Title

Presentation

Katapult Holdings, Inc. misses on earnings expectations. Reported EPS is $-2.12 EPS, expectations were $0.71.

Operator: Thank you for standing by and welcome to the Katapult Holdings Fourth Quarter and Full-Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] I’d now like to turn the call over to Jennifer Kull, Vice President and Head of Investor Relations you may begin.

Jennifer Kull: Welcome to Katapult’s fourth quarter 2024 conference call. On the call with me today are Orlando Zayas, Chief Executive Officer; Nancy Walsh, Chief Financial Officer, and Derek Medlin, President and Chief Growth Officer. For your reference, we have posted materials related to today’s call on the investor relations section of the Katapult website, which can be found at ir.katapultholdings.com. Please keep in mind that our remarks today include forward-looking statements related to our financial guidance, our business, and our operating results as noted in the earnings release and slide deck posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today’s earnings release and our most recent Form 10-K and which will be updated in future periodic reports that we file with the SEC.

Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also, during the call, we’ll present both GAAP and non-GAAP financial measures. Non-GAAP financial measures should be considered supplemental to and not replacements for or superior to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is included with today’s earnings release and is available on the investor relations section of the company’s website. Any comparisons to 2023 financial results are referencing our restated financials included in our Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024.

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

Orlando Zayas: Thank you, Jennifer, and thanks to everyone joining us today. We are excited to give you an update on our Q4 results and our plans for 2025. If we had to land on one headline this quarter, it would be, we finished the year strong. Q4 growth originations grew more than 11% year-over-year, and fourth quarter revenue was up more than 9%. With this strong performance, we have now grown our gross originations consistently for more than two years and we expect our revenue growth track record to hit this two-year milestone after we report Q1 in May. These results showcase the enhancements we’ve made across the board. From our go-to market strategy to operations, we believe we have executed well and transformed our business model, setting Katapult up for continued success.

I could not be more proud of our team here. Their dedication and hard work are the main ingredients in our success. And I’d like to give a big thank you to everyone here at Katapult. Before we dive further into our results, I want to take a quick step back to summarize and review the progress we’ve made over the past few years. We have transformed our business from single input driven business to a multi-dimensional growth engine in a very short period of time. We believe this is important context as you evaluate where we are today and where we believe we can go over the next year and beyond. If you recall, just two short years ago, we launched our Katapult app, which included a groundbreaking feature we call Katapult Pay or KPay. Up until this launch, nearly 100% of our focus had been on merchant engagement opportunities.

Before our app existed, our business model relied completely on merchants to refer consumer traffic to us, either through direct integration, which offered a Katapult lease as a checkout option, or through a waterfall finance platform, which would offer our LTO if we were the best option for its consumers. We developed a great reputation for converting this traffic into transactions, which were incremental sales for our merchants. This strategy allowed us to build relationships with merchants that partnered with us. Our partnerships were supported by data and insights that show the incremental sales that the Katapult LTO option brings when added to merchant payment ecosystems. And today, we are confident that we have a superior LTO product that gives non-prime consumers the choice, transparency, and pricing terms they need.

This is a driver of our consistently high repeat rates and our strong NPS and trust pilot scores. We are proud of the product we built and the way we serve our community of consumers. When we launched our app, our goal was to create a destination where consumers could go for all their durable goods shopping needs. Simply put, we wanted to create an ecosystem that allowed Katapult to connect consumers to merchant partners, enabling commerce whenever and however the consumer wanted to shop. We believe we could turn our app into a marketplace where consumers would choose to start their shopping journey, because they trusted Katapult. To do this, we needed to create vibrancy in our marketplace. So in addition to the hundreds of direct and waterfall merchant websites that consumers could link to and shop from within our app, we began to methodically add merchants with whom we didn’t have a direct or waterfall relationship in our app marketplace.

We also added KPay functionality that allows consumers to seamlessly check out using our proprietary virtual credit card technology, allowing them to check out with these merchants in our marketplace. Our technology lets customers start and finish their shopping journey in our app. Practically speaking, we give consumers more choice. They could shop our app and check out on a merchant website or check out in our app with KPay. And as our customers enjoy a better experience, Katapult can gather behavioral insights that allow us to create a more personalized customer journey that encourages repeat shopping. With the launch of our app, we also took control of our destiny, because it allows us, for the first time, to include merchants with whom we didn’t have a direct or waterfall relationship in our marketplace.

This meant that we could service consumer demand at our own discretion and we could be the source of traffic to our merchants. This dynamic creates an even more compelling reason for merchants to want to partner with Katapult. Since our app launched, we have added more than 30k pay-enabled merchants to our marketplace, which again are in addition to the hundreds of other direct and waterfall merchant customers can reach through our marketplace. The impact of our marketplace has been phenomenal. For 2024, approximately $127 million of gross originations actually began in our app. And our market-leading KPay feature enabled nearly $77 million of those gross originations last year alone. This is a significant change from our original go-to-market strategy.

Before we launched our app, we were 100% reliant on merchants to send us this traffic. In just two years 54% of our 2024 originations are now being driven by our own efforts, starting in our ecosystem. We have created a two-sided marketplace that benefits consumers and merchants alike. It’s self-generative and highly complementary to our merchant and waterfall-driven traffic. Our two-sided marketplace is growing, because we offer benefits to all market participants. We send merchants incremental sales with great economics and our customers have a reliable shopping destination that offers straightforward and fair pricing for durable goods. We are a destination where they know they’ll be treated with dignity and they will be able to acquire the items they need and want whenever and however they want to shop.

This virtuous ecosystem means that customer success leads to merchant success and vice versa. And when this happens, Katapult is also successful. We’ve gone from simply being a payment method to being a growth partner to our merchants and a destination for consumers. And this 2.0 transformation has happened in less than two years. We believe merchants are beginning to understand the power of our marketplace and the strength of our LTO offering, because they are now reaching out to Katapult with requests to be featured in our ecosystem. We know how to convert traffic into transactions, and we believe this will encourage our merchant and waterfall partners to send us even more traffic in the future. To unlock more of our marketplace potential, we need to drive additional top-of-the-funnel activity.

In short, we need more applications that we can convert into customers and it will come back to Katapult for their durable goods and needs again and again. To do this, we have focused our top initiatives in four core areas. One, consumer engagement. Two, merchant engagement. Three, referral partnerships. And four, improving our unit economics and capital structure over time, so that we can improve profitability and sustainably generate cash. We’re incredibly excited about the future of our marketplace. I’d now like to turn the call over to Derek, who will provide you with an overview of our Q4 successes, which we intend to build upon to drive growth in 2025. After this, Nancy will give you a recap of our Q4 and 2024 financial results, as well as some expectations for our first quarter and full-year 2025.

We’ll then open it up for your questions. Derek?

Derek Medlin: Thanks Orlando, and good morning to everyone. You just heard Orlando described how we’ve transformed our business over the past two years. When we launched our app in late 2022, we saw the opportunity to create a growth driver that would allow Katapult to gain more control over its destiny. Since that time, we’ve been executing against strategic initiatives we believe will support our continued progress. While we’ve already begun to see our strategy deliver, we believe we are still in the very early stages of a new phase of growth. We now have evidence that we can bring value to merchants and consumers alike, so our focus is on finding opportunities to move faster than we ever had before. So let’s start with the progress we’re making in our consumer engagement initiative.

Within our consumer initiative, our overarching priority is engagement. In support of this, we’re expanding our app functionality and footprint as we continue to test and learn with a variety of marketing campaigns. We believe our success in these efforts will allow us to leverage our app marketplace to drive consumer engagement, gross originations, and profitable revenue growth. During the fourth quarter, $46 million in gross originations started in our app. For easy reference going forward, we will refer to this data point as total app originations. Year-over-year, total app originations grew by 32% in Q4. This means that we were our own referral source for approximately 61% of the gross originations we generated in the fourth quarter. And roughly $31 million of our gross originations were transacted using KPay, which was up approximately 52% year-over-year.

Going forward, we will continue to refer to this data point as KPay originations. This means that roughly 41% of our originations went through KPay. Both these data points show that we are increasing the engagement and velocity in our marketplace and that activity is leading to growth. Since the start of 2024, we added eight merchants to our marketplace based on customer feedback. These merchants include Metro by T-Mobile, Zales, and Rooms to Go, which we launched in December 2024 and early 2025, respectively. During 2025, we will continue to strategically add features, functionality, and merchants to our marketplace that we believe will encourage consumers to engage and transact with Katapult for more of their shopping needs. We intend to leverage data and insights to personalize the shopping journey for our customers, which we believe will lead to higher conversion rates.

Now let’s turn to marketing, which is our other high priority consumer engagement initiative. Throughout 2024, we increased our marketing activity with a focus on getting the Katapult product in front of more eyeballs. We expect to continue to improve the return on ad spend over time, and we feel comfortable with our customer acquisition costs and our continued investment in our multi-channel marketing strategy. For 2025, our top marketing priorities are to drive application growth. So we have more activity at the top of our funnel and to both increase the number of customers, who take out a second lease with us and shorten the timeline between the origination of their first and second leases. Multiple leases are an obvious driver of lifetime value growth.

And permitting customers to have more than one lease with us at a time distinguishes Katapult LTO from many of our competitors. Let me give you a few examples of how we’re leveraging marketing to deliver growth. We’re thoughtfully engaging with consumers more regularly. In fact, our lifecycle team increased their volume of communications by nearly 200% in 2024. Touch points included emails, SMS, and push, whose timing was tied to inflection points in the customer journey and experience. We also launched strategies within new customer acquisition channels, including Google Paid ad search. We are seeing a strong ROI and we expect to invest further in this channel as it continues to perform. Finally, we also launched marketing strategies related to organic social, paid social, video ads, and direct [man] (ph), and we believe we have a lot of potential growth to tap into related to these channels.

We will continue to scale our marketing efforts by testing and learning in a variety of campaigns throughout 2025. We believe our hard work is paying off, and we are seeing strength and opportunities across the spectrum of KPIs we’re using to measure the health of our marketplace. Let me highlight a few Q4 data points that illustrate our progress. Given top-of-funnel activity is our biggest near-term priority, I’ll start with application volume, which grew approximately 50% during the fourth quarter, driven in equal parts by new and returning customers. Feeding our application volume, both app downloads and MAUs, our monthly active users, grew during 2024. We now have nearly 1 million cumulative app downloads. Traveling down the funnel, let’s talk briefly about our conversion rate.

The team has done a great job improving the customer journey, which led to a 72 basis point improvement in global conversion rate during the full-year 2024. We continue to sustain what we believe is a market-leading customer repeat rate, which was 61.5% in the fourth quarter and came in above 55% for all of 2024. In fact, as of the end of the year, nearly 30% of our active customers have entered into four or more leases with Katapult during their time with us. We believe this data point demonstrates the value we bring to customers and given the demographic and psychographic similarities across our customer base, we believe we can drive that 30% much higher over time. We believe this repeat rate is fueled by the positive experiences our customers have with the catwalk marketplace.

We have a customer-centric philosophy, which means we never charge late fees, and we give consumers the transparent and affordable LTO options they deserve. Our approach has consistently resonated with our customers. Our MTS was 58 as of the end of Q4, up from 52 in Q4 of 2023. This strong score is a testament to our customer service obsession. All of these data points drive LTV, which is one of the more important hallmarks of our healthy marketplace. During 2024, our customer LTV grew approximately 9%, compared with 2023. We believe that these stats are giving merchants a better understanding of the incremental sales our LTO delivers and the consumer demand for our product. These merchants are seeing us as a growth partner and our relationships have become even more collaborative.

That’s a great segue to a conversation about our merchant engagement initiatives. Within merchant engagement, we are focusing on positioning Katapult as a partner of choice for all merchants and waterfall finance platforms. No matter how merchants are participating in our marketplace, we want them to recognize and value the incremental sales that Katapult is delivering. Our direct and waterfall merchants accounted for approximately 68% of total gross originations in 2024. We have remained focused on bringing new merchants to our marketplace and growing our market share with our anchor merchants. This focus led to success. During the fourth quarter, if we exclude the home furnishings and mattress category, our direct and waterfall gross originations grew approximately 44% year-over-year.

For full-year 2024, this metric was up 16%. This growth was driven by several factors. Let me highlight two; first, we added more than 30 new direct or waterfall merchants or merchant pathways to our ecosystem. As a reminder, pathways include new or existing merchant partners that launch a new website or an in-store experience that includes Katapult as a direct or waterfall LTO offering. These merchants span a variety of categories, most notably automotive and durable medical devices. And collectively, we believe they will begin to contribute to the vibrancy of our marketplace and gross originations over time. Second, in the fourth quarter, we leaned into co-granted marketing campaigns with our merchant partners. Their support led to very strong growth during the Cyber 5 holiday period and the rest of the holiday season.

With their partnership, we grew gross originations by 24% in the month of December and approximately 100% during the Cyber 5 period, compared with 2023. Let me give you a few examples of the types of co-marketing and other activities we’re engaging in and the results they’re creating. First, during a two-week promotion, we partnered with a gaming product merchant that led to a 200% increase in applications and more than 180% increase in gross originations, compared with the same period last year. Second, with one of our leading tire and auto merchants, we co-sponsored a one-week promotion that led to applications increasing 65% year-over-year during that week and gross originations growth of nearly 35%. We also worked with one of our leading electronics merchants to refresh their product detail pages to include a financing widget to help consumers find Katapult LTO options more easily.

This led to an approximate 38% increase in average daily gross originations through the end of the quarter, compared with last year. Finally, for another leading tire and auto merchant, we added our innovative price calculator and were included in both our email newsletters and abandoned card emails. Following these updates, we saw a 42% increase in average daily gross originations. We will look for new opportunities to partner even more closely with our merchants as we test and learn in 2025 and continue to build affinity within our Katapult community. And while we’re watching the performance of our entire merchant base, we closely monitor the success and health of our top 25 merchants. By monitoring the tip of the sphere performance, we believe we can quickly get a sense of our marketplace health and implement enhancements that unlock growth.

During the fourth quarter, application volume grew approximately 30% for our top 25 merchants, when compared to the top 25 last year, which led to nearly 10% gross origination growth to this cohort of merchants. And perhaps most importantly, the Katapult marketplace drove about $43 million in gross originations to our top 25 merchants. We are executing well on the consumer and merchant fronts, and we believe that our partnership initiatives can accelerate our progress even more. We want to enter partnerships that can deliver new customers, increase brand awareness, create new products that customers want, and leverage our technology in new ways to drive gross originations and revenue growth. Given our focus on building top-of-the-funnel activity, our partnership efforts in 2025 will lean into building new relationships that broaden our application pool and give our customers more reason to engage with the Katapult marketplace.

We’ve recently kicked off new partnerships that align with these goals. In addition, we have multiple new executed contracts and are entering the launch phase with several others. Recent partnerships include Self Financial Technology Company, with a mission to help people build credit, particularly those who are new to credit or might not have access to traditional financial products. Through this partnership, we believe we can monetize our declined applications and as these consumers improve their credit profiles, they can reapply with Katapult, which will help us grow application volume and help our customers improve their financial health. We also have a new partnership with the global market leader that delivers discounts and benefits to employees of larger enterprises.

This relationship is focused on exploring the benefits of their digital platform as an economical referral source for Katapult. Finally, we have also launched a partnership with the Fintech that offers banking, investing, and borrowing products with a focus on consumers with limited credit. During the first two months following the launch, we expanded our reach to 50,000 consumers. We believe this partnership will also create an ROI positive opportunity to expand our brand reach, giving the Katapult name in front of customers who can benefit from our offerings. Beyond these efforts, we have continued to build new relationships with waterfall finance platforms, while deepening our partnerships with waterfalls we already work with. For example, of the more than 30 new direct or waterfall merchants we onboarded during Q4, 11 came to us through one waterfall partnership.

Eight of these merchants are new to our platform, and three already had a direct integration with us. We have created multiple opportunities for merchants to participate in our marketplace, from direct to waterfall to KPay to our app marketplace. We believe that allowing customers to connect to merchants whenever and however they want will drive growth for our merchants and Katapult. We are very excited about our progress and our team is executing well across our key initiatives and the hard work is translating into continued gross origination and revenue growth, as well as unlocking our path to profitability. With that, I’ll turn it over to Nancy, who will give you an update on our financial results and outlook. Nancy?

Nancy Walsh: Thanks, Derek, and hello to everyone joining us this morning. As you have heard, we had a great quarter and we believe we are well positioned to accelerate our momentum. Let’s start with a few insights on our top line performance. We have now grown gross originations for nine consecutive quarters. Gross originations grew 11.3% to $75.2 million in the fourth quarter, and on a two-year stack basis, our gross originations grew 25.7%. In addition, if we exclude home furnishings and mattress gross originations from the direct and waterfall channel, Q4 gross originations grew more than 50% year-over-year. For the full-year 2024, total gross originations grew approximately 5%. Q4 gross originations grew faster than our 6% to 8% outlook, and this was driven in large part by an exceptional holiday sales season.

We saw growth accelerate throughout the quarter culminating in December growing 24% year-over-year. We are leveraging our technology, underwriting and go-to market know-how to scale our two-sided marketplace and I’m proud of the results we’re delivering. We are also successfully diversifying our gross originations footprint. As Derek mentioned, gross originations for our top 25 merchants grew 10% during the quarter and we reduced our merchant concentration. To add further context to our top 25 merchants, our largest merchant, Wayfair, represented 27% of our total gross originations in Q4, down from 43% of our total in Q4, 2023. From a financial model perspective, I am very excited about how accelerated top line growth can positively impact profitability and cash flow.

Since we are a two-sided marketplace, we can rapidly grow the top line without having to rapidly grow our expense base. Given where we are in our growth cycle, we are prioritizing those initiatives that can accelerate gross originations, but that do not add meaningfully to our fixed cost expenses. And we are executing on these priorities as fast as we can. And our execution is creating value for all marketplace participants. We are referring valuable traffic to our merchant partners and creating a safe and productive shopping experience for our customers. This is delivering a virtuous cycle of benefits for our marketplace participants, which we believe can continue to grow. As we lean into growing applications, we are also closely watching cross-shopping activity.

Not only does cross-shopping create new avenues for growth for merchants, it also provides tangible proof of the vibrancy of our marketplace. Cross-shoppers during the fourth quarter grew approximately 60% and for the full-year they grew approximately 46%. On the revenue front, we also had a great quarter and a terrific year. We delivered $63 million or 9.4% growth in Q4, which was above our outlook and marked the seventh consecutive quarter of year-over-year growth. This growth reflects continued improvements in productivity and efficiencies, as well as strong collection trends. For the full-year 2024, we delivered approximately 12%, also above our outlook. Gross profit for Q4 was approximately $7.4 million. This compares with gross profit of $8.9 million last year.

As a reminder, we front-load lease depreciation, which impacts gross profit, and this depreciation is not an add back to adjusted EBITDA. This means that in times of rapid gross originations growth such as what we achieved in December depreciation costs will have a disproportionate impact on gross profit in the quarter. For the full-year, gross profit was $45.8 million, up about 10% versus 2023. Gross margin for full-year 2024 was 18.5% within our target range of 18% to 20%. We have continued to effectively manage write-offs as a percent of revenue. During the fourth quarter this metric was 9.6%, fairly in line with our Q3 rate of 9.5%, and up from 8.7% in the fourth quarter of 2023. Moving on to expenses and profitability. Our disciplined approach to expense management coupled with our top line growth is at the center of our financial model.

This philosophy fuels our decision making and it is a core component of our long-term growth strategy. This approach allowed us to increase adjusted EBITDA by nearly $7 million in 2024 and report the first full-year of positive adjusted EBITDA since 2021. We believe we are well positioned to further improve upon this performance in 2025. Let me walk you through some of the puts and takes that impact a Q4 adjusted EBITDA. We’ve already talked about our front-loaded lease depreciation and the impact rapid growth has on in-quarter gross profit. Similarly, because lease depreciation is not an [adback] (ph), this non-cash expense drives cost of sales higher without a commensurate adback to adjusted EBITDA. This was a headwind to our Q4 adjusted EBITDA.

Total operating expenses decreased by 37% during the quarter. The year-over-year decrease was primarily driven by lower litigation expense this quarter, compared to Q4 2023. Full-year OpEx decreased 11%. Excluding underwriting fees and servicing costs, which are variable, depreciation and stock-based compensation expense, which are non-cash expenses, and excluding litigation settlement, our Q4 fixed cash operating expenses were $8.4 million, a decrease of 6.9%, compared to last year, reflecting our ongoing commitment to expense control. For the full-year fixed cash operating expenses decreased 7.1%. During the fourth quarter our loss from operations was $4.8 million, a significant improvement compared with the $10.6 million loss from operations we reported for Q4 2023.

For the full-year, excluding litigation expense we recognized in Q3, our loss from operations was approximately $4.4 million, down from $11.8 million in full-year 2023. Taken together, these puts and takes resulted in a Q4 adjusted EBITDA loss of $1.1 million, which was below our outlook. Again, this performance was primarily driven by stronger-than-expected top line growth and the least depreciation costs associated with this growth. For full-year 2024, we delivered approximately $4.8 million of adjusted EBITDA, a $6.7 million improvement, compared to the same period of last year. We are proud of the progress we have made on this front and believe we have the right strategy, initiatives, and discipline in place to deliver continued growth.

Turning to the balance sheet and cash flow, as of December 31, 2024, we had total cash and cash equivalents of $16.6 million, which included $13.1 million of restricted cash. Our restricted cash balance was unusually high due to the timing of the New Year’s holiday, which impacted our cash collection flow. In early January, we returned to our normal collection flow, and as of January 31, total cash and cash equivalents were $20 million, including approximately $5 million of restricted cash. As of the end of the fourth quarter, we also had $82.8 million in outstanding debt on our revolving credit facility. Last quarter, we disclosed that we signed a non-binding letter of intent in October with a direct lender with respect to a new credit facility.

As we advised previously, there can be no assurance we will consummate this or any other credit facility with this or any other lender. While we are continuing to work on a refinancing, we do not have anything additional to share today. In the 10-K we filed this morning, we provided more information regarding risks and uncertainties surrounding our ability to secure this refinancing and to continue as a going concern. We will provide an update when we have something to report. Cash used in operations for the full-year 2024 was $32.6 million, compared to $17.4 million in cash used in operations in 2023. The increase was largely driven by costs related to our growth in Q4, specifically an increase in property held for lease, as well as a decrease in accrued liabilities and the costs related to the litigation settlements we finalized in Q3 2024.

Excluding the costs related to accrued liabilities and litigation, cash used in operations in 2024 would have been approximately $20 million. Turning to our Q1 2025 and full-year 2025 outlook, we are continuing to navigate a challenging macro environment, particularly surrounding the home furnishings and mattress category. That said, given the current breadth of our merchant selection, as well as our plans to introduce new merchants to the Katapult app marketplace throughout 2025, our strategic marketing and our strong consumer offering, we believe we are well positioned to deliver continued growth in 2025. From a big picture perspective, we believe we have a large addressable market of underserved non-prime consumers and that we will benefit if prime credit options become less available.

From a Katapult specific perspective, we plan to leverage the many direct and waterfall merchant relationships we have that provide our customers with access to just about any durable good they want and unleash the power of the Katapult app marketplace and our targeted marketing campaigns to give consumers the shopping experience they need to keep coming back to Katapult again and again. Based on quarter-to-date results, we expect the following for the first quarter. Gross originations growth of approximately 11%. Gross originations excluding the home furnishings and mattress category are expected to continue to grow at a much faster pace than our overall gross originations. Revenue growth of approximately 10% and approximately $3 million and positive adjusted EBITDA.

For your models, our Q1 adjusted EBITDA will be impacted by the strong gross originations growth we achieved in Q4 2024. This high growth means that we expect to have higher lease depreciation costs in Q1 2025, which will impact gross margin. As a reminder, during the first quarter of 2024, we had an exceptionally strong gross profit margin. Based on these dynamics and our operating plan, we expect to deliver the following for 2025. Gross originations growth of at least 20%. Gross originations excluding the home, furnishings and mattress category are also expected to continue to grow at a much faster pace than our overall gross originations during full-year 2025. Revenue growth of at least 20% and at least $10 million in positive adjusted EBITDA.

We are very excited about the year ahead and really proud of the hard work and results we delivered in 2024. We look forward to reporting on our success as the year progresses. With that I’ll turn it back to the operator for Q&A. Operator?

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from a line of Kyle Joseph from Stephens. Your line is open.

Kyle Joseph: Hey, good morning. Thanks very much for taking my questions. Just wanted to dive into the model a little bit. I know you talked about the margin being impacted by growth in the fourth quarter and potentially kind of back weighted growth, but obviously your guidance for 2025 calls for strong growth again. So just want to get a sense for the outlook for the margin. I know you talked about it in the first quarter, year-over-year, but the margin for ‘25 given the outlook for originations growth, would you anticipate that kind of drifting back towards historical levels or given growth, should we anticipate that being a little bit lower than historically?

Nancy Walsh: What we’ve talked about consistently is that for the full-year gross profit is expected to stay in that 18% to 20% range and that would be consistent in 2025. We do see seasonality obviously in Q1 and then in Q4, Q1 being high and Q4 being low, but that 18% to 20% range still holds for 2025.

Kyle Joseph: Got it. And then just one follow-up from me. You know, given all the headlines on tariffs and everything, obviously, I mean, you’re expecting strong growth, and I think you mentioned potential for trade-down effect as you see traditional providers of credit. But have you seen any changes in consumer behavior as a result of all the headlines recently, either a greater demand for credit or a change in purchase activity?

Orlando Zayas: Hey, Kyle, this is Orlando. Yes, I think we haven’t seen a direct impact yet to tariffs, and the consumer, you know, when we look at our consumer and how they’re behaving, we haven’t seen much of a change, and actually the delinquencies are kind of in line with what we expect. You know, when we’ve looked at this in the past, the thing that really drives our consumer is gas prices and as you know, gas prices are down. So I think that’s some of them feel good about it. But you know, we’re working closely with our merchants and I’ll let Derek talk more about it, working closely with our merchants around how does the tariff affect their pricing and how do we look at that and how do we build that in?

Derek Medlin: Yes, thanks, Orlando. And Kyle, thanks for the question. Like Orlando mentioned, we really haven’t seen any incremental increase in trade-down conversations since mid-2023 when we first saw it. Again, it hasn’t been accelerating. It’s been fairly stable for us. And like you mentioned, looking across things like tax season and tariffs, you know, just there’s been a lot of stability and resiliency in our base. You know, I think when we think about the impact of tariffs, obviously, there could impact prices, which might decrease conversion, but it could also increase gross origination amounts and average order values. So we’re just going to be watching very, very closely and understanding where there’s opportunity for us to partner with our retailers to deliver meaningful offers that help to stabilize options for the customer.

Kyle Joseph: Got it. Very helpful. Thanks for taking my questions.

Orlando Zayas: Thanks, Kyle.

Derek Medlin: Thanks.

Nancy Walsh: Thank you.

Operator: Your next question comes from a line of Anthony Chukumba from Loop Capital Markets. Your line is open.

Anthony Chukumba: Good morning. Thanks for taking my questions as well. I guess my first question was on lease merchandise write-offs. I know it was within your target range, but it was up year-over-year and I guess just wondering what was the driver for that?

Nancy Walsh: You know they fluctuate Anthony that’s why we provide the range, so there really was no significant reason for the change, you know, it is a function of the revenue growth as well, but we’re very comfortable with where the range stands consistently and also you know, compared to some of our competitors, so very happy with that range.

Anthony Chukumba: Got it. Fair enough. So second thing, you know, in terms of your guidance you’re assuming 20% revenue growth, but EBITDA essentially doubling. What’s the — so that would imply that your EBITDA margin obviously improves significantly. What’s the driver that I mean, is that just, you know, since you’re like, you know, corporate overhead leverage or what’s sort of driving that?

Nancy Walsh: That is predominantly what we’re seeing. You know, we continue to manage our expenses very diligently, but we are focused on growth. So we’re making sure that we’re investing in the right places to drive that growth technology, marketing things that we’ve talked about in the past. So that’s the main driver, but we’re always looking for opportunities to continue to improve the profitability. Very thrilled with our first year of profitability or positive adjusted EBITDA this year and looking to continue to grow that as we get into 2025 and beyond.

Anthony Chukumba: Got it. And then maybe this is in your 10-K, but what was the growth in specifically Wayfair originations in the fourth quarter specifically?

Nancy Walsh: Wayfair gross origination growth, we don’t typically, I think, give that out, but it was a continued theme of what we had seen throughout the year. You know, the application flow continues to be down. We’ve signaled that as we’ve given our guidance. But the business outside of Wayfair continues to be very strong growing at 50%. So as we talked about next year, we’re hoping to see that trend improve as we go through the year, but we’re remaining very conservative on Wayfair and home furnishing sector in general.

Anthony Chukumba: Got it. That’s all very helpful. Thank you.

Nancy Walsh: Thank you, Anthony.

Orlando Zayas: Thanks, Anthony.

Operator: Your next question comes from a line of Scott Buck from H.C. Wainwright. Your line is open.

Scott Buck: Hi, good morning guys. Thanks for taking my questions. I’m curious, does an environment, macro environment where there’s more uncertainty, can that actually help accelerate merchant acquisition as they look for every edge possible?

Derek Medlin: Hi Scott, this is Derek. Listen, I think across the board what we’re finding is that merchants are looking for avenues of growth, whether that be helping them in their checkout experience or also bringing new customers to their door. And when things are stressed, certainly I think that, that makes the conversation more relevant and more timely. And what we’ve done with the app and being able to not only bring our community of users together, but then to distribute them out to merchants has really been resonating. So I think it’s kind of the combination of the desire for growth, especially in segments that have been under pressure like home furnishings, but also the fact that we can deliver value that’s measurable and specific and targeted for them with very little lift, if any, to help support their business.

So yes, I think in general there is some concern of growth opportunities in different retail segments, but even when there’s not, if someone can help bring you, you know put traffic and or click traffic that’s a really attractive proposition that’s really resonating in the marketplace.

Scott Buck: Great that’s helpful and then I apologize if I missed this, but first quarter seasonality around tax season, has that been consistent with previous years? Or are you seeing any changes there?

Nancy Walsh: No, it was consistent with prior years. We were very pleased with how that contributed to first quarter.

Scott Buck: Okay, perfect. And then last one, Nancy for ‘25, anywhere in the OpEx that you need to play catch up? Or expect to see increased investment in 2025?

Nancy Walsh: The only place, as we’ve talked about, that we really expect to see any increases in SG&A relate to our investments in technology, investments in marketing, which we’ve talked about quite a bit, those are the two predominant ones. And that’s to drive the growth. But we’re looking always for places to offset that and to continue to optimize and make our business more efficient from an expense category and making sure all of those expenses have an appropriate ROI.

Scott Buck: Okay. And then you brought it up in the comments, but timing around the refinancing of the line, what do we think in there?

Nancy Walsh: You know, other than the prepared remarks, it really we have nothing new to add right now, but as soon as we do we will obviously share it with everyone.

Scott Buck: Okay, well I appreciate it guys. Thanks for the time.

Nancy Walsh: Thank you so much.

Operator: And that does conclude our question-and-answer session. I will now turn the call back over to Orlando for closing remarks.

Orlando Zayas: Thanks, operator, and thanks to everyone tuning in today. We believe we have a differentiated offering that provides benefits for both consumers and merchants. For consumers, we provide a fair and transparent LTO that allows them to acquire the durable goods they need from merchants they trust. For merchants, we provide a growth partnership that gives them access to non-prime customer, who may not have been able to purchase their goods without our LTO. These benefits are the foundation for the Katapult app marketplace and we believe we are well positioned for continued growth. We look forward to chatting with you and then other investors as the year progresses. Please reach out to Jennifer if you have any questions or feedback. Thank you.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.