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FlexShopper, Inc. Reports 2020 Fourth Quarter and Year End Financial Results

Q4 2020 Net Revenues Up 25.3% to $28.1 million

Lease Merchandise, net, Up 37.8% at December 31, 2020 Compared With Prior Year

BOCA RATON, Fla., March 08, 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 and fiscal year ended December 31, 2020, highlighted by continued growth in lease activity from repeat customers, along with new customer additions.

Results for Quarter Ended December 31, 2020 vs. Quarter Ended December 31, 2019:

Total net revenues and fees increased 25.3% to $28.1 million from $22.4 million
   
Originated 71,350 gross leases, up 26.5% from 56,391; average origination value increased by 8.7% to $464
   
Gross lease originations increased $8.9 million, or 37.3%, to $33.1 million from $24.1 million         
   
Net loss of $(419) thousand compared with net loss of $(1.0) million
   
Net loss attributable to common stockholders of $(1.0) million, or $(0.05) per diluted share, compared to net loss of $(1.6) million, or $(0.09) per diluted share
   
Gross profit increased 46.7% to $11.1 million from $7.5 million
   
Adjusted EBITDA1 increased to $2.6 million compared to $1.1 million

Results for Twelve Months Ended December 31, 2020 vs. Twelve Months Ended December 31, 2019:

Total net revenues and fees increased 15% to $102.1 million from $88.8 million
   
Originated 188,554 gross leases, up 23.95% from 152,122; average origination value increased by 3.4% to $468
   
Gross lease originations increased $19.4 million, or 28.2%, to $88.2 million from $68.8 million
   
Net loss of $(340) thousand compared with net income of $577 thousand
   
Net loss attributable to common stockholders, inclusive of deemed dividend expense of $0.7 million in Q1, of $(3.5) million, or $(0.17) per diluted share, compared to $(1.9) million, or $(0.11) per diluted share in the prior year, which included no deemed dividend expense
   
Gross profit increased 23.7% to $35.4 million from $28.6 million
   
Adjusted EBITDA1 improved to $8.7 million from $8.4 million
   
Lease merchandise, net, of $42.8 million at December 31, 2020 increased 37.8%

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

Fourth Quarter 2020 Highlights and Recent Developments

  Pilot program with a national retailer has been expanded from one state to four states. Following a successful introduction, the program will expand to three additional states as of March 15th.  
     
  Credit facility maturity extended along with important modifications. The Company’s credit facility was extended until April 1, 2024 and included eligibility and covenant modifications which improve liquidity.
     
  Origination growth continuing into 2021. The strong origination growth experienced in the fourth quarter has continued into 2021, with originations rising 23% in January and February combined, compared with the same two-month period in 2020.
     
  Leases originated in the fourth quarter driving favorable results in the first months of 2021. Adjusted EBITDA for January 2021 was approximately $1.59 million.
     
  Repeat customer trends continue to be favorable. During 2020, the Company originated $37.7 million from existing customers, representing approximately 43% of total gross lease originations. This compared with $27.4 million repeat customer leases in 2019, or 38% of total existing gross lease originations.

Rich House, CEO, stated, “We closed 2020 with excellent momentum as our originations in the fourth quarter grew 37.3%, resulting in year-end a Net Merchandise balance of $42.8 million, which was similarly up 37.8%. Our asset quality continued to be solid and with our recently extended credit facility, we believe we are well-positioned to continue our growth. Subsequent to year end, we expanded our pilot program with a national retailer and now are a payment option in four states with them. We are also continuing to focus on securing additional retail partners and are optimistic regarding the progress of those discussions.”

Mr. House continued, “Against the challenging backdrop that 2020 posed for everyone, our business proved its resilience as our underwriting remained solid. Additionally, our FlexShopper platform continues to be a key differentiator for our business by providing our partners a robust direct to consumer option alongside our integrationless payment option in their stores and on their websites. We took a methodical approach during the pandemic and, after thorough data analysis, resumed our emphasis on growth. In addition to growing originations with new customers, we are also having good success driving repeat business which leads to expanding margins. Combined with our return on capital framework, we expect this strategy to drive increased value for FlexShopper.”

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

Conference Call Details
Date: Tuesday, March 9, 2021
Time: 9:00 a.m. Eastern Time

Participant Dial-In Numbers:
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/43735/indexl.html. An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

  For the three months ended   For the twelve months ended
  December 31,   December 31,
    2020       2019       2020       2019  
Revenues:              
Lease revenues and fees, net   26,950,434       21,378,164       96,939,767       85,331,360  
Lease merchandise sold   1,191,139       1,083,653       5,144,747       3,458,529  
Total revenues   28,141,573       22,461,817       102,084,514       88,789,889  
               
Costs and expenses:              
Cost of lease revenues, consisting of depreciation   16,326,208       14,152,683       63,308,210       57,939,899  
and impairment of lease merchandise              
Cost of lease merchandise sold   739,281       760,792       3,424,880       2,282,036  
Marketing   2,260,152       1,618,065       5,880,063       3,649,292  
Salaries and benefits   3,116,073       2,484,537       10,440,693       8,469,334  
Operating expenses   4,367,210       3,188,853       14,404,953       11,345,091  
Total costs and expenses   26,808,924       22,204,930       97,458,799       83,685,652  
               
Operating income   1,332,649       256,887       4,625,715       5,104,237  
               
Interest expense including amortization of debt issuance costs   1,088,478       1,044,651       4,302,561       4,310,422  
Income/(loss) before income taxes   244,171       (787,764 )     323,154       793,815  
Provision for income taxes   663,050       216,400       663,050       216,400  
Net income/(loss)   (418,879 )     (1,004,164 )     (339,896 )     577,415  
               
Deemed dividend from exchange offer of warrants   -       -       713,212       -  
Dividends on Series 2 Convertible Preferred Shares   609,771       609,717       2,438,988       2,437,884  
Net income/(loss) attributable to common shareholders $ (1,028,650 )   $ (1,613,881 )   $ (3,492,096 )   $ (1,860,469 )
               
               
Basic and diluted (loss) per common share:              
Basic and diluted $ (0.05 )   $ (0.09 )   $       (0.17 )   $ (0.11 )
               
WEIGHTED AVERAGE COMMON SHARES:              
Basic and diluted   21,359,912       17,704,865       20,995,349       17,672,156  
               

FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS

    December 31,     December 31,  
    2020     2019  
             
ASSETS            
CURRENT ASSETS:            
Cash   $ 8,541,232     $ 6,868,472  
Accounts receivable, net     10,032,714       8,272,332  
Prepaid expenses     869,081       672,242  
Lease merchandise, net     42,822,340       31,063,104  
Total current assets     62,265,367       46,876,150  
                 
PROPERTY AND EQUIPMENT, net     5,911,696       5,260,407  
                 
OTHER ASSETS, net     72,316       78,335  
Total assets   $ 68,249,379     $ 52,214,892  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES:                
Accounts payable   $ 7,907,619     $ 4,567,889  
Accrued payroll and related taxes     352,102       513,267  
Current portion of promissory notes to related parties, net of $8,276 at 2020 and $5,333 at 2019 of unamortized issuance costs, including accrued interest     4,815,546       1,067,740  
Current portion of promissory note – Paycheck Protection Program     1,184,952       -  
Accrued expenses     2,646,800       1,372,901  
Lease liability - current portion     160,726       27,726  
Total current liabilities     17,067,745       7,549,523  
                 
Loan payable under credit agreement to beneficial shareholder, net of $61,617 at 2020 and $281,138 at 2019 of unamortized issuance costs and current portion     37,134,009       28,904,738  
Promissory notes to related parties, net of $24,828 at 2019 of unamortized issuance costs and current portion     -       3,725,172  
Promissory note – Paycheck Protection Program, net of current portion     741,787       -  
Accrued payroll and related taxes net of current portion     204,437       -  
Lease liabilities less current portion     1,947,355       2,067,184  
Total liabilities     57,095,333       42,246,617  
                 
STOCKHOLDERS’ EQUITY                
Series 1 Convertible Preferred Stock, $0.001 par value - designated 250,000 shares, issued and outstanding 170,332 shares at 2020 and 171,191 shares at 2019 at $5.00 stated value     851,660       855,955  
Series 2 Convertible Preferred Stock, $0.001 par value - designated 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 21,359,945 shares at 2020 and 17,783,960 shares at 2019     2,136       1,779  
Additional paid in capital     36,843,326       35,313,721  
Accumulated deficit     (48,495,076 )     (48,155,180 )
Total stockholders’ equity     11,154,046       9,968,275  
    $ 68,249,379     $ 52,214,892  

 FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2020 and 2019

    2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net (loss)/ income   $ (339,896 )   $ 577,415  
Adjustments to reconcile net (loss)/ income to net cash used in operating activities:                
Depreciation and impairment of lease merchandise     63,308,210       58,253,095  
Other depreciation and amortization     2,577,084       2,524,422  
Compensation expense related to issuance of stock options and warrants     1,388,755       723,394  
Provision for doubtful accounts     (31,930,714 )     34,838,046  
Interest in kind added to promissory notes balance     13,388       -  
Payment of interest in kind under promissory notes     -       73,073  
Payment of interest in kind under credit agreement     -       170,550  
Changes in operating assets and liabilities:                
Accounts receivable     30,170,332       (36,734,415 )
Prepaid expenses and other     (195,104 )     (352,710 )
Lease merchandise     (75,067,446 )     (56,951,502 )
Security deposits     2,943       9,210  
Accounts payable     3,339,730       (3,814,098 )
Lease liabilities     198,528       (124,319 )
Accrued payroll and related taxes     43,271       120,172  
Accrued expenses     1,283,372       218,206  
Net cash used in operating activities     (5,207,547 )     (469,461 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment, including capitalized software costs     (3,098,194 )     (2,241,172 )
Net cash used in investing activities     (3,098,194 )     (2,241,172 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from loan payable under credit agreement     15,033,000       12,396,078  
Repayment of loan payable under credit agreement     (7,023,250 )     (11,815,488 )
Proceeds from promissory notes to related parties, net of fees     -       3,440,000  
Proceeds from promissory notes- Paycheck Protection Program, net of fees     1,914,100       -  
Repayment of promissory note     -       (500,000 )
Principal payment under finance lease obligation     (6,664 )     (2,527 )
Refund of equity issuance related costs     -       61,509  
Proceeds from exercise of warrants     131,250       43,875  
Proceeds from exercise of stock options     5,662       69,406  
Repayment of installment loan     (11,207 )     (11,208 )
Debt issuance related costs     (64,390 )     (243,750 )
Net cash provided by financing activities     9,978,501       3,437,895  
                 
INCREASE IN CASH     1,672,760       727,262  
                 
CASH, beginning of period     6,868,472       6,141,210  
                 
CASH, end of period   $ 8,541,232     $ 6,868,472  

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 twelve months ended December 31, 2020 and 2019 were as follows:

  Three months ended        
  December 31,        
    2020       2019     $ Change   % Change
Adjusted EBITDA:              
Net loss   (418,879 )     (1,004,164 )     585,285     (58.3 )
Provision for income taxes   663,050       216,400       446,650     206.4  
Amortization of debt costs   71,514       94,346       (22,832 )   (24.2 )
Other amortization and depreciation   615,881       550,140       65,741     11.9  
Interest expense, excluding amortization of debt costs   1,016,964       950,305       66,659     7.0  
Stock compensation   188,020       149,927       38,093     25.4  
Product/infrastructure expense   17,457       95,513       (78,056 )   (81.7 )
Warrants compensation-consulting agreement   -       84,361              (84,361 )   (100.0 )
Executive separation agreement   396,090       -       396,090     -  
Adjusted EBITDA $ 2,550,097     $ 1,136,828     $ 1,413,269     124.32  


  Twelve months ended        
  December 31,        
    2020       2019   $ Change   % Change
Adjusted EBITDA:              
Net (loss) / income   (339,896 )     577,415         (917,311 )   (158.9 )
Provision for income taxes   663,050       216,400     446,650     206.4  
Amortization of debt costs   305,797       324,686          (18,889 )   (5.8 )
Other amortization and depreciation   2,271,287       2,199,737     71,550     3.3  
Interest expense, excluding amortization of debt costs   3,996,764       3,985,736     11,028     0.3  
Stock compensation   981,261       595,833     385,428     64.7  
Product/infrastructure expense   299,287       401,896     (102,609 )       (25.5 )
Warrants compensation-consulting agreement   139,480       127,561     11,919     9.3  
Executive separation agreement   396,090       -     396,090     -  
Adjusted EBITDA $ 8,713,120     $ 8,429,264   $ 283,856     3.4  

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
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.


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