FlexShopper Reports 2019 First Quarter Financial Results; Total Revenues Up 53.8% With Adjusted EBITDA of $2.3 Million and Net Income of $504,000

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Retail Store Pilot Expands to 400+ Store Rollout

BOCA RATON, Fla., May 07, 2019 (GLOBE NEWSWIRE) -- FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper” or the “Company”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the quarter ended March 31, 2019, highlighted by continued revenue growth coupled with positive net income (before preferred stock dividend expense). 

Results for Quarter Ended March 31, 2019 vs. Quarter Ended March 31, 20181:

  • Total revenues increased 53.8% from $14.8 million to $22.7 million, calculated on a basis consistent with the 2019 adoption of ASC 842 related to lease accounting
  • FlexShopper originated 29,972 gross leases, up 36.0% from 22,035
  • Gross lease originations increased 54.7% from $9.1 million to $14.1 million
  • Net income of $0.5 million, compared with net loss of ($2.3) million
  • Net loss attributable to common stockholders declined to ($0.1) million, compared to ($2.9) million
  • Gross Profit2 increased 70.7% from $4.0 million to $6.9 million
  • Adjusted EBITDA2 was $2.3 million compared to ($0.9) million

1 Beginning with current period financial results, the Company has adopted a new accounting standard which requires revenues to be reported net of bad debt expense.  The Company has retroactively adopted the provisions of the new accounting standard to prior periods in order to provide an accurate comparison.
2 Gross Profit and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions and reconciliations of these measures under “Non-GAAP Measures”.

Q1 2019 Highlights and Recent Developments

  • Continued growth in originations. FlexShopper originated 29,972 gross leases in Q1 2019, representing a gain of 36.0% compared with the prior year period.  Growth was driven by continued improvement in repeat customer activity along with strong growth in the Company’s B2B channel.
     
  • Lease originations through third party retail stores, the Company’s B2B channel, grew 214.3% compared to the same period last year. In addition, retail store lease originations increased from 11.0% of total originations in the first quarter of 2018 to 26.4% of originations in the first quarter of 2019.
  • The Company’s average cost to acquire a new customer continued to decrease in the first quarter of 2019 to its lowest amount for any fiscal quarter at $93, compared to $154 for the same period in 2018. This decrease is the result of continued optimization of the Company’s marketing and underwriting strategies, combined with increased lease originations through retail partners. Leases acquired through the Company’s B2B retail channel have significantly lower acquisition costs than its direct to consumer, or B2C, channels.
     
  • A retail store pilot has expanded to more than 400 stores. With this expansion and exclusive relationship, the Company’s “save the sale” LTO program is in over 1,100 stores nationwide. This rollout reaffirms the merits of the Company’s mobile LTO technology, which provides a quick and seamless process for retailers and consumers to transact on an LTO basis.
     
  • Strong bottom line results shown by net income (before preferred dividends) exceeding $500,000.  Driven by the combination of strong top line growth and operating expense control, the Company reported its first-ever profitable quarter with net income of approximately $504,000.  Adjusted EBITDA was also positive at $2.3 million.

Brad Bernstein, CEO, stated, “The first quarter of 2019 truly marks an inflection point for FlexShopper as we reported the first profitable quarter in our history.  This quarter reflects a combination of many factors coming together, including lease origination growth, continued repeat business, significant increases in our retail store, B2B business and cost controls.  We are successfully fulfilling the company’s original vision of being the pure play, omnichannel virtual LTO Company. I am gratified to see the hard work of our team members and our company’s innovation to meet consumers’ and retailers’ needs, translate into the excellent bottom-line results we reported in Q1.”

2019 Outook

The Company is updating its guidance for 2019.

  Current Guidance Previous Guidance
2019 Gross Lease Originations > $70 million > $70 million
2019 Gross Revenue > $110 million > $110 million
2019 Gross Profit > $25.5 million > $25.0 million
2019 Adjusted EBITDA > $4.0 million > $3.5 million
     

The Company's guidance for Gross Lease Originations, Gross Revenue, Gross Profit and Adjusted EBITDA are forward-looking statements. They are subject to various risks and uncertainties that could cause the Company's actual results to differ materially from the anticipated targets. There can be no assurance the Company will meet these financial projections. See the cautionary information about forward-looking statements in the "Forward-Looking Statements" section of this press release. Additionally, Gross Profit and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions of these measures under “Non-GAAP Measures,” but note that information reconciling forward-looking non-GAAP measures to GAAP measures is not available without unreasonable effort.

Conference Call Details
Date:         Wednesday, May 8, 2019
Time:   10:00 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/30251/indexl.html.  An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

  For the three months ended
March 31,		  
  2019     2018  
           
Revenues:          
Lease revenues and fees, net $ 21,784,779     $ 14,161,578  
Lease merchandise sold   946,618       614,518  
Total revenues   22,731,397       14,776,096  
               
Costs and expenses:              
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise   15,277,939       10,407,746  
Cost of lease merchandise sold   565,007       333,763  
Marketing   848,546       1,168,950  
Salaries and benefits   1,758,087       2,179,376  
Operating expenses   2,596,282       2,038,938  
Total costs and expenses   21,045,861       16,128,773  
               
Operating income/(loss)   1,685,536       (1,352,677 )
               
Interest expense including amortization of debt issuance costs   1,181,993       933,667  
Net income/(loss)   503,543       (2,286,344 )
               
Dividends on Series 2 Convertible Preferred Shares   609,168       603,680  
Net loss attributable to common shareholders $ (105,625 )   $ (2,890,024 )
               
Basic and diluted (loss) per common share:              
Net loss $ (0.01 )   $ (0.55 )
               
WEIGHTED AVERAGE COMMON SHARES:              
Basic and diluted   17,650,847       5,294,501  
               
               

FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS

  March 31,     December 31,  
  2019     2018  
  (unaudited)        
ASSETS          
CURRENT ASSETS:          
Cash $ 2,647,056     $ 6,141,210  
Accounts receivable, net   6,510,338       6,375,963  
Prepaid expenses   335,484       317,160  
Lease merchandise, net   28,181,941       32,364,697  
Total current assets   37,674,819       45,199,030  
               
PROPERTY AND EQUIPMENT, net   3,497,073       3,336,664  
               
OTHER ASSETS, net   149,852       90,621  
  $ 41,321,744     $ 48,626,315  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
CURRENT LIABILITIES:              
Current portion of loan payable under credit agreement to beneficial shareholder net of $222,526 at 2019 and $167,483 at 2018 of unamortized issuance costs $ 18,372,922     $ 14,252,717  
Accounts payable   3,105,990       8,317,216  
Accrued payroll and related taxes   195,530       393,095  
Promissory notes to related parties net of $32,574 at 2019 and $0 at 2018 of unamortized issuance costs   3,762,526       1,814,771  
Accrued expenses   1,012,131       1,335,505  
Lease liability – current portion   94,249       -  
Total current liabilities   26,543,348       26,113,304  
               
Loan payable under credit agreement to beneficial shareholder net of $54,869 at 2019 and $164,752 at 2018 of unamortized issuance costs and current portion   4,530,310       14,020,335  
Promissory notes to related parties net of $22,001 at 2019 and $0 at 2018 of unamortized issuance costs and current portion   1,164,789       -  
Lease liabilities less current portion   37,202       -  
Total liabilities   32,275,649       40,133,639  
               
STOCKHOLDERS’ EQUITY              
Series 1 Convertible Preferred Stock, $0.001 par value- authorized 250,000 shares, issued and outstanding 171,191 shares at 2019 and 239,405 shares at $5.00 stated value at 2018   855,955       1,197,025  
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: 17,666,193 shares at 2019 and 17,579,870 at 2018   1,767       1,758  
Additional paid in capital   34,465,425       34,074,488  
Accumulated deficit   (48,229,052 )     (48,732,595 )
Total stockholders’ equity   9,046,095       8,492,676  
  $ 41,321,744     $ 48,626,315  
               

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2019 and 2018
(unaudited)

  2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income/(loss) $ 503,543     $ (2,286,344 )
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities:              
Depreciation and impairment of lease merchandise   15,277,939       10,407,746  
Other depreciation and amortization   584,968       568,078  
Compensation expense related to issuance of stock options and warrants   36,729       49,702  
Interest in kind added to promissory notes balance   167,119       -  
Provision for doubtful accounts   7,344,944       5,175,318  
Changes in operating assets and liabilities:              
Accounts receivable   (7,479,319 )     (4,690,455 )
Prepaid expenses and other   (17,624 )     (361,718 )
Lease merchandise   (11,095,183 )     (7,947,647 )
Security deposits   (60,000 )     -  
Accounts payable   (5,211,226 )     (2,704,981 )
Accrued payroll and related taxes   (197,565 )     (229,283 )
Accrued expenses   (320,979 )     (3,774 )
Net cash used in operating activities   (466,654 )     (2,023,358 )
               
CASH FLOWS FROM INVESTING ACTIVITIES              
Purchases of property and equipment, including capitalized software costs   (553,184 )     (307,340 )
Net cash used in investing activities   (553,184 )     (307,340 )
               
CASH FLOWS FROM FINANCING ACTIVITIES              
Refund of equity issuance related costs   13,147       -  
Proceeds from promissory notes, net of fees   2,940,000       3,465,000  
Proceeds from loan payable under credit agreement   1,241,328       1,550,000  
Repayment of loan payable under credit agreement   (6,665,989 )     (5,855,000 )
Repayment of installment loan   (2,802 )     -  
Net cash used in financing activities   (2,474,316 )     (840,000 )
               
INCREASE/(DECREASE) IN CASH   (3,494,154 )     (3,170,698 )
               
CASH, beginning of period   6,141,210       4,968,915  
               
CASH, end of period $ 2,647,056     $ 1,798,217  
               
Supplemental cash flow information:              
Interest paid $ 993,544     $ 754,276  
Non-cash financing activities:              
Conversion of preferred stock to common stock $ 341,070       -  
               

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.

Key performance metrics for the three months ended March 31, 2019 and 2018 are as follows:

  Three months ended
March 31,		            
  2019     2018     $ Change     % Change
Gross Profit:                    
Gross lease revenues and fees $ 29,129,723     $ 19,336,896     $ 9,792,827       50.6
Lease merchandise sold   946,618       614,518       332,100       54.0
Gross Revenue   30,076,341       19,951,414       10,124,927       50.8
Provision for doubtful accounts and revenue adjustments   (7,344,944 )     (5,175,318 )     (2,169,626 )     41.9
Net revenues   22,731,397       14,776,096       7,955,301       53.8
Cost of merchandise sold   (565,007 )     (333,763 )     (231,244 )     69.3
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise   (15,277,939 )     (10,407,746 )     (4,870,193 )     46.8
Gross Profit $ 6,888,451     $ 4,034,587     $ 2,853,864       70.7
Gross profit margin   30 %     27 %              
                             

Gross Profit represents GAAP revenue less the provision for doubtful accounts and cost of leased inventory and inventory sold. Gross Profit provides us with an understanding of the results from the primary operations of our business. We use Gross Profit to evaluate our period-over-period operating performance. This measure may be useful to an investor in evaluating the underlying operating performance of our business.

  Three months ended
March 31,		              
  2019     2018     $ Change     % Change  
Adjusted EBITDA:                      
Net income/(loss) $ 503,543     $ (2,286,344 )   $ 2,789,887       -  
Amortization of debt costs   60,265       132,404       (72,139 )     (54.5 )
Other amortization and depreciation   524,703       435,674       89,029       20.4  
Interest expense   1,121,728       801,263       320,465       40.0  
Stock compensation   25,529       49,702       (24,173 )     (48.6 )
Non recurring product/infrastructure expenses   92,297       -       92,297       -  
Adjusted EBITDA $ 2,328,065     $ (867,301 )*   $ 3,195,366       -  
                               

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. 

The Company refers to Gross Profit and Adjusted EBITDA in the above tables as the Company uses these measures to evaluate operating performance and to make strategic decisions about the Company.  Management believes that Gross Profit and Adjusted EBITDA provide relevant and useful information which is widely used by analysts, investors and competitors in our 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
Senior Associate
The Equity Group
212-836-9626
jhellman@equityny.com

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com

FlexShopper, Inc.

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FlexShopper, Inc.