UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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CURRENT REPORT ON FORM 8-K
FlexShopper, Inc. (the “Company”)
November 15, 2021
Item 2.02. Results of Operations and Financial Condition.
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, 2021, highlighted by growth in net revenue and net income. A copy of the press release is furnished with this report as Exhibit 99.1. Such information, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (a) | Exhibits. The exhibit listed in the following Exhibit Index is filed as part of this current report. |
| Exhibit No. | Description | |
| 99.1 | Press Release issued by FlexShopper, Inc. on November 15, 2021. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FLEXSHOPPER, INC. | ||
| Date: November 15, 2021 | By: | /s/ Richard House, Jr. |
| Richard House, Jr. | ||
| Chief Executive Officer | ||
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Exhibit 99.1
FlexShopper, Inc. Reports Third Quarter 2021 Financial Results
Q3 2021 Net Revenues Up 25.6% to $30.9 million; Net Income of $1.7 million; EPS of $0.05
BOCA RATON, Fla., November 15, 2021 (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, 2021, highlighted by a significant improvement in bottom-line profitability.
Results for Third Quarter Ended September 30, 2021 vs. Third Quarter Ended September 30, 2020:
| ● | Total net revenues and fees increased 25.6% to $30.9 million from $24.6 million |
| ● | Originated 30,407 gross leases, down 35.7% from 47,317; average origination value increased to $522 from $480 |
| ● | Gross lease originations decreased $6.7 million, or 29.8%, to $15.9 million from $22.6 million |
| ● | Gross profit increased 42.3% to $12.7 million from $8.9 million |
| ● | Net income increased to $1.7 million compared with net income of $0.3 million |
| ● | Net income attributable to common stockholders of $1.1 million, or $0.05 per diluted share, compared to net loss attributable to common stockholders of $(0.3) million, or $(0.02) per diluted share |
| ● | Adjusted EBITDA1 increased to $4.8 million compared to $2.1 million |
| ● | Lease merchandise, net improved to $33.3 million from $30.7 million |
¹Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.
Third Quarter 2021 Highlights and Recent Developments
| ● | Gross margin expanded to 41%, compared with 36% in the year-ago period. Gross margin expansion resulted from the combination of growth in gross billings while the associated costs, including depreciation and impairment, grew at a slower rate. |
| ● | Retail partner rollout programs continued to be impacted by COVID-19. A significant number of partner retail storefronts are operated by a low number of staff, often less than five people. As a result, employee sick days due to COVID-19 have resulted in reduced operating hours or temporary store closures, limiting location activity and thereby limiting lease originations for FlexShopper. As COVID-19 rates continue to subside, the Company expects retail partner activity to increase. |
| ● | Repeat customer trends continue to be favorable. During the third quarter, the Company originated $6.5 million from existing customers, representing approximately 41.3% of total gross lease originations. This compared with $8.6 million repeat customer leases in the third quarter of 2020, or 38.2% of total gross lease originations. |
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| ● | Pre-marketing EBITDA continues to demonstrate growth. Excluding marketing expense, which is the Company’s most significant variable expense category, pre-marketing EBTDA for Q3 was $6.6 million, up from $3.8 million in the year-ago quarter. |
| ● | Net lease merchandise up compared with third quarter 2020 despite stimulus-driven headwinds. Representing the value of actual goods on which customers are due to make lease payments, Net Lease Merchandise improved to $33.3 million at September 30, 2021, compared with $30.7 million a year ago |
Rich House, CEO, stated, “Despite the continued impact of stimulus on the consumer credit marketplace, we reported a solid third quarter with top line revenue growth and a nice increase in bottom-line profitability. A consistent theme many have heard us articulate with respect to our business is the fact that weekly payment activity provides us real-time visibility into market changes. We have recently observed falling pre-payment activity, which we think is indicative of a waning impact from stimulus programs. If this observation proves true, we expect to see increasing demand for rent to own and other consumer credit products among sub-prime consumers. Heading into the holiday shopping season we intend to ramp up our marketing spend as we normally do in support of our busiest quarter for originations.”
Mr. House continued, “We are also cautiously optimistic that COVID-19 is receding and that will allow our retail partners to resume normal operations. Our retail partner relationships are fully intact and we have been working to support them with our own sales support in the field. We recently signed an additional partner with whom we began a roll out a few days ago and look forward to our retail channel helping drive origination growth through the rest of 2021 and into 2022.”
Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”
Conference Call Details
Date: November 16, 2021
Time: 9:00 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/46992/indexl.html. An audio replay of the call will be archived on the Company’s website.
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FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues: | ||||||||||||||||
| Lease revenues and fees, net | $ | 29,134,709 | $ | 23,391,348 | $ | 88,876,167 | $ | 69,989,333 | ||||||||
| Lease merchandise sold | 1,726,226 | 1,178,716 | 5,456,991 | 3,953,608 | ||||||||||||
| Total revenues | 30,860,935 | 24,570,064 | 94,333,158 | 73,942,941 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 16,936,374 | 14,886,798 | 56,001,355 | 46,982,002 | ||||||||||||
| Cost of lease merchandise sold | 1,235,601 | 763,728 | 4,300,224 | 2,685,599 | ||||||||||||
| Marketing | 1,824,402 | 1,650,717 | 5,571,237 | 3,619,911 | ||||||||||||
| Salaries and benefits | 2,672,864 | 2,499,235 | 8,329,188 | 7,324,620 | ||||||||||||
| Operating expenses | 4,325,825 | 3,528,890 | 13,654,038 | 10,037,743 | ||||||||||||
| Total costs and expenses | 26,995,066 | 23,329,368 | 87,856,042 | 70,649,875 | ||||||||||||
| Operating income | 3,865,869 | 1,240,696 | 6,477,116 | 3,293,066 | ||||||||||||
| Gain on extinguishment of debt | - | - | 1,931,825 | - | ||||||||||||
| Interest expense including amortization of debt issuance costs | (1,233,617 | ) | (951,336 | ) | (3,855,014 | ) | (3,214,083 | ) | ||||||||
| Income before income taxes | 2,632,252 | 289,360 | 4,553,927 | 78,983 | ||||||||||||
| Provision for income taxes | (936,229 | ) | - | (1,914,473 | ) | - | ||||||||||
| Net income | 1,696,023 | 289,360 | 2,639,454 | 78,983 | ||||||||||||
| Deemed dividend from exchange offer of warrants | - | - | - | 713,212 | ||||||||||||
| Dividends on Series 2 Convertible Preferred Shares | 609,777 | 609,772 | 1,829,322 | 1,829,217 | ||||||||||||
| Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders | $ | 1,086,246 | $ | (320,412 | ) | $ | 810,132 | $ | (2,463,446 | ) | ||||||
| Basic and diluted income/(loss) per common share: | ||||||||||||||||
| Basic | $ | 0.05 | $ | (0.02 | ) | $ | 0.04 | $ | (0.12 | ) | ||||||
| Diluted | $ | 0.05 | $ | (0.02 | ) | $ | 0.03 | $ | (0.12 | ) | ||||||
| WEIGHTED AVERAGE COMMON SHARES: | ||||||||||||||||
| Basic | 21,608,878 | 21,358,141 | 21,603,209 | 20,872,940 | ||||||||||||
| Diluted | 23,577,179 | 21,358,141 | 23,682,265 | 20,872,940 | ||||||||||||
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FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 3,147,926 | $ | 8,541,232 | ||||
| Accounts receivable, net | 19,651,250 | 10,032,714 | ||||||
| Prepaid expenses | 1,118,140 | 869,081 | ||||||
| Lease merchandise, net | 33,332,854 | 42,822,340 | ||||||
| Total current assets | 57,250,170 | 62,265,367 | ||||||
| PROPERTY AND EQUIPMENT, net | 7,227,023 | 5,911,696 | ||||||
| OTHER ASSETS, net | 78,347 | 72,316 | ||||||
| Total assets | $ | 64,555,540 | $ | 68,249,379 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 3,344,185 | $ | 7,907,619 | ||||
| Accrued payroll and related taxes | 629,876 | 352,102 | ||||||
| Promissory notes to related parties, net of $2,546 at 2021 and net of $8,276 at 2020 of unamortized issuance costs, including accrued interest | 4,802,650 | 4,815,546 | ||||||
| Current portion of promissory note – Paycheck Protection Program, including accrued interest | - | 1,184,952 | ||||||
| Accrued expenses | 3,446,104 | 2,646,800 | ||||||
| Lease liability - current portion | 164,274 | 160,726 | ||||||
| Total current liabilities | 12,387,089 | 17,067,745 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $419,307 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion | 34,205,693 | 37,134,009 | ||||||
| Promissory note – Paycheck Protection Program, net of current portion | - | 741,787 | ||||||
| Accrued payroll and related taxes net of current portion | 204,437 | 204,437 | ||||||
| Deferred income tax liability | 700,199 | - | ||||||
| Lease liabilities net of current portion | 1,821,935 | 1,947,355 | ||||||
| Total liabilities | 49,319,353 | 57,095,333 | ||||||
| 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 21,390,944 shares at 2021 and 21,359,945 shares at 2020 | 2,139 | 2,136 | ||||||
| Additional paid in capital | 38,286,010 | 36,843,326 | ||||||
| Accumulated deficit | (45,855,622 | ) | (48,495,076 | ) | ||||
| Total stockholders’ equity | 15,236,187 | 11,154,046 | ||||||
| $ | 64,555,540 | $ | 68,249,379 | |||||
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FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended September 30, 2021 and 2020
(unaudited)
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 2,639,454 | $ | 78,983 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 56,001,355 | 46,982,002 | ||||||
| Other depreciation and amortization | 2,032,811 | 1,655,407 | ||||||
| Amortization of debt issuance costs | 177,647 | 234,283 | ||||||
| Compensation expense related to issuance of stock options and warrants | 1,417,699 | 1,052,281 | ||||||
| Provision for doubtful accounts | 30,622,139 | 23,643,556 | ||||||
| Interest in kind added to promissory notes balance | 9,460 | 7,814 | ||||||
| Deferred income tax | 700,199 | - | ||||||
| Gain on debt extinguishment | (1,931,825 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (40,240,674 | ) | (23,226,544 | ) | ||||
| Prepaid expenses and other | (248,203 | ) | (120,482 | ) | ||||
| Lease merchandise | (46,511,869 | ) | (46,577,002 | ) | ||||
| Security deposits | (8,338 | ) | 2,943 | |||||
| Lease Liabilities | (2,595 | ) | - | |||||
| Accounts payable | (4,563,434 | ) | 485,878 | |||||
| Accrued payroll and related taxes | 277,774 | 62,108 | ||||||
| Accrued expenses | 788,228 | 273,903 | ||||||
| Net cash provided by operating activities | 1,159,828 | 4,555,130 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (3,459,424 | ) | (2,099,654 | ) | ||||
| Net cash used in investing activities | (3,459,424 | ) | (2,099,654 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan payable under credit agreement | 4,000,000 | 2,412,000 | ||||||
| Repayment of loan payable under credit agreement | (6,575,000 | ) | (7,023,250 | ) | ||||
| Debt issuance related costs | (529,608 | ) | - | |||||
| Proceeds from exercise of warrants | - | 131,250 | ||||||
| Proceeds from exercise of stock options | 24,988 | 5,267 | ||||||
| Proceeds from promissory notes, net of fees | - | 1,914,100 | ||||||
| Principal payment under finance lease obligation | (5,684 | ) | (4,891 | ) | ||||
| Repayment of instalment loan | (8,406 | ) | (8,405 | ) | ||||
| Net cash used in financing activities | (3,093,710 | ) | (2,573,929 | ) | ||||
| DECREASE IN CASH | (5,393,306 | ) | (118,453 | ) | ||||
| CASH, beginning of period | $ | 8,541,232 | $ | 6,868,472 | ||||
| CASH, end of period | $ | 3,147,926 | $ | 6,750,019 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | 3,702,949 | $ | 3,021,833 | ||||
| Deemed dividend from exchange offer of warrants | $ | - | $ | 713,212 | ||||
| Conversion of preferred stock to common stock | $ | - | $ | 4,295 | ||||
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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. Adjusted EBITDA may be useful to an investor in evaluating our operating performance and liquidity because this measure:
| ● | is widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company; |
| ● | is a financial measurement that is used by rating agencies, lenders and other parties to evaluate our credit worthiness; and |
| ● | is used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting. |
Adjusted EBITDA is a supplemental measure of FlexShopper’s performance that is neither required by, nor presented in accordance with, GAAP. Adjusted EBITDA should not be considered as a substitute for GAAP metrics such as operating income/ (loss), net income or any other performance measures derived in accordance with GAAP.
Key performance metrics for the three months ended September 30, 2021 and 2020 were as follows:
| Three months ended September 30, | ||||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 1,696,023 | $ | 289,360 | $ | 1,406,663 | 486.1 | |||||||||
| Provision for incomes taxes | 936,229 | - | 936,229 | |||||||||||||
| Amortization of debt costs | 43,067 | 50,050 | (6,983 | ) | (14.0 | ) | ||||||||||
| Other amortization and depreciation | 684,356 | 593,267 | 91,089 | 15.4 | ||||||||||||
| Interest expense | 1,190,550 | 901,286 | 289,264 | 32.1 | ||||||||||||
| Stock compensation | 265,407 | 169,393 | 96,014 | 56.7 | ||||||||||||
| Product/infrastructure expenses | - | 97,390 | (97,390 | ) | ||||||||||||
| Adjusted EBITDA | $ | 4,815,632 | $ | 2,100,746 | $ | 2,714,886 | 129.2 | |||||||||
Key performance metrics for the nine months ended September 30, 2021 and 2020 were as follows:
| Nine months ended September 30, | ||||||||||||||||
| 2021 | 2020 | $ Change | % Change | |||||||||||||
| Adjusted EBITDA: | ||||||||||||||||
| Net income | $ | 2,639,454 | $ | 78,983 | $ | 2,560,471 | 3,241.8 | |||||||||
| Provision for income taxes | 1,914,473 | - | 1,914,473 | |||||||||||||
| Amortization of debt costs | 177,647 | 234,283 | (56,636 | ) | (24.2 | ) | ||||||||||
| Other amortization and depreciation | 2,008,405 | 1,655,406 | 352,999 | 21.3 | ||||||||||||
| Interest expense | 3,677,367 | 2,979,800 | 697,567 | 23.4 | ||||||||||||
| Stock compensation | 894,892 | 793,241 | 101,651 | 12.8 | ||||||||||||
| Product/infrastructure expenses | 10,000 | 281,830 | (271,830 | ) | (96.5 | ) | ||||||||||
| Warrants compensation – consulting agreement | - | 139,480 | (139,480 | ) | ||||||||||||
| Gain on debt extinguishment | (1,931,825 | ) | - | (1,931,825 | ) | |||||||||||
| Adjusted EBITDA | $ | 9,390,413 | $ | 6,163,023 | $ | 3,227,390 | 52.4 | |||||||||
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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 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
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com
FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.
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