Q4 2023 Katapult Holdings Inc Earnings Call
And a growth of 13% year over year.
Revenue of $56 7 million, which represented 16% growth and just below breakeven adjusted EBITDA.
Not only did we record our second highest quarter for gross originations volume ever.
We also delivered double digit revenue growth and positive adjusted EBITDA that improved by $4 $9 million year over year.
Today, My comments will focus on the.
The drivers of our outperformance during the fourth quarter progress on our merchant and customer strategies and a brief update on our tech position and finally I'll give you a brief overview of our top focus areas for 2024, and the initiatives, we intend to prioritize to drive growth this year.
I will then turn the call over to Nancy who will provide you with more insight on our fourth quarter financial performance our outlook for performance in the fourth quarter and full year 2024, and what we're seeing in the macro environment and our competitive landscape. So far this year.
Before I jump into Q4 performance I want to take a quick step back and reflect on the very strong year we've had.
First we delivered strong gross originations and revenue growth during the period in which most of our competitors saw their business contract.
This underscores our belief that we are not only offering the right product to the market, but we are offering a highly differentiated for both merchants and consumers.
Second we changed the trajectory of our path.
Forward by significantly enhancing catapult pay during 2023.
Catapult pay accounted for approximately 19% of our total gross originations in 2023, and we are very excited about the future of this game changing applications.
Finally, we accomplished all of this within the rigor of our disciplined expense strategy, which allows us to improve adjusted EBITDA substantially as we grew the top line.
We are proud of the strong year, we had and of our future potential neither of which would be possible without the hard work of our catapult team.
I am so grateful for their contributions on behalf of the entire management team I want to thank them for their dedication to our success.
With that backdrop, let's talk about our strong performance during the quarter as.
As we ended the fourth quarter, we believe the uncertain macro environment could have an impact on our core non prime consumer.
While inflation had come down student loan repayments had resumed savings rates were low and credit card balances were high creating an uncertain macro environment. Despite this we saw strong and steady growth and gross originations during the fourth quarter.
And importantly, gross originations volume growth was achieved during the year in which our dynamic underwriting model risk and controls led to an approval rate that was more than 400 basis points below our 2022 approval rates.
This strength was driven by originations coming from our direct integrations as well as catapult bag.
Within our direct channel, we believe we benefited from merchant advertising and discounting, which we leverage in our own marketing campaigns driving better than expected increase in demand.
This strength extended across our core retail categories included automotive electronics furniture Empire and.
In addition, we benefited from performance of new direct merchants, such as grown brilliant and exotic PC.
Catapult <unk> was an important driver as well during the quarter.
Customers continue to leverage the feature to originate new leases with more than 20 merchants that were available in a marketplace heading into the fourth quarter.
Second this was a big driver of our performance, we added Walmart to our catapult pay marketplace sooner than we anticipated we saw a very robust response from our customers and approximately 6% of the leases that originated in the fourth quarter were durable goods from Walmart. We believe this demonstrated our ability to drive demand by offering merchant.
Our customers that our customers really want and we are one step closer to transforming catapult into a true shopping destination.
Overall, we are reaping the benefits of our investments in our direct integration capabilities and catapult pay our goal is to leverage both these channels to grow our merchant base and overall consumer reach.
Let's now dive into the progress we've made executing our merchant strategy, which are rooted in three key areas.
One growing gross originations by integrating with new merchant.
Two growing our market share with our anchor merchant and three offering.
Ensuring that we offer the variety of durable goods are customers are looking to drive sustainable customer demand.
I'll start with a few updates on direct integration, we're very pleased with the quality of the merchants that we've integrated during the quarter.
To highlight a few merchant first lenovo.
While we've had the relationship with Lenovo since 2017.
Opted to pursue a waterfall only process in 2021.
Since that time, we work with them to demonstrate that having a direct <unk> option as well as the waterfall process fills a meaningful gap for consumers.
As a result, we've added Lenovo back as a direct merchant during the fourth quarter.
They are already supporting us with marketing on their financing page, which includes catapult as their only <unk> options.
We also launched grown brilliance during the quarter as we announced in November last year customers have been embracing the brand and we're excited to have them onboard during the engagements season.
While some of you may not be familiar with exotic PC. There are PC company that craft custom Pcs and laptops for creators gamers and professional <unk>.
<unk> integrated our <unk> option in the fourth quarter and so far our customers have been very engaged with their goods.
And finally, we also kicked off a direct relationship with <unk> one of the most trusted names in medical equipment nationwide.
Denmark has both online presence as well as brick and mortar stores and we're excited to recognize them as one of our top 25 merchants during the fourth quarter.
Beyond our fourth quarter success stories, we believe we have a robust pipeline of direct integration opportunities that we can continue to steadily convert throughout 2024.
But bringing on new direct merchant is only one part of our merchant growth strategy.
We are focused on leveraging ways in which we can deepen relationships with merchants that are already on our platform.
And we've successfully done it with Lenovo and are working with other merchant market catapult on their website and to get catapult into the lead position versus other <unk> operator.
In addition, we're exploring new ways to leverage our data to help our merchants with their marketing efforts.
For example, we are piloting ways in which we can share the lease amount that a customer has been preapproved to spend with our merchants, while protecting the data privacy as our of our consumers. We believe we can allow merchants to create a more targeted marketing effort to drive conversion.
We have already seen these types of initiatives.
Work, well with our largest merchant partner wafer.
<unk> 2023, we completed multiple rounds of testing to better understand how it can enhance the parts of our customer journey, we directly control within the wayfarers checkout flow.
Our focus was on making sure we are doing a good job educating our consumers about our products.
Trying to ensure for example that customers fully understand pricing and terms.
And in an effort to remove friction increase transparency and make their customer journey, an even better experience.
Our hard work with wafer or paid off in 2023.
For the full year, we grew waste our gross originations by five 6%, which was faster than wafer as U S sales growth for the full.
For the full year, indicating we are continuing to take share with this important merchant partner.
During 2023 applications for wafer leases grew by more than four 5%.
Further same day take rate increased by approximately 210 basis points in 2023, and overall take rate expanded by 450 basis points.
During our fourth quarter. However, we saw some softness in our wafer gross originations and they are down slightly compared to 2022.
We believe this softness was driven by a few factors including seasonality.
Furniture sales have not been historically a driver of Q4 holiday performance for US we were able to improve our wafer business across several key metrics.
Same day take rate at wave Air grew 340 basis points in the fourth quarter and our overall take rate grew 370 basis points, which we believe shows that customers who receive a lease software from us are engaged and ready to convert and that our efforts to provide customers with even more transparency on their lease terms are bearing fruit.
There is one more positive results that I'd like to highlight within our furniture category, excluding waived their gross originations grew 30% in the fourth quarter. This was driven in large part by the success. We're seeing we're seeing with one stop bedroom, which we launched as a direct merchant in December 2022.
Since then we've also added a key user feature key user features such as a price calculator, which allow our customers to not only see the full prices for the durable goods they are viewing.
But also their weekly monthly et cetera payments would be if they use the <unk> product. This tool also shows customers pricing should they choose to.
To exercise an early purchase options. This has had a meaningful impact on volumes in the fourth quarter.
We are pleased with our traction in the furniture category generally and with our wastewater partnership specifically wayfaring catapult have mutually a mutually value partnership and we are working hard to grow together by improving marketing and take rates, while enhancing the technology behind our products to deliver an even better customer journey.
As we look out into 2024, we believe we can leverage the lessons we learned from tailoring our products to fit the needs of waste there and its customers to drive growth again, this year and equally as important we can take these lessons and continue to deploy them across the rest of our merchant base to drive growth.
To complement the work we are doing with our merchants. We are also focused on attracting new customers and enhancing our product experience that we can capture more wallet share from our existing customers.
I'll talk about how we're doing this in a moment the bottom line is our strategy is working.
During 2000 22023 total application volume grew 13% and we approved more than 600000 new leases. This.
<unk> into about a 23% increase in the number of lease origination approximately 15% growth in new customers and as of December 31, 2023, we had approximately 19% more active customers than we did at the same time in 2022.
At the same time, we continue to offer an experience that our customers love, resulting in fourth quarter customer repeat rate of almost 60%, which is an all time high growth.
And with an NPS score of 52 as of December 31, we feel confident these data underscore we are delivering a lease to own product that meet the needs of our customers across the U S.
So how are we doing this.
<unk> already talked about how our robust portfolio of directly integrated merchants is driving customer demand and how this is this is a steady part of our business that we expect to continue to grow but let's also talk about catapult pet.
Catapult payers a feature on our App that leverages, our virtual credit card technology, which is fueled by our proprietary AI and machine learning that will allow us to determine what is leasable and what is not.
This unique capability allows us to use catapult conveniently shop for more than 20 merchants from our marketplace.
Like our direct integrations catapult pay is a great business driver for merchants that gives them access to new non prime customers customer population, who if not for our lease to own solution might not have had the financial resources to purchase their durable goods.
But unlike our direct integration catapult pay allows us to onboard new merchants like Amazon Walmart best buy home depot and target among others without requiring merchants to invest in a direct integration.
In addition, catapult pay has allowed us to create a consumer journey that starts in the catapult mobile app. This means that consumers can starker transaction with catapult, specifically and we have more visibility into our customer shopping habits and more control over our destiny.
Currently it's a tool that our existing customers are using mode, but we can envision a future where catapult pay becomes a low cost customer acquisition channel for us.
Our confidence is driven by several data points.
First catapult pay has become a trusted channel for customers to start at least with US as of December 31, more than 15% of our current leases were initiated through catapult debt.
This strong usage led to December being the best month ever for catapult pay nearly $10 million in gross originations came through the feature during the month and $20 million in gross originations came through catapult pay for the fourth quarter, representing 30% of our total originations for the quarter.
For the full year 2023 $42 million of gross originations were generated through catapult that.
Third 14% of the leases that were initiated through catapult.
Or from actually brand new customers in 2023.
And finally, our App itself has become a terrific engagement tools and is the most used channel for our customers to access their lease information and December 63% of customer interactions with catapult began in the app.
Whether through catapult pay merchant or a directly integrated merchant these interactions started in our app.
We ended 2023 with more than 500000, app downloads up from roughly 125000 downloads in 2022.
And we also had more than 200000 unique users interact with the App.
In short we believe our App has created a customer experiences.
From the competitive landscape.
In addition to catapult pay we continue to do a lot of testing and learning within marketing during the fourth quarter.
Similar to similar to catapult pay we believe marketing can help us drive customer demand independent and in concert with our merchants.
Throughout 2023, we put the structure and resources in place to allow us to begin scaling our marketing strategy focused on ROI positive consumer acquisition and reactivation.
We grew our communication volumes significantly with a 500% increase in the number of emails. We sent an addition of SMS and push notification capability.
As we increased our touch points with consumers. We also saw our open rates and click rates increase and we believe this indicates that our marketing campaigns are resonating.
While we are being very prudent with our marketing spend we continue to believe that our opportunities to build our market share within the underserved <unk> under.
Industry is considerable we will continue to test and learn and tie our marketing investment to strict ROI requirements.
As a summary about our opportunity to grow our customer base, we feel good about the strong ecosystem we've built.
We have direct merchant partners that deliver a steady stream of new and repeat customers.
<unk> is an important contributor to our strong repeat customer rate and has potential to blossom into a reliable low cost consumer acquisition channel and finally, we have an emerging market strategy that can prudently scale to amplify growth from both of these channels over time.
All of this progress we're making is supported by the fundamental strength of our technology platform from our seamless.
Direct integrations that get a decision back to a customer and an average of five seconds or less for our underwriting algorithms that use personal information that a customer has top of mind to our ability to autonomous fully on board new merchants into catapult pay to.
To testing and learning, we're doing within our marketing strategy.
All of this progress is on the bedrock of our technology, we believe that our direct <unk> option in catapult pay are creating sustainable competitive advantage that will help support our continued growth and keep us at the forefront of technology in our industry.
In addition, our tech advantage has been built upon low cost lean nimble tech infrastructure that allows us to move quickly to scale, new solutions and capitalize on growth opportunities that require tax ingenuity.
For example, catapult pay is powered by proprietary models to determine if a durable good as leasable. These models allow us to onboard retailers like Walmart, which has a broad spectrum of products available for purchase including many that are not eligible for <unk> transactions.
Given the breadth and depth of their skus without these technology driven models it would be very difficult if not impossible to bring market leading retailers like like this to our customers.
Looking across our competitive landscape, we believe our technology is unique and cutting edge.
Last quarter, we talked a bit about generative AI and our opportunities to deploy it within our tech stack. We are excited to launch our first use case of generative AI in the fourth quarter to help us automate address validation.
We created this tool to address the friction some customers are experiencing if there are minor differences in their addresses they provided and what was listed in the merchant database. We can now use generative AI to quickly address what was previously a manual process to update eliminating a source of customer frustration.
Beyond this we are exploring ways to integrate generative AI further in catapult pay marketing and other areas.
Before I turn it over to Nancy I want to provide a few thoughts on our focus areas for 2024.
On the customer front, we understand that our customers are DLC curve.
Which is why we continue to focus on offering the best and transparent pricing and passing those savings onto our customers.
We believe we offer the lowest pricing in the industry and we will remain focused on giving our customers the value they need and the experience they desire.
As you know by now our application process is the best in our competitive landscape.
We make it easy for the customers to apply we don't require a bank account information and length of credit history, and we never charge late fees ever.
So in 2024, we expect to see our strategy continue to reflect our commitment to delivering value, while fostering long term customer relationships.
This approach not only sets us apart in the market. It also drives better performance for our business and significantly increases our retention rates.
We're also dedicating effort to making it easier for customers to shop with US we think.
That enhancing the customer shopping journey and our marketplace is another way, we can control our destiny and help drive demand.
One big area, we're exploring is product based research.
Broader product based search.
Right now customers have to start their searches at the retail level and we believe we can create options that consumers for consumers to shop directly for the actual durable good they'd like the least we can make their experiences even better.
In turn this will help us better understand what the customer is in their journey and while they're shopping for what they're shopping for and eventually unlock unlock our ability to do more targeted marketing.
Regarding catapult pay we are very pleased with the adoption rate and customer engagements in 2024 will be exploring opportunities to both bring our new merchant that our customers want and further personalize the user experience with the aim of increasing conversion to.
To round out our customer focus in 2024, we believe we are well positioned to grow our customer base. There are multiple levers. We believe we can pull including continuing to execute our ROI focused marketing strategy.
Build out our other customer referral channels, including strategic partnerships and sustaining high customer repeat rates.
Within our marketing strategy, we will continue to focus on making sure our customers can use our market, leading <unk> product to shop for all the durable goods they want and need.
This means we will focus on onboarding direct merchants that can help round out our shopping experience.
We believe that our high repeat rates is the hallmark of a loyal and engaged customer base and we will continue to look for ways to sustain this differentiator, which is compelling piece of our merchant value proposition.
In 2024 will continue to look for opportunities to leverage our unique platform to solve merchant problems opening up new growth channels for both catapult and our merchant partners. We will also continue to look for opportunities to build new merchant referral pipelines such as the one we created in 2023 with synchrony.
And finally.
We will also be looking at opportunities to further leverage our technology and proprietary data to grow our business first our technology and data insights will continue to be fundamental drivers of the customer and merchant focus areas of outlines.
We want to look for ways that we can extend our data lead by integrating new resources that will allow us to capture even more underwriting and broad signals that allow us to offer more leases to underserved customers.
And while I won't go into too many specifics today.
From a big picture perspective, we are also exploring ways to leverage these competitive advantages to better monetize our growing customer base and create new revenue streams.
With that I'll turn it over to Nancy to discuss our fourth quarter results Nancy.
Thank you Orlando I'm excited to talk to you today about our strong fourth quarter results, which have added to our track record of growth.
For five consecutive quarters, we have grown our gross originations year over year in the fourth quarter, our revenue growth of 16, 1%, which accelerated from the revenue growth rate, we achieved in the third quarter.
We also reduced our write offs as a percentage of revenue and with our focus on disciplined expense management, we delivered a $4 $9 million year over year improvement to adjusted EBITDA during the fourth quarter.
With that as context, let me provide you with some financial highlights for the fourth quarter and full year 2023.
Alright discuss the rest of our P&L I wanted to mention that we made out of period adjustment to correct immaterial errors related to cost of revenues and rental revenue on our P&L.
Also impacted property held for lease and sales tax payable on our balance on our balance sheet.
It will also be a $1 $2 million cash impact associated with sales tax Pamela.
We have reflected these out of period adjustments in the adjusted EBITDA reconciliation table in our press release for your reference.
The revenue write offs as a percentage of revenue and adjusted EBITDA data that I'm about to present also reflect these adjustments.
As I mentioned, we have now brown gross originations for five consecutive quarters and is Orlando touched upon our fourth quarter results came in significantly better than what we were expecting.
Gross originations increased 13% to $67 5 million.
Our performance was driven by strength with our existing margin and our ability to onboard Wal Mart into catapult <unk> during the fourth quarter sooner than we expected.
New and existing customers engage with Walmart through catapult paid during the quarter, resulting in higher than expected gross originations.
In addition to this driver we also saw strong performance during the cyber five period the holiday season.
Gross originations during this period grew double digits compared to the same period of 2022 and catapult pain was a key driver of this growth.
For the full year 2023, we achieved gross originations of $226 $6 million up.
<unk>, 15%.
While the headline number is a result, we are very proud of our business, excluding wasting agreement faster during 2023.
Excluding <unk> gross originations grew nearly 28%.
While we are very pleased with our partnership with waste. There. We are also pleased with our progress toward diversifying our sources of gross originations and revenue.
For 2023, non wafer gross originations were 48% of our base up from 43% in 2020 channels we.
We believe this demonstrates that we can continue to leverage weight there to drive growth, even as we diversify our gross origination fee.
During the quarter 59, 9% of our originations came from existing customers.
This is an all time high for us and we believe this reflects our obsession with driving to give our customers. The best experience we can in all time.
For the full year 54, 2% of our origination came from existing customers.
As we have discussed we are continuing to see a large number of repeat customers come back.
To catapult <unk> and.
In fact, those customers who generate at least through catapult paid.
First second or third approximately 29% of the time these customers will generate another lease within 60 days.
We continue to believe that engagement with the App and our targeted marketing efforts are helping us drive our very strong repeat customer growth rate.
Q4 revenue increased 16, 1% to $56 7 million exceeding the 13% to 15% growth outlook, we provided last quarter.
This performance reflects the trends driving gross origination volume performance, we saw in the first three quarters of the year and strong collection efforts for <unk>.
Full year 2023 revenue grew by 5% compared with 2020 channels.
<unk> as a percent of lease revenue continued to improve and remained within our 8% to 10% target range for the fourth quarter. This metric was nine 6% 10 basis points lower compared with nine 7% in Q4 2022.
Moving onto profitability, our disciplined approach to expense management, coupled with our topline growth allowed us to deliver another quarter of substantial adjusted EBITDA growth. As a reminder, late in 2022, we instituted a number of cost savings measures and we are now at the tail end of Anniversarying. These benefits.
Our fourth quarter total operating expenses were impacted by a $7 million net expense reported in connection with our negotiation.
The two class action lawsuits that have been pending in New York and Delaware since 2021 and 2022, respectively.
This may be satisfied with a combination of cash and shares in.
In addition, we recorded a $5 million receivable for our insurance policy payments.
In total we recorded a $12 million liability in connection with the potential settlement.
I should note that we have not yet and may not reach a settlement for these parties on these terms or at all.
Further any settlement agreement is subject to court approval by the Delaware and New York Court.
Although this settlement negotiations are ongoing and not final given the status of settlement talks we are required under GAAP to accrue to the potential settlement.
We'll provide additional updates as appropriate in the future.
During the fourth quarter, our total operating expenses increased by 14, 5%, primarily driven by the $7 million net onetime estimated litigation settlement expense.
Excluding this expense total opex for Q4 would have decreased by 27, 8% year over year for.
For the full year, we reduced our total operating expenses by eight 5% year over year and excluding the onetime estimate litigation settlement expense full year 2023, opex decreased by 19%.
Excluding underwriting fees and servicing costs, which are variable. The one time expenses related to our estimated legal settlement and depreciation and noncash stock compensation expense, our fixed cash operating expenses were $8 5 million down 35, 6% compared to last year.
Based on our top line performance and the structural and sustainable benefits. We are realizing from our operating efficiencies, we were able to improve our year over year adjusted EBIT performance for the fourth consecutive quarter.
For the fourth quarter, we recorded just below breakeven adjusted EBITDA, an increase of $4 9 million compared to the $5 million loss reported in the fourth quarter of last year.
As a reminder expenses related to our estimated legal settlements or an add back to our adjusted EBITDA.
For the full year 2023, our adjusted EBITDA loss was approximately $1 9 million <unk>.
Excluding approximately $1 $8 million for immaterial out of period adjustment, we delivered adjusted EBITDA that was slightly below breakeven. This means that we delivered approximately $16 $6 million more in adjusted EBITDA compared to full year 2020.
As of December one 2023, we had total cash and cash equivalents of $28 $8 million, which includes $7 4 million of restricted cash.
We also had $60 $7 million of credit facility debt.
During the fourth quarter, we identified an issue with our third party leased verification vendor. This issue led to catapult overfunding $9 $6 million in leases during the fourth quarter. It should have been funded by our lending partner.
This meant that our cash to use should have been about $9 $6 million lower during the quarter and our debt should have been $9 $6 million higher.
We corrected the issue in early 2024 recover the cash and normalized our cash and debt levels.
On an adjusted basis. Excluding this issue we would have ended the quarter with total cash and cash equivalents of $38 4 million, which.
<unk> $7 4 million of restricted cash.
Also have reflected $70 4 million and outstanding debt on our credit facility on an adjusted basis.
Let me explain the issue in more detail.
We have a third party lease verification vendor that verifies and then improves the new leases to be included in our borrowing base.
In December 2023, this vendor had a timing area and timing error in their validation processes. This created a situation where a number of new leases. Each day, we're not validated and therefore were not added to our borrowing base.
This in turn led to a funding need specific leases at 100% with our own cash.
Instead of at 10%, which is our normal practice.
Our credit facility provides a 90% advance rate for funding each validly.
This issue only impacted Q4 and as I mentioned, we have already received the cash from the underfunding.
In addition, once we alerted our least verification vendor together, we implemented enhanced controls and processes to prevent this from recurring in the future.
We are continuing to navigate an evolving macro environment, while inflation remains stable. It is still having an impact on the spending habits and budgets of our core target consumers.
U S retail traffic is down interest rates swap stable remain elevated saving rates are low and credit card usage is high.
Currently it is unclear what impact these dynamics will have on time lending standards and how they will affect the U S consumers access to credit.
We continue to believe that we have a large addressable market of underserved non prime consumers and it's important to note that lease to own solution have historically benefited when prime credit options become less available.
Based on these dynamics and the operating plan in place for the full year 2024, we expect the following for the first quarter.
Year over year gross origination growth that is about flat compared with the first quarter of 2023.
At 12% to 14% year over year increase in revenue.
Meaningful improvement in our adjusted EBITDA performance compared with the first quarter of last year, reflecting our revenue growth expectation in a sustained reduction of fixed cash operating expenses.
Fixed cash operating expenses are expected to be down approximately 15% year over year in the first quarter.
As I mentioned earlier, we will anniversary the cost reduction activities, we put in place last year and see a full year benefit in Q1 2024 versus only a partial benefit in Q1 2023.
For full year 2024, we expect to continue to expand our customer base and acquire new customers.
Another year of gross originations growth for the full year, we expect gross originations to grow at a rate of at least 10% in our first quarter performance should be the low point for the year.
We also expect gross originations to improve sequentially in the second half of 2024 compared to the first half of 2024 driven by growth in direct merchant originations in originations coming through catapult.
Our outlook does not include any material impact from prime credit is tightening or loosening in box and it assumes that the macro environment does not change significantly.
We also expect to maintain strong credit quality in our portfolio. This will be driven by ongoing enhancements to our risk modeling onboarding high quality, new merchants to a direct integration and repeat customer engaging with catapult Teng.
Revenue growth is expected to be 10% at.
At least 10%.
Finally, with the continued execution of our disciplined expense strategy combined with our growing top line, we expect to deliver another year of adjusted EBIT growth.
Also expect adjusted EBITDA to follow the seasonal patterns that we have seen historically.
We delivered strong results during 2023, and we believe we are positioning the company for sustainable and profitable growth.
We have multiple levers that we can pull to drive both gross originations and revenue and we have built a lean infrastructure that does not require significant investments for continued growth.
Our strategy is clear and we believe our focus on providing our customers with the best in class <unk> experience, where terms of transparent and fair and our approach is human and compassionate.
We will allow us to build market share and continue to expand the business we.
We are very proud of our 2023 performance and with that I'll turn it over to the operator for Q&A operator.
Thank you we will now be conducting a question and answer session.
You'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate that your line is in the question queue.
And you May press Star two if you would like to move your question from the queue.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question comes from the line of Josh <unk> with Cantor Fitzgerald. Please proceed with your question.
Yes, hi, guys. Good morning, Thanks for taking my question nice to see the strong growth originations this quarter.
I first wanted to touch on your guidance. So your guidance implies acceleration in originations as we progressed through 2024. So to that end I was wondering if you could comment a bit on your merchant pipeline and if you expect that accelerates from really be driven by new merchant ads or deepening penetration with existing merchants.
Hi, Josh Thanks for the question.
<unk> pipeline continues to be robust.
We're looking and we're having a more meaningful conversations obviously with the retail environment, especially in January being what it was.
Obviously, bringing incremental.
Rental customers to these merchants is becoming more and more important.
Some of the.
The issues that we had in the past like shipping constraints and things like that have gone away.
I would say we're in more of a normal operating standpoint with our merchants.
<unk>.
But the issue with the merchants is really getting through their tech stack and getting the integration completed so we expect that some of the growth is going to come from new merchants that we've already identified in the pipeline.
And but that most of the growth is coming from the growth in catapult pay as well as our current merchant.
And really continuing to do what we've done with wafer with our other merchants to grow to grow the business.
Yes.
Got it that's helpful color. Thank you.
And then.
I wanted to talk a little bit about reinvestment. So as we're progressing through claim going forward. How are you thinking about allocating incremental dollars towards either a dependable pay up or your more traditional.
Lease to own model, either integrated into company's web site or in store.
Yes.
So we continue to evaluate all investments based on.
The return that is going to provide and deploying those and Thats, where we think it will have the biggest and quickest impact so whether that be.
Our marketing testing, whether that means continuing to invest in our technology.
All of those are things that we're incorporating into the plan, but really using the return on investment as our basis for what we do and how quickly we.
We do have a scalable low cost tech stack that really gives us an advantage to be able to not have to make huge investments to continue to drive the business forward and Josh as Orlando I'll add.
One of the things that we see incredible pay us as a strong customer performance.
From a returns perspective, and so obviously that we want to continue to grow that business doesn't mean, we're not going to focus on direct we really wanted to do both and we think that that's.
We'll put investment dollars, where we think its important but whats going to bring us the best return.
Now that makes sense. Thank you.
Our next question comes from the line of Anthony <unk> with loop capital markets. Please proceed with your question.
Good morning, Thanks for taking my question and congrats.
Congrats on the strong into the year as well I guess my first question I was just a little confused I thought you had a pre announced your revenues and the revenue number that I saw today was.
Unless I'm going crazy, which is entirely possible was different from what I saw in your pre announcement. So I was just wondering if you can reconcile that.
Sure Hi, Anthony its Nancy. Thank you for the question you are absolutely correct, we did pre announce 19%.
As a result of those onetime out of period adjustments, we needed to make that impacted revenue as we indicated and that's purely the difference between what we pre announced and what we announced today, but still very pleased overall with not only the gross origination growth, but the revenue growth and with our continued outlook into 2024.
Okay, great to hear that I'm not crazy.
Okay great.
Okay.
The second thing so.
Obviously, there is some CFPB.
The reduction in late fees on credit cards.
Love your thoughts in terms of <unk>.
First off do you think theres going be litigation are you doing.
Then to your guidance at all and I guess most importantly.
If let's just say that that holds up in late fees do get reduced will.
B the impact on you if abbvie.
Okay Alright.
Hi, Yes, Hi, Anthony. This is this is Derrick I'll take that question. So.
What we see in terms of the changes to what's happening in the credit stack up all of us with prime credit cards, and near Prime credit cards, and other financial products as that.
Eight times that there isn't a reduction in their financial returns.
That could create opportunity for us in terms of.
A change in their underwriting criteria or change of their approval rates.
There is a potential there however, we have not built that into any of our planning in general.
What we see is that consumers are savvy theyre looking for.
Financial products and in Chinas plans that are very transparent to them that they can understand the total cost and so.
We take all of these <unk>.
Insights and learnings as to what's happening and we implement them into our stance in terms of how we serve our customers.
Stand up well in terms of being very transparent and clear.
And.
In general we will have to see how this all settles out.
Last thing I would say, though is that consumer.
Partnerships in the prime space.
We have certainly heightened as as different credit providers are looking for ways to increase the overall approval rate by having a waterfall partnership with someone like catapult. So we saw that with <unk>.
Last year with different partnerships that we already announced and we think that there is continued interest in partnering with catapult to improve the overall.
Options for merchants and Anthony this Orlando.
Thanks for the question I just wanted to reiterate we don't and we haven't for a number of years, we don't charge late fees and so we're pretty proud of that because we try to work with our customers and they see that as advantage I think that helps our repeat rate, but we're kind of ahead of the curve from a regulatory perspective, they start going down to lease term.
Right, Yes, I was worried you guys can charge late fees I was just thinking more about the impact on your guys view.
Yes.
Helpful.
And then I guess I guess just my last question I just wanted to make sure I heard the Walmart number correctly. So you said Walmart accounted for 6% of your fourth quarter was that total leases as debt.
Most originations what was that number exactly.
Total leases not the gross origination dollars total leases.
Got it.
Hey.
I mean that is a very impressive number I mean, what exactly in the quarter did you onboard them.
The week before cyber five.
We had expected the tech team was starting to get it done before they were anticipating it is done after cyber five.
<unk> exceeded expectations that had done right before cyber five and so really it's about six weeks worth of business in the fourth quarter.
And we were very very happily surprised that the response by our customers.
Okay.
I was just one last thing because I am a boomer cyber five we're talking about the week before Thanksgiving right.
Yes.
Yes.
Sure.
Thanksgiving to five days, starting Thanksgiving Thanksgiving Thursday, Friday going through cyber Monday.
Got it you learn something new every day, when you're a boomer right. Thanks Scott.
Thank you.
Thanks for taking the questions. There are no further questions at this time I would like to turn the floor back over to CEO Orlando Science for closing comments.
Thanks, Operator, I just wanted to reiterate how proud I am of our team we had a great year, we delivered top line growth during a time when our competitors decline we grew while adhering to our disciplined expense management philosophy. We believe we are well positioned to build on the success of 2023, and we're looking forward to extending our track record of growth. This.
Year.
To everyone listening. Thank you very much for tuning in to hear about the progress we've made over the past year, we are proving our ability to grow while providing our customers with fair transparent and accessible lease to own product and our merchants with a growth channel that have much potential.
Thank you again for your support and the interest in our story.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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