CURO Group Holdings Corp.

speaker's remarks there will be a question and answer session if you'd like to ask a question during that time you you'll need to press start and then number one on your telephone keypad thank you i would now like to turn the conference over to yours to your first speaker for today jennifer paul vice president and head of investor relations you may now begin welcome to catapult's third quarter 2024 conference call

On the call with me today are Orlando Zayas, Chief Executive Officer, Nancy Walsh, Chief Financial Officer, and Derek Medlin, President and Chief Growth Officer. For your reference, we have posted materials for today's call on the investor relations section of the Catapult website, which can be found at ir.catapultholdings.com. Please keep in mind that our remarks today include forward-looking statements related to our financial guidance, our business, and our operating results as noted in the earnings release and slide deck posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's earnings release and our most recent Form 10-Q, and which will be updated in future periodic reports that we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also during the call, we'll present both GAAP and non-GAAP financial measures. Non-GAAP financial measures should be considered supplemental to and not replacements for or superior to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is included with today's earnings release and is available on the Investor Relations section of the company's website. Any comparisons to 2023 financial results are referencing our restated financials included in our Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024. Finally, All comparisons are year-over-year unless otherwise stated. With that, I will turn the call over to Orlando.

Thank you, Jennifer, and everyone joining us this morning. We're excited to talk to you about our third quarter performance, which improved year-over-year. Today, I'll focus my commentary on the drivers of our results and how are we positioning Catapult for continued growth and future profitability. In addition, I've asked Derek to say a few words about his new role as Chief Growth Officer. his top priorities, and how these efforts can accelerate our progress. After this, Nancy will take us through our financial results and provide an update on our 2024 outlook. Q3 marked another period of across-the-board progress for us, and we're proud to deliver our eighth consecutive quarter of gross originations growth. Beyond gross originations, during Q3, we delivered healthy revenue growth and a solid adjusted EBITDA. Throughout 2024, we have successfully diversified our gross originations base by adding new direct and waterfall merchants and rapidly growing catapult pay originations. As a result, more than 58% of our total Q3 gross originations, which excludes Wayfair, grew more than 37% year-over-year, up from 20% year-over-year growth we achieved in Q2. In addition, for this portion of the business, applications grew by more than 50% year over year. Last quarter, we discussed that our outlook for gross originations include an assumption that we would see improvement within the home furnishings category, particularly at Wayfair. During Q3, Wayfair application flow was down meaningfully. And while I will walk you through a few of the initiatives we've put in place to offset this, ultimately, we can't control the application volume. As a result, the home furnishings category fell short of our expectations. Overall gross originations would have grown approximately 16% if Wayfair gross originations had just been flat compared to Q3 of last year. So we believe that when this category begins to recover in earnest, this will be a tailwind for our growth. Given the current operating environment, we have continued to focus on drivers that are within our control. including launching growth initiatives that are helping offset the challenges of the current macroeconomic environment. And it's important to note that we are making these investments while maintaining a very streamlined expense base. At Wayfair specifically, our efforts include strategic pricing promotions and surgically precise underwriting that altogether allow us to be even more targeted with our consumer offerings. Over the course of Q3, these initiatives helped drive approval and conversion rates higher without eroding our risk profile. So let's look at the numbers. With these initiatives in place, we were able to drive a 350 basis point improvement in approval rates for Wayfair, a 440 basis point improvement in same-day take rates, and a 60 basis point improvement in overall take rates. With that as a backdrop, I'd like to walk you through some of the highlights from the rest of our business that achieved 37% year-over-year growth. Let's start with our Q3 progress against our merchant strategy. Our merchant strategy revolves around three main drivers. One, growing gross originations by integrating with new merchants, either through a direct integration or a waterfall relationship. Two, growing a market share with our anchor merchants. And three, ensuring we offer a variety of durable goods our customers are routinely looking to acquire. Starting with our integration progress, we have several new developments to discuss this quarter. Last quarter, we announced our new agreement with PayTomorrow, a premier waterfall financing platform. They have more than 2,700 merchants on their platform, and we have already begun to convert these merchants to Catapult. We now have 24 merchants live on PayTomorrow platforms. Let me tell you about a few recent Waterfall launches. In mid-October, we launched BB Wheels, which is tires, wheels, and accessories business with the customers throughout the continental U.S. We also launched a Waterfall integration for Extreme Customs, another tire, wheels, and accessories retailer that has a nationwide customer base. We already have a direct relationship with Extreme Customs, and we are very excited to expand our relationships. We also launched Tire Agent, which went live in mid-October. Tire Agent is an online tire and wheels company that serves customers across the continental U.S. Given their e-commerce model, they were drawn to Catapult in large part because of the power of our app. They're excited about having access to the broad Catapult economy, and we are excited to welcome them to our platform. Automotive is becoming a key category for us. And it has an average order value that is higher than home furnishings category. During Q3, automotive grew more than 25%, and we believe it will become an even larger part of our business over time. We're very pleased with our partnership with Pay Tomorrow and look forward to continuing to expand our relationship. These are just a few of our successes this quarter that demonstrate the steady progress we are making on this strategic front. As we remain focused on partnering with new merchants, we are also equally focused on doing more with our current merchant partners. Let me give you a few highlights. We've added more than 40 new merchant pathways in Q3. Pathways include new or existing merchant partners that launch a new website or an in-store experience that includes Catapult as a direct or waterfall LTO offering. About 40% of the launches this quarter were with existing merchant partners. showcasing their interest in broadening their relationships with Catapult. We look at these launches as incremental top-line growth opportunities as well as low-cost ways to expand our brand reach. Let me give you another example of how our team is deepening our relationship with our merchants. Less than six months ago, we onboarded a new auto merchant that specializes in tire and wheel products. Just after four months, the merchant was so pleased with our performance that they agreed to move us up their financing funnel. After that move, we saw average daily gross originations from that merchant grow by more than 180% in Q3, which contributed to the growth we saw in tires and wheels categories during the quarter. During the Q2, we continued to work closely with our merchants to leverage the power of their marketing assets to amplify the impact on our promotional activities. For example, we launched a variety of pricing promotions for the Labor Day holiday And several of our merchants promoted these across their sites, newsletters, social media, and other marketing domains. Through the power of our partnerships, during the Labor Day sales period, year over year, we grew applications and approvals by approximately 29 and 30% respectively, leading to a nearly 50% gross originations growth during this period. And while these data points do include some impact from merchants that are new to Catapult since Labor Day last year, If we look only at the week-over-week growth, we achieved an approximately 850 basis point improvement in take rate that led to 24% week-over-week gross originations growth during the Labor Day sales period. This performance demonstrates our ability to find new ways to work with our mature merchant base to profitably grow our business. As you've heard, we're continuing to move with a great sense of urgency across several merchant avenues to drive growth and we are attacking our market opportunity creatively and strategically, and we are delivering results. The mantra is very true when it comes to executing our strategy to drive consumer demand for our market-leading LTO product. Let's dive into our progress with Catapult Pay and marketing. Starting with Catapult Pay, or K-Pay, which has continued to outpace our early expectations year to date, K-Pay has delivered 46 million of gross originations And in that time period, it has grown 110% year-over-year. During Q3, K-PAY grew 86.1% to $16 million in gross originations and represented 31% of our total base. In October, we added two merchants to K-PAY, Blue Nile, which is our first jewelry merchant on K-PAY, and Tire Rack, further strengthening our growing position in the tire and wheel category. Year-to-date, we've added seven merchants to K-Pay, including Newegg early in Q3, bringing the total number of merchants on K-Pay to 30. During the third quarter alone, K-Pay applications nearly doubled. And given the growth and customer engagement with K-Pay, we feel confident that our app is allowing us to deepen and strengthen our relationship with our customers. Turning to marketing, we are continuing to build this muscle with an increasing cadence of tests. Within consumer marketing, the majority of our resources remain focused on driving traffic to our app. We believe we can effectively leverage our marketing to complement the customer acquisition flow we receive from our merchant partners and keep our acquisition costs reasonable. And our efforts continue to deliver results, including an 83% year-over-year increase in app downloads, with a 52% increase in unique app users. including more than a 50% increase in quarterly active users. We've also doubled the number of marketing campaigns in Q3 versus last year, set up operations that allow us to launch two new marketing channels in early Q4, and we increased leases attributable to our Google ads by more than 100% versus Q2 of this year. This helped drive originations coming through our app up by 37% year-over-year, which represented more than 53% of our total gross originations for the quarter. We also continue to make progress expanding our referral networks. And while I don't have anything specific to report this quarter, we are excited about several new partnerships that are on the horizon. All these partnerships are very focused on our app, and we expect to launch new referral partnerships in the first quarter of next year. To give you a sense of their potential impact, these types of referral partnerships could deliver gross originations in the range of a large enterprise merchant on an annual basis. I'd also like to give you a quick but exciting update on our tech front. During the first quarter of this year, we previewed our intention to introduce a product-based search. And early in Q4, we were excited to launch our pilot of this new feature. In the past, our tech only allowed customers to shop at the retail level. When looking for a specific durable good, we could only show them the retailers that we knew offered similar products. Now, we can show them specific inventory that is available on multiple merchant sites, giving the customer options to get the best deal. In addition, over time, this capability should provide us with more precise insights into what customers are searching for and ultimately purchasing, unlocking opportunities across business intelligence, marketing, and other areas of Catapult. As you've heard, we are taking a multi-pronged approach to growing our Catapult business. From the strength of our direct and waterfall merchant business to our innovative K-Pay and app to our scalable marketing strategy to early progress we're making on expanding referral and affiliate partnerships, we believe we're well positioned to create value. We appreciate the support of our fantastic team of employees, our shareholders, merchants, other partners, and customers as we continue our journey. We recognize that we need to move as quickly as possible to make our vision a reality, and this is one of the reasons why we appointed Derek to the new role of President and Chief Growth Officer. Derek has spent the last seven years helping Tadapult grow. He spearheaded our direct-to-consumer efforts, scaled our global operations to support our top-line growth, and led several cross-functional teams spanning product, technology, operations, that have allowed us to expand our business. He's a terrific partner to both Nancy and me. So before Nancy walks us through our financial results, I'd like to have Derek give a few insights on his top priorities and how we will relentlessly pursue profitable growth opportunities.