FlexShopper, Inc. Reports Third Quarter 2021 Financial Results
11/15/2021 - 04:10 PM
Q3 2021 Net Revenues Up 25.6% to $30.9 million ; Net Income of $1.7 million ; EPS of $0.05
BOCA RATON, Fla., Nov. 15, 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 September 30, 2021, highlighted by a significant improvement in bottom-line profitability.
Results for Third Quarter Ended September 30, 2021 vs. Third Quarter Ended September 30, 2020:
Total net revenues and fees increased 25.6% to $30.9 million from $24.6 million Originated 30,407 gross leases, down 35.7% from 47,317; average origination value increased to $522 from $480 Gross lease originations decreased $6.7 million , or 29.8% , to $15.9 million from $22.6 million Gross profit increased 42.3% to $12.7 million from $8.9 million Net income increased to $1.7 million compared with net income of $0.3 million Net income attributable to common stockholders of $1.1 million , or $0.05 per diluted share, compared to net loss attributable to common stockholders of $(0.3) million , or $(0.02) per diluted share Adjusted EBITDA1 increased to $4.8 million compared to $2.1 million Lease merchandise, net improved to $33.3 million from $30.7 million
¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.
Third Quarter 2021 Highlights and Recent Developments
Gross margin expanded to 41% , compared with 36% in the year-ago period. Gross margin expansion resulted from the combination of growth in gross billings while the associated costs, including depreciation and impairment, grew at a slower rate. Retail partner rollout programs continued to be impacted by COVID-19. A significant number of partner retail storefronts are operated by a low number of staff, often less than five people. As a result, employee sick days due to COVID-19 have resulted in reduced operating hours or temporary store closures, limiting location activity and thereby limiting lease originations for FlexShopper. As COVID-19 rates continue to subside, the Company expects retail partner activity to increase. Repeat customer trends continue to be favorable. During the third quarter, the Company originated $6.5 million from existing customers, representing approximately 41.3% of total gross lease originations. This compared with $8.6 million repeat customer leases in the third quarter of 2020, or 38.2% of total gross lease originations. Pre-marketing EBITDA continues to demonstrate growth. Excluding marketing expense, which is the Company’s most significant variable expense category, pre-marketing EBTDA for Q3 was $6.6 million , up from $3.8 million in the year-ago quarter. Net lease merchandise up compared with third quarter 2020 despite stimulus-driven headwinds. Representing the value of actual goods on which customers are due to make lease payments, Net Lease Merchandise improved to $33.3 million at September 30, 2021, compared with $30.7 million a year ago. Rich House, CEO, stated, “Despite the continued impact of stimulus on the consumer credit marketplace, we reported a solid third quarter with top line revenue growth and a nice increase in bottom-line profitability. A consistent theme many have heard us articulate with respect to our business is the fact that weekly payment activity provides us real-time visibility into market changes. We have recently observed falling pre-payment activity, which we think is indicative of a waning impact from stimulus programs. If this observation proves true, we expect to see increasing demand for rent to own and other consumer credit products among sub-prime consumers. Heading into the holiday shopping season we intend to ramp up our marketing spend as we normally do in support of our busiest quarter for originations.”
Mr. House continued, “We are also cautiously optimistic that COVID-19 is receding and that will allow our retail partners to resume normal operations. Our retail partner relationships are fully intact and we have been working to support them with our own sales support in the field. We recently signed an additional partner with whom we began a roll out a few days ago and look forward to our retail channel helping drive origination growth through the rest of 2021 and into 2022.”
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/46992/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 ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenues: Lease revenues and fees, net $ 29,134,709 $ 23,391,348 $ 88,876,167 $ 69,989,333 Lease merchandise sold 1,726,226 1,178,716 5,456,991 3,953,608 Total revenues 30,860,935 24,570,064 94,333,158 73,942,941 Costs and expenses: Cost of lease revenues, consisting of depreciation and impairment of lease merchandise 16,936,374 14,886,798 56,001,355 46,982,002 Cost of lease merchandise sold 1,235,601 763,728 4,300,224 2,685,599 Marketing 1,824,402 1,650,717 5,571,237 3,619,911 Salaries and benefits 2,672,864 2,499,235 8,329,188 7,324,620 Operating expenses 4,325,825 3,528,890 13,654,038 10,037,743 Total costs and expenses 26,995,066 23,329,368 87,856,042 70,649,875 Operating income 3,865,869 1,240,696 6,477,116 3,293,066 Gain on extinguishment of debt - - 1,931,825 - Interest expense including amortization of debt issuance costs (1,233,617 ) (951,336 ) (3,855,014 ) (3,214,083 ) Income before income taxes 2,632,252 289,360 4,553,927 78,983 Provision for income taxes (936,229 ) - (1,914,473 ) - Net income 1,696,023 289,360 2,639,454 78,983 Deemed dividend from exchange offer of warrants - - - 713,212 Dividends on Series 2 Convertible Preferred Shares 609,777 609,772 1,829,322 1,829,217 Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders $ 1,086,246 $ (320,412 ) $ 810,132 $ (2,463,446 ) Basic and diluted income/(loss) per common share: Basic $ 0.05 $ (0.02 ) $ 0.04 $ (0.12 ) Diluted $ 0.05 $ (0.02 ) $ 0.03 $ (0.12 ) WEIGHTED AVERAGE COMMON SHARES: Basic 21,608,878 21,358,141 21,603,209 20,872,940 Diluted 23,577,179 21,358,141 23,682,265 20,872,940
FLEXSHOPPER, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2021 2020 (unaudited) ASSETS CURRENT ASSETS: Cash $ 3,147,926 $ 8,541,232 Accounts receivable, net 19,651,250 10,032,714 Prepaid expenses 1,118,140 869,081 Lease merchandise, net 33,332,854 42,822,340 Total current assets 57,250,170 62,265,367 PROPERTY AND EQUIPMENT, net 7,227,023 5,911,696 OTHER ASSETS, net 78,347 72,316 Total assets $ 64,555,540 $ 68,249,379 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,344,185 $ 7,907,619 Accrued payroll and related taxes 629,876 352,102 Promissory notes to related parties, net of $2,546 at 2021 and net of $8,276 at 2020 of unamortized issuance costs, including accrued interest 4,802,650 4,815,546 Current portion of promissory note – Paycheck Protection Program, including accrued interest - 1,184,952 Accrued expenses 3,446,104 2,646,800 Lease liability - current portion 164,274 160,726 Total current liabilities 12,387,089 17,067,745 Loan payable under credit agreement to beneficial shareholder, net of $419,307 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion 34,205,693 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 700,199 - Lease liabilities net of current portion 1,821,935 1,947,355 Total liabilities 49,319,353 57,095,333 STOCKHOLDERS’ EQUITY Series 1 Convertible Preferred Stock, $0.001 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, $0.001 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, $0.0001 par value- authorized 40,000,000 shares, issued and outstanding 21,390,944 shares at 2021 and 21,359,945 shares at 2020 2,139 2,136 Additional paid in capital 38,286,010 36,843,326 Accumulated deficit (45,855,622 ) (48,495,076 ) Total stockholders’ equity 15,236,187 11,154,046 $ 64,555,540 $ 68,249,379
FLEXSHOPPER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended September 30, 2021 and 2020 (unaudited)
2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,639,454 $ 78,983 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and impairment of lease merchandise 56,001,355 46,982,002 Other depreciation and amortization 2,032,811 1,655,407 Amortization of debt issuance costs 177,647 234,283 Compensation expense related to issuance of stock options and warrants 1,417,699 1,052,281 Provision for doubtful accounts 30,622,139 23,643,556 Interest in kind added to promissory notes balance 9,460 7,814 Deferred income tax 700,199 - Gain on debt extinguishment (1,931,825 ) - Changes in operating assets and liabilities: Accounts receivable (40,240,674 ) (23,226,544 ) Prepaid expenses and other (248,203 ) (120,482 ) Lease merchandise (46,511,869 ) (46,577,002 ) Security deposits (8,338 ) 2,943 Lease Liabilities (2,595 ) - Accounts payable (4,563,434 ) 485,878 Accrued payroll and related taxes 277,774 62,108 Accrued expenses 788,228 273,903 Net cash provided by operating activities 1,159,828 4,555,130 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment, including capitalized software costs (3,459,424 ) (2,099,654 ) Net cash used in investing activities (3,459,424 ) (2,099,654 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loan payable under credit agreement 4,000,000 2,412,000 Repayment of loan payable under credit agreement (6,575,000 ) (7,023,250 ) Debt issuance related costs (529,608 ) - Proceeds from exercise of warrants - 131,250 Proceeds from exercise of stock options 24,988 5,267 Proceeds from promissory notes, net of fees - 1,914,100 Principal payment under finance lease obligation (5,684 ) (4,891 ) Repayment of instalment loan (8,406 ) (8,405 ) Net cash used in financing activities (3,093,710 ) (2,573,929 ) DECREASE IN CASH (5,393,306 ) (118,453 ) CASH, beginning of period $ 8,541,232 $ 6,868,472 CASH, end of period $ 3,147,926 $ 6,750,019 Supplemental cash flow information: Interest paid $ 3,702,949 $ 3,021,833 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. Adjusted EBITDA may be useful to an investor in evaluating our operating performance and liquidity because this measure:
is widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company; is a financial measurement that is used by rating agencies, lenders and other parties to evaluate our credit worthiness; and is used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting. Adjusted EBITDA is a supplemental measure of FlexShopper’s performance that is neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA should not be considered as a substitute for GAAP metrics such as operating income/ (loss), net income or any other performance measures derived in accordance with GAAP.
Key performance metrics for the three months ended September 30, 2021 and 2020 were as follows:
Three months ended September 30, 2021 2020 $ Change % Change Adjusted EBITDA: Net income $ 1,696,023 $ 289,360 $ 1,406,663 486.1 Provision for incomes taxes 936,229 - 936,229 Amortization of debt costs 43,067 50,050 (6,983 ) (14.0 ) Other amortization and depreciation 684,356 593,267 91,089 15.4 Interest expense 1,190,550 901,286 289,264 32.1 Stock compensation 265,407 169,393 96,014 56.7 Product/infrastructure expenses - 97,390 (97,390 ) Adjusted EBITDA $ 4,815,632 $ 2,100,746 $ 2,714,886 129.2
Key performance metrics for the nine months ended September 30, 2021 and 2020 were as follows:
Nine months ended September 30, 2021 2020 $ Change % Change Adjusted EBITDA: Net income $ 2,639,454 $ 78,983 $ 2,560,471 3,241.8 Provision for income taxes 1,914,473 - 1,914,473 Amortization of debt costs 177,647 234,283 (56,636 ) (24.2 ) Other amortization and depreciation 2,008,405 1,655,406 352,999 21.3 Interest expense 3,677,367 2,979,800 697,567 23.4 Stock compensation 894,892 793,241 101,651 12.8 Product/infrastructure expenses 10,000 281,830 (271,830 ) (96.5 ) Warrants compensation – consulting agreement - 139,480 (139,480 ) Gain on debt extinguishment (1,931,825 ) - (1,931,825 ) Adjusted EBITDA $ 9,390,413 $ 6,163,023 $ 3,227,390 52.4
The Company refers to Adjusted EBITDA in the above table as the Company uses this measure to evaluate operating performance and to make strategic decisions about the Company. Management believes that Adjusted EBITDA provides relevant and useful information which is widely used by analysts, investors and competitors in its industry in assessing performance.
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 Hellman
FlexShopper, Inc.
FlexShopper, Inc.
