8-K: Katapult Reports Q3 Growth, Secures $65M Investment

Katapult Holdings, Inc. announced strong third-quarter 2025 financial results with significant growth in originations and revenue, alongside a $65 million convertible preferred stock investment from Hawthorn Horizon Credit Fund.

Summary

• Gross originations increased by 25.3% year-over-year to $64.2 million in Q3 2025, marking the third consecutive year of growth.
• Total revenue grew 22.8% year-over-year to $74.0 million for the third quarter of 2025.
• Net loss improved to $4.9 million in Q3 2025, compared to a net loss of $8.9 million in Q3 2024.
• Adjusted EBITDA significantly improved to $4.4 million in Q3 2025, up from $0.6 million in Q3 2024.
• Total applications grew approximately 80% year-over-year in the third quarter.
• The Katapult app marketplace became the largest customer referral source, accounting for 61% of Q3 gross originations, with app marketplace originations growing 44% year-over-year.
• KPay gross originations grew approximately 66% year-over-year in Q3, representing 41% of total gross originations.
• Hawthorn Horizon Credit Fund invested $65.0 million in convertible preferred stock, with proceeds used to repay $35.1 million of existing term loan and a portion of the revolving credit facility.
• The company ended Q3 2025 with $9.0 million in total cash and cash equivalents, including $5.6 million of restricted cash.
• Write-offs as a percentage of revenue were 9.9% in Q3 2025, within the company's 8% to 10% long-term target range.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to strong operational growth in Q3, significant improvement in profitability metrics (Adjusted EBITDA, reduced net loss), and a substantial capital injection that strengthens the balance sheet. However, the company still reports a net loss, and the full-year outlook was tempered due to macroeconomic headwinds, introducing a degree of caution.

Positives

• Gross originations increased 25.3% year-over-year to $64.2 million in Q3 2025, demonstrating continued strong operational performance.
• Excluding the home furnishings and mattress category, gross originations grew approximately 50% year-over-year, highlighting strength in other segments.
• Total revenue increased 22.8% year-over-year to $74.0 million in Q3 2025.
• Net loss significantly improved to $4.9 million in Q3 2025 from $8.9 million in Q3 2024, driven by decreased litigation settlement expenses and compensation costs.
• Adjusted EBITDA saw substantial improvement, reaching $4.4 million in Q3 2025 compared to $0.6 million in Q3 2024.
• Total applications grew approximately 80% year-over-year in Q3, indicating strong customer interest and acquisition.
• The Katapult app marketplace is a premier shopping destination for nonprime consumers, with 61% of Q3 gross originations starting there and app marketplace originations growing 44% year-over-year.
• Customer satisfaction remained high with a Net Promoter Score of 64 as of September 30, 2025.
• Repeat customers accounted for approximately 55% of gross originations in Q3 2025, indicating strong customer retention.
• KPay conversion rate increased, leading to unique KPay customer count growth of 76% year-over-year and KPay gross originations growth of approximately 66% year-over-year.
• Fixed cash operating expenses decreased by 21.4% year-over-year, reflecting improved cost efficiency.
• The $65.0 million investment from Hawthorn Horizon Credit Fund strengthens the balance sheet and increases liquidity, allowing for accelerated growth and progress toward sustained profitability.

Negatives

• The company reported a net loss of $4.9 million for Q3 2025, despite significant improvement from the prior year.
• Write-offs as a percentage of revenue increased slightly to 9.9% in Q3 2025 from 9.3% in Q3 2024, though still within the long-term target range.
• The home furnishings and mattress category remains challenging, impacting overall gross originations.
• Macroeconomic headwinds, including uncertainty surrounding tariff regulations, inflation rates, and the U.S. government shutdown, are expected to impact the core consumer in the near-term.

Risks

• Meeting future liquidity requirements and complying with restrictive covenants related to indebtedness.
• The ability to obtain, and the impact of, stockholder approval related to the preferred stock transaction.
• Potential impact of the conversion of preferred stock on existing shareholders.
• The execution of business strategy and expanding information and technology capabilities.
• Market opportunity and the ability to acquire new customers and retain existing customers.
• Adoption and success of the mobile application featuring Katapult Pay.
• The timing and impact of growth initiatives on future financial performance.
• Anticipated occurrence and timing of prime lending tightening and its impact on results of operations.
• General economic conditions in the markets where the company operates, the cyclical nature of customer spending, and seasonal sales and spending patterns of customers.
• Factors affecting consumer spending that are not under the company's control, including levels of employment, disposable consumer income, inflation, prevailing interest rates, consumer debt and availability of credit, consumer confidence, political conditions, and consumer perceptions of personal well-being and security and willingness and ability of customers to pay.
• Uncertainty of estimates of market opportunity and forecasts of market growth, including the home furnishings and retail environment.
• Risks related to the concentration of a significant portion of transaction volume with a single merchant partner, or type of merchant or industry.
• The effects of competition on future business.
• The impact of unstable market and economic conditions such as rising inflation and interest rates.
• Reliability of the platform and effectiveness of the risk model.
• Data security breaches or other information technology incidents or disruptions, including cyber-attacks, and the protection of confidential, proprietary, personal and other information.
• Ability to attract and retain employees, executive officers or directors.
• Effectively responding to general economic and business conditions.
• Obtaining additional capital, including equity or debt financing, and servicing indebtedness.
• Enhancing future operating and financial results.
• Anticipating rapid technological changes, including generative artificial intelligence and other new technologies.
• Complying with laws and regulations applicable to the business, including laws and regulations related to rental purchase transactions and privacy.
• Maintaining and growing relationships with merchants and partners.
• Responding to uncertainties associated with product and service developments and market acceptance.
• The impacts of new U.S. federal income tax laws.
• Material weaknesses in internal control over financial reporting which, if not identified and remediated, could affect the reliability of financial statements.
• Successfully defending litigation, regulatory matters, complaints, adverse publicity and/or misconduct by employees, vendors and/or service providers.
• Other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, public health crises and pandemics, trade wars, or responses to such events.

Future Outlook

Katapult expects continued growth in the fourth quarter and full year 2025, despite navigating macroeconomic headwinds such as a challenging home furnishings category, tariff regulations, inflation rates, and the potential impact of a U.S. government shutdown. For Q4 2025, the company anticipates a 15% to 20% year-over-year increase in gross originations, a 21% to 23% year-over-year increase in revenue, and approximately $2 million of Adjusted EBITDA. For the full year 2025, gross originations are expected to grow between 20% and 23%, revenue between 18% and 20%, and Adjusted EBITDA between $8 million and $9 million. The company believes its credit quality will remain strong and is well-positioned for long-term growth with a more efficient capital structure and market-leading technology.

Management Comments

• "We are continuing to execute against our priorities and our third quarter results demonstrate the progress we're making. Our 25% gross originations growth in the third quarter marks our third consecutive year of growth and we are very proud of our team's hard work and dedication that allowed us to achieve this milestone." Orlando Zayas, CEO of Katapult.
• "We believe the Katapult app marketplace has become a premier shopping destination for nonprime consumers and we are very excited about our future. We look forward to delivering a strong fourth quarter for our merchants and customers alike." Orlando Zayas, CEO of Katapult.
• "We also announced a significant investment from Hawthorn Horizon Credit Fund last week. We believe this transaction strengthens our balance sheet and will allow Katapult to accelerate its growth and progress toward achieving sustained profitability." Orlando Zayas, CEO of Katapult.
• "Thanks to our team's hard work throughout 2025, we are looking forward to a great fourth quarter. We expect robust gross originations growth during the quarter, but given macroeconomic headwinds we believe it's prudent to take a more conservative stance on our expectations for this quarter, so we are tempering our full year outlook for gross originations, revenue and Adjusted EBITDA growth." Nancy Walsh, CFO of Katapult.
• "With a more efficient capital structure, market-leading technology and the continued growth of the Katapult app marketplace, we believe that we are well positioned to capitalize on our long-term growth opportunities." Nancy Walsh, CFO of Katapult.

Industry Context

Katapult operates in the e-commerce-focused financial technology sector, specifically targeting underserved U.S. non-prime consumers with lease-to-own solutions. The company's strategy is well-aligned with broader industry trends where alternative financing options gain traction, especially when traditional prime credit becomes less accessible. The company believes it has a large addressable market and that lease-to-own solutions historically benefit during periods when prime credit options tighten, suggesting a counter-cyclical advantage in certain economic environments.

Management Changes

Corporate Governance

Legal Proceedings

• Net loss improvement in Q3 2025 was mainly driven by a decrease in litigation settlement expenses of $3.2 million, indicating a reduction in past legal liabilities.

Related Party Transactions

• Hawthorn Horizon Credit Fund, LLC invested $65.0 million in convertible preferred stock, and in conjunction with this transaction, appointed two new directors to the Katapult board of directors: Philip K. Bartow III and Jeffrey Rubin. This significant investment and board representation establish a material relationship between Hawthorn and Katapult.

Stakeholder Impact

• Shareholders: Potential for significant dilution if Hawthorn converts all preferred stock, subject to stockholder approval. The capital raise strengthens the company's financial position, which could benefit long-term shareholder value.
• Employees: Management changes on the board, including the appointment of a key executive, may impact internal dynamics and strategic direction.
• Customers: Continued investment in the Katapult app marketplace and KPay functionality aims to enhance the shopping experience and expand merchant options for underserved non-prime consumers.
• Creditors: A portion of the capital raise was used to repay existing debt, strengthening the company's balance sheet and potentially improving its creditworthiness.
• Merchant Partners: Continued expansion of relationships with merchant-partners through new integrations and co-promoted marketing campaigns aims to drive mutual growth.

Next Steps

• Submit the issuance of equity securities upon conversion of the preferred stock to the company's stockholders for their consideration.
• File a proxy statement with the SEC to solicit stockholder approval of the proposed transaction and other relevant documents.
• Host a conference call and webcast on November 12, 2025, to discuss the financial results.

Key Dates

Recommendation

The company demonstrated strong operational growth in gross originations and revenue, coupled with improved profitability metrics like Adjusted EBITDA and a reduced net loss. The significant capital injection from Hawthorn Horizon strengthens the balance sheet and provides liquidity for growth. However, the company still operates at a net loss, and management tempered the full-year outlook due to macroeconomic headwinds. The potential for substantial dilution from the preferred stock conversion, pending shareholder approval, introduces uncertainty. Therefore, a 'hold' recommendation is appropriate, advising investors to monitor the execution of growth strategies, progress towards sustained profitability, and the outcome of the shareholder vote on the preferred stock conversion.

Keywords

Katapult, KPLT, Financial Technology, E-commerce, Lease-to-Own, Non-Prime Consumers, Q3 2025 Earnings, Gross Originations, Revenue Growth, Adjusted EBITDA, Hawthorn Horizon, Convertible Preferred Stock, Capital Structure, Corporate Governance, Financial Results