Q3 2024 Katapult Holdings Inc Earnings Call

Thomson Reuters StreetEvents11-07

Participants Jennifer Kull; Vice President and Head of Investor Relations; Katapult Holdings Inc Orlando Zayas; Chief Executive Officer; Katapult Holdings Inc Derek Medlin; President and Chief Growth ...

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Hello, everyone. Thank you for standing by and welcome to the Katapult Holdings third quarter, 2024 earnings conference call.  I would now like to turn the conference over to your first speaker for today, Jennifer Kull, Vice President and Head of Investor Relations. You may now begin.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 thro","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"W":"Wayfair"},"translate_title":"2024年第三季度Katapult Holdings Inc收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"W":0.9},"content_text":"Participants\nJennifer Kull; Vice President and Head of Investor Relations; Katapult Holdings Inc\nOrlando Zayas; Chief Executive Officer; Katapult Holdings Inc\nDerek Medlin; President and Chief Growth Officer; Katapult Holdings Inc\nNancy Walsh; Chief Financial Officer; Katapult Holdings Inc\nScott Buck; Analyst; HC Wainwright & Co\nAnthony Chukumba; Analyst; Loop capital\nPresentation\nOperator\n Hello, everyone. Thank you for standing by and welcome to the Katapult Holdings third quarter, 2024 earnings conference call. (Operator Instruction) I would now like to turn the conference over to your first speaker for today, Jennifer Kull, Vice President and Head of Investor Relations. You may now begin.\nJennifer Kull\n Welcome to Katapult'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 Katapult website, which can be found at IR. Katapult holdings.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.\nOrlando Zayas\n 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 growth originations. During Q3, we delivered healthy revenue growth and a solid adjusted EBITA.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 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 macro economic environment.And it's important to note that we are making these investments while maintaining a very streamlined expense base.At Wayfair specifically, our effort includes strategic pricing promotions and surgically precise underwriting that all together allow us to be even more targeted with our consumer offerings.Over the course of Q3, these initiatives help 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 and approval rates for Wayfair, a 440 basis point improvement in same day, take rates and a 60 basis point improvement and 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 our 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 Pay Tomorrow, 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 Katapult. We now have 24 merchants live on pay tomorrow platform. 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 US. 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 relationship.We also launched tire agent which went live in mid-October. Tire agent is an online tire wheels company that serves customers across the continental us. Given their e-commerce model, they were drawn to Katapult in large part because of the power of our app. They're excited about having access to the broad Katapult 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 Katapult 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 Katapult.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 entire 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.Similar to Q2, we continue 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 for merchants that are new to Katapult 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're 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 Katapult pay or K pay, which has continued to outpace our early expectations. Year-to-date KPA 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 kay and tire rack. Further strengthening our growing position in the tire and wheel category.Here. Today, we have added seven merchants to K pay including new egg early in Q3, bringing the total number of merchants on K pay to 30 during the third quarter alone, paypay applications nearly doubled and given the growth and customer engagement with kay. 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 test within consumer marketing. The majority of our resources will 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're 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 Katapult.As you've heard, we are taking a multi strong 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 catapult 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. Derek.\nDerek Medlin\n Thanks Orlando. Let me start by saying how excited I am to take on this new role at this point in the company's journey, Katapult has done a great job building a lease to own offering that has a terrific product market fit a customer experience that drives high repeat rates and loyalty and an app that sets us apart from the competitive landscape.These characteristics are turning catapult into a partner of choice for customers and merchants alike.We are shifting from simply being a payment method to a growth partner that makes shopping easier in doing so. We're diversifying our gross origination space by offering direct waterfall and Katapult pay LTO options that meet consumers wherever they are.We have also successfully grown gross originations for eight consecutive quarters while remaining focused on fiscal discipline.In order to accelerate our top line growth even more, we are focused on new opportunities to drive more volume to the top of our funnel.You've heard us talk about the testing and learning we've been doing within marketing and those efforts continue to have positive impact. But our approach to marketing must be measured given that the investment required to scale customer acquisition and brand campaigns and frankly, we need to move faster to do this.We must significantly increase our application flow. This is our number one priority.But together with the team, we have ramped up activities that are allowing us to go deeper with our current partners, identify new partners that can bring new customer populations to Katapult. And at the same time, we're supporting merchants with marketing collaborations that bring our consumer community which translates to meaningful volume to their retail doorsteps.We have been aggressively expanding our coverage of enterprise and omni channel merchants as merchants continue to look for growth wherever they can find it. The tone of the conversations we're having with them has become more and more positive. And here's why we have built a marketplace ecosystem and we can measure the traffic and conversion from traffic. We drive as well as the traffic that comes to us from merchant partners.Our data show that if merchants bring customers to Katapult, we can convert them and we can also bring customers to merchants.These two data points have been amazing conversation starters. At the same time, we know that with the power of our app, we can cross sell and up sell consumers a variety of durable goods offered by merchants in the Katapult marketplace, making the growing applicant flow even more valuable to us.Orlando already told you that we nearly doubled K pay applications in the quarter and that our cross sell activity grew 62% year over year in the third quarter. So let me give you another data point that underscores why our app is so important to our future lifetime value.When a customer uses the Katapult app, this channel increases their lifetime lease originations by more than two X.If we can rapidly grow our overall application volume, like I believe we can, this can be a game changer for our business one that I believe will ignite a new engine for long term growth.The team is energized and organized for a great fourth quarter.I look forward to updating you on our progress with that. I'll turn it over to Nancy to discuss our third quarter financial results.Nancy.\nNancy Walsh\n Thanks Derek and hello to everyone joining us this morning. As Orlando mentioned, we achieved growth across the board this quarter and we believe we are well positioned for a strong Q4.Let's start with a few insights on our top line performance. We have now grown gross originations for eight consecutive quarters. Gross originations grew 3.3% to $51.2 million in the third quarter and on a two year stack basis, our gross originations grew 16% when we provided our outlook for Q3. One Key element was the assumption that home furnishings including our business with Wayfair would return to normal levels. Unfortunately, this did not happen.You have heard Orlando talk about all the ways that we are executing on initiatives that are within our control and this is why despite this headwind, we were able to drive growth in our overall business as well as 37% growth in our business excluding Wayfair.I'm very proud of the team's efforts which are not only driving growth but also strong repeat purchase rates, cross shopping and net promoter scores. During Q3, our customer repeat purchase rate was 60.3%. Cross shopping activity grew by approximately 62% and our NPS score was 61% on the revenue front. We delivered $60.3 million or 10% growth which is above our outlook and reflects continued improvements in productivity and efficiencies.Our collection trends also remain strong.Q3 marked our sixth consecutive quarter of year over year revenue growth gross profit for Q3 was approximately $11.9 million. An increase of nearly 4% and gross profit during the first nine months of 2024 grew by nearly 17%. We achieved a Q3 gross margin of 19.8% which is within our 18% to 20% range for full year 2024. And in line with seasonal patterns where our margins are typically the highest in the 1st and 3rd quarters. We have continued to effectively manage write offs as a percent of revenue during the third quarter. This metric was 9.5% approximately flat compared to Q3 2023 and within our target range of 8% to 10%.Our approval rate in Q3 was consistent with Q3 of last year.We also continuously review a number of other metrics that are indicative of the quality of our incoming applications, approved applicants and lease origination space.These data points suggest that the credit quality of applicants approved applications and lease originations have all trended up in Q3 2024 versus Q3 2023.Moving on to expenses and profitability. Our disciplined approach to expense management coupled with our top line growth allowed us to deliver another quarter of solid adjusted ebita performance. Let's first talk about some of the puts and takes within adjusted EBITA this quarter. During the third quarter, we entered into a $3 million agreement to settle litigation related to a matter involving die or corporate advisory or DCI.We paid DCI a $1.5 million in Q4 and the remainder will be paid quarterly over the next two years. This is an add back to adjusted EBITA.This was the primary driver of our increase in total operating expenses which grew by 38% during the quarter excluding the litigation expense total. OpEx as a percent of revenue was approximately the same as Q3 2023.Given the hard work our team has been doing to drive revenue growth while keeping our expense structure lean. We're starting to see the benefits of operating leverage excluding underwriting fees and servicing costs which are variable depreciation and stock based compensation expense, which are non cash expenses and excluding litigation settlement and severance expense. Our fixed cash operating expenses were $9.5 million an increase of 8.5% compared to last year during the third quarter, excluding litigation settlement expenses. Our loss from operations was $1.1 million in Q3 2024 versus a loss of 400,000 in Q3 2023.During the first nine months of 2024 excluding litigation expense, we achieved approximately $100,000 in income from operations based on our top line performance and our operating efficiencies. We were able to deliver positive adjusted ebita of $600,000 which was in line to slightly ahead of our Q3 outlook.This year over year decline was primarily driven by increased operating expenses.Year-to-date adjusted EBITA is positive $5.8 million. A $7.4 million improvement compared to the same period of last year.Turning to the balance sheet and cash flow as of September 30, 2024, we had total cash and cash equivalents of $30.3 million which includes $4.4 million of restricted cash. As of the end of the third quarter, we also had $67.3 million in outstanding debt on our credit facility regarding our capital structure and balance sheet and our upcoming June 2025 debt maturity in October. We signed a non binding letter of intent with a lender for a new revolving line of credit, working capital line of credit and term loan. If we finalize this credit facility, it would refinance and replace our outstanding credit facility. There can be no assurance that we will close this potential credit facility with this lender or any other lender cash flow from operations for the first nine months of 2024 improved by $3.6 million versus the same period in 2023 year-to-date 2024 cash used in operations was $4.1 million compared with $7.7 million for the first nine months of 2023.For your models. I would note that as of September 30, 2024 we recorded a reserve for the $3 million DC settlement included in accrued liabilities and operating expenses and we have included approximately 168,000 shares in our total outstanding share count as of November 1st related to the Delaware litigation settlement.Turning to our Q4 outlook, we are continuing to navigate a challenging macro environment, particularly surrounding the home furnishings category that said we are excited about the fourth quarter and believe that given the breadth of our merchant selection, our strategic marketing and our strong consumer offering, we are well positioned heading into the holiday season.From a big picture perspective, we believe we have a large addressable market of underserved non prime consumers and that we will benefit if prime credit options become less available.From a catapult specific perspective. We plan to leverage the many direct and waterfall merchant relationships. We have to provide our customers with access to just about any durable good they want and unleash the power of paypay in our targeted marketing campaigns to give consumers the inspiring shopping experiences. They deserve this holiday season based on these dynamics and the operating plan in place for the rest of this year. We expect the following for the fourth quarter, gross originations growth of 68%.Gross originations excluding wayfair are expected to continue to grow at a much faster pace than our overall gross originations, revenue growth in the range of 5% to 7% and roughly breakeven adjusted EBITA.I will note that our outlook for Q4 assumes that the home furnishings category does not improve materially from our Q3 performance and that we will not see any material impact from prime creditors tightening or loosening above us based on our year-to-date performance. We are adjusting our outlook for full year gross originations. We now expect 2024 gross originations to grow 2% to 4%.We are reiterating our 2024 revenue outlook for growth of at least 10%.Finally, we also expect to deliver $5.5 million in positive adjusted EBITA for the full year 2024. This will be the first time we have achieved positive adjusted EBITA since 2021.With that, I'll turn it back to the operator for Q&A operator.\nQuestion and Answer Session\nOperator\n Thank you.(Operator Instruction) Your first question comes from Scott Buck from HC Wainwright. Your line is now open.\nScott Buck\n Hi, good morning guys. Thanks for taking my questions.\nDerek Medlin\n First one, Orlando.\nScott Buck\n What would it take to see a material change in, in home furnishings demand? Is it as simple as just more home purchases?\nOrlando Zayas\n Yes.Yes, bluntly, yes. You know, I think we're, we're, we're excited that, you know, interest rates are starting to come down, home purchases are starting to pick up a little bit. So I think if that continues into 2025 we should probably see a turnaround on the home furnishing side. But we're, we're.We're, we're, we're prepared for it. Let's just say.\nScott Buck\n That that that's helpful and maybe I missed it. But what is the average origination size today versus, you know, 12 months ago?\nNancy Walsh\n Still in the $6 to $700 range?\nScott Buck\n Okay. So not materially different.\nNancy Walsh\n No, we have not seen that materially change.\nScott Buck\n Okay, perfect. And, and then I want to kind of dig in a little bit on paypay. I'm curious if there's particular products or particular merchants, maybe you're working with there that are driving a material part of that, that new demand.\nDerek Medlin\n Hi, this is Derek. Let me share a little bit more about that. It's a great question and it's something that we're really excited about. So within the K pay and in our mobile app, mobile app ecosystem, we're really excited because what we find is that the shopping activity that we see from our customers is really distributed and diversified across many different retailers. And so that means that we're seeing traffic going through major players like Walmart Amazon and Best Buy, but also back into Wayfair and into our, our tire and wheel partners and to other segments. And really the key here is having the breadth of offering and as we've added different retailers to the catapult pay ecosystem, we found more shopping and finding those niches where customers are looking to lease different types of goods. And so having the breadth of offering has really diversified it. So, it's not concentrated at all in any single merchant. It's spread across a large set with really kind of the TOP10 major e-commerce retailers that you know, you know, pulling in the bulk of that, that.Volume.\nScott Buck\n Great. I appreciate that color. And then last one, Orlando, you mentioned potential referral partners in the pipeline. How long does it generally take for those relationships to mature.\nOrlando Zayas\n I'm actually going to let Derek so that one is now that he's in charge of, of all the, all the partnerships with his new.\nDerek Medlin\n Role. Yeah, great. Thanks for that. Good question. I think what's exciting is that when we initially launched the mobile app and K pay, we really targeted on our existing customers and the reason for that is that we wanted to validate that we could help customers find access to new retailers to find the goods that they're looking to lease with us and to just make the whole process easier and, as we have now matured that over the last two years, we've expanded further and further into not only using it as a cross shopping sort of destination for existing customers to, to do additional leases, but also as an acquisition channel. And so we've done that through digital marketing activities. But we've also found massive referral networks that have customers and segments that look a lot like ours that can help us to attract new customers to the capital community and to help them understand the value they can have to shop with us and flexibility and transparency with our product. And so some of those, it's a flip of a switch in terms of getting access to those which is really exciting to be able to get the flow quickly. But on top of that, though, the ma the maturity or the seasoning that needs to happen is to identify what's the right value proposition in front of that customer. What kind of conversion rate will we see and how would they perform over time? And so capital takes a really diligent approach to analyzing these and, and you know, ramping up in some cases slowly to ensure that we're having solid quality, solid performance before we really open the funnel up completely. But this is an area of major focus for us in the fourth quarter and going into 2025.\nScott Buck\n Thanks, Derek. I appreciate that and appreciate the time guys. Thank you.\nOperator\n Thank you.Your next question comes from Anthony Chukumba from Loop capital. Your line is now open.\nAnthony Chukumba\n Good morning. Thanks for taking my question. So you gave a great update on on pay tomorrow. Any update on the synchrony waterfall integration?Sure. So at, at this stage, synchrony only released their preapproval waterfall flow, which we're a part of and is active with, with a handful of merchants.They have a, you know, broader plan to extend functionality and you know, we're excited to keep partnering with them. They're a major player, especially in some of the segments that we see significant growth in. And so as you know, catapult, our platform is really extensible to any of these digital and omni channel environments that make us, you know, a partner of choice for these types of solutions, whether it be synchrony or pay tomorrow or others.And we're really leaning in to partner closely to, to help them to, to deliver new value propositions and, and to make it easy for merchants to, to access the line product offering. So stay tuned. I think there's more in 2025.Got it. That's helpful. And that's definitely encouraging news to hear about the line of credit. Just, I guess two questions there. You know, how did the terms compare to the terms and on the on the, on the current line of credit? And, and also do you have any sense for, you know, like timing in terms of potentially closing that?\nNancy Walsh\n So Anthony, this is Nancy. You know, we, we can't say a lot at this point, let's just say I'm, we're definitely pursuing market conditions both in terms of the maturity and any of the underlying covenants and, and what not. And we've been working very hard at this trying to close it as soon as possible.\nAnthony Chukumba\n Got it. Okay. And then so you know, so yeah, it looks like your shares outstanding. I was just looking at the, you know, the queue and it looked like it was up about 220,000 or so shares. Can you just fill us in like what, what is, where, how, why were those shares issued or what exactly happened with that I was just, I, Ijust wasn't clear on that.\nNancy Walsh\n So, as part of the Delaware litigation settlement, we released 168,000 shares as of November 1st or October 24th, excuse me. And that, you know, is, is for your modeling going forward that will be factored in.We anticipate as New York settles that, that will be the case as well. And you know, from the settlement arrangement that there is a a secondary over the next 12 months that we can settle either in additional shares or in cash.\nAnthony Chukumba\n Got it. And, sorry, just remind me what, what was the, what was the litigation in reference to.\nNancy Walsh\n That was the [DP] litigation just settled for $12 million. This is the stock component of it. We, we provided the cash and this is the secondary piece as we move through the process. So just Delaware has settled in terms of the shares New York will happen sometime early next year.\nAnthony Chukumba\n Okay. And so none of this is with the, with the warrants that, you issued. You know, when you, you know, when you restructure the line of credit.\nNancy Walsh\n No, those have already been issued and they're taken. So that was a while ago.\nAnthony Chukumba\n Got it. Okay. Thanks for the clarification. I appreciate it.\nNancy Walsh\n Thank you, Anthony.\nOperator\n Your next question comes from Scott Buck from HC Wainwright. Your line is now open.\nScott Buck\n Hi, sorry guys had a couple more. I wanted to throw in on fourth quarter, seasonality in terms of originations. I'm curious what percentage of the quarters originate originations generally come from that, you know, Thanksgiving, Black Friday to Cyber Monday period.\nNancy Walsh\n A fair component that as you would imagine Q4 with retailers as being the most important, quarter for them, it's going to follow with us as well, so it'll be a significant portion.\nScott Buck\n Okay, perfect.And then, last thing I, I just want to ask about the patent infringement lawsuit brought against you by one of your peers. Curious if you guys are, are able to or have any comments you want to share on that.\nDerek Medlin\n Sure, just, just quickly we're evaluating what's been recently filed and there's no current impact on our financial statements, but we intend to vigorously defend catapult in this matter and that's really all.Ready to say.\nScott Buck\n Great. I appreciate that. And again, thank you for the time today guys.\nOperator\n Thank you.Thank you. I'd now like to hand back over to the management for further remarks.\nOrlando Zayas\n Thanks, operator. Our team has done a good job developing growth opportunities throughout 2024 and I am grateful for their hard work. We have focused on the business drivers that are within our control. And as a result, we've been able to deliver nearly 40% gross originations growth excluding wayfair.We believe we are well positioned heading into the holiday season and are looking forward to delivering another quarter of growth momentum that we believe will carry us into 2025. We look forward to chatting with our investors. As Q4 progresses, please reach out to Jennifer if you have any questions or feedback. Thank you for your time.Today.\nOperator\n Thank you for attending today's call. You may now disconnect. 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