FlexShopper, Inc. Reports First Quarter 2021 Financial Results
Q1 2021 Net Revenues Up 32.7% to
Lease Merchandise, net, Up 31.4% at
Results for Quarter Ended
- Total net revenues and fees increased 31.9% to
$32.7 million from$24.8 million
- Originated 39,299 gross leases, up 8.7% from 36,153; average origination value increased to
$532 from$475
- Gross lease originations increased
$3.7 million , or 21.7%, to$20.9 million from$17.2 million
- Gross profit increased 28% to
$10.3 million from$8.0 million
- Net income of
$1.2 thousand compared with net income of$51.6 thousand
- Net loss attributable to common stockholders of
$(608) thousand , or$(0.03) per diluted share, compared to net loss attributable to common stockholders of$(1.3) million , or$(0.06) per diluted share
- Adjusted EBITDA1 increased to
$2.4 million compared to$2.0 million
- Lease merchandise, net, increase 31.4% to
$39.3 from$29.9 million
¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.
First Quarter 2021 Highlights and Recent Developments
- Pilot program with a national retailer continues to expand from one state to four states. As noted in the Company’s Q4 2020 earnings release, FlexShopper’s payment option was due to roll-out to three additional states as of
March 15 th. This further roll-out has resulted inFlexShopper now being available in over 300 storefronts with this retail partner.
- Digital advertising rates continue to support an aggressive marketing stance. Through the first quarter,
FlexShopper continued to invest in digital marketing programs as the company was able to attract customers at its targeted acquisition cost.
- Origination growth through Q1 2021. The Company previously announced origination growth of 23% in January and February combined, compared with the same two-month period in 2020. Overall Q1 2021 originations grew 21.7%, while average origination value increased to
$532 from$475 .
- Repeat customer trends continue to be favorable. During the first quarter, the Company originated
$8.2 million from existing customers compared with$7.3 million repeat customer leases in the first quarter of 2020.
- Pre-marketing EBITDA continues to demonstrate growth. Excluding marketing expense, which is the Company’s most significant variable expense category, pre-marketing EBITDA for Q1 was
$4.2 million , up from$3 million in the prior year quarter.
- Net lease merchandise up compared with prior year. Representing the value of actual goods on which customers are due to make lease payments, Net Lease Merchandise grew 31.4% to
$39.3 million atMarch 31, 2020 , compared with$29.9 million a year ago
Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”
Conference Call Details
Date:
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/44878/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 |
|||||||
2021 | 2020 | ||||||
Revenues: | |||||||
Lease revenues and fees, net | $ | 31,104,664 | $ | 23,697,705 | |||
Lease merchandise sold | 1,679,006 | 1,145,042 | |||||
Total revenues | 32,783,670 | 24,842,747 | |||||
Costs and expenses: | |||||||
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 21,200,510 | 16,196,949 | |||||
Cost of lease merchandise sold | 1,326,443 | 630,781 | |||||
Marketing | 1,832,740 | 1,031,145 | |||||
Salaries and benefits | 2,909,319 | 2,548,869 | |||||
Operating expenses | 4,114,424 | 3,171,692 | |||||
Total costs and expenses | 31,383,436 | 23,579,436 | |||||
Operating income | 1,400,234 | 1,263,311 | |||||
Interest expense including amortization of debt issuance costs | 1,398,997 | 1,211,626 | |||||
Net income | 1,237 | 51,685 | |||||
Dividends on Series 2 Convertible Preferred Shares | 609,772 | 609,717 | |||||
Deemed dividend from exchange offer of warrants | - | 713,212 | |||||
Net loss attributable to common shareholders | $ | (608,535 | ) | $ | (1,271,244 | ) | |
Basic and diluted (loss) per common share: | |||||||
Basic and diluted | $ | (0.03 | ) | $ | (0.06 | ) | |
WEIGHTED AVERAGE COMMON SHARES: | |||||||
Basic and diluted | 21,369,904 | 19,903,435 |
CONSOLIDATED BALANCE SHEETS
2021 | 2020 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash | $ | 6,315,815 | $ | 8,541,232 | |||
Accounts receivable, net | 11,028,554 | 10,032,714 | |||||
Prepaid expenses | 923,093 | 869,081 | |||||
Lease merchandise, net | 39,320,781 | 42,822,340 | |||||
Total current assets | 57,588,243 | 62,265,367 | |||||
PROPERTY AND EQUIPMENT, net | 5,945,497 | 5,911,696 | |||||
OTHER ASSETS, net | 67,267 | 72,316 | |||||
Total assets | $ | 63,601,007 | $ | 68,249,379 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 3,126,214 | $ | 7,907,619 | |||
Accrued payroll and related taxes | 560,332 | 352,102 | |||||
Current portion of promissory notes to related parties, net |
59,811 | 4,815,546 | |||||
Current portion of promissory note – Paycheck Protection Program, including accrued interest | 1,291,951 | 1,184,952 | |||||
Accrued expenses | 2,866,607 | 2,646,800 | |||||
Lease liability - current portion | 148,301 | 160,726 | |||||
Total current liabilities | 8,053,216 | 17,067,745 | |||||
Loan payable under credit agreement to beneficial shareholder, net of |
36,290,339 | 37,134,009 | |||||
Promissory notes to related parties, net of |
4,744,904 | - | |||||
Promissory note – Paycheck Protection Program, net of current portion | 639,510 | 741,787 | |||||
Accrued payroll and related taxes net of current portion | 204,437 | 204,437 | |||||
Lease liabilities net of current portion | 1,907,220 | 1,947,355 | |||||
Total liabilities | 51,839,626 | 57,095,333 | |||||
STOCKHOLDERS’ EQUITY | |||||||
Series 1 Convertible Preferred Stock, |
851,660 | 851,660 | |||||
Series 2 Convertible Preferred Stock, |
21,952,000 | 21,952,000 | |||||
Common stock, |
2,138 | 2,136 | |||||
Additional paid in capital | 37,449,422 | 36,843,326 | |||||
Accumulated deficit | (48,493,839 | ) | (48,495,076 | ) | |||
Total stockholders’ equity | 11,761,381 | 11,154,046 | |||||
$ | 63,601,007 | $ | 68,249,379 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended
(unaudited)
2021 | 2020 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 1,237 | $ | 51,685 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and impairment of lease merchandise | 21,200,510 | 16,196,949 | |||||
Other depreciation and amortization | 651,394 | 460,013 | |||||
Amortization of debt issuance costs | 91,703 | 94,346 | |||||
Compensation expense related to issuance of stock options and warrants | 593,186 | 215,814 | |||||
Provision for doubtful accounts | 8,833,349 | 7,682,927 | |||||
Interest in kind added to promissory notes balance | 9,098 | 141,038 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (9,829,189 | ) | (7,870,539 | ) | |||
Prepaid expenses and other | (53,683 | ) | (87,873 | ) | |||
Lease merchandise | (17,698,951 | ) | (15,032,521 | ) | |||
Security deposits | 4,280 | 2,943 | |||||
Lease Liabilities | (1,033 | ) | 100,014 | ||||
Accounts payable | (4,781,405 | ) | (1,406,398 | ) | |||
Accrued payroll and related taxes | 208,230 | (220,263 | ) | ||||
Accrued expenses | 208,271 | 230,394 | |||||
Net cash provided by (used in) operating activities | (563,003 | ) | 558,529 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchases of property and equipment, including capitalized software costs | (734,122 | ) | (646,414 | ) | |||
Net cash used in investing activities | (734,122 | ) | (646,414 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from loan payable under credit agreement | 3,500,000 | 1,900,000 | |||||
Repayment of loan payable under credit agreement | (3,910,000 | ) | (3,353,000 | ) | |||
Debt issuance related costs | (526,565 | ) | - | ||||
Proceeds from exercise of warrants | - | 131,250 | |||||
Proceeds from exercise of stock options | 12,912 | - | |||||
Principal payment under finance lease obligation | (1,833 | ) | (1,515 | ) | |||
Repayment of installment loan | (2,802 | ) | (2,802 | ) | |||
Net cash used in financing activities | (928,290 | ) | (1,326,067 | ) | |||
DECREASE IN CASH | (2,225,417 | ) | (1,413,952 | ) | |||
CASH, beginning of period | $ | 8,541,232 | $ | 6,868,472 | |||
CASH, end of period | $ | 6,315,815 | $ | 5,454,520 | |||
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 |
|||||||||||||||
2021 | 2020 | $ Change | % Change | ||||||||||||
Adjusted EBITDA: | |||||||||||||||
Net income | $ | 1,237 | $ | 51,685 | $ | (50,448 | ) | (97.6 | ) | ||||||
Amortization of debt costs | 91,704 | 94,345 | (2,641 | ) | (2.8 | ) | |||||||||
Other amortization and depreciation | 651,396 | 460,013 | 191,383 | 41.6 | |||||||||||
Interest expense | 1,307,293 | 1,117,281 | 190,012 | 17.0 | |||||||||||
Stock compensation | 380,264 | 171,815 | 208,449 | 121.3 | |||||||||||
Product/infrastructure expenses | 10,000 | 104,664 | (94,664 | ) | (90.4 | ) | |||||||||
Adjusted EBITDA | $ | 2,441,894 | $ | 1,999,803 | $ | 442,091 | 22.1 |
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. 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
Contact:
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com
Investor Relations
ir@flexshopper.com
Source: FlexShopper, Inc.