FlexShopper, Inc. Reports 2021 Fourth Quarter and Year End Financial Results

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FY 2021 Net Revenues Up 22.9% to $125.4 million; Net Income of $3.3 million

BOCA RATON, Fla., March 30, 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 and fiscal year ended December 31, 2021, highlighted by increase in revenue and net income.

Results for Quarter Ended December 31, 2021 vs. Quarter Ended December 31, 2020:

  • Total net revenues and fees increased 10.5% to $31.1 million from $28.1 million

  • Originated 51,071 gross leases, down 28.4% from 71,350; average origination value increased by 13.6% to $527

  • Net income of $633 thousand compared with net loss of $(419) thousand

  • Net income attributable to common stockholders of $23 thousand, or $0.00 per diluted share, compared to net loss of $(1.0) million, or $(0.05) per diluted share

  • Gross profit increased 10.3% to $12.2 million from $11.1 million

  • Adjusted EBITDA1 decreased to $2.0 million compared to $2.6 million

Results for Twelve Months Ended December 31, 2021 vs. Twelve Months Ended December 31, 2020:

  • Total net revenues and fees increased 22.9% to $125.4 million from $102.1 million

  • Originated 159,217 gross leases, down 15.5% from 188,468; average origination value increased by 12.0% to $524

  • Net income of $3.3 million compared with net loss of $(340) thousand

  • Net income attributable to common stockholders of $0.8 million, or $0.04 per diluted share, compared to $(3.5) million, or $(0.17) per diluted share in the prior year.

  • Gross profit increased 30.8% to $46.2 million from $35.4 million

  • Adjusted EBITDA1 improved to $11.4 million from $8.7 million

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

Fourth Quarter 2021 Highlights and Recent Developments

  • Retail partner rollouts resuming as pandemic impacts recede. FlexShopper currently expects to add over 500 partner store locations during the first half of the year as new and existing pilot programs expand.

  • Expanded borrowing capacity provides capital to support expected growth. The Company recently announced an expansion of its credit facility from $52 million to $82.5 million. The additional capacity is expected to support continued growth of the business.

  • Company expects Adjusted EBITDA growth rate to continue or accelerate. FlexShopper expects demand for alternative finance solutions among subprime customers to continue normalizing in 2022 and, as a result, expects 2022 Adjusted EBITDA to grow at or above the rate in 2021.

Rich House, CEO, stated, “2021 was a challenging year across our industry as subprime consumers benefitted from a range of government stimulus programs which, in turn, reduced their demand for alternative financing products and solutions. This negatively impacted our new lease originations for the full year. Despite the headwind for much of the year, we were able to grow our bottom line. For the year, we reported net income of $0.8 million after accounting for non-cash preferred dividend accrual, compared with a loss of $3.5 million in the prior year, with Adjusted EBITDA growing 31% to $11.4 million. Importantly, we achieved this improved profitability without compromising our underwriting. Across our industry we saw many participants do the opposite to maintain volume in the face of reduced demand for alternative financing solutions resulting from massive government stimulus. Those competitors now appear to be reversing course, which is a positive for FlexShopper.”

Mr. House continued, “As the recent COVID surge has receded, we have seen our industry steadily returning to normal. Notably, we have seen existing and new retail partners eager to resume rolling out our lease to own solution. We currently expect to add over 500 stores over the first half of the year, consisting of new pilot programs and other full roll outs. We have also recently introduced a consumer lending product to further support our retail partners. Lease to own contracts are limited to durable goods, leaving a gap for our tire store partners when subprime customers need service work such as wheel alignments. Our new lending product addresses this need, providing a value-added solution for our partners and their customers. Initial interest in this product has been positive and we expect to see continued growth through the year, eventually creating a material impact on our financial results.”

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

Conference Call Details

Date: Thursday, March 31, 2022
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://themediaframe.com/mediaframe/webcast.html?webcastid=5vm0GSlj. 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,  
    2021     2020     2021     2020  
Revenues:                        
Lease revenues and fees, net     29,479,017       26,950,434       118,355,184       96,939,767  
Lease merchandise sold     1,614,581       1,191,139       7,071,572       5,144,747  
Total revenues     31,093,598       28,141,573       125,426,756       102,084,514  
                                 
Costs and expenses:                                
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise     17,614,938       16,326,208       73,616,293       63,308,210  
                                 
Cost of lease merchandise sold     1,261,369       739,281       5,561,593       3,424,880  
Marketing     3,557,825       2,260,152       9,129,062       5,880,063  
Salaries and benefits     3,160,020       3,116,073       11,489,208       10,440,693  
Operating expenses     4,611,743       4,367,210       18,265,781       14,404,953  
Total costs and expenses     30,205,895       26,808,924       118,061,937       97,458,799  
                                 
Operating income     887,703       1,332,649       7,364,819       4,625,715  
                                 
Gain on extinguishment of debt     -       -       1,931,825       -  
Interest expense including amortization of debt issuance costs     (1,383,546 )     1,088,478       (5,238,560 )     (4,302,561 )
Income/(loss) before income taxes     (495,843 )     244,171       4,058,084       323,154  
Provision for income taxes     1,129,163       (663,050 )     (785,310 )     (663,050 )
Net income/(loss)     633,320       (418,879 )     3,272,774       (339,896 )
                                 
Deemed dividend from exchange offer of warrants     -       -       -       713,212  
Dividends on Series 2 Convertible Preferred Shares     609,777       609,771       2,439,099       2,438,988  
Net income/(loss) attributable to common shareholders   $ 23,543     $ (1,028,650 )   $ 833,675     $ (3,492,096 )
                                 
Basic and diluted income/(loss) per common share:                                
Basic   $ -     $ (0.05 )   $ 0.04     $ (0.17 )
Diluted   $ -     $ (0.05 )   $ 0.04     $ (0.17 )
                                 
WEIGHTED AVERAGE COMMON SHARES:                                
Basic     20,712,772       21,359,912       21,387,960       20,995,349  
Diluted     22,455,815       21,359,912       23,227,964       20,995,349  


FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS

    December 31,     December 31,  
    2021     2020  
             
ASSETS            
CURRENT ASSETS:            
Cash   $ 5,094,642     $ 8,541,232  
Accounts receivable, net     29,898,991       10,032,714  
Prepaid expenses     957,527       869,081  
Lease merchandise, net     40,942,112       42,822,340  
Total current assets     76,893,272       62,265,367  
                 
PROPERTY AND EQUIPMENT, net     7,841,206       5,911,696  
                 
OTHER ASSETS, net     77,578       72,316  
Total assets   $ 84,812,056     $ 68,249,379  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES:                
Accounts payable   $ 7,982,180     $ 7,907,619  
Accrued payroll and related taxes     391,078       352,102  
Current portion of promissory notes to related parties, net of $1,247 at 2021 and $8,276 at 2020 of unamortized issuance costs, including accrued interest     1,053,088       4,815,546  
Current portion of promissory note – Paycheck Protection Program     -       1,184,952  
Accrued expenses     2,987,646       2,646,800  
Lease liability - current portion     172,732       160,726  
Total current liabilities     12,586,724       17,067,745  
                 
Loan payable under credit agreement to beneficial shareholder, net of $1,274 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion     50,061,924       37,134,009  
Promissory notes to related parties, net of current portion     3,750,000       -  
Promissory note – Paycheck Protection Program, net of current portion     -       741,787  
Accrued payroll and related taxes net of current portion     -       204,437  
Deferred income tax liability     495,166       -  
Lease liabilities less current portion     1,774,623       1,947,355  
Total liabilities     68,668,437       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 21,442,278 shares at 2021 and 21,359,945 shares at 2020     2,144       2,136  
Additional paid in capital     38,560,117       36,843,326  
Accumulated deficit     (45,222,302 )     (48,495,076 )
Total stockholders’ equity     16,143,619       11,154,046  
    $ 84,812,056     $ 68,249,379  

 

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2021 and 2020

    2021     2020  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income/ (loss)   $ 3,272,774     $ (339,896 )
Adjustments to reconcile net income/ (loss) to net cash used in operating activities:                
Depreciation and impairment of lease merchandise     73,616,293       63,308,210  
Other depreciation and amortization     2,871,541       2,577,084  
Amortization of debt issuance cost     220,816       305,797  
Compensation expense related to issuance of stock options and warrants     1,648,627       1,388,755  
Provision for doubtful accounts     40,489,540       31,930,714  
Interest in kind added to promissory notes balance     9,460       13,388  
Write off of capitalized software costs     4,361       -  
Deferred income tax     495,166       -  
Gain on debt extinguishment     (1,931,825 )     -  
Changes in operating assets and liabilities:                
Accounts receivable     (60,355,817 )     (33,691,096 )
Prepaid expenses and other     (87,394 )     (195,104 )
Lease merchandise     (71,736,065 )     (75,067,446 )
Security deposits     (8,338 )     2,943  
Accounts payable     74,561       3,339,730  
Lease liabilities     (5,811 )     198,528  
Accrued payroll and related taxes     (165,461 )     43,271  
Accrued expenses     331,541       1,283,372  
Net cash used in operating activities     (11,256,031 )     (5,207,547 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment, including capitalized software costs     (4,949,544 )     (3,098,194 )
Net cash used in investing activities     (4,949,544 )     (3,098,194 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from loan payable under credit agreement     19,850,000       15,033,000  
Repayment of loan payable under credit agreement     (6,575,000 )     (7,023,250 )
Proceeds from promissory notes- Paycheck Protection Program, net of fees     -       1,914,100  
Principal payment under finance lease obligation     (7,707 )     (6,664 )
Proceeds from exercise of warrants     -       131,250  
Proceeds from exercise of stock options     68,172       5,662  
Repayment of installment loan     (11,207 )     (11,207 )
Debt issuance related costs     (565,273 )     (64,390 )
Net cash provided by financing activities     12,758,985       9,978,501  
                 
(DECREASE)/ INCREASE IN CASH     (3,446,590 )     1,672,760  
                 
CASH, beginning of period     8,541,232       6,868,472  
                 
CASH, end of period   $ 5,094,642     $ 8,541,232  


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, 2021 and 2020 were as follows:

    Three months ended              
    December 31,              
    2021     2020     $ Change     % Change  
Adjusted EBITDA:                        
Net income/ (loss)     633,320       (418,879 )     1,052,199       251.2  
Provision for income taxes     (1,129,163 )     663,050       (1,792,213 )     (270.3 )
Amortization of debt costs     43,169       71,514       (28,345 )     (39.6 )
Other amortization and depreciation     867,497       615,881       251,616       40.9  
Interest expense, excluding amortization of debt costs     1,340,377       1,016,964       323,413       31.8  
Stock compensation     230,927       188,020       42,907       22.8  
Product/infrastructure expense     -       17,457       (17,457 )     -  
Executive separation agreement     -       396,090       (396,090 )     -  
Adjusted EBITDA   $ 1,986,127     $ 2,550,097     $ (563,970 )     (22.1 )


    Twelve months ended              
    December 31,              
    2021     2020     $ Change     % Change  
Adjusted EBITDA:                        
Net income/ (loss)     3,272,774       (339,896 )     3,612,670       1,062.9  
Provision for income taxes     785,310       663,050       122,260       18.4  
Amortization of debt costs     220,816       305,797       (84,981 )     (27.8 )
Other amortization and depreciation     2,875,902       2,271,287       604,615       26.6  
Interest expense     5,017,744       3,996,764       1,020,980       25.5  
Stock compensation     1,125,819       981,261       144,558       14.7  
Product/infrastructure expense     10,000       299,287       (289,287 )     (96.7 )
Warrants compensation-consulting agreement     -       139,480       (139,480 )     -  
Executive separation agreement     -       396,090       (396,090 )     -  
Gain on debt extinguishment     (1,931,825 )     -       (1,931,825 )     -  
Adjusted EBITDA   $ 11,376,540     $ 8,713,120     $ 2,663,420       30.6  


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 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. 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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