Greetings. And welcome to the Katapult Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Jennifer Kull. Please go ahead.

Welcome to Katapult’s third quarter 2023 conference call. On the call with me today are Orlando Zayas, Chief Executive Officer; Nancy Walsh, Chief Financial Officer; and Derek Medlin, Chief Operating Officer. For your reference, we have posted materials from today’s call on the Investor Relations section of the Katapult website, which can be found at ir.katapultholdings.com. I would like to remind everyone that this call will contain forward-looking statements based on our current assumptions, expectations and beliefs, which include our future financial performance and financial results, and are subject to significant risks and uncertainties. These forward-looking statements should be considered in conjunction with cautionary statements contained in the earnings release and on Form 10-Q for the quarter ended September 30, 2023, as well as the subsequent periodic and current reports the company files with the SEC. These statements reflect management’s current beliefs, assumptions and expectations, and are subject to a number of factors that may cause actual results to differ materially from those statements. The information contained in this call is accurate only as of the date discussed. Except as required by law, the company undertakes no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events or otherwise. During today’s discussion, the company will provide certain financial information that constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures should not be considered replacements for and should be read together with 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. With that, I will turn the call over to Orlando.

Thank you, Jennifer, and thank you to everyone joining us this morning. I’m excited to give you an update on our progress this quarter, which illustrates the value we are creating for our merchant partners and the enhanced experience we’re delivering to our loyal customers. Our third quarter results represented another strong period of growth for Katapult. While Nancy will give you more details on our financial performance, as well as our outlook for continued growth in the fourth quarter, let me set the stage. Despite the ebb and flow of macroeconomic headwinds that caused the consumer to pull back on retail spending during the late summer, we delivered our fourth consecutive quarter of year-over-year gross origination growth, which was up 12.5%. This is also what we’d consider to be a breakout quarter for revenue growth. Revenue was up nearly 10% year-over-year, more than tripling the year-over-year revenue growth we achieved last quarter. In addition, by coupling our topline growth with continued focus on disciplined expense management, we were able to deliver a positive adjusted EBITDA, which improved substantially compared to last year. Our progress this quarter was driven by strong performance across our strategic pillars, focused on; one, expanding our merchant base and deepening our existing merchant relationships; two, growing our consumer reach by focusing mainly on doing more with our current customers, but taking measured steps to bring more consumers to our platform; and three, continuing to leverage our technology to support our merchant and consumer goals while expanding our competitive moat. Let’s start with our progress on the merchant front this quarter. The success of our merchant strategy lies in three key areas, driving gross origination growth through direct integration, gaining market share with our anchor merchants and ensuring that our platform offers a wide variety of…

Thank you, Orlando. I’m excited to talk to you today about our strong third quarter results which have added to our track record of growth. For four consecutive quarters we have grown our gross originations year-over-year and in the third quarter, we more than tripled our revenue growth compared with Q2 resulting in more than $4 million in year-over-year improvement to adjusted EBITDA and we’ve achieved this growth against the backdrop of macroeconomic headwinds and growing consumer concerns about the economy. With that as a context, let me provide you with some financial highlights for the third quarter of 2023. Gross originations increased 12.5% year-over-year to $49.6 million. As a reminder, gross origination trends are a leading indicator of future revenue streams. A percentage of revenue is realized in the quarter in which the gross origination occurs and increases cumulatively over the next four quarters. While we have continued to see healthy results from our direct merchants and Katapult Pay merchants, we did face macro headwinds and a few timing challenges during the quarter. Specifically, we saw retail slow in August and early September before picking back up again and we had one key integration that took a bit longer to launch than we anticipated. Our integrations are heavily dependent on our partners’ resources and schedules, which can often shift after the launch schedule has been planned. Katapult’s portfolio of direct merchants provides a funnel of new customers to drive gross originations at minimal customer acquisition costs. And now with our Western Union partnership, we expect to have another low cost channel to acquire new customers. During the quarter, approximately 51% of our originations came from existing customers. This is consistent with the 51% we reported in Q2. Our customers are highly engaged and we believe we are fostering the…

Thank you. [Operator Instructions] And our first question comes from Josh Siegler with Cantor Fitzgerald.

Hey, team. This is Will Carlson on for Josh. Congrats on the quarter. I wanted to ask, could you guys provide any additional color on just kind of the partnership with Synchrony Financial and how it’s kind of helping you guys monetize the customer base and if you expect to seek additional partnerships like this in the future?

Yeah. Hi, Will. It’s Orlando. Thanks for the question. Yeah. I mean, we have kind of been on the forefront of the waterfall integration. We did it with a firm in the past and we like the waterfall because of what it does is it brings those declines that come from a prime lender to us electronically, easily, seamlessly to help drive more approvals for the retailer, as well as additional incremental volume. And so it’s just one more step. We always talk to many of the prime lenders about doing an integration, whether it’s through a third party waterfall or a direct integration. This one’s pretty exciting, because Synchrony has tons of retailers that fit our profile perfectly. Their approval rates are not 100%. I don’t think any prime lender has 100% approval so we can see the increase in applications that come. Now, the way that it’s going to work is, a retailer still has to say, yes, I want to be on the waterfall. And so, we’re going to team up together to go out to talk to the retailers that have durable goods, make sure that they’re -- they see the offer or see the opportunity to add us on their waterfall and to be able to get that integration done. So there’s some work to do, by selling the retailers, but I think it’s a great partnership. I’m real proud that we were able to get through this -- get this partnership done and we’re going to continue to look for others. I mean, there’s a lot of opportunity because, as I said, the prime lenders don’t approve everyone and this is a great way to get into a retailer.

Thanks. And then second follow-up question was just back on the Casper partnership and how you kind of expect that to ramp up through the first half of 2024.

Yeah. We’re excited about that one because Casper’s been in the online mattress business for a long time and they made an announcement a while back that they were going to be adding stores -- storefronts and I visited a few of them. It’s a simple mall operation and financing is a big part of their business. And they realized that, their prime lender is Affirm. But Affirm, again, doesn’t approve everybody. So we expect to have, we have the online integration done. We’ll be working in the first quarter to get the in-store integration, and the in-store integration, I think it’s going to be unique compared to others in that. We’re still keeping the clarity, the transparency of our product in the customer’s hands so that they can make the decision and see exactly what the terms and conditions are and execute that seamlessly and very quickly and clearly and transparently. So we’re excited about that integration and training the stores on how to offer leasing to their customers and really sets us apart, I think, and not only in the mattress business, but I think this will just be a good step forward in some of the other lease-to-own brick-and-mortar stores that have e-commerce plus brick-and-mortar.

Great. Thank you for taking my questions.

All right. Thank you, Will.

[Operator Instructions] And our next question comes from Anthony Chukumba with Loop Capital Markets. Please go ahead.

Good morning and congrats on a strong quarter and continuing the momentum. I guess I just had a couple questions. Maybe I’ll just take them one at a time. First thing, so, it was a very strong quarter. Don’t mean to nitpick, but your guidance for GMV growth is 14% to 16%. You came up a little bit light of that. I’m assuming it was that sort of slowdown that you referred to during your prepared remarks, but I just wanted to see if there was any additional call you could provide on that.

Hi, Anthony. It’s Nancy. Thank you for your question. Yes. Exactly what you said, it was that slowdown that we saw in August going into early September and then we talked about there was one integration that just took a little bit longer compared to what we had projected. So the business is still really strong. We feel very good about what we’ve achieved year-to-date and we are continuing on our growth trajectory, five quarters of consecutive growth that with what we projected for our Q4 outlook.

Got it. That’s helpful. And then second question on Western Union. I understand about the referral fees, but like how exactly, I’m just trying to sort of like dimensionalize this or sort of think about how this would work practically. Like how exactly is Western Union going to be marketing Katapult’s, like just walking through the logistics, the practical logistics of that?

Thanks, Anthony. This is Derek, I’ll take this question. So basically just to summarize a little bit of our perspective a little again on this is that, we’ve really seen that our level of engagement with consumers just continues to increase as there’s clearly demand in the non-prime segment for choice in their transaction options. And so the lease-to-own, especially now that we have the mobile app where a consumer can shop at fantastic tier one retailers, national retailers and find just about any durable good they could want through this marketplace that we’ve developed. And so as we discussed with partners like Western Union about where there’s overlaps in our customer base and what that can do for both of our communities in terms of enabling more transaction options, it was just a win-win for both of us in terms of giving a new capability for Western Union customers. Now to introduce that opportunity, you’ve got to engage with them where they are. So Western Union has properties -- digital properties to their websites, mobile apps, et cetera, that they’ll be introducing Katapult through various advertising and collaborations they have with us that will engage the consumer to click through and engage with our mobile app. And its early days, but I think this signals for us, one, that we’re really resonating with consumers and opening up new channels for us to access consumer communities. And we’re delivering value to us and other partners who have large communities of non-prime customers. So we’re really excited about where this can take us and stand by as we learn more.

Yeah. Anthony, last quarter I mentioned that, our strategy going forward is to expand the pie of customers, and in numerous ways, obviously, a direct integration, a waterfall integration or partnership, and this is the third prong of that expansion of getting new customers to our platform.

Got it. That’s helpful. And then just one last question for me, just any updates in terms of the, I mean, you talked about the Casper integration, but any updates in terms of the new retail partners that you signed on in the third quarter or just potential partnerships in the pipeline?

Yeah. The pipeline question. Yeah. We are -- we obviously have a strong pipeline of not only Synchrony retailers, new retailers that are new to us, but also on the partnership front. So we’re kind of attacking it on all three fronts and I’m looking forward to 2024 and getting some of these integrations done. I mean, the beauty of partnership one is the easier integration than the direct integration. Waterfall one with Synchrony will be a much easier integration to add retailers at a quicker pace.

That’s helpful. Good luck with the remainder of the year.

All right. Thanks, Anthony.

Thank you.

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

Thank you. Before we sign off, I want to acknowledge the amazing Katapult team. I’m so grateful to the work with our team and is so focused on winning and delivering for our customers and merchants. Thank you for your hard work and dedication. You are the most important ingredient of our success. To everyone listening, thank you so much for tuning in to hear about the progress we’ve made over the past quarter. We are proud of our ability to grow while providing our customers with a fair, transparent and accessible lease-to-own product and our merchants with a growth channel that has so much potential. We look forward to chatting with the Wall Street community throughout the quarter and providing a next update after our fourth quarter concludes. We plan to participate in the Stephen’s Annual Investment Conference in Nashville next week and we hope to see you there. If we can’t meet you in person, you can access a live webcast and replay of our fireside chat on our IR website. Thanks again for your support and interest in our story.

This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation and have a great day.