FlexShopper, Inc. Reports Third Quarter 2022 Financial Results


BOCA RATON, Fla., Nov. 10, 2022 (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, 2022.

Results for Quarter Ended September 30, 2022 vs. Quarter Ended September 30, 2021:

  • Total fundings increased 60.1% to $25.8 million from $16.1 million consisting of gross lease originations decreasing from $15.9 to $15.7 million and loan participations up ~4,350% from $226 thousand to $10.1 million
  • Total net lease revenues and fees decreased 20.3% to $24.5 million from $30.7 million
  • Total net loan revenues and fees increased 1,249% to $1.6 million from $121 thousand
  • Gross profit decreased 49.8% to $6.4 million from $12.7 million
  • Adjusted EBITDA1 decreased to $(2.9) million compared to $4.8 million
  • Net loss of $(6.3) million compared with net income of $1.7 million
  • Net loss attributable to common stockholders of $(6.9) million, or $(0.32) per diluted share, compared to net income attributable to common stockholders of $1.1 million, or $0.05 per diluted share

Results for Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021:

  • Total fundings increased 38.3% to $78.9 million from $57.0 million consisting of gross lease originations decreasing from $56.6 to $51.9 million and loan participations up ~6,753% from $395 thousand to $27.0 million
  • Total net lease revenues and fees decreased 12.1% to $82.7 million from $94.2 million
  • Total net loan revenues and fees increased 4,864% to $8.9 million from $179 thousand
  • Gross profit decreased 2.2% to $33.3 million from $34.0 million
  • Adjusted EBITDA1 decreased to $3.4 million compared to $9.4 million
  • Net income of $5.7 million compared with net income of $2.6 million
  • Net income attributable to common stockholders of $3.9 million, or $0.17 per diluted share, compared to net income attributable to common stockholders of $810 thousand, or $0.03 per diluted share

¹ Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.

“FlexShopper is feeling the same headwind on consumer demand experienced by both traditional retailers and our peers in this challenging economic environment. As a result, we are observing a decline in response rates and approval rates which has created a gap in our near-term earnings. Despite the decrease in the online marketplace business, our retail partnership channel and repeat volume continue to grow in this environment.” said Richard House, CEO of FlexShopper. 

FlexShopper CEO, Richard House, FlexShopper CFO, Russ Heiser and FlexShopper COO, John Davis will discuss the Company’s recent quarter, including financial and operating results, and strategic outlook on the Company’s earnings conference call and webcast.

Conference Call and Webcast Details

Conference call

Date: Friday, November 11, 2022
Time: 9:30 a.m. Eastern Time

Participant Dial-In Numbers:

Domestic callers: (877) 407-2988
International callers: (201) 389-0923

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://event.choruscall.com/mediaframe/webcast.html?webcastid=Fpl90J10

An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 For the three months ended
September 30,
  For the nine months ended
September 30,
 
 2022  2021  2022  2021 
            
Revenues:           
Lease revenues and fees, net$24,512,086  $30,740,119  $82,746,874  $94,153,920 
Loan revenues and fees, net of changes in fair value 1,629,365   120,816   8,897,964   179,238 
Total revenues 26,141,451   30,860,935   91,644,838   94,333,158 
                
Costs and expenses:               
Cost of lease revenues and merchandise sold 18,746,897   18,005,170   56,114,813   59,959,590 
Loan origination costs and fees 1,027,097   166,805   2,256,838   341,989 
Marketing 2,393,185   1,824,402   8,178,120   5,571,237 
Salaries and benefits 2,820,033   2,672,864   8,799,395   8,329,188 
Operating expenses 5,702,800   4,325,825   17,124,288   13,654,038 
Total costs and expenses 30,690,012   26,995,066   92,473,454   87,856,042 
                
Operating (loss)/ income (4,548,561)  3,865,869   (828,616)  6,477,116 
                
Gain on extinguishment of debt -   -   -   1,931,825 
Interest expense including amortization of debt
issuance costs
 (3,030,142)  (1,233,617)  (7,336,048)  (3,855,014)
(Loss)/income before income taxes (7,578,703)  2,632,252   (8,164,664)  4,553,927 
Benefit /(expense) from income taxes 1,298,269   (936,229)  13,892,516   (1,914,473)
Net (loss)/ income (6,280,434)  1,696,023   5,727,852   2,639,454 
                
Dividends on Series 2 Convertible Preferred Shares 609,778   609,777   1,829,332   1,829,322 
Net income/(loss) attributable to common and Series
1 Convertible Preferred shareholders
$(6,890,212)  1,086,246   3,898,520   810,132 
                
Basic and diluted income/(loss) per common share:               
Basic$(0.32) $0.05  $0.18  $0.04 
Diluted$(0.32) $0.05  $0.17  $0.03 
                
WEIGHTED AVERAGE COMMON SHARES:               
Basic 21,681,853   21,383,647   21,611,879   21,377,978 
Diluted 21,681,853   23,577,179   22,403,447   23,682,265 
                


FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 September 30,  December 31, 
 2022  2021 
 (unaudited)    
ASSETS     
CURRENT ASSETS:     
Cash$5,274,219  $4,986,559 
Restricted cash 481,867   108,083 
Lease receivables, net 33,425,123   25,473,154 
Loan receivables at fair value 26,591,546   3,560,108 
Prepaid expenses and other assets 1,478,800   1,823,256 
Lease merchandise, net 30,652,824   40,942,112 
Total current assets 97,904,379   76,893,272 
        
Property and equipment, net 7,416,249   5,490,434 
Right of use asset, net 1,445,159   1,553,330 
Other assets, net 1,726,443   875,020 
Deferred tax asset, net 13,607,949   - 
Total assets$122,100,179  $84,812,056 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY       
CURRENT LIABILITIES:       
Accounts payable$3,875,469  $7,982,180 
Accrued payroll and related taxes 703,465   391,078 
Promissory notes to related parties, net of $0 at 2022 and $1,274 at 2021 of unamortized issuance costs, including accrued interest 1,182,585   1,053,088 
Accrued expenses 3,243,570   2,987,646 
Lease liability - current portion 198,853   172,732 
Total current liabilities 9,203,942   12,586,724 
        
Loan payable under credit agreement to beneficial shareholder, net of $338,113 at
2022 and $413,076 at 2021 of unamortized issuance costs
 77,261,887   50,061,924 
Promissory notes to related parties, net of current portion 10,750,000   3,750,000 
Deferred income tax liability 178,160   495,166 
Lease liabilities net of current portion 1,623,211   1,774,623 
Total liabilities 99,017,200   68,668,437 
        
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 21,750,804 shares at September 30, 2022 and 21,442,278 shares at
December 31, 2021
 2,176   2,144 
Additional paid in capital 39,771,593   38,560,117 
Accumulated deficit (39,494,450)  (45,222,302)
Total stockholders’ equity 23,082,979   16,143,619 
 $122,100,179  $84,812,056 
        

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2022 and 2021
(unaudited)

 2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net income$5,727,852  $2,639,454 
Adjustments to reconcile net income to net cash (used in)/ provided by operating
activities:
       
Depreciation and impairment of lease merchandise 56,114,813   59,959,590 
Other depreciation and amortization 3,303,591   2,032,811 
Amortization of debt issuance costs 163,169   177,647 
Compensation expense related to stock-based compensation and warrants 950,003   1,417,699 
Provision for doubtful accounts 42,639,102   30,566,352 
Proceeds from sale of lease receivables 7,611,586   - 
Interest in kind added to promissory notes balance 128,223   9,460 
Deferred income tax (13,924,955)  700,199 
Gain on debt extinguishment -   (1,931,825)
Net changes in the fair value of loan receivables at fair value 1,938,570   54,236 
Changes in operating assets and liabilities:       
Lease receivables (58,202,657)  (39,915,536)
Loan receivables at fair value (24,970,008)  (490,995)
Prepaid expenses and other assets 344,766   (80,795)
Lease merchandise (45,825,525)  (50,470,104)
Security deposits (4,956)  (8,338)
Lease liabilities (8,732)  (2,595)
Accounts payable (4,106,711)  (4,563,434)
Accrued payroll and related taxes 312,387   277,774 
Accrued expenses 264,019   788,228 
Net cash (used in)/ provided by operating activities (27,545,463)  1,159,828 
        
CASH FLOWS FROM INVESTING ACTIVITIES       
Purchases of property and equipment, including capitalized software costs (4,855,150)  (2,998,044)
Purchases of data costs (1,220,722)  (461,379)
Net cash used in investing activities (6,075,872)  (3,459,424)
        
CASH FLOWS FROM FINANCING ACTIVITIES       
Proceeds from loan payable under credit agreement 32,855,000   4,000,000 
Repayment of loan payable under credit agreement (5,730,000)  (6,575,000)
Debt issuance related costs (86,932)  (529,608)
Proceeds from exercise of stock options 261,505   24,988 
Proceeds from promissory notes 7,000,000   - 
Principal payment under finance lease obligation (8,388)  (5,684)
Repayment of installment loan (8,406)  (8,406)
Net cash provided by/(used in) financing activities 34,282,779   (3,093,710)
        
INCREASE / (DECREASE) IN CASH and RESTRICTED CASH 661,444   (5,393,306)
        
CASH and RESTRICTED CASH, beginning of period 5,094,642   8,541,232 
        
CASH and RESTRICTED CASH, end of period$5,756,086  $3,147,926 
        
Supplemental cash flow information:       
Interest paid$6,828,663  $3,702,949 
        

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 nine months ended September 30, 2022 and 2021 were as follows:

 Three months ended
September 30,
       
 2022  2021  $ Change  % Change 
Adjusted EBITDA:           
Net (loss)/income$(6,280,434) $1,696,023  $(7,976,457)  (470.3)
Income taxes (1,298,269)  936,229   (2,234,498)  (238.7)
Amortization of debt issuance costs 56,283   43,067   13,216   30.7 
Other amortization and depreciation 1,244,267   708,762   535,505   75.6 
Interest expense 2,973,859   1,190,550   1,783,309   149.8 
Stock-based compensation 387,298   265,407   121,891   45.9 
Adjusted EBITDA$(2,916,996) $4,840,038  $(7,757,034)  (160.3)


 Nine months ended
September 30,
       
 2022  2021  $ Change  % Change 
Adjusted EBITDA:           
Net income$5,727,852  $2,639,454  $3,088,398   117.0 
Income taxes (13,892,516)  1,914,473   (15,806,989)  (825.7)
Amortization of debt issuance costs 163,169   177,647   (14,478)  (8.1)
Other amortization and depreciation 3,303,590   2,032,811   1,270,779   62.5 
Interest expense 7,172,879   3,677,367   3,495,512   95.1 
Stock-based compensation 950,003   894,892   55,111   6.2 
Product/ infrastructure expenses -   10,000   (10,000)    
Gain on debt extinguishment -   (1,931,825)  1,931,825   - 
Adjusted EBITDA$3,424,977  $9,414,819  $(5,989,842)  (63.6)
                

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 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. 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:

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com 

FlexShopper, Inc.