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FlexShopper Reports 2017 Fourth Quarter and Year End Financial Results Highlighted by 41% Increase in Revenue and Improved Bottom Line Results

BOCA RATON, Fla., March 08, 2018 (GLOBE NEWSWIRE) -- FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper” or the “Company”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the quarter and fiscal year ended December 31, 2017.

Financial Highlights for the Three Months Ended December 31, 2017 vs. Three Months Ended December 31, 2016:

  • Total revenues increased 15% to $16.4 million from $14.3 million
  • Lease originations increased 11.5% to 45,451 from 40,750
  • Net loss was $4.0 million compared to a net loss of $3.5 million
  • Net loss attributable to common shareholders rose to $4.6 million or $0.87 per diluted share compared to $4.0 million or $0.77 per diluted share
  • Adjusted Gross Profit(1) increased 11.9% from $4.2 million to $4.7 million
  • Adjusted EBITDA(1) was ($2.9) million compared to ($2.7) million

Financial Highlights for the Year Ended December 31, 2017 vs. Fiscal Year Ended December 31, 2016:

  • Total revenues increased 41% to $67.0 million from $47.6 million
  • Lease originations increased 13.7% to 87,031 from 76,496
  • Net loss was $8.3 million compared to a net loss of $12.3 million
  • Net loss attributable to common shareholders decreased to $10.6 million or $2.01 per diluted share as compared to $13.5 million or $2.57 per diluted share
  • Adjusted Gross Profit(1) increased 42.1% from $10.9 million to $15.5 million
  • Adjusted EBITDA(1) was ($4.4) million compared to ($9.1) million
      (1)Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions and reconciliations of these measures under “Non-GAAP Measures”.

Fiscal Year 2017 Operating Highlights

  • Launched a faster, more scalable, and user-friendly e-commerce site contributing to an 8% increase in application rate in the fourth quarter.
  • Continued diversification and expansion of FlexShopper.com’s e-commerce marketplace with the addition of retailers such as Walmart, Overstock.com and Amazon.
  • Diversified marketing by creating an automated pay per click advertising platform utilizing campaign segmentation and machine learning bid adjustments. This channel generated a 159% increase in lease purchase volume in the fourth quarter compared to the same period in 2016.
  • Released an enhanced underwriting model that increased approval rates by 22% while maintaining portfolio performance.
  • Continued to grow a loyal customer base that repeats by providing great value and customer service.

Management Commentary
Brad Bernstein, CEO, stated, “We closed 2017 with excellent momentum as we reported top line revenue growth of 41%, driven by year over year lease origination increases. Our 2017 holiday season saw FlexShopper hit new records for monthly originations.  In 2017, we maintained a discipline of achieving our targeted customer acquisition cost which resulted in a significant reduction in marketing costs from $10.2 million in 2016 to $6.1 million in 2017. Our underwriting and marketing enhancements combined to drive growth and narrow our losses.”

Mr. Bernstein continued, “Looking ahead to 2018, we are pursuing a number of key initiatives which we expect to drive value for our shareholders.  I am excited to have our first earnings call on March 9 and provide greater visibility into some of the growth initiatives we have planned for 2018, which are all designed to scale FlexShopper to profitability and penetrate our large market opportunity.”       

       FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

    For the years ended  
    December 31,  
    2017     2016  
Revenues:            
Lease revenues and fees   $ 65,412,131     $ 46,513,235  
Lease merchandise sold     1,634,233       1,066,350  
Total revenues     67,046,364       47,579,585  
                 
Costs and expenses:                
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise     31,453,246       22,734,553  
Cost of lease merchandise sold     998,800       687,991  
Provision for doubtful accounts     19,135,207       13,281,242  
Marketing     6,094,330       10,193,052  
Salaries and benefits     7,862,714       5,946,401  
Other operating expenses     7,664,566       5,064,869  
Total costs and expenses     73,208,863       57,908,108  
                 
Operating loss     (6,162,499 )     (10,328,523 )
Interest expense including amortization of debt issuance costs     2,168,262       1,925,184  
Net loss     (8,330,761 )     (12,253,707 )
Cumulative dividends on Series 2 Convertible Preferred Shares     2,316,396       1,211,964  
Net loss attributable to common shareholders   $ (10,647,157 )   $ (13,465,671 )
                 
Basic and diluted (loss) per common share:                
Net loss   $ (2.01 )   $ (2.57
                 
Weighted average common shares outstanding:                
Basic and diluted     5,290,944       5,249,476  
                 


FLEXSHOPPER, INC.

CONSOLIDATED BALANCE SHEETS

    December 31,  
    2017     2016  
ASSETS            
CURRENT ASSETS:            
Cash   $ 4,968,915     $ 5,412,495  
Accounts receivable, net     4,259,468       2,181,787  
Prepaid expenses     321,035       361,777  
Lease merchandise, net     21,415,322       18,570,460  
Total current assets     30,964,740       26,526,519  
                 
PROPERTY AND EQUIPMENT, net     2,948,164       2,540,514  
                 
OTHER ASSETS, net     95,722       88,591  
                 
    $ 34,008,626     $ 29,155,624  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES:                
Current portion of loan payable under credit agreement to beneficial shareholder
net of $118,404 of unamortized issuance costs
  $ 14,094,096     $ -  
Accounts payable     7,702,145       3,917,747  
Accrued payroll and related taxes     404,346       296,333  
Accrued expenses     786,095       259,104  
Total current liabilities     22,986,682       4,473,184  
                 
Loan payable under credit agreement to beneficial shareholder net of $39,468 in
2017 and $631,488 in 2016 of unamortized issuance costs and current portion
    4,698,032       10,156,719  
Total liabilities     27,684,714       14,629,903  
                 
COMMITMENTS                
                 
STOCKHOLDERS’ EQUITY                
Series 1 Convertible Preferred stock, $0.001 par value- authorized 250,000 shares,
issued and outstanding 239,405 shares in 2017 and 243,065 in 2016 at $5.00
stated value
    1,197,025       1,215,325  
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 15,000,000 shares, issued and
outstanding 5,294,501 shares in 2017 and 5,287,281 in 2016
    529       529  
Additional paid in capital     22,445,691       22,298,439  
Accumulated deficit     (39,271,333 )     (30,940,572 )
Total stockholders’ equity     6,323,912       14,525,721  
    $ 34,008,626     $ 29,155,624  

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the years ended
December 31,
 
    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (8,330,761 )   $ (12,253,707 )
Adjustments to reconcile net loss to net cash (used in) operating activities:                
Depreciation and impairment of lease merchandise     31,453,246       22,734,553  
Other depreciation and amortization     2,090,581       1,566,507  
Compensation expense related to issuance of stock options and warrants     113,952       136,308  
Provision for uncollectible accounts     19,135,207       13,281,242  
Changes in operating assets and liabilities:                
Accounts receivable     (21,212,888 )     (14,710,870 )
Prepaid expenses and other     32,296       (124,707 )
Lease merchandise     (34,298,108 )     (30,100,878 )
Security deposits     (10,206 )     (1,493 )
Accounts payable     3,784,397       2,133,818  
Accrued payroll and related taxes     108,013       44,814  
Accrued expenses     535,437       (78,016 )
Net cash (used in) operating activities     (6,598,834 )     (17,372,429 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property and equipment, including capitalized software costs     (2,021,538 )     (1,855,088 )
Net cash (used in) investing activities     (2,021,538 )     (1,855,088 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Proceeds of loans from shareholder     -       1,000,000  
  Repayment of loans from shareholder     -       (1,000,000 )
  Proceeds from loan payable under credit agreement     10,450,000       4,941,359  
  Repayment of loan payable under credit agreement     (2,288,208 )     (4,172,714 )
  Proceeds from exercise of stock options     15,000       42,500  
  Proceeds from sale of Series 2 Convertible Preferred Stock, net of related costs                
  of $1,519,339 in 2016     -       20,432,661  
Net cash provided by financing operations     8,176,792       21,243,806  
                 
(DECREASE)/ INCREASE IN CASH     (443,580     2,016,289  
                 
CASH, beginning of year     5,412,495       3,396,206  
                 
CASH, end of year   $ 4,968,915     $ 5,412,495  
                 
Supplemental cash flow information:            
Interest paid   $ 1,649,795     $ 1,459,756  
Non-cash financing activities:                
Conversion of preferred stock to common stock   $ 18,300     $ 425,660  
Warrants issued to placement agent in conjunction with sale of Series 2 Preferred Stock   $ -     150,451  

Non-GAAP Measures

The Company regularly reviews a number of metrics, including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate financial projections and make strategic decisions.

    Year ended
December 31,
             
Adjusted Gross Profit   2017     2016     $ Change     % Change  
                         
Lease revenues and fees   $ 65,412,131     $ 46,513,235     $ 18,898,896       40.6  
Lease merchandise sold     1,634,233       1,066,350       567,883       53.3  
Cost of merchandise sold     (998,800     (687,991     310,809       45.2  
Provision for doubtful accounts     (19,135,207     (13,281,242     5,853,965       44.0  
Net revenues     46,912,357       33,610,352       13,302,005       39.6  
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise     (31,453,246     (22,734,553     8,718,693       38.4  
Adjusted Gross Profit   $ 15,459,111     $ 10,875,799     $ 4,583,312       42.1  
Gross profit margin     33 %     32 %                
Net revenues as a percentage of cost of lease revenue     149 %     148 %                


    Year ended
December 31,
           
Adjusted EBITDA   2017     2016     $ Change     % Change
                       
Net Loss   $ (8,330,761 )   $ (12,253,707 )   $ 3,922,946       (32.0 )
Amortization of debt costs     473,616       451,304       22,312       4.9  
Other amortization and depreciation     1,616,964       1,115,203       501,761       44.9  
Interest expense     1,694,645       1,473,880       220,765       15.0  
Stock compensation     113,952       136,308       (22,356 )     (16.4 )
Adjusted EBITDA   $ (4,431,584 )*   $ (9,077,012 )*   $ 4,645,428       (51.2 )

* Represents loss

The Company refers to Adjusted Gross Profit and Adjusted EBITDA in the above tables as it uses these measures to evaluate its operating performance and make strategic decisions about the Company. Management believes that Adjusted Gross Profit and Adjusted EBITDA provide relevant and useful information which is widely used by analysts, investors and competitors in its industry in assessing performance.

Adjusted Gross Profit represents GAAP revenue less the provision for doubtful accounts and cost of leased inventory and inventory sold as a percentage of cost of lease revenues. Adjusted Gross Profit provides us with an understanding of the results from the primary operations of its business. The Company uses Adjusted Gross Profit to evaluate its period-over-period operating performance. This measure may be useful to an investor in evaluating the underlying operating performance of its business.

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) and patent pending LTO payment method. 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. Follow us on Facebook or Twitter @FlexShopper.

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 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. 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
Senior Associate
The Equity Group
212-836-9626
jhellman@equityny.com

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com

FlexShopper, Inc.

 

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FlexShopper, Inc.