid Challenges

Katapult Holdings, Inc. ((KPLT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Katapult Holdings, Inc. recently held its earnings call, revealing a mixed sentiment among investors and analysts. The company showcased impressive growth in gross originations and revenue, largely driven by increased consumer engagement and the expansion of their KPay and app marketplace. However, concerns were raised regarding challenges with gross profit, operating expenses, and the maturity of their credit facility.

Strong Q1 Gross Originations Growth

Katapult Holdings reported a robust 15.4% year-over-year growth in gross originations, surpassing their initial outlook of 11% growth. Notably, when excluding the home furnishings and mattress category, gross originations surged by 51% year-over-year, highlighting the company’s ability to expand beyond traditional categories.

Increasing Consumer Engagement

The company experienced a significant increase in consumer engagement, with applications growing by approximately 59% and the total lease count rising by 22%. Additionally, the percentage of customers with more than one active lease increased to over 28%, up from just under 27% last year, indicating a growing customer base and enhanced customer loyalty.

Significant Growth in KPay Originations

KPay originations saw a substantial increase, reaching $22.8 million, up approximately 57%. This segment now represents 35% of the total gross originations, up from 26% in Q1 2024, showcasing the success of Katapult’s strategic focus on this area.

Expansion of App Marketplace

The app marketplace has become a pivotal component of Katapult’s growth strategy, with app originations growing 42% to $37.9 million. Approximately 59% of gross originations now start in the app marketplace, underscoring the effectiveness of this digital platform in driving business.

Positive Revenue Growth

Katapult’s first-quarter revenue grew by 10.6% to $71.9 million, marking the eighth consecutive quarter of year-over-year growth. This consistent revenue increase reflects the company’s successful adaptation to market demands and strategic initiatives.

Lower Gross Profit and Margin

Despite revenue growth, Katapult faced a decline in gross profit, which decreased to $14.3 million with a gross margin of 19.9%, down from $16.5 million last year. This drop was attributed to front-loaded lease depreciation costs, presenting a challenge for the company moving forward.

Challenges with Credit Facility Maturity

The company encountered difficulties in negotiating a maturity extension for its credit facility. Ongoing discussions aim to adjust covenants and advance rates, highlighting a critical area of concern that could impact future financial stability.

Wayfair Originations Decline

Katapult reported a decline in Wayfair’s gross originations, which were $17.2 million. This reflects ongoing challenges within this category, suggesting a need for strategic adjustments to address these issues.

Increased Operating Expenses

Operating expenses rose by 17%, driven by increased general and administrative costs, including efforts to refinance debt. This increase in expenses poses a challenge to maintaining profitability and requires careful management.

Forward-Looking Guidance

Looking ahead, Katapult Holdings provided optimistic financial guidance, projecting gross originations growth of 25% to 30% for the second quarter and at least 20% for the full year. The company also aims for a revenue growth target of at least 20% and anticipates at least $10 million in positive adjusted EBITDA for 2025. These projections reflect confidence in their strategic initiatives and market positioning.

In summary, Katapult Holdings’ earnings call presented a mixed sentiment, with strong growth in certain areas countered by challenges in others. The company’s strategic focus on consumer engagement and digital expansion has yielded positive results, yet issues with profitability and credit facility maturity remain areas to watch. Investors will be keenly observing how Katapult navigates these challenges while pursuing its ambitious growth targets.