FlexShopper, Inc. Reports 2022 Fourth Quarter and Year End Financial Results
Results for Quarter Ended
- Total fundings increased 11.3% to
$33.1 million from$29.7 million consisting of gross lease originations decreasing from$26.9 to$23.2 million , loan participations increasing ~52.5% from$2.9 million to$4.4 million , and loan originations increasing from$0 to$5.5 million - Total net lease and loan revenues, including the changes in fair value of loan receivables, decreased 31.1% to
$21.4 million from$31.1 million - Gross profit decreased 68.5% to
$3.8 million from$12.2 million - Adjusted EBITDA1 decreased to
$(4.0) million compared to$2.0 million - Net income of
$7.9 million compared with net income of$633 thousand . Net income for the quarter endedDecember 31, 2022 includes a gain on bargain purchase for$14.5 million and a benefit from income taxes for$2.7 million - Net income attributable to common and Series 1 Convertible Preferred shareholders of
$6.0 million , or$0.27 per diluted share, compared to$23.5 thousand , or$0.00 per diluted share
Results for Twelve Months Ended
- Total fundings increased 28.9% to
$111.8 million from$86.7 million consisting of gross lease originations decreasing from$83.4 to$75.1 million , loan participations increasing from$3.3 million to$31.2 million and loan originations increasing from$0 to$5.5 million - Total net lease and loan revenues, including the changes in fair value of loan receivables, decreased 9.9% to
$113.1 million from$125.4 million - Gross profit decreased 19.7% to
$37.1 million from$46.2 million - Adjusted EBITDA1 decreased to
$(0.5) million compared to$11.4 million - Net income increased to
$13.6 million compared with net income of$3.3 million . Net income for the year endedDecember 31, 2022 includes a gain on bargain purchase for$14.5 million and a benefit from income taxes for$16.6 million - Net income attributable to common and Series 1 Convertible Preferred shareholders increased to
$9.9 million , or$0.44 per diluted share, compared to$0.8 million , or$0.04 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”.
Operational Highlight:
- In December,
FlexShopper purchased the assets ofRevolution Financial, Inc. The purchase facilitated the launch of a brick and mortar, direct origination model for loans to underserved consumers in 11 states. There are currently 100 locations with plans to expand, via revenue share agreements, to additional locations.
Conference Call and Webcast Details
Conference call
Date: Tuesday.
Time:
Participant Dial-In Numbers:
Domestic callers: (877) 407-2988
International callers: +1 (201) 389-0923
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=CqIR0Ahy
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=CqIR0Ahy
An audio replay of the call will be archived on the Company’s website.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the years ended |
||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Lease revenues and fees, net | $ | 105,936,072 | $ | 124,505,432 | ||||
| Loan revenues and fees, net of changes in fair value | 7,120,101 | 921,324 | ||||||
| Total revenues | 113,056,173 | 125,426,756 | ||||||
| Costs and expenses: | ||||||||
| Depreciation and impairment of lease merchandise | 72,556,431 | 78,669,393 | ||||||
| Loan origination costs and fees | 3,384,013 | 508,493 | ||||||
| Marketing | 11,031,695 | 9,129,062 | ||||||
| Salaries and benefits | 10,991,477 | 11,489,208 | ||||||
| Operating expenses | 21,395,767 | 18,265,781 | ||||||
| Total costs and expenses | 119,359,383 | 118,061,937 | ||||||
| Operating (loss)/ income | (6,303,210 | ) | 7,364,819 | |||||
| Gain on extinguishment of debt | - | 1,931,825 | ||||||
| Gain on bargain purchase | 14,461,274 | - | ||||||
| Interest expense including amortization of debt issuance costs | (11,161,396 | ) | (5,238,560 | ) | ||||
| (Loss)/income before income taxes | (3,003,332 | ) | 4,058,084 | |||||
| Benefit /(expense) from income taxes | 16,635,051 | (785,310 | ) | |||||
| Net income | 13,631,719 | 3,272,774 | ||||||
| Dividends on Series 2 Convertible Preferred Shares | 3,730,580 | 2,439,099 | ||||||
| Net income attributable to common and Series 1 Convertible Preferred shareholders | $ | 9,901,139 | $ | 833,675 | ||||
| Basic and diluted income per common share: | ||||||||
| Basic | $ | 0.45 | $ | 0.04 | ||||
| Diluted | $ | 0.44 | $ | 0.04 | ||||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||
| Basic | 21,646,896 | 21,387,960 | ||||||
| Diluted | 22,425,354 | 23,227,964 | ||||||
CONSOLIDATED BALANCE SHEETS
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 6,051,713 | $ | 4,986,559 | ||||
| Restricted cash | 121,636 | 108,083 | ||||||
| Lease receivables, net | 35,540,043 | 25,473,154 | ||||||
| Loan receivables at fair value | 32,932,504 | 3,560,108 | ||||||
| Prepaid expenses and other assets | 3,489,136 | 1,823,256 | ||||||
| Lease merchandise, net | 31,550,441 | 40,942,112 | ||||||
| Total current assets | 109,685,473 | 76,893,272 | ||||||
| Property and equipment, net | 8,086,862 | 5,490,434 | ||||||
| Right of use asset, net | 1,406,270 | 1,553,330 | ||||||
| Intangible assets, net | 15,162,349 | 4,960 | ||||||
| Other assets, net | 1,934,728 | 870,060 | ||||||
| Deferred tax asset, net | 12,013,828 | - | ||||||
| Total assets | $ | 148,289,510 | $ | 84,812,056 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 6,511,943 | $ | 7,982,180 | ||||
| Accrued payroll and related taxes | 310,820 | 391,078 | ||||||
| Promissory notes to related parties, net of |
1,209,455 | 1,053,088 | ||||||
| Accrued expenses | 3,988,093 | 2,987,646 | ||||||
| Lease liability - current portion | 208,001 | 172,732 | ||||||
| Total current liabilities | 12,228,312 | 12,586,724 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of |
80,847,748 | 50,061,924 | ||||||
| Promissory notes to related parties, net of current portion | 10,750,000 | 3,750,000 | ||||||
| Promissory note related to acquisition, net of |
3,158,471 | - | ||||||
| Purchase consideration payable related to acquisition | 8,703,684 | - | ||||||
| Deferred income tax liability | - | 495,166 | ||||||
| Lease liabilities net of current portion | 1,566,622 | 1,774,623 | ||||||
| Total liabilities | 117,254,837 | 68,668,437 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series 1 Convertible Preferred Stock, |
851,660 | 851,660 | ||||||
| Series 2 Convertible Preferred Stock, |
21,952,000 | 21,952,000 | ||||||
| Common stock, |
2,176 | 2,144 | ||||||
| Additional paid in capital | 39,819,420 | 38,560,117 | ||||||
| Accumulated deficit | (31,590,583 | ) | (45,222,302 | ) | ||||
| Total stockholders’ equity | 31,034,673 | 16,143,619 | ||||||
| $ | 148,289,510 | $ | 84,812,056 | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 13,631,719 | $ | 3,272,774 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 72,556,431 | 78,669,393 | ||||||
| Other depreciation and amortization | 4,769,614 | 2,875,902 | ||||||
| Amortization of debt issuance costs | 228,843 | 220,816 | ||||||
| Amortization of discount on the promissory note related to acquisition | 19,747 | - | ||||||
| Compensation expense related to stock-based compensation and warrants | 997,830 | 1,648,627 | ||||||
| Provision for doubtful accounts | 57,420,480 | 40,342,618 | ||||||
| Gain on sale of lease receivables | 8,821,106 | - | ||||||
| Interest in kind added to promissory notes balance | 155,093 | 9,460 | ||||||
| Deferred income tax | (17,282,364 | ) | 495,166 | |||||
| Gain on debt extinguishment | - | (1,931,825 | ) | |||||
| Gain on bargain purchase | (14,461,274 | ) | - | |||||
| Net changes in the fair value of loan receivables at fair value | 9,559,979 | (248,984 | ) | |||||
| Changes in operating assets and liabilities, net of effects of acquisition: | ||||||||
| Lease receivables | (76,308,475 | ) | (56,738,233 | ) | ||||
| Loan receivables at fair value | (25,612,049 | ) | (3,221,679 | ) | ||||
| Prepaid expenses and other assets | (1,665,880 | ) | (87,394 | ) | ||||
| Lease merchandise | (63,164,760 | ) | (76,789,165 | ) | ||||
| Security deposits | (4,956 | ) | (8,338 | ) | ||||
| Purchase consideration payable related to acquisition | 164,102 | - | ||||||
| Lease liabilities | (14,488 | ) | (5,811 | ) | ||||
| Accounts payable | (1,976,844 | ) | 74,561 | |||||
| Accrued payroll and related taxes | (80,258 | ) | (165,461 | ) | ||||
| Accrued expenses | 1,009,468 | 331,542 | ||||||
| Net cash used in operating activities | (31,236,936 | ) | (11,256,031 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash acquired in business combination | 2,938,355 | - | ||||||
| Purchases of property and equipment, including capitalized software costs | (6,498,115 | ) | (4,065,384 | ) | ||||
| Purchases of data costs | (1,640,885 | ) | (884,160 | ) | ||||
| Net cash used in investing activities | (5,200,645 | ) | (4,949,544 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan payable under credit agreement | 36,455,000 | 19,850,000 | ||||||
| Repayment of loan payable under credit agreement | (5,730,000 | ) | (6,575,000 | ) | ||||
| Debt issuance related costs | (166,745 | ) | (565,273 | ) | ||||
| Proceeds from exercise of stock options | 261,505 | 68,172 | ||||||
| Proceeds from promissory notes to related parties | 7,000,000 | - | ||||||
| Principal payment under finance lease obligation | (11,184 | ) | (7,707 | ) | ||||
| Repayment of purchase consideration payable related to acquisition | (283,266 | ) | - | |||||
| Repayment of installment loan | (9,022 | ) | (11,207 | ) | ||||
| Net cash provided by financing activities | 37,516,288 | 12,758,985 | ||||||
| INCREASE / (DECREASE) IN CASH and RESTRICTED CASH | 1,078,707 | (3,446,590 | ) | |||||
| CASH and RESTRICTED CASH, beginning of period | 5,094,642 | 8,541,232 | ||||||
| CASH and RESTRICTED CASH, end of period | $ | 6,173,349 | $ | 5,094,642 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 10,289,334 | $ | 4,945,690 | ||||
| Noncash investing and financing activities | ||||||||
| Acquisition of loan receivables at fair value | $ | 13,320,326 | $ | - | ||||
| Acquisition of property and equipment | 136,249 | - | ||||||
| Acquisition of intangible assets | 15,307,894 | - | ||||||
| Acquisition of purchase consideration payable related to acquisition | 8,539,582 | - | ||||||
| Acquisition of accounts payable | 506,607 | - | ||||||
| Acquisition of deferred tax liability | 4,773,370 | - | ||||||
| Issuance of promissory note related to acquisition | 3,421,991 | - | ||||||
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 merchandise), 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 years ended
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 13,631,719 | $ | 3,272,774 | $ | 10,358,945 | 316.5 | |||||||||
| Income taxes | (16,635,051 | ) | 785,310 | (17,420,361 | ) | (2,218.3 | ) | |||||||||
| Amortization of debt issuance costs | 228,843 | 220,816 | 8,027 | 3.6 | ||||||||||||
| Other amortization and depreciation | 4,769,614 | 2,875,902 | 1,893,712 | 65.8 | ||||||||||||
| Interest expense | 10,932,553 | 5,017,744 | 5,914,809 | 117.9 | ||||||||||||
| Stock-based compensation | 997,830 | 1,125,819 | (127,989 | ) | (11.4 | ) | ||||||||||
| Product/infrastructure expenses | - | 10,000 | (10,000 | ) | ||||||||||||
| Gain on debt extinguishment | - | (1,931,825 | ) | 1,931,825 | ||||||||||||
| Gain on bargain purchase | (14,461,274 | ) | - | (14,461,274 | ) | |||||||||||
| Adjusted EBITDA | $ | (535,766 | ) | $ | 11,376,540 | $ | (11,912,306 | ) | (104.7 | ) | ||||||
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 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, 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 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
Contact:
Investor Relations
ir@flexshopper.com
Source: FlexShopper, Inc.