Results for the Quarter Ended
- Net lease revenues and fees1 increased 51.9% to
$19.9 millionfrom $13.1 million. FlexShopperoriginated 29,252 gross leases, up 24.6% from 23,474.
- Gross lease originations increased
$4.0 million, an increase of 43.4%, to $13.2 millionfrom $9.2 million.
- The average origination value increased to
- Net loss decreased to
$(0.3) millioncompared with net loss of $(2.0) million.
- Net loss attributable to common stockholders declined to
$(0.9) million, or $(0.05)per diluted share, compared to $(2.6) million, or $(0.48)per diluted share.
- Gross Profit increased 37.9% to
$5.9 millionfrom $4.3 million.
- Adjusted EBITDA increased to
$1.7 millioncompared to ($0.4) million.
Results for the Six Months Ended June 30, 2019 vs. Six Months Ended June 30, 20181:
- Net lease revenues and fees rose 52.8% to
$41.7 millionfrom $27.3 million.
- Lease originations increased from 45,517 to 59,245, for an increase of of 30.2%.
- Gross lease originations increased
$9.3 million, an increase of 50.5%, to $27.7 millionfrom $18.4 million.
- The average origination value advanced to
- Net income posted positive at
$0.2million compared to a net loss of $(4.3) million.
- Net loss attributable to common shareholders decreased to $(1.0) million or $(0.06) per diluted share, compared to $(5.5) million, or $(1.03) per diluted share.
- Gross Profit increased 53.9% to
$12.8 millionfrom $8.3 million.
- Adjusted EBITDA2 grew to
$4.1million compared to $(1.3) million.
1 Beginning with Q1 2019 financial results, the Company 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 Adjusted EBITDA is a non-GAAP financial measure. Refer to the definitions and reconciliations of this measure under “Non-GAAP Measures.”
Q2 2019 Highlights and Recent Developments
- Continued growth in originations.
FlexShopperoriginated 29,252 gross leases in Q2 2019, representing an increase of 24.6% compared with the prior year period. Growth continued to be driven by the combination of 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, increased 776% compared to the same period last year. In addition, retail store lease originations increased from 6.7% of total originations in the second quarter of 2018 to 24.5% of originations in the second quarter of 2019. Leases acquired through the Company’s B2B retail channel have significantly lower acquisition costs than the Company’s direct to consumer, or B2C, channel.
- The Company’s average cost to acquire a new customer continued to decrease in the second quarter of 2019, reaching a new quarterly low of
$58, compared to $167for the same period in 2018. The Company continues to optimize its marketing expense, which declined from $1.3 millionin Q2 2018 to $0.3 millionin Q2 2019. For the six months ended June 30, 2019, marketing expense was $1.2 millioncompared with $2.4 millionin the same period last year.
- Completed roll-outs with two B2B partners. During Q2, the Company completed the rollout of its integrationless, mobile app-based LTO checkout option at more than 560 additional retail locations between two new retail partners.
- Business model continuing to gain leverage. Gross Profit increased 37.9% during Q2 2019 resulting in
$712,038of operating income compared to an operating loss of $929,568for the same period last year. Gross Profit increased 53.9% for the six months ended June 30, 2019resulting in operating income of $2.4 millioncompared to an operating loss of $2.3 millionfor the same period last year.
The Company is updating its guidance for 2019.
|Current Guidance||Previous Guidance|
|2019 Gross Lease Originations||> $72 million||> $70 million|
|2019 Gross Revenue||> $112 million||> $110 million|
|2019 Gross Profit||> $26.5 million||> $25.5 million|
|2019 Adjusted EBITDA||> $5.0 million||> $4.0 million|
The Company's guidance for Gross Lease Originations, Gross Revenue, Gross Profit and Adjusted EBITDA are forward-looking statements. They are subject to various risks and uncertainties that could cause the Company's actual results to differ materially from the anticipated targets. There can be no assurance the Company will meet these financial projections. See the cautionary information about forward-looking statements in the "Forward-Looking Statements" section of this press release. Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures,” but note that information reconciling forward-looking non-GAAP measures to GAAP measures is not available without unreasonable effort.
Conference Call Details
|Date:||Tuesday, August 13, 2019|
|Time:||10:00 a.m., Eastern time|
|Participant Dial-In Numbers:|
|Domestic callers:||(877) 407-3944|
|International callers:||(412) 902-0038|
Access by Webcast
The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at www.flexshopper.com or by clicking on the conference call link: https://78449.themediaframe.com/dataconf/productusers/fpay/mediaframe/31688/indexl.html. An audio replay of the call will be archived on the Company’s website.
CONSOLIDATED STATEMENTS OF OPERATIONS
|For the three months ended
|For the six months ended
|Lease revenues and fees, net||$||19,901,156||$||13,104,990||$||41,685,935||$||27,266,568|
|Lease merchandise sold||763,184||487,830||1,709,802||1,102,348|
|Costs and expenses:|
|Cost of lease revenues, consisting of depreciation and impairment of lease merchandise||14,260,308||8,987,412||29,538,247||19,395,158|
|Cost of lease merchandise sold||498,838||324,705||1,063,845||658,468|
|Salaries and benefits||2,037,081||2,031,788||3,795,168||4,211,164|
|Total costs and expenses||19,952,302||14,522,388||40,998,163||30,651,161|
|Interest expense including amortization of debt issuance costs||1,021,984||1,045,338||2,203,977||1,979,005|
|Dividends on Series 2 Convertible Preferred Shares||609,282||604,824||1,218,450||1,208,504|
|Net loss attributable to common shareholders||$||(919,228||)||$||(2,579,730||)||$||(1,024,853||)||$||(5,469,754||)|
|Basic and diluted (loss) per common share:|
|WEIGHTED AVERAGE COMMON SHARES:|
|Basic and diluted||17,666,193||5,368,390||17,658,562||5,331,445|
CONSOLIDATED BALANCE SHEETS
|June 30,||December 31,|
|Accounts receivable, net||6,897,421||6,375,963|
|Lease merchandise, net||24,425,167||32,364,697|
|Total current assets||34,631,556||45,199,030|
|PROPERTY AND EQUIPMENT, net||5,266,219||3,336,664|
|OTHER ASSETS, net||129,884||90,621|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Current portion of loan payable under credit agreement to beneficial shareholder net of $0 at 2019 and $167,483 at 2018 of unamortized issuance costs||$||-||$||14,252,717|
|Accrued payroll and related taxes||364,659||393,095|
|Promissory notes to related parties net of $13,333 at 2019 and $0 at 2018 of unamortized issuance costs||1,053,114||1,814,771|
|Lease liability - current portion||224,998||-|
|Total current liabilities||5,014,129||26,113,304|
|Loan payable under credit agreement to beneficial shareholder net of $226,963 at 2019 and $164,752 at 2018 of unamortized issuance costs and current portion||20,480,678||14,020,335|
|Promissory notes to related parties net of $33,103 at 2019 and $0 at 2018 of unamortized issuance costs and current portion||3,716,896||-|
|Lease liabilities less current portion||1,734,564||-|
|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 2018 at $5.00 stated value||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, $0.0001 par value- authorized 40,000,000 shares, issued and outstanding 17,666,193 shares at 2019 and 17,579,870 shares at 2018||1,767||1,758|
|Additional paid in capital||34,810,668||34,074,488|
|Total stockholders’ equity||9,081,392||8,492,676|
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Adjustments to reconcile net income/(loss) to net cash used in operating activities:|
|Depreciation and impairment of lease merchandise||29,538,247||19,395,158|
|Other depreciation and amortization||1,237,143||1,191,510|
|Compensation expense related to issuance of stock options and warrants||371,972||72,481|
|Provision for doubtful accounts||15,774,830||10,658,805|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other||(198,666||)||(60,167||)|
|Accrued payroll and related taxes||(28,436||)||(38,832||)|
|Net cash used in operating activities||(2,695,843||)||(2,412,710||)|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Purchases of property and equipment, including capitalized software costs||(1,105,122||)||(1,021,551||)|
|Net cash used in investing activities||(1,105,122||)||(1,021,551||)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Refund of equity issuance related costs||23,147||-|
|Proceeds from exercise of warrants||-||1,750|
|Proceeds from promissory notes, net of fees||3,440,000||3,465,000|
|Repayment of promissory note||(500,000||)||-|
|Proceeds from loan payable under credit agreement||1,358,343||3,550,000|
|Repayment of loan payable under credit agreement||(9,255,988||)||(6,420,852||)|
|Repayment of installment loan||(5,604||)||(5,604||)|
|Debt issuance related costs||-||(69,000||)|
|Net cash (used in) provided by financing activities||(4,940,102||)||521,294|
|DECREASE IN CASH||(3,349,381||)||(2,912,967||)|
|CASH, beginning of period||6,141,210||4,968,915|
|CASH, end of period||$||2,791,829||$||2,055,948|
|Supplemental cash flow information:|
|Non-cash financing activities:|
|Conversion of preferred stock to common stock||$||341,070||-|
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
|2019||2018||$ Change||% Change|
|Amortization of debt costs||58,569||160,903||(102,334||)||(63.6||)|
|Other amortization and depreciation||593,605||462,530||131,075||28.3|
|Non-recurring product/infrastructure expenses||134,814||-||134,814||-|
Key performance metrics for the six months ended
|Six months ended
|2019||2018||$ Change||% Change|
|Amortization of debt costs||118,834||293,307||(174,473||)||(59.5||)|
|Other amortization and depreciation||1,118,308||898,204||220,104||24.5|
|Non recurring product/infrastructure expenses||227,111||-||227,111||-|
The Company refers to Adjusted EBITDA in the above tables 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.
All statements in this release that are not based on historical fact are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements include the Company’s financial guidance for fiscal year 2019 appearing under “2019 Outlook” above. 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
Source: FlexShopper, Inc.