FlexShopper, Inc. Reports Third Quarter 2022 Financial Results

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BOCA RATON, Fla., Nov. 10, 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 ended September 30, 2022.

Results for Quarter Ended September 30, 2022 vs. Quarter Ended September 30, 2021:

  • Total fundings increased 60.1% to $25.8 million from $16.1 million consisting of gross lease originations decreasing from $15.9 to $15.7 million and loan participations up ~4,350% from $226 thousand to $10.1 million
  • Total net lease revenues and fees decreased 20.3% to $24.5 million from $30.7 million
  • Total net loan revenues and fees increased 1,249% to $1.6 million from $121 thousand
  • Gross profit decreased 49.8% to $6.4 million from $12.7 million
  • Adjusted EBITDA1 decreased to $(2.9) million compared to $4.8 million
  • Net loss of $(6.3) million compared with net income of $1.7 million
  • Net loss attributable to common stockholders of $(6.9) million, or $(0.32) per diluted share, compared to net income attributable to common stockholders of $1.1 million, or $0.05 per diluted share

Results for Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021:

  • Total fundings increased 38.3% to $78.9 million from $57.0 million consisting of gross lease originations decreasing from $56.6 to $51.9 million and loan participations up ~6,753% from $395 thousand to $27.0 million
  • Total net lease revenues and fees decreased 12.1% to $82.7 million from $94.2 million
  • Total net loan revenues and fees increased 4,864% to $8.9 million from $179 thousand
  • Gross profit decreased 2.2% to $33.3 million from $34.0 million
  • Adjusted EBITDA1 decreased to $3.4 million compared to $9.4 million
  • Net income of $5.7 million compared with net income of $2.6 million
  • Net income attributable to common stockholders of $3.9 million, or $0.17 per diluted share, compared to net income attributable to common stockholders of $810 thousand, or $0.03 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”.

“FlexShopper is feeling the same headwind on consumer demand experienced by both traditional retailers and our peers in this challenging economic environment. As a result, we are observing a decline in response rates and approval rates which has created a gap in our near-term earnings. Despite the decrease in the online marketplace business, our retail partnership channel and repeat volume continue to grow in this environment.” said Richard House, CEO of FlexShopper. 

FlexShopper CEO, Richard House, FlexShopper CFO, Russ Heiser and FlexShopper COO, John Davis will discuss the Company’s recent quarter, including financial and operating results, and strategic outlook on the Company’s earnings conference call and webcast.

Conference Call and Webcast Details

Conference call

Date: Friday, November 11, 2022
Time: 9:30 a.m. Eastern Time

Participant Dial-In Numbers:

Domestic callers: (877) 407-2988
International callers: (201) 389-0923

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://event.choruscall.com/mediaframe/webcast.html?webcastid=Fpl90J10

An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

  For the three months ended
September 30,		     For the nine months ended
September 30,		  
  2022     2021     2022     2021  
                       
Revenues:                      
Lease revenues and fees, net $ 24,512,086     $ 30,740,119     $ 82,746,874     $ 94,153,920  
Loan revenues and fees, net of changes in fair value   1,629,365       120,816       8,897,964       179,238  
Total revenues   26,141,451       30,860,935       91,644,838       94,333,158  
                               
Costs and expenses:                              
Cost of lease revenues and merchandise sold   18,746,897       18,005,170       56,114,813       59,959,590  
Loan origination costs and fees   1,027,097       166,805       2,256,838       341,989  
Marketing   2,393,185       1,824,402       8,178,120       5,571,237  
Salaries and benefits   2,820,033       2,672,864       8,799,395       8,329,188  
Operating expenses   5,702,800       4,325,825       17,124,288       13,654,038  
Total costs and expenses   30,690,012       26,995,066       92,473,454       87,856,042  
                               
Operating (loss)/ income   (4,548,561 )     3,865,869       (828,616 )     6,477,116  
                               
Gain on extinguishment of debt   -       -       -       1,931,825  
Interest expense including amortization of debt
issuance costs		   (3,030,142 )     (1,233,617 )     (7,336,048 )     (3,855,014 )
(Loss)/income before income taxes   (7,578,703 )     2,632,252       (8,164,664 )     4,553,927  
Benefit /(expense) from income taxes   1,298,269       (936,229 )     13,892,516       (1,914,473 )
Net (loss)/ income   (6,280,434 )     1,696,023       5,727,852       2,639,454  
                               
Dividends on Series 2 Convertible Preferred Shares   609,778       609,777       1,829,332       1,829,322  
Net income/(loss) attributable to common and Series
1 Convertible Preferred shareholders		 $ (6,890,212 )     1,086,246       3,898,520       810,132  
                               
Basic and diluted income/(loss) per common share:                              
Basic $ (0.32 )   $ 0.05     $ 0.18     $ 0.04  
Diluted $ (0.32 )   $ 0.05     $ 0.17     $ 0.03  
                               
WEIGHTED AVERAGE COMMON SHARES:                              
Basic   21,681,853       21,383,647       21,611,879       21,377,978  
Diluted   21,681,853       23,577,179       22,403,447       23,682,265  
                               


FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

  September 30,     December 31,  
  2022     2021  
  (unaudited)        
ASSETS          
CURRENT ASSETS:          
Cash $ 5,274,219     $ 4,986,559  
Restricted cash   481,867       108,083  
Lease receivables, net   33,425,123       25,473,154  
Loan receivables at fair value   26,591,546       3,560,108  
Prepaid expenses and other assets   1,478,800       1,823,256  
Lease merchandise, net   30,652,824       40,942,112  
Total current assets   97,904,379       76,893,272  
               
Property and equipment, net   7,416,249       5,490,434  
Right of use asset, net   1,445,159       1,553,330  
Other assets, net   1,726,443       875,020  
Deferred tax asset, net   13,607,949       -  
Total assets $ 122,100,179     $ 84,812,056  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
CURRENT LIABILITIES:              
Accounts payable $ 3,875,469     $ 7,982,180  
Accrued payroll and related taxes   703,465       391,078  
Promissory notes to related parties, net of $0 at 2022 and $1,274 at 2021 of unamortized issuance costs, including accrued interest   1,182,585       1,053,088  
Accrued expenses   3,243,570       2,987,646  
Lease liability - current portion   198,853       172,732  
Total current liabilities   9,203,942       12,586,724  
               
Loan payable under credit agreement to beneficial shareholder, net of $338,113 at
2022 and $413,076 at 2021 of unamortized issuance costs		   77,261,887       50,061,924  
Promissory notes to related parties, net of current portion   10,750,000       3,750,000  
Deferred income tax liability   178,160       495,166  
Lease liabilities net of current portion   1,623,211       1,774,623  
Total liabilities   99,017,200       68,668,437  
               
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 21,750,804 shares at September 30, 2022 and 21,442,278 shares at
December 31, 2021		   2,176       2,144  
Additional paid in capital   39,771,593       38,560,117  
Accumulated deficit   (39,494,450 )     (45,222,302 )
Total stockholders’ equity   23,082,979       16,143,619  
  $ 122,100,179     $ 84,812,056  
               

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2022 and 2021
(unaudited)

  2022     2021  
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income $ 5,727,852     $ 2,639,454  
Adjustments to reconcile net income to net cash (used in)/ provided by operating
activities:		              
Depreciation and impairment of lease merchandise   56,114,813       59,959,590  
Other depreciation and amortization   3,303,591       2,032,811  
Amortization of debt issuance costs   163,169       177,647  
Compensation expense related to stock-based compensation and warrants   950,003       1,417,699  
Provision for doubtful accounts   42,639,102       30,566,352  
Proceeds from sale of lease receivables   7,611,586       -  
Interest in kind added to promissory notes balance   128,223       9,460  
Deferred income tax   (13,924,955 )     700,199  
Gain on debt extinguishment   -       (1,931,825 )
Net changes in the fair value of loan receivables at fair value   1,938,570       54,236  
Changes in operating assets and liabilities:              
Lease receivables   (58,202,657 )     (39,915,536 )
Loan receivables at fair value   (24,970,008 )     (490,995 )
Prepaid expenses and other assets   344,766       (80,795 )
Lease merchandise   (45,825,525 )     (50,470,104 )
Security deposits   (4,956 )     (8,338 )
Lease liabilities   (8,732 )     (2,595 )
Accounts payable   (4,106,711 )     (4,563,434 )
Accrued payroll and related taxes   312,387       277,774  
Accrued expenses   264,019       788,228  
Net cash (used in)/ provided by operating activities   (27,545,463 )     1,159,828  
               
CASH FLOWS FROM INVESTING ACTIVITIES              
Purchases of property and equipment, including capitalized software costs   (4,855,150 )     (2,998,044 )
Purchases of data costs   (1,220,722 )     (461,379 )
Net cash used in investing activities   (6,075,872 )     (3,459,424 )
               
CASH FLOWS FROM FINANCING ACTIVITIES              
Proceeds from loan payable under credit agreement   32,855,000       4,000,000  
Repayment of loan payable under credit agreement   (5,730,000 )     (6,575,000 )
Debt issuance related costs   (86,932 )     (529,608 )
Proceeds from exercise of stock options   261,505       24,988  
Proceeds from promissory notes   7,000,000       -  
Principal payment under finance lease obligation   (8,388 )     (5,684 )
Repayment of installment loan   (8,406 )     (8,406 )
Net cash provided by/(used in) financing activities   34,282,779       (3,093,710 )
               
INCREASE / (DECREASE) IN CASH and RESTRICTED CASH   661,444       (5,393,306 )
               
CASH and RESTRICTED CASH, beginning of period   5,094,642       8,541,232  
               
CASH and RESTRICTED CASH, end of period $ 5,756,086     $ 3,147,926  
               
Supplemental cash flow information:              
Interest paid $ 6,828,663     $ 3,702,949  
               

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 nine months ended September 30, 2022 and 2021 were as follows:

  Three months ended
September 30,		              
  2022     2021     $ Change     % Change  
Adjusted EBITDA:                      
Net (loss)/income $(6,280,434 )   $1,696,023     $(7,976,457 )     (470.3 )
Income taxes   (1,298,269 )     936,229       (2,234,498 )     (238.7 )
Amortization of debt issuance costs   56,283       43,067       13,216       30.7  
Other amortization and depreciation   1,244,267       708,762       535,505       75.6  
Interest expense   2,973,859       1,190,550       1,783,309       149.8  
Stock-based compensation   387,298       265,407       121,891       45.9  
Adjusted EBITDA $(2,916,996 )   $4,840,038     $(7,757,034 )     (160.3 )


  Nine months ended
September 30,		              
  2022     2021     $ Change     % Change  
Adjusted EBITDA:                      
Net income $5,727,852     $2,639,454     $3,088,398       117.0  
Income taxes   (13,892,516 )     1,914,473       (15,806,989 )     (825.7 )
Amortization of debt issuance costs   163,169       177,647       (14,478 )     (8.1 )
Other amortization and depreciation   3,303,590       2,032,811       1,270,779       62.5  
Interest expense   7,172,879       3,677,367       3,495,512       95.1  
Stock-based compensation   950,003       894,892       55,111       6.2  
Product/ infrastructure expenses   -       10,000       (10,000 )        
Gain on debt extinguishment   -       (1,931,825 )     1,931,825       -  
Adjusted EBITDA $3,424,977     $9,414,819     $(5,989,842 )     (63.6 )
                               

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 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:

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com 

FlexShopper, Inc.


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Source: FlexShopper, Inc.