Q3 2025 Katapult Holdings Inc Earnings Call
But any background noise I would now like to turn the call over to Jennifer <unk>, Vice President head of Investor Relations you may begin.
Welcome to catapult third quarter 2025 conference call on the call with me today are Orlando Diet, Chief Executive Officer, Nancy Walsh, Chief Financial Officer, and Derek Medland, President and Chief growth Officer.
For your reference we have posted materials related to today's call on the Investor Relations section of the catapult website, which can be found at IR Dot catapult holdings Dot 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.
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-Q, which will be updated in future periodic reports that we filed 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 replacement 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 finally.
Speaker #1: for Thank you standing I'd like by . Katapult Holdings, Inc. welcome At this 2020 Earnings placed third to call . I would now like to turn the call Jennifer Kull Vice President , Head of may Investor on mute any .
Speaker #1: Relations .
All comparisons are year over year, unless stated otherwise with that I will turn the call over to Orlando.
Speaker #2: third catapults
Thank you Jennifer and welcome everyone. Joining us this morning before I jump into reviewing our Q3 progress I wanted to take a few moments to discuss some of the highlights from our recently announced capital investment from Hawthorne Horizon Credit Fund.
Speaker #2: Orlando Zayas Officer
We filed an 8-K last week the detail of the $65 million investments at Hawthorne has made in our business.
<unk> allowed us to pay off our term loan in full.
Repay a portion of the amounts outstanding under our revolving line of credit.
And will also allow us to invest in growth opportunities.
Very excited about this transaction.
We believe this investment will create a more efficient capital structure and provide more stable foundation for us to grow successfully executing on our operating strategy.
Speaker #2: in release and our recent form we make earnings today's updated in and we actual will be file with that we to our . Also , periodic them described in which present financial release and guidance , our .
We're also excited to welcome our new directors, including Derek to our board and look forward to their input as we continue on our journey to create value for all our stakeholders.
Please refer to the 8-K, we filed with the SEC on November 3rd for more details on the transaction.
Now, let's move on to Q3 results.
When we entered 2025, we had three near term priorities one increased top of the funnel activity.
To find new ways to interact with our loyal and engaged customer base and enhance their user experience and.
And three evolve our balance sheet and capital structure to create a strong foundation for growth.
Well, we have an important holiday season ahead of us I'm very pleased with the progress we've made against these objectives.
Speaker #3: reviewing unless moments to last week filed an this Fund that 8-K us to pay made , and Credit welcome announced our revolving line invest this Hawthorne progress , I , and investment opportunities . excited Hawthorne has structure of the .
Eric will review, our operating progress in greater detail, but let me walk you through a few proof points that will show how well we've executed year to date.
Regarding top of the funnel activity.
And very important marker of our progress as our application growth.
For the first three quarters of 2025, we grew applications by 76%.
This growth has positively impacted our business in several ways let.
Let me highlight two.
First this application growth is there.
Direct contributor to our ability to expand our customer base during.
During the first three quarters of 2025, we've grown unique new customers by 35% compared with 2024.
Speaker #3: operating capital will including our create strategy business amounts investment will also , repay a We're on our as in growth very outstanding directors , our to credit .
And this includes the nearly 47% growth in the third quarter.
This is the fourth quarter of accelerating growth for this metrics given our track record of high repeat rates, bringing new customers into the catapult marketplace can create significant downstream value.
Speaker #3: For more excited to welcome our journey and our loyal and successfully interact with user priorities . with the base value for all , find new stakeholders three evolve our results create a on to This Increased And season have an us .
The influx of new customers, coupled with our strong repeat rate allowed us to grow our total customer base, a little more than 30% during the third quarter.
Second in addition to attracting applicants were also growing catapult app engagement in the third quarter monthly active users or <unk> grew to nearly 49% when compared with the activity in the third quarter of 2024.
As we look down our engagement funnel, we believe that application growth and increasing engagement, our two leading indicators for future conversion rate expansion and gross originations growth.
Speaker #3: points me is our growth highlight two . application direct . contributor to year to expand our by . is a First , ability to our review our We grew first we've of three quarters 2025 , grown base new customers For by 35% .
As we've extended our consumer reach our team has also done a terrific job of providing best in class experience to our existing customers.
As a result, we sustained very strong NPS and repeat customer rates. During Q3, our NPS was 64, which was up year over year and 55, 3% of our gross originations came from repeat customers.
And our repeat customers are becoming increasingly valuable to the catapult ecosystem during the third quarter LTV for this cohort of customers increased by about 5%.
Speaker #3: This is our customer growth, and the nearly accelerating growth metric. Our track record given with 2020 is bringing in new customers at a rate of 47%.
Speaker #3: This is the customer and growth metric in the nearly accelerating growth track given for 2020. This brings in a new 47% record of customers for the third quarter. This influx compared to new customers.
Our financial model gains, even more power as it scales and our success. This year has established that we have the right product market fit to attract new consumers and the right offering to retain their loyalty.
As evidenced in hand, we are constantly turning our focus to optimizing this top of funnel growth pursuing strategies that should allow us to make our growth more profitable.
The next 12 months will be a critical time for catapult as we focus on our goals of growth and profitability. We believe we have laid the foundation cracking the code on accelerating top of funnel activity streamlining our cost structure to reach a key inflection point.
Speaker #3: . rate , applicants , marketplace can grow we are coupled with than to catapult attracting also growing allowed repeat And the users total third quarter , or nearly grew funnel , of 2020 .
Speaker #3: The rate at which applicants can grow in the marketplace has been coupled with our efforts to catapult attraction, resulting in a growing total of monthly active users. In the third quarter, we saw our application funnel nearly double in size, and we’ve achieved significant growth in both gross conversion and consumer activity. This growth has allowed us to expand our best-in-class experience. Additionally, we’ve extended our efforts in providing an optimal user experience.
Speaker #3: . rate , applicants , marketplace can grow we are coupled with than to catapult attracting also growing allowed repeat And the users total third quarter , or nearly grew funnel , , monthly active as we for rate application that quarter expansion and Second , two leading Mas , gross conversion are consumer growth activity in extended our look down our growth best providing experience to we've our in addition . our team result , has NPS also done a Q3 .
Speaker #3: . rate , applicants , marketplace can grow we are coupled with than to catapult attracting also growing allowed repeat And the users total third quarter , or nearly grew funnel , , monthly active as we for rate application that quarter expansion and Second , two leading Mas , gross conversion are consumer growth activity in extended our look down our growth best providing experience to we've our in addition . our team .
Nancy will speak in greater detail about how our evolving operating strategy is creating opportunities to both sustain growth while driving toward a higher margin profile.
Before I turn the call over to Derek to review, how we are approaching our next phase of growth priorities and execution strategies, Let me hit a few more highlights from our Q3 results.
Turning to third quarter, we grew gross originations 25, 3%.
Speaker #3: customer Our in 55.3% of our year which over was 64 , NPS our repeat the year . And customers to cohort customers repeat rates increasingly gains Our . scales , financial even more third quarter , of and increased by right , and our we have the fit market LTV catapult model During the the right attract new to established that retain their .
And revenue 22, 8%.
Both of these results were within our outlook range. We also delivered $4 4 million in positive adjusted EBITDA, which was above our 3% to three $5 million range.
With this quarter's performance. We now have delivered three consecutive years of gross origination growth in 10 consecutive quarters of revenue growth.
I'm excited about the track record, we've built and believe it's a testament to the strength of our product offering and our team's strong execution.
The catapult marketplaces thriving we continue to generate new gross originations for our merchants and are allowing more and more customers to access the durable goods they need.
Speaker #3: evidence success With this top of and to has allow it growth make our more growth are that should funnel As next profitable for 12 months will be a turning our critical as we focus on us to growth and goals of . .
Speaker #3: evidence success With this top of and to has allow it growth make our more growth are that should funnel As next profitable for 12 months will be a turning our critical as we focus on us to growth and goals of .
During the third quarter, we saw strong growth for both total <unk> originations in Taipei originations during Q3, total app originations, which our originations that start in our app, but may be consummated elsewhere grew 44% to $39 3 million. This means that approximately 61% of our gross originations start.
Speaker #3: our profitability time laid the catapult , cracking the code believe we We have top cost accelerating , streamlining our to reach a point inflection key will speak in greater about The how our evolving strategy is foundation , operating creating both .
And our App marketplace.
Okay pay originations, which are a subset of total app originations were $26 4 million and grew 66% year over year.
Speaker #3: opportunities to margin detail higher driving . Before I turn the profile call over to review how toward a to we are growth next priorities and execution hit a let me strategies , few more Derek Q3 results .
We have grown quarterly K pay originations by more than 50% each quarter. Since we launched the feature in late 2022.
Speaker #3: highlights During the third quarter , we grew gross phase of 25.3% and Nancy from our revenue 22.8% . Both of these originations range .
Our marketplace performance is fueled in equal parts by the value, we bring to our merchants and to customers merchants love catapult.
Because we help them capture incremental market share as well as wallet share in the third quarter alone, we set nearly $13 million of gross originations to our merchants.
Speaker #3: We within our also delivered $4.4 million in positive adjusted EBITDA , which was outlook above our 3 to $3.5 million range . With this quarter's performance , we now have three of years consecutive gross results were delivered origination growth ten consecutive quarters of and growth revenue track about the record we built and believe it's a strength of our offering product and our to the team's strong testament execution excited so catapult .
Other solidify our role as a unique growth partner.
Customers Love Us because we are a SaaS will providing best in class customer service only offer fair transparent pricing they need to make their budgets work recently, we enhanced our user experience with new features including access to higher lease lines for certain customers, a new auto pay feature and a paypal payment option.
Speaker #3: . The thriving . continue to We are generate marketplace is new merchants We are gross originations for our and and more durable access the customers to goods they quarter , we saw .
We want to deliver a wonderful holiday season for our customers and we believe we are well positioned to do so.
Speaker #3: growth for App both total strong originations and originations CPP . During Q3 , App total are originations that originations , which in our app but start consummated elsewhere , grew 44% to 39.3 million .
With that I'll turn the call over to Derek to discuss our operating progress in more detail Derrick.
Thanks, Orlando and good morning to everyone.
To Echo Orlando sentiments, we're very proud of the results we delivered this year.
Keating well against each one of our core initiatives and I are looking forward to a great fourth quarter.
Speaker #3: means that This 61% of our gross approximately started in our originations . CPP are a subset originations , which of total marketplace , were 26.4 million and grew have .
Let's start with a few highlights of the progress we've made against our consumer engagement initiatives.
When we entered 2025, we set our sights on meaningfully increasing top of funnel activity and that's exactly what we've done.
Speaker #3: 66% year over quarterly grown originations CPP We than by more quarter since we launched the year late feature in app Our fueled in 50% each performance is value we bring to our marketplace merchants parts by the 2022 .
As Orlando mentioned total catapult applications, which includes those coming in from direct waterfall, our app marketplace NK cell.
76% during the first nine months of 2025.
Speaker #3: Merchants love Katapult because we help them capture market share, as well as incremental wallet share. In the third quarter alone, we sent nearly $13 million of gross originations to our merchants.
Grew 80% in the third quarter alone.
We feel confident that we have the breadth of referral sources and acquisition channels in place.
Speaker #3: share . solidifying our role as a growth partner . Customers love us we're because unique obsessed with providing best in class service , and we fair , offer customer pricing .
Driving this top of funnel activity.
But applications are just one ingredient and a full funnel ROI positive customer acquisition strategy.
We are very pleased with the growth we've seen in this area, but we cannot directly control the credit quality of the majority of the applications we received.
And over the last few months, we have seen application quality trend slightly downward.
Speaker #3: their budgets work . to make Recently , we user enhanced our experience with new features , including access to higher lease lines for certain customers , autopay a new feature , and a PayPal payment option .
While we can't influence however is conversion to drive conversion higher we're optimizing in two areas underwriting and promotional activity.
With underwriting as it impacts the types of promotions we offer consumers.
Speaker #3: We want to deliver a wonderful season for our customers, and we believe we are well positioned to do so. With that, I'll turn the call over to Derek to discuss our operating progress in more detail. Derek.
Speaker #3: We a deliver want to season for our customers , and we believe we are well positioned to wonderful do so . With that , I'll turn the Derek to operating progress call over to in more detail .
In the third quarter, we tightened our underwriting decision and a few targeted areas and this is already delivering positive results. We are already seeing the credit quality of our paper consumers as well as converting customers begin to trend up.
Speaker #4: Orlando and good morning to I want to
Speaker #4: echo . Orlando's everyone sentiments . We're very proud . Thanks for results we delivered this of the year . We're each one of our core against initiatives , are and I looking executing well a great fourth quarter .
We believe this heightened posture will also enable us to do an even better job of putting the most compelling pricing promotions in front of our best customers, which should be a driver of conversion rate expansion and have a positive impact on write offs overtime.
Speaker #4: start with a of the few progress we've made against our engagement highlights Let's consumer initiative entered When we forward to sights on meaningfully increasing top of .
While early we have already begun to see our conversion rates increase and we would expect this to continue as we further refine our pricing strategies.
Speaker #4: As of funnel done in Orlando, total applications have increased, which catapulted those from coming in. The waterfall effect caused a 76% increase during the first nine months of marketplace 2025, with direct growth alone at 80% in the third quarter.
Our marketing strategy is also fueling our continued growth and is highly complementary to our pricing and underwriting strategies.
When we launched the catapult app in late 2020 to.
We created a communications channel that would allow us to engage with consumers more directly.
Speaker #4: We confident that we have the of feel referral breadth acquisition sources and to channels in continue driving this top of activity funnel , but applications are just full funnel one ingredient in a customer acquisition are strategy very pleased with the we've seen in this cannot directly .
As we build scale on the App, we steadily increased the number of touch points and interactions with consumers primarily through E mail and SMS.
Cross shopping activity, where a customer has two or more current leases and these leases are with two or more different retailers continuing to increase year over year.
By this measure cross shopping customers, who entered into multiple leases with more than one retailer grew about 64% year over year.
Speaker #4: majority of the receive applications we over the last few months , growth we quality have ROI application quality trends slightly area , but we , but we can , however , is influence to .
Represented about 13% of our gross originations during the quarter.
Having more than one lease and cross shopping our hallmark behaviors of an existing customer and this is one of the key drivers of our increasing LTV among returning customers.
Speaker #4: underwriting and two areas We activity Let's start . with as it impacts the types of offer promotions we consumers In the third . quarter , we tightened underwriting our in a few targeted decisioning areas , and underwriting this is already delivering positive We are results .
Next up let's dive into our App marketplace in KSA performance.
As a reminder, when we talk about App marketplace performance, we are referring to activity in originations that begin in Iraq.
Speaker #4: already seeing the credit quality of our pre-approved consumers , as well as converted customers begin to trend up believe this tightened posture will .
This includes transactions completed with cafe.
Our marketplace allows catapult brand partner to our merchants.
Speaker #4: to do And better job of putting the most compelling pricing promotions enable us of our best customers , which should be a driver of conversion rate We and have a expansion impact on write time .
This means that even if a customer start their journey and our app are able to interface with our merchant partners brands websites and user experiences seamlessly around catapult to become an extension of their brands.
Speaker #4: While early , we have already begun to conversion see our increase and we would expect this to offs over continue as we further rates our pricing strategies , our marketing refine strategy also fueling our continued growth and is is highly our pricing complementary to and underwriting strategies .
Customers, then have the option to complete their transactions on our merchant partners site or within RF.
Choice in their shopping journey.
Since we were able to attract their journeys all of this activity is included in our total app marketplace performance City.
Speaker #4: When we launch app late 2022 , we catapult created a communications would allow us to engage with the directly more as we built scale on the channel that in consumers app , we steadily increased the and interactions , primarily number of through email and with SMS .
Speaker #4: When we launch app late 2022 , we catapult created a communications would allow us to engage with the directly more as we built scale on the channel that in consumers app , we steadily increased the and interactions , primarily number of through email and with SMS consumers Cross activity , where a two or more , and these customer has with two or more leases retailers leases are increase , continue to .
Allowing our merchants and other partners to understand the impact of our marketplace can have on their growth.
During Q3, the number of gross originations in our App marketplace grew approximately 62% year over year driven by the factors, we discussed earlier healthy repeat customer activity robust conversion cross shopping and our targeted marketing campaigns.
These activities are helping us to bring more and more participants to our marketplace.
Speaker #4: year By cross shopping this customers current who entered into leases with more than multiple one retailer grew about 64% year over year measure , represented about 13% of our gross originations during the , having more than one lease and cross hallmark shopping are existing customer , one of the key our drivers of increasing LTV customers among .
A few quarters ago, we talked a bit about our efforts to increase our wallet share with customers by highlighting the availability of lease lines for lower cost durable goods at or around the 300 dollar Mark.
This quarter Cathay transactions of this size increase as a percentage of our total case a lease portfolio.
Given our continued gross originations growth by both dollars and the number of leases. We believe we are successfully taking wallet share.
Speaker #4: Next dive into our app marketplace and performance . As a reminder , when we talk about app performance , we are referring to activity quarter and originations that begin marketplace And in our app .
And that we are truly becoming a shopping destination for non prime customers.
Speaker #4: this includes transactions completed with Capay . Our marketplace allows catapult to be a partner to our merchants brand . This means that even if a starts their journey customer app , they are able to interface with our merchant partners , brands , websites and user experiences seamlessly , catapult to allowing extension of their brand's customers , then have the option to complete their partner's or within our app , choice giving them in their shopping journey .
Hey, Thanks transactions continue to grow at robust rates as a reminder, <unk> and related activity refers only to those leases that are originated using our case a feature to checkout.
Gross originations grew 66% during Q3, which represented 41% of total gross originations.
It approached 50% of our total originations KSA has become an increasingly important driver of our business and one that we have direct control over.
This is why we are so excited to see engagement with our App continue to increase our.
Speaker #4: Since we are able to track journeys , their this all of activity is included in our marketplace data our , allowing total app other performance merchants and to understand the impact of our marketplace can have on their growth .
Orlando already mentioned, our <unk> growth.
This growth has been supported by more than $1 2 million unique downloads and since the beginning of 2025 or that has been opened more than 11 million times.
Speaker #4: Q3 , During number of gross our app marketplace grew approximately originations in 62% year over the driven by the factors year , discussed earlier .
This engagement also drove our case, a unique customer account, which grew by about 76% year over year.
Speaker #4: Healthy customer repeat rates and robust conversion shopping, along with our targeted marketing campaigns, are helping us bring more participants to our marketplace.
This was also accompanied by another year over year increase in quarterly tip a conversion rate.
Beyond the marketing the strategic pricing initiatives and the new features and functionality that Orlando highlighted earlier, we continue to look for other opportunities to surprise and delight our app users.
Speaker #4: quarters ago , A few talked a bit our about . increase our wallet efforts to share with we highlighting the These availability of lease lines for lower durable goods at the or around $300 mark this quarter of this size increased as a of our total percentage portfolio .
For example, consumers can now leased from Apple our most recent addition to our growing list of K pay enabled merchants.
We believe we are executing well across our growth initiatives, including our strategy is to engage with our merchants.
Speaker #4: continued . originations Given our growth by both number of leases we and the believe we lease are successfully taking wallet share For transactions and that we are truly becoming a shopping for destination non-Prime customers transactions continue to .
During Q3 direct and waterfall merchants accounted for approximately 59% of total gross originations.
Gross originations from this group of merchants grew about 6%.
If we exclude the home furnishings and masters category from our direct and waterfall gross originations are direct and waterfall gross originations grew approximately 42% year over year.
Speaker #4: grow at Hey , pay rates . As a reminder and related activity refers those that are originated using our only to key leases .
<unk> continues to execute strategies that compel merchants to want to do more with us.
Speaker #4: feature to If gross grew Q3 , which 41% of total gross originations originations as it 66% during approaches 50% of our total originations , Cfpa has become an increasingly important driver of our one that we have and direct control over why we are so to see engagement with represented to continue .
During Q3, we added approximately 46, new direct or waterfall merchants that were merchant pathway to our ecosystem.
As a reminder, pathways include new or existing merchant partners that launched a new website or an in store experience that includes catapult as a direct or waterfall <unk> offering.
Speaker #4: excited Orlando our mentioned MOU already growth . This growth has been supported by more than This is 1.2 million unique downloads beginning 2025 , of has been opened more our app than our app .
These pathways provide new ways for consumers to discover and engage with our offerings.
We also continued to work their merchant partners to implement a variety of promotional strategies and future functionality focused on driving conversion and consumer engagement.
We've already talked a bit about various pricing and refined strategy that we're working on independently, but we have also partnered with key merchants to deploy these strategies in combination with dynamic promotions.
Speaker #4: This 11 million times engagement also drove unique our customer count , which grew by 76% year over year . about also This was by over year another year , and since the in quarterly conversion rate .
Continue to closely monitor the success and health of our top 25 merchants. This quarter. This cohort of merchants. Once again grew robustly gross originations grew 25% in Q3.
Speaker #4: Beyond the marketing and strategic pricing initiatives and the features and new functionality that Orlando highlighted we earlier , continue to look for other opportunities to surprise and delight our app users .
We are also closely watching emerging macroeconomic trends and analyzing their potential impact on our non prime consumers.
Speaker #4: For example , accompanied lease from Apple consumers can now of increase enabled merchants we are . We believe well growth across our initiatives , including our strategies to engage with our merchants during Q3 Direct and Waterfall merchants accounted for executing approximately originations and gross originations from this group of merchants grew about 6% .
Currently we see the <unk>.
Looming shadow of continued inflation as well as general market delinquency data that suggests non prime U S. Consumers are finding it more challenging to meet their financial commitments such as the much publicized data that we've all seen for car loans and repayment trends.
Speaker #4: If we exclude the home furnishings and mattress categories from our direct and waterfall gross originations, our direct and waterfall gross originations grew approximately year over year.
We're also trying to assess the impact that the government shutdown is having on our core consumer.
While each of these macroeconomic indicators and developments factor into our planning for underwriting and marketing we don't run our business based strictly on these data.
Speaker #4: 42% year over Our team continues to strategies that compel execute merchants to want to do with us more . During Q3 , we added approximately direct or waterfall merchants or 46 new pathways to our ecosystem .
We rely on a tremendous amount of real time catapult specific data points to inform our underwriting and credit decisioning policies.
Speaker #4: As a reminder , pathways include new or merchant existing partners that launch a new website or an in-store experience that includes catapult as a direct waterfall .
So while we have already implemented a round of tightening as we discussed earlier. We also have a variety of scenario plans in place that will allow us to react quickly to new data and actions as they materialize.
Speaker #4: LTO or offering these pathways provide new ways for consumers to and offerings . We also continue to work with our partners to implement a engage with our variety of promotional strategies and future discover functionality focused on driving , conversion and consumer engagement .
Our team is doing a great job of executing our strategy. We believe we are on track to deliver a great Q4, and look forward to helping our customers and merchants have a terrific holiday season.
With that I'll turn it over to Nancy for an update on our financial results and outlook assay.
Speaker #4: already talked a bit about various pricing and lease strategies that we're working on independently , but we have also merchants to partnered with these strategies in combination with promotions dynamic .
Kathy.
Thanks, Derrick and Hello to everyone. Joining us. This morning, we are moving full steam ahead on a number of operating initiatives that we believe will have a positive impact on our long term P&L and we are excited about the future.
Speaker #4: We continue to closely monitor the success and health of our top 25 merchants. This quarter, this cohort once again grew.
Let's start with a few insights on our top line performance.
Speaker #4: Gross merchants , originations grew 25% in Q3 . We are also closely robustly emerging macroeconomic watching trends and analyzing their potential impact on our non-prime consumers .
We have now grown grocery originations for 12 consecutive quarters gross originations grew 25, 3% to $64 $2 million, which was within our outlook range.
Speaker #4: Currently , we see the looming shadow continued of general well as market delinquency inflation as data suggests non-prime US consumers are finding that it more challenging to meet their financial commitments , such as the much publicized data that we've all seen for car loans and repayment trends .
We estimate that we experienced a minor headwind to growth related to the tightening discussed earlier in our prepared comments.
In addition, if we exclude home furnishings and mattress gross originations Q3 grocery originations grew 50% year over year.
Speaker #4: We are also trying to assess the impact that the government shutdown is having on our core consumer. While each of these macroeconomic indicators and developments factors into our planning for underwriting and marketing, we don't run our business strictly based on data.
You have heard us discuss our strong application growth, which we believe will translate into continued gross originations growth.
Despite the tightening and impacted the home furnishings and mattress category. We grew the number of pre approvals by nearly 60%, which translated to a 61% increase in total approved application.
Speaker #4: We rely on the tremendous amount of real time , catapult specific data points inform our underwriting and to credit decisioning policies . So while we have already implemented a round of tightening , as we discussed earlier , we also have a scenario plans variety of in place allow us to react that will quickly data and actions as to new Immaterialized , our team is doing a great executing job of our We believe we are on track to deliver a great Q4 and look helping our customers and merchants have a terrific holiday season .
As we continue to refine and improve our conversion funnels. We believe we have the ingredients necessary to sustain and accelerate top line growth.
As Derek noted gross originations for our top 25 merchants grew 25% during the quarter and were beginning to see an inflection with our largest merchant waste. There. We saw total gross originations, which includes cafe originations rose slightly year over year during the third quarter.
Speaker #4: With that , forward to I'll turn it over to Nancy for an update on our strategy . results and financial outlook . Nancy .
On the revenue front, we also had another great quarter, we delivered $74 million or 22, 8% growth in Q3, which was in the middle of our outlook range and marked the 10th consecutive quarter of year over year growth.
Speaker #5: Thanks , Derek and hello to joining us everyone this We are moving full steam morning . ahead on a number of operating initiatives that we believe will have a positive impact on our long term we are PNL , and excited about the future .
Gross profit for Q3 was approximately $14 6 million an increase of approximately 21, 8% compared with $11 $9 million last year and gross margin was 19, 7% compared with 19, 8% gross margin in Q3 2024.
Speaker #5: start with Let's a few insights on our top line performance . We have now gross grown originations for 12 consecutive quarters . Gross originations grew 25.3% to $64.2 million , which was our outlook range .
Speaker #5: We estimate that we experienced a minor headwind to growth related to the discussed tightening earlier in our prepared comments . In addition , if we exclude home furnishings and gross mattress within originations , Q3 gross originations grew 50% year over year .
Write offs as a percent of revenue were nine 9% up 60 basis points from Q3, 2020 for performance and within our 8% to 10% target range.
Given the early impact we've already seen from our recent tightening. We believe we are taking the right steps to drive write offs down in future quarters.
Speaker #5: You have heard us discuss our strong application growth , which we believe will translate into continued gross originations growth despite the tightening and impact of the home furnishings and mattress category , we grew the pre-approvals by nearly 60% , which translated a 61% increase in number of total to approved application dollars .
Moving on to expenses and profitability.
<unk> approach to expense management, coupled with our topline growth is at the center of our financial model.
Philosophy fuels, our decision, making and it is a core component of our long term growth strategy.
Speaker #5: continue As we to improve our conversion refine and funnel , we believe we have the ingredients necessary to sustain and accelerate top line growth .
This approach allowed us to deliver another quarter of positive adjusted EBITDA above our outlook range. We believe we are well positioned to further improve upon this performance.
Speaker #5: As Derek noted , gross our originations for top 25 merchants grew 25% during the quarter , and we're beginning to see an inflection with our largest merchant , who saw total gross includes Cp-a originations , which originations , grow slightly year over year during the third quarter .
Let me walk you through some of the puts and takes that impacted Q3 adjusted EBITDA.
We've previously talked about our frontloaded lease depreciation any impact rapid growth has on in quarter gross profit.
It's noncash expense drives cost of sales higher.
Speaker #5: On the revenue front , we also had another great quarter . We delivered $74 million or 22.8% growth in which Q3 , was in the middle of our outlook range and marked the 10th consecutive quarter of year over year growth .
Total operating expenses were down 26, 3%, we remain committed to fiscal discipline, even as we strategically invest in our growth initiatives.
Excluding underwriting fees and servicing costs, which are variable depreciation and stock based compensation expense, which are noncash expenses and excluding costs related to the settlement of litigation transaction related costs and debt refinancing our Q3 fixed cash operating expenses were $7 5 million or 20.
Speaker #5: profit Q3 was Gross approximately an increase of $14.6 million , 21.8% compared approximately $11.9 million last year . And gross margin with was 19.7% , compared with 19.8% gross margin in for Q3 2020 .
Speaker #5: For us , as a percent of revenue were up 9.9% , 60 basis points from Q3 2020 . For performance . And within our 8 to 10% target range given early impact , we've already seen from our recent tightening , we believe we are taking the right steps to drive write offs down in future quarters .
One 4% decrease compared to last year.
During the third quarter income from operations was $2 5 million.
Substantial improvement compared with a $4 $4 million loss from operations in Q3 2024.
Overall, our continued focus on fiscal discipline and topline growth allowed us to deliver $4 4 million.
Speaker #5: 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 .
Positive adjusted EBITDA for Q3, which exceeded our outlook range.
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.
Speaker #5: This philosophy fuels our decision-making, and at its core, it is a component of our long-term growth strategy. This approach allowed us to deliver another quarter of positive adjusted EBITDA above our outlook range.
Turning to the balance sheet and cash flow as of September 32025, we had total cash and cash equivalents of $9 million, which included $5 6 million of restricted cash.
Speaker #5: We believe we are positioned well upon improve performance . Let you through some of the me walk puts and takes that impacted Q3 adjusted EBITDA .
As Orlando mentioned, we recently finalized a $65 million transaction with Hawthorne Horizon Credit Fund LLC.
Speaker #5: previously We talked about our front lease loaded the impact depreciation and rapid growth has on in quarter gross profit . This non-cash drives cost of expense sales higher total operating expenses were down 26.3% .
Under the terms of the transaction. They have purchased 35000 shares of our newly created series a convertible preferred stock with an initial conversion price of $12 32 per share and 30000 shares of our newly created series B convertible preferred stock with an initial conversion price of $11 39 per share.
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We have already used approximately $35 $1 million of the proceeds to repay our term loan in full and approximately $6 9 million to reduce the outstanding amounts drawn on our revolving line of credit or lock the reduction to our lock has allowed us to reduce our advance rate from 99% to 90% and this reduction.
Result in interest expense savings over time and.
And with the retirement of our term loan. We believe we may have the potential to negotiate more favorable terms Robert baldor, if we refinance in the future.
As of the end of the third quarter, we had $79 $6 million in outstanding debt on our revolving credit facility.
Moving on to cash performance cash generated from operations for Q3, 2025 was $800000 a significant improvement compared to $4 $1 million of cash used for operations. In Q3 2024. This year over year change was primarily due to changes in working capital.
Turning to our Q4 2025 and full year 2025 outlook.
Derek mentioned, we're navigating a complicated macroeconomic environment and it's difficult to predict the impact to our core consumers over the near term.
In addition, we are also comping against a robust growth in Q4, 2024, and we achieved 11, 3% gross origination growth.
Based on our quarter to date results and given the uncertainties created by recent macro trends and events. We believe it's prudent to take a more conservative approach to our expectations for the fourth quarter, which are as follows.
Gross originations are expected to grow in the 15% to 20% range. This includes about one percentage point headwind related to the tightening we did late in the third quarter.
Gross originations, excluding the home furnishing the mattress category are expected to continue to grow at a much faster pace than our overall gross originations.
Revenue growth in the range of 21% to 23% and approximately $2 million of adjusted EBITDA.
Based on our Q4 outlook, we are tempering, our 2025 outlook for gross originations revenue and adjusted EBITDA.
We expect gross originations to grow between 20 and 23% we.
We expect revenue in the 18% to 20% range and that we will deliver between eight and $9 million in positive adjusted EBITDA, which will represent between 60 and 80% year over year growth for this metric.
Before we close I'd like to offer a bit of perspective on the near term future, while I'm not ready to offer an official outlook for 2026 I do believe that we will continue to see robust growth next year.
Based upon the work and results we have delivered this year, we would project gross origination growth of at least 20% for the full year.
We are so grateful to our team who continue to work tirelessly to help catapult reach its potential we are proud of what we were achieving together and look forward to delivering an incredible holiday season for our merchants and customers alike.
in addition, we are also comping against robust growth in Q4 2024, when we achieved 11.3% gross, origination growth,
Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect.
Based on our quarter-to-date results and given the uncertainties created by recent macro trends and events, we believe it is prudent to take a more conservative approach to our expectations for the fourth quarter, which are as follows.
Gross, originations are expected to grow in the 15th to 20% range. This includes about 1 percentage, Point headwind related to the tightening. We did late in the third quarter.
Gross originations, excluding the home furnishings and mattress category, are expected to continue to grow at a much faster pace than our overall growth in originations.
Revenue growth in the range of 21 to 23% and approximately 2 million dollars of adjusted Ava.
Based on our Q4 outlook, we are tempering. Our 2025 outlook for gross originations revenue and adjusted Ava.
We expect gross originations to grow between 20 and 23%.
We expect Revenue in the 18-20% range and that we will deliver between 8 and 9 million in positive adjusted e, but the which will represent between 60 and 80% year-over-year growth for this metric.
Before we close, I'd like to offer a bit of perspective on the near-term future. Well, I'm not ready to offer an official outlook for 2026. I do believe that we will continue to see robust growth next year.
Based upon the work and results we've delivered this year. We would project gross. Origination growth of at least 20% for the full year.
We are so grateful to our team, who continue to work tirelessly to help, catapult reach, its potential. We are proud of what we are achieving together and look forward to delivering an incredible holiday season for our merchants and customers alike.
Ladies and gentlemen, that concludes today's call, thank you for joining you may now. Disconnect