FlexShopper, Inc. Reports 2020 First Quarter Financial Results; Net Revenues Up 8.8% to $23.7 million; Gross Lease Originations up 20.6% to 36,153
Results for Quarter ended
- Net lease revenues and fees increased 8.8% to
$23.7 million from$21.8 million . FlexShopper originated 36,153 gross leases, up 20.6% from 29,972 leases.- Gross lease originations increased by
$3.1 million , or 21.9%, to$17.2 million from$14.1 million . - Average origination value increased to
$475 from$470 . - Net income was
$52,000 compared with net income of$504,000 . - Net loss attributable to common stockholders increased to
$(1.2) million , or$(0.06) per diluted share, compared to$(0.1) million , or$(0.01) per diluted share. - Gross profit increased 16.4% to
$8.0 million from$6.9 million . - Adjusted EBITDA1 decreased to
$2.0 million compared to$2.3 million .
¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures.”
First Quarter 2020 Highlights and Recent Developments
- Growth in originations and net revenues.
FlexShopper recorded growth in both gross lease originations and net revenues in the first quarter of 2020, although the pace of growth moderated later in the quarter due to the broader COVID-19 driven slowdown in economic activity.
- Payments activity remains firm. As of
March 31, 2020 ,FlexShopper had not observed a material decline in payments activity by its customers.FlexShopper continues to closely monitor payments on a weekly basis and intends to modify its marketing and underwriting guidelines as needed.
- B to B to C channel rollouts are delayed due to COVID-19. Previously-planned pilot programs with new retail partners that were originally scheduled to take place in late Q1 and Q2 2020 have been put on hold. The Company remains in close communication with its retail partners and intends to move forward with the roll-out of pilot programs as soon as practicable.
- Withdrawing 2020 financial guidance. In light of the unknown duration and ultimate impact of COVID-19 mitigation measures by governmental authorities,
FlexShopper is withdrawing previously-issued 2020 financial guidance.
Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”
| Conference Call Details |
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| Date: | |
| Time: | |
| Participant Dial-In Numbers: |
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| Domestic callers: | (877) 407-3944 |
| International callers: | (412) 902-0038 |
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/37617/indexl.html. An audio replay of the call will be archived on the Company’s website.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended |
||||||||
| 2020 | 2019 | |||||||
| Revenues: | ||||||||
| Lease revenues and fees, net | $ | 23,697,705 | $ | 21,784,779 | ||||
| Lease merchandise sold | 1,145,042 | 946,618 | ||||||
| Total revenues | 24,842,747 | 22,731,397 | ||||||
| Costs and expenses: | ||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 16,196,949 | 15,277,939 | ||||||
| Cost of lease merchandise sold | 630,781 | 565,007 | ||||||
| Marketing | 1,031,145 | 848,546 | ||||||
| Salaries and benefits | 2,548,869 | 1,758,087 | ||||||
| Operating expenses | 3,171,692 | 2,596,282 | ||||||
| Total costs and expenses | 23,579,436 | 21,045,861 | ||||||
| Operating income | 1,263,311 | 1,685,536 | ||||||
| Interest expense including amortization of debt issuance costs | 1,211,626 | 1,181,993 | ||||||
| Net Income | 51,685 | 503,543 | ||||||
| Dividends on Series 2 Convertible Preferred Shares | 609,717 | 609,168 | ||||||
| Deemed dividend from exchange offer of warrants | 713,212 | - | ||||||
| Net loss attributable to common shareholders | $ | (1,271,244 | ) | $ | (105,625 | ) | ||
| Basic and diluted (loss) per common share: | ||||||||
| Basic and diluted | $ | (0.06 | ) | $ | (0.01 | ) | ||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||
| Basic and diluted | 19,903,435 | 17,650,847 | ||||||
CONSOLIDATED BALANCE SHEETS
| 2020 | 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 5,454,520 | $ | 6,868,472 | ||||
| Accounts receivable, net | 8,459,944 | 8,272,332 | ||||||
| Prepaid expenses | 760,610 | 672,242 | ||||||
| Lease merchandise, net | 29,898,676 | 31,063,104 | ||||||
| Total current assets | 44,573,750 | 46,876,150 | ||||||
| PROPERTY AND EQUIPMENT, net | 5,414,740 | 5,260,407 | ||||||
| OTHER ASSETS, net | 74,623 | 78,335 | ||||||
| $ | 50,063,113 | $ | 52,214,892 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 3,161,491 | $ | 4,567,889 | ||||
| Accrued payroll and related taxes | 293,004 | 513,267 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of |
2,294,829 | - | ||||||
| Promissory notes to related parties, net of |
1,212,777 | 1,067,740 | ||||||
| Accrued expenses | 1,600,988 | 1,372,901 | ||||||
| Lease liability - current portion | 129,203 | 27,726 | ||||||
| Total current liabilities | 8,692,292 | 7,549,523 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of |
25,243,117 | 28,904,738 | ||||||
| Promissory notes to related parties, net of |
3,729,310 | 3,725,172 | ||||||
| Lease liabilities less current portion | 2,031,370 | 2,067,184 | ||||||
| Total liabilities | 39,696,089 | 42,246,617 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series 1 Convertible Preferred Stock, |
855,955 | 855,955 | ||||||
| Series 2 Convertible Preferred Stock, |
21,952,000 | 21,952,000 | ||||||
| Common stock, |
2,135 | 1,779 | ||||||
| Additional paid in capital | 35,660,429 | 35,313,721 | ||||||
| Accumulated deficit | (48,103,495 | ) | (48,155,180 | ) | ||||
| Total stockholders’ equity | 10,367,024 | 9,968,275 | ||||||
| $ | 50,063,113 | $ | 52,214,892 | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended
(unaudited)
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 51,685 | $ | 503,543 | ||||
| Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 16,196,949 | 15,277,939 | ||||||
| Other depreciation and amortization | 554,359 | 584,968 | ||||||
| Compensation expense related to issuance of stock options and warrants | 215,814 | 36,729 | ||||||
| Provision for doubtful accounts | 7,682,927 | 7,344,944 | ||||||
| Interest in kind added to promissory notes balance | 141,038 | 167,119 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (7,870,539 | ) | (7,479,319 | ) | ||||
| Prepaid expenses and other | (87,873 | ) | (17,624 | ) | ||||
| Lease merchandise | (15,032,521 | ) | (11,095,183 | ) | ||||
| Security deposits | 2,943 | (60,000 | ) | |||||
| Accounts payable | (1,406,398 | ) | (5,211,226 | ) | ||||
| Accrued payroll and related taxes | (220,263 | ) | (197,565 | ) | ||||
| Accrued expenses | 330,408 | (320,979 | ) | |||||
| Net cash provided by (used in) operating activities | 558,529 | (466,654 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (646,414 | ) | (553,184 | ) | ||||
| Net cash used in investing activities | (646,414 | ) | (553,184 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Principal payment under finance lease obligation | (1,515 | ) | - | |||||
| Refund of equity issuance related costs | - | 13,147 | ||||||
| Proceeds from exercise of warrants | 131,250 | - | ||||||
| Proceeds from promissory notes, net of fees | - | 2,940,000 | ||||||
| Proceeds from loan payable under credit agreement | 1,900,000 | 1,241,328 | ||||||
| Repayment of loan payable under credit agreement | (3,353,000 | ) | (6,665,989 | ) | ||||
| Repayment of installment loan | (2,802 | ) | (2,802 | ) | ||||
| Net cash used in financing activities | (1,326,067 | ) | (2,474,316 | ) | ||||
| DECREASE IN CASH | (1,413,952 | ) | (3,494,154 | ) | ||||
| CASH, beginning of period | $ | 6,868,472 | $ | 6,141,210 | ||||
| CASH, end of period | $ | 5,454,520 | $ | 2,647,056 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 985,763 | $ | 993,544 | ||||
| Deemed dividend from exchange offer of warrants | $ | 713,212 | $ | - | ||||
| Conversion of preferred stock to common stock | $ | - | $ | 341,070 | ||||
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 months ended
| Three months ended |
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| 2020 | 2019 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 51,685 | $ | 503,543 | $ | (451,858 | ) | (89.7 | ) | |||||||
| Amortization of debt costs | 94,346 | 60,265 | 34,081 | 56.6 | ||||||||||||
| Other amortization and depreciation | 460,013 | 524,703 | (64,690 | ) | (12.3 | ) | ||||||||||
| Interest expense | 1,117,281 | 1,121,728 | (4,447 | ) | (0.4 | ) | ||||||||||
| Stock compensation | 171,815 | 25,529 | 146,286 | 573.0 | ||||||||||||
| Non-recurring product/infrastructure expenses | 104,663 | 92,297 | 12,366 | 13.4 | ||||||||||||
| Adjusted EBITDA | $ | 1,999,803 | $ | 2,328,065 | $ | (328,262 | ) | - | ||||||||
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
Forward-Looking Statements
All statements in this release that are not based on historical fact are “forward-looking statements” within the meaning of 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 impact of the COVID-19 pandemic on our business and industry, and the other risks and uncertainties described in the Risk Factors and Management’s Discussion and Analysis sections of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The forward-looking statements made in this release speak only as of the date of this release, and
Contact:
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com
Investor Relations
ir@flexshopper.com
Source: FlexShopper, Inc.