Catapult Holdings (KPLT) Q3 2025: 76% Application Surge Fuels Customer Base Expansion
Catapult’s Q3 marked a decisive inflection in customer acquisition, with applications up 76% year-to-date and unique new customers climbing 47% in the quarter, driving a 30% total customer base expansion. The business paired this demand momentum with disciplined expense management and a $65 million capital infusion, positioning for profitable growth even as macro headwinds loom. Management’s conservative Q4 guide reflects both strong execution and prudent risk posture as Catapult enters a critical holiday stretch.
Summary
- Marketplace Engagement Accelerates: App-originated originations now drive 61% of total volume, with K-Pay up 66% YoY.
- Cost Discipline and Capital Restructuring: Operating expenses fell 26%, aided by a $65 million credit investment and debt paydown.
- Profitability Focus Sharpens: Underwriting tightened and Q4 guidance tempered, prioritizing margin and credit quality over pure volume.
Performance Analysis
Catapult delivered double-digit top-line growth in Q3, with revenue up 22.8% and gross originations rising 25.3%, both within guided ranges. Gross profit grew 21.8%, and gross margin held steady at 19.7%. The company’s repeat customer engine remains robust, with 55.3% of gross originations from returning users and rising customer lifetime value (LTV) for this cohort. Notably, monthly active users (MAUs) surged 49%, reflecting deepening engagement within the Catapult app ecosystem.
Expense management was a highlight, as total operating expenses dropped 26.3% and fixed cash operating expenses declined 21.4%, driving positive adjusted EBITDA of $4.4 million—well above the company’s outlook. Cash from operations swung positive to $800,000 from a $4.1 million outflow a year ago, underpinned by working capital improvements and balance sheet restructuring.
- Originations Mix Shift: App-initiated originations and K-Pay (in-app checkout) represented 61% and 41% of total volume, respectively, with K-Pay unique customers up 76% YoY.
- Merchant Diversification: Excluding home furnishings and mattresses, direct and waterfall merchant originations grew 42% YoY, signaling improved vertical balance.
- Credit Quality Pivot: Underwriting was tightened late in Q3, already yielding improved pre-approval and conversion rates, aimed at lowering future write-offs.
Catapult’s ability to drive both new customer acquisition and repeat engagement demonstrates strong product-market fit, while its financial discipline and capital structure overhaul provide a foundation for sustainable scaling.
Executive Commentary
"For the first three quarters of 2025, we grew applications by 76%. This growth has positively impacted our business in several ways... Given our track record of high repeat rates, bringing new customers into the catapult marketplace can create significant downstream value."
Orlando Zayas, Chief Executive Officer
"Our disciplined approach to expense management coupled with our top-line growth is at the center of our financial model... This approach allowed us to deliver another quarter of positive adjusted EBITDA above our outlook range."
Nancy Walsh, Chief Financial Officer
Strategic Positioning
1. Marketplace Ecosystem and App Engagement
Catapult’s app-centric ecosystem is now the primary driver of growth, with 61% of originations starting in the app and MAUs up nearly 49%. K-Pay, the proprietary in-app checkout, accounted for 41% of gross originations and continues to scale rapidly, with unique K-Pay customers rising 76%. This digital-first strategy not only deepens customer engagement but also provides Catapult with direct data to inform underwriting and promotional targeting.
2. Capital Structure Transformation
The $65 million investment from Hawthorne Horizon Credit Fund enabled Catapult to retire its term loan and reduce revolving credit balances, improving liquidity and reducing interest expense going forward. The company’s advance rate reduction from 99% to 90% on its revolver will yield further savings, and management signaled potential for even more favorable terms in future refinancing. This restructuring provides a more stable foundation for growth and risk management.
3. Underwriting and Profitability Optimization
Management is shifting focus from pure volume to profitable growth, tightening underwriting to improve credit quality and conversion rates. Early signs show positive trends in pre-approval and conversion, with expectations for lower write-offs ahead. This pivot is especially relevant given rising macro stress signals for non-prime consumers, as Catapult seeks to balance growth with risk discipline.
4. Merchant and Product Diversification
Catapult’s merchant portfolio is broadening, with 46 new merchant pathways added in Q3 and 42% YoY growth in direct and waterfall merchant originations (excluding home furnishings/mattresses). The addition of high-frequency, lower-ticket lease lines and new brands like Apple to K-Pay further diversify the product mix, supporting wallet share gains and reducing category concentration risk.
5. Data-Driven Marketing and Customer Retention
Targeted marketing and personalized promotions, enabled by in-app data, are driving higher cross-shopping and LTV among repeat customers. Cross-shopping customers—those with leases at multiple retailers—grew 64% YoY and now represent 13% of originations, underlining the stickiness of the platform and Catapult’s ability to become a shopping destination for non-prime consumers.
Key Considerations
Q3 reflected a business at a turning point, balancing rapid customer and originations growth with a pivot toward risk management and profitability. The interplay between digital engagement, disciplined underwriting, and capital structure overhaul sets the stage for Catapult’s next phase.
Key Considerations:
- Application Quality Remains a Wildcard: While application quantity surged, management noted a slight downtrend in quality, necessitating tighter underwriting and conversion focus.
- Holiday Season as a Critical Test: Q4 will test Catapult’s ability to convert engagement into profitable growth amid macro uncertainty and tough comps.
- Repeat Customer Engine Strength: High repeat rates and rising LTV suggest a durable core, but sustaining this as the base scales will be key.
- Cost Structure Leverage: Operating expense reductions and non-cash cost management are crucial levers for margin expansion as growth continues.
- Capital Flexibility for Growth Initiatives: The new investment provides dry powder for both organic growth and potential product or merchant expansion.
Risks
Macroeconomic headwinds—especially inflation and rising delinquencies among non-prime consumers—pose a risk to originations quality and repayment rates. Management’s own commentary acknowledged these pressures and the need for scenario planning. Category concentration (notably in home furnishings/mattresses) and application quality volatility also remain watchpoints as Catapult scales. Execution risk around underwriting adjustments and merchant diversification is elevated entering the holiday quarter.
Forward Outlook
For Q4 2025, Catapult guided to:
- Gross originations growth of 15 to 20% (including a one-point headwind from underwriting tightening)
- Revenue growth of 21 to 23%
- Adjusted EBITDA of approximately $2 million
For full-year 2025, management tempered guidance:
- Gross originations growth of 20 to 23%
- Revenue growth of 18 to 20%
- Adjusted EBITDA of $8 to $9 million (60 to 80% YoY growth)
Management emphasized macro uncertainty, tough comps, and a deliberate shift to prioritize margin and credit quality over pure volume as guiding factors for the outlook.
- Holiday season conversion and credit trends will be closely watched
- Early 2026 signals point to continued robust growth, but no official guide yet
Takeaways
Catapult’s Q3 showcased a business scaling its digital marketplace and customer base, but now pivoting to sustainable, profitable growth through tighter underwriting and capital discipline.
- Customer Acquisition Engine Proves Scalable: Application and MAU growth demonstrate Catapult’s ability to reach and engage non-prime consumers at scale, with downstream revenue and LTV benefits.
- Profitability and Risk Management Take Center Stage: The shift to tighter underwriting and conservative guidance signals a new phase focused on sustainable margin and credit quality, not just top-line growth.
- 2026 Will Test Repeatability: Investors should watch for sustained engagement, conversion, and merchant diversification as Catapult seeks to balance growth with risk in a volatile macro climate.
Conclusion
Catapult’s Q3 2025 was marked by breakout digital engagement and disciplined scaling, underpinned by a major capital structure reset. As the company enters a pivotal holiday quarter, management’s focus on underwriting, profitability, and merchant diversification will be critical to sustaining momentum and managing risk.
Industry Read-Through
Catapult’s results reinforce the power of app-based ecosystems and embedded finance for non-prime consumer access, with digital engagement and data-driven underwriting now central to growth strategies in alternative credit. The company’s experience with merchant diversification and product mix broadening is instructive for other fintechs seeking to reduce category risk. Macroeconomic pressures on non-prime borrowers are a sector-wide concern, and Catapult’s pivot to risk management and profitability over pure volume growth could presage a broader industry shift as lenders brace for potential credit normalization.