FlexShopper, Inc. Reports Second Quarter 2021 Financial Results
08/09/2021 - 04:15 PM
Q2 2021 Net Revenues Up 25.1% to $30.7 million ; Diluted EPS of $0.01
Lease Merchandise, net, Up 44.3% at June 30, 2021 Compared With Prior Year
BOCA RATON, Fla., Aug. 09, 2021 (GLOBE NEWSWIRE) -- FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the quarter ended June 30, 2021, highlighted by continued growth in lease activity from repeat customers, along with new customer additions.
Results for Quarter Ended June 30, 2021 vs. Quarter Ended June 30, 2020:
Total net revenues and fees increased 25.1% to $30.7 million from $24.5 million Originated 38,531 gross leases, up 13.5% from 33,941; average origination value increased to $516 from $452 Gross profit increased 51% to $11.1 million from $7.3 million Net income of $0.9 million compared with net loss of $(262) thousand Net income attributable to common stockholders of $0.3 million , or $0.01 per diluted share, compared to net loss attributable to common stockholders of $872 thousand , or $(0.04) per diluted share Adjusted EBITDA1 increased to $2.1 million compared to $2.0 million Lease merchandise, net, increase 44.3% to $37.6 from $26.1 million Results for Six Months Ended June 30, 2021 vs. Six Months Ended June 30, 2020:
Total net revenues and fees increased 28.6% to $63.5 million from $49.4 million Originated 77,830 gross leases, up 11.1% from 70,068; average origination value increased to $524 from $464 Gross profit increased 39% to $21.3 million from $15.4 million Net income of $0.9 million compared with net loss of $(210) thousand Net loss attributable to common stockholders of $(276.1) thousand , or $(0.01) per diluted share, compared to net loss attributable to common stockholders of $(2.1) million , or $(0.10) per diluted share Adjusted EBITDA1 increased to $4.6 million compared to $4.1 million ¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.
Second Quarter 2021 Highlights and Recent Developments
Pilot program with a national retailer set to expand further. FlexShopper has firm plans to continue its rollout with a national retail partner following its expansion to over 300 storefronts in March. The next stage of expansion will more than double the number of storefronts offering FlexShopper’s rent to own option at checkout. The expansion is expected to occur during the third quarter, with the retail partner adjusting final timing due to recent surges in COVID-19 infection rates.Additional pilot program to launch with another diversified national retailer. During the second quarter, FlexShopper agreed to a 4-state pilot with a second national-footprint, multi-product retailer. The pilot is expected to launch in August 2021 and run through year-end.Co-branded website initiative progressing well. The Company previously discussed its efforts to collaborate with partners by developing co-branded online retail storefronts. FlexShopper is pleased to report that the company is acquiring customers through this channel at customer acquisition costs (“CAC”) that generate an attractive return on capital.Driving repeat customer activity remains a focus. During the second quarter, the Company originated approximately 49% of gross origination dollars from existing customers.Pre-marketing EBITDA continues to demonstrate growth. Excluding marketing expense, which is the Company’s most significant variable expense category, pre-marketing EBITDA for Q2 was $4.0 million , up from $2.9 million in the prior year quarter.Net lease merchandise up compared with prior year. Representing the value of actual goods on which customers are due to make lease payments, Net Lease Merchandise grew 44.3% to $37.6 million at June 30, 2021, compared with $26.1 million a year ago. The current Net Lease Merchandise level also compares favorably versus a pre-pandemic level on June 30, 2019, of $24.4 million .Rich House, CEO, stated, “We are pleased with our Q2 results and the progress on our strategic initiatives despite what continues to be a challenging economic environment for our retail partners due to the recent uptick in COVID-19 infection rates. Overall, our originations continue to grow, with our Net Lease Merchandise balance up over 44% from a year ago. While comparisons to 2020 are obviously impacted by the pandemic and significant government stimulus last year and into early 2021, the Net Lease Merchandise balance is also up significantly from pre-pandemic levels.”
Mr. House continued, “Our retail channel strategy continues to advance. The pilot program with a national retailer that we have reported on during our recent calls is set to more than double the number or storefronts in the near-term while we have also launched a new pilot with another diversified national retailer. In addition, our recent push to collaborate with retail partners in developing co-branded websites is generating new lease customers at attractive customer acquisition costs.”
Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”
Conference Call Details
Participant Dial-In Numbers:
Access by Webcast
The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at www.flexshopper.com or by clicking on the conference call link: https://78449.themediaframe.com/dataconf/productusers/fpay/mediaframe/46043/indexl.html . An audio replay of the call will be archived on the Company’s website.
FLEXSHOPPER, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months For the six months ended ended June 30, June 30, 2021 2020 2021 2020 Revenues: Lease revenues and fees, net $ 28,636,794 $ 22,900,280 $ 59,741,458 $ 46,597,985 Lease merchandise sold 2,051,759 1,629,850 3,730,765 2,774,892 Total revenues 30,688,553 24,530,130 63,472,223 49,372,877 Costs and expenses: Cost of lease revenues, consisting of depreciation and impairment of lease merchandise 17,864,471 15,898,255 39,064,981 32,095,204 Cost of lease merchandise sold 1,738,180 1,291,090 3,064,623 1,921,871 Marketing 1,914,095 938,049 3,746,835 1,969,194 Salaries and benefits 2,747,005 2,276,516 5,656,324 4,825,385 Operating expenses 5,213,789 3,337,162 9,328,213 6,508,853 Total costs and expenses 29,477,540 23,741,072 60,860,976 47,320,507 Operating income 1,211,013 789,058 2,611,247 2,052,370 Gain on extinguishment of debt 1,931,825 - 1,931,825 - Interest expense including amortization of debt issuance costs (1,222,400 ) (1,051,120 ) (2,621,397 ) (2,262,747 ) Income before income taxes 1,920,438 (262,062 ) 1,921,675 (210,377 ) Provision for income taxes (978,244 ) - (978,244 ) - Net income/(loss) 942,194 (262,062 ) 943,431 (210,377 ) Deemed dividend from exchange offer of warrants - - - (713,212 ) Dividends on Series 2 Convertible Preferred Shares (609,773 ) (609,728 ) (1,219,545 ) (1,219,445 ) Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders $ 332,421 (871,790 ) (276,114 ) (2,143,034 ) Basic and diluted income/(loss) per common share: Basic $ 0.02 (0.04 ) (0.01 ) (0.10 ) Diluted 0.01 $ (0.04 ) (0.01 ) (0.10 ) WEIGHTED AVERAGE COMMON SHARES: Basic 21,605,461 21,351,914 21,375,096 20,627,674 Diluted 23,603,477 21,351,914 21,375,096 20,627,674
FLEXSHOPPER, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2021 2020 (unaudited) ASSETS CURRENT ASSETS: Cash $ 5,147,213 $ 8,541,232 Accounts receivable, net 13,150,666 10,032,714 Prepaid expenses 1,043,917 869,081 Lease merchandise, net 37,633,318 42,822,340 Total current assets 56,975,114 62,265,367 PROPERTY AND EQUIPMENT, net 5,875,217 5,911,696 OTHER ASSETS, net 66,498 72,316 Total assets $ 62,916,829 $ 68,249,379 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,802,071 $ 7,907,619 Accrued payroll and related taxes 790,106 352,102 Promissory notes to related parties, net of $3,820 at 2021 and net of $8,276 at 2020 of unamortized issuance costs, including accrued interest 4,802,626 4,815,546 Current portion of promissory note – Paycheck Protection Program, including accrued interest - 1,184,952 Accrued expenses 2,500,944 2,646,800 Lease liability - current portion 156,144 160,726 Total current liabilities 12,051,891 17,067,745 Loan payable under credit agreement to beneficial shareholder, net of $458,058 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion 35,266,942 37,134,009 Promissory note – Paycheck Protection Program, net of current portion - 741,787 Accrued payroll and related taxes net of current portion 204,437 204,437 Deferred income tax liability 378,859 - Lease liabilities net of current portion 1,865,762 1,947,355 Total liabilities 49,767,891 57,095,333 STOCKHOLDERS’ EQUITY Series 1 Convertible Preferred Stock, $0.00 1 par value - authorized 250,000 shares, issued and outstanding 170,332 shares at $5.00 stated value 851,660 851,660 Series 2 Convertible Preferred Stock, $0.00 1 par value - authorized 25,000 shares, issued and outstanding 21,952 shares at $1,000 stated value 21,952,000 21,952,000 Common stock, $0.00 01 par value- authorized 40,000,000 shares, issued and outstanding 21,381,278 shares at 2021 and 21,359,945 shares at 2020 2,138 2,136 Additional paid in capital 37,894,784 36,843,326 Accumulated deficit (47,551,645 ) (48,495,076 ) Total stockholders’ equity 13,148,937 11,154,046 $ 62,916,829 $ 68,249,379
FLEXSHOPPER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended June 30, 2021 and 2020 (unaudited)
2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $ 943,431 $ (210,377 ) Adjustments to reconcile net income/(loss) to net used in/cash provided by operating activities: Depreciation and impairment of lease merchandise 39,064,981 32,095,204 Other depreciation and amortization 1,324,049 1,062,139 Amortization of debt issuance costs 134,580 184,233 Compensation expense related to issuance of stock options and warrants 1,034,334 763,328 Provision for doubtful accounts 18,804,705 15,564,198 Interest in kind added to promissory notes balance 9,461 2,989 Deferred income tax 378,859 - Gain on debt extinguishment (1,931,825 ) - Changes in operating assets and liabilities: Accounts receivable (21,922,656 ) (15,261,863 ) Prepaid expenses and other (174,222 ) 81,916 Lease merchandise (33,875,960 ) (27,113,342 ) Security deposits 4,280 2,943 Lease Liabilities (2,598 ) 197,443 Accounts payable (4,105,547 ) (1,488,607 ) Accrued payroll and related taxes 438,010 84,922 Accrued expenses (158,248 ) (170,185 ) Net cash used in/provided by operating activities (34,366 ) 5,794,941 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment, including capitalized software costs (1,367,154 ) (1,399,360 ) Net cash used in investing activities (1,367,154 ) (1,399,360 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loan payable under credit agreement 3,500,000 2,412,000 Repayment of loan payable under credit agreement (4,975,000 ) (5,864,250 ) Debt issuance related costs (526,565 ) - Proceeds from exercise of warrants - 131,250 Proceeds from exercise of stock options 17,126 2,634 Proceeds from promissory notes, net of fees - 1,914,100 Principal payment under finance lease obligation (2,457 ) (3,175 ) Repayment of instalment loan (5,603 ) (5,603 ) Net cash used in financing activities (1,992,499 ) (1,413,044 ) INCREASE/(DECREASE) IN CASH (3,394,019 ) 2,982,537 CASH, beginning of period $ 8,541,232 $ 6,868,472 CASH, end of period $ 5,147,213 $ 9,851,009 Supplemental cash flow information: Interest paid $ 2,506,589 $ 2,120,502 Deemed dividend from exchange offer of warrants $ - $ 713,212 Conversion of preferred stock to common stock $ - $ 4,295
Non-GAAP Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Adjusted EBITDA represents net income before interest, stock-based compensation, taxes, depreciation (other than depreciation of leased inventory), amortization, and one-time or non-recurring items. We believe that Adjusted EBITDA provides us with an understanding of one aspect of earnings before the impact of investing and financing charges and income taxes.
Key performance metrics for the three and six months ended June 30, 2021 and 2020 were as follows:
Three months ended June 30, 2021 2020 $ Change % Change Adjusted EBITDA: Net income/ (loss) $ 942,194 $ (262,062 ) $ 1,204,256 459.5 Provision for income taxes 978,244 - 978,244 Amortization of debt costs 42,877 89,888 (47,011 ) (52.3 ) Other amortization and depreciation 672,656 602,126 70,530 11.7 Interest expense 1,179,523 961,233 218,290 22.7 Stock compensation 249,222 452,033 (202,811 ) (44.9 ) Product/ infrastructure expenses - 63,376 (63,376 ) Warrants compensation – consulting agreement - 95,481 (95,481 ) Gain on debt extinguishment (1,931,825 ) - (1,931,825 ) Adjusted EBITDA $ 2,132,891 $ 2,002,075 $ 130,816 6.5
Six months ended June 30, 2021 2020 $ Change % Change Adjusted EBITDA: Net income/ (loss) $ 943,431 $ (210,377 ) $ 1,153,808 548.4 Provision for income taxes 978,244 - 978,244 Amortization of debt costs 134,580 184,233 (49,653 ) (27.0 ) Other amortization and depreciation 1,324,049 1,062,139 261,910 24.7 Interest expense 2,486,817 2,078,514 408,303 19.6 Stock compensation 629,486 623,848 5,638 0.9 Product/infrastructure expenses 10,000 184,440 (174,440 ) (94.6 ) Warrants compensation – consulting agreement - 139,480 (139,480 ) Gain on debt extinguishment (1,931,825 ) - (1,931,825 ) Adjusted EBITDA $ 4,574,782 $ 4,062,277 $ 512,505 12.6
About FlexShopper
FlexShopper, LLC, a wholly owned subsidiary of FlexShopper, Inc. (FPAY), is a financial and technology company that provides brand name electronics, home furnishings and other durable goods to consumers on a lease-to-own (LTO) basis through its e-commerce marketplace (www.FlexShopper.com) as well as its patented and patent pending systems. FlexShopper also provides LTO technology platforms to retailers and e-retailers to facilitate transactions with consumers that want to acquire their products, but do not have sufficient cash or credit. FlexShopper approves consumers utilizing its proprietary consumer screening model, collects from consumers under an LTO contract and funds the LTO transactions by paying merchants for the goods.
Forward-Looking Statements
All statements in this release that are not based on historical fact are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include the Company’s financial guidance for fiscal year 2019. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “seek,” “intend,” “plan,” “goal,” “estimate,” “anticipate,” or other comparable terms. Examples of forward-looking statements include, among others, statements we make regarding expectations of lease originations during the holiday season, the expansion of our lease-to-own program; expectations concerning our partnerships with retail partners; investments in, and the success of, our underwriting technology and risk analytics platform; our ability to collect payments due from customers; expected future operating results and; expectations concerning our business strategy. Forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, as a result of various factors including, among others, the following: our limited operating history, limited cash and history of losses; our ability to obtain adequate financing to fund our business operations in the future; the failure to successfully manage and grow our FlexShopper.com e-commerce platform; our ability to maintain compliance with financial covenants under our credit agreement; our dependence on the success of our third-party retail partners and our continued relationships with them; our compliance with various federal, state and local laws and regulations, including those related to consumer protection; the failure to protect the integrity and security of customer and employee information; and the other risks and uncertainties described in the Risk Factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections of our Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q. The forward-looking statements made in this release speak only as of the date of this release, and FlexShopper assumes no obligation to update any such forward-looking statements to reflect actual results or changes in expectations, except as otherwise required by law.
Contact:
Jeremy Hellmanjhellman@equityny.com
FlexShopper, Inc.ir@flexshopper.com
FlexShopper, Inc.
