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 and
year ended December 31, 2018, highlighted by record revenue and
lease originations.
Results for Quarter Ended December 31,
2018 vs. Quarter Ended December 31, 2017:
- Total revenues increased 50.5% from $16.4 million to $24.7
million
- Gross lease originations increased 44.1% from $19.0 million to
$27.4 million
- Net loss declined to $2.5 million compared to a net loss of
$4.0 million
- Net loss attributable to common stockholders declined to $3.1
million, or $0.36 per diluted share, compared to $4.6 million, or
$0.87 per diluted share
- Adjusted Gross Profit¹ increased 40.5% from $4.7 million to
$6.7 million
- Adjusted EBITDA¹ was ($0.8) million compared to ($2.9)
million
Results for the Full Year Ended December
31, 2018 vs. Full Year Ended December 31, 2017:
- Total revenues increased 26.4% from $67.0 million to $84.7
million
- Gross lease originations increased 45.8% from $40.0 million to
$58.2 million
- Net loss increased to $9.5 million compared to a net loss of
$8.3 million
- Net loss attributable to common shareholders increased to $11.9
million, or $1.39 per diluted share, compared to $10.6 million, or
$2.01 per diluted share
- Adjusted Gross Profit¹ increased 25.7% from $15.5 million to
$19.4 million
- Adjusted EBITDA¹ was ($3.1) million compared to ($4.4)
million
¹Adjusted Gross Profit and Adjusted EBITDA are
non-GAAP financial measures. Refer to the definitions and
reconciliations of these measures under “Non-GAAP Measures”.
2018 Highlights and Recent
Developments
- In 2018, our average cost to acquire a new customer was
at its lowest for any fiscal year at $135 compared to $194 for
2017. This decrease is the result of continued
optimization of our marketing and underwriting strategies combined
with increased lease originations through retail partners. While
marketing expense increased compared to the same period last year,
our investments in marketing at targeted acquisition costs drives
revenues and gross profits in future periods and are within the
Company’s budget.
- We added 67% more new customers in 2018 than we added
in 2017. For all of 2018, we added 52,295 new customers,
up from 31,406 in 2017. These new customers ultimately expand
our returning customer base and our revenue potential going
forward.
- We continue to build a strong base of repeat
customers. Repeat customers continue to be a growing
segment of our business and represented approximately 58% of lease
originations in 2018 proving that our offering resonates with
consumers.
- Company launched its largest retail rollout to 730
retail stores, accelerating its B2B2C business. This
rollout successfully demonstrated our “integrationless” mobile
application technology, which provides a quick and seamless process
for retailers and consumers to transact on an LTO basis. Our
technology does not require integration into the retailer’s point
of sale system and enables retailers to get paid instantly at the
point of sale.
- Launched a new pilot of our LTO “save the sale” program
with another tire and auto service retailer with a 400+ store
footprint across multiple states. This rollout reaffirms
the merits of our mobile LTO technology that provides a quick and
seamless process for retailers and consumers to transact on an LTO
basis.
- Continued strong growth and focus on cost controls has
allowed us to scale operations and close in on positive Adjusted
EBITDA and profitability. 2018 was a record and
pivotal year for lease originations. Since our leases generate
revenues, gross profit and cash for periods within the 12 months
subsequent to their origination date, we expect to report our first
Adjusted EBITDA positive quarter for the quarter ending March 31,
2019.
- Received a Patent from the United States Patent and
Trademark Office (USPTO). FlexShopper was granted U.S.
Patent Number 10,089,682 by the USPTO, on October 2, 2018, for its
system that enables e-commerce servers to complete LTO transactions
through their e-commerce websites.
- Received an Indication from the USPTO that a Pending
Patent Application is Sufficient for Patenting.
FlexShopper has also received a notice of allowance from the USPTO
for systems that enable retailer devices to complete LTO
transactions through their retailer web pages, as well as systems
that further enable consumer devices to modify received retailer
web pages to indicate LTO payments in association with
transaction-eligible products as part of LTO transactions through
the retailer web pages.
Brad Bernstein, CEO, stated, “We are pleased to
report record revenues in 2018, driven by continued lease
origination growth. For the full year, we originated 139,949 gross
leases with an average origination value of $416, compared with
97,073 leases with an average origination value of $411 last
year. Both new and repeat customer demand was strong, and we
finished 2018 with an excellent holiday season, positioning us well
for 2019. In 2018 we were also able to control our
operating expenses, which grew at a much lower rate than revenues
and adjusted gross profit. With these factors in mind, we are
updating our financial guidance for 2019.”
Financial Outlook –
Guidance
|
Current Guidance |
Previous Guidance |
2019 Gross Lease Originations |
> $70 million |
> -- |
2019 Gross Revenue |
> $110 million |
> $105 million |
2019 Adjusted Gross Profit |
> $25 million |
> $24 million |
2019 Adjusted EBITDA |
> $3.5 million |
> $3 million |
Bernstein continued, “We are also pleased to
report that Howard Dvorkin has been named as Chairman of the Board.
As we previously reported, Howard brings a strong
knowledge base in consumer finance, particularly the subprime
segment, and significant business experience through a portfolio of
companies.”
“I am delighted to assume the role of Chairman
of the Board of FlexShopper, Inc. where I see an exciting
opportunity to continue to penetrate the $25 billion lease-to-own
market with FlexShopper's innovative technology and omnichannel
approach for consumers and retailers." said Dvorkin. “I look
forward to applying my knowledge of the non prime consumer segment
and my network for the benefit of the company and its
shareholders."
The Company's guidance for Gross Lease
Originations, Gross Revenue, Adjusted 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 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 DetailsDate:
Tuesday, March 12, 2019Time: 10:00 a.m. Eastern
Time
Participant Dial-In Numbers:Domestic callers:
(877) 407-3944International callers: (412)
902-0038
Access by WebcastThe 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/29063/indexl.html.
An audio replay of the call will be archived on the Company’s
website.
|
|
FLEXSHOPPER, INC.CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
|
|
|
For the years ended |
|
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
Revenues: |
|
|
|
|
|
|
Lease revenues and
fees |
|
$ |
82,458,661 |
|
|
$ |
65,412,131 |
|
Lease merchandise
sold |
|
|
2,269,708 |
|
|
|
1,634,233 |
|
Total
revenues |
|
|
84,728,369 |
|
|
|
67,046,364 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of lease revenues,
consisting of depreciation and impairment of lease merchandise |
|
|
40,639,232 |
|
|
|
31,453,246 |
|
Cost of lease
merchandise sold |
|
|
1,423,526 |
|
|
|
998,800 |
|
Provision for doubtful
accounts |
|
|
23,239,189 |
|
|
|
19,135,207 |
|
Marketing |
|
|
7,046,812 |
|
|
|
6,094,330 |
|
Salaries and
benefits |
|
|
8,796,011 |
|
|
|
7,862,714 |
|
Other operating
expenses |
|
|
8,761,815 |
|
|
|
7,664,566 |
|
Total
costs and expenses |
|
|
89,906,585 |
|
|
|
73,208,863 |
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(5,178,216 |
) |
|
|
(6,162,499 |
) |
|
|
|
|
|
|
|
|
|
Loss on extinguishment
of debt |
|
|
126,622 |
|
|
|
- |
|
Interest expense
including amortization of debt issuance costs |
|
|
4,156,424 |
|
|
|
2,168,262 |
|
Net
loss |
|
|
(9,461,262 |
) |
|
|
(8,330,761 |
) |
|
|
|
|
|
|
|
|
|
Dividends on Series 2
Convertible Preferred Stock |
|
|
2,426,840 |
|
|
|
2,316,396 |
|
Net loss
attributable to common stockholders |
|
$ |
(11,888,102 |
) |
|
$ |
(10,647,157 |
) |
|
|
|
|
|
|
|
|
|
Basic and
diluted (loss) per common share: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1.39 |
) |
|
$ |
(2.01 |
) |
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
8,574,569 |
|
|
|
5,290,944 |
|
|
|
|
|
|
|
|
|
|
FLEXSHOPPER, INC.CONSOLIDATED
BALANCE SHEETS |
|
|
|
|
|
December 31, |
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
6,141,210 |
|
|
$ |
4,968,915 |
|
Accounts
receivable, net |
|
|
6,375,963 |
|
|
|
4,259,468 |
|
Prepaid
expenses |
|
|
317,160 |
|
|
|
321,035 |
|
Lease
merchandise, net |
|
|
32,364,697 |
|
|
|
21,415,322 |
|
Total
current assets |
|
|
45,199,030 |
|
|
|
30,964,740 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT,
net |
|
|
3,336,664 |
|
|
|
2,948,164 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS, net |
|
|
90,621 |
|
|
|
95,722 |
|
|
|
$ |
48,626,315 |
|
|
$ |
34,008,626 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Current
portion of loan payable under credit agreement to beneficial
shareholder net of $167,483 at 2018 and $118,404 at 2017 of
unamortized issuance costs |
|
$ |
14,252,717 |
|
|
$ |
14,094,096 |
|
Accounts
payable |
|
|
8,317,216 |
|
|
|
7,702,145 |
|
Accrued
payroll and related taxes |
|
|
393,095 |
|
|
|
404,346 |
|
Promissory notes to related parties, including interest of
$64,771 |
|
|
1,814,771 |
|
|
|
- |
|
Accrued
expenses |
|
|
1,335,505 |
|
|
|
786,095 |
|
Total
current liabilities |
|
|
26,113,304 |
|
|
|
22,986,682 |
|
|
|
|
|
|
|
|
|
|
Loan payable under
credit agreement to beneficial shareholder net of $164,752 at 2018
and $39,468 at 2017 of unamortized issuance costs and current
portion |
|
|
14,020,335 |
|
|
|
4,698,032 |
|
Total
liabilities |
|
|
40,133,639 |
|
|
|
27,684,714 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
Series 1
Convertible Preferred Stock, $0.001 par value- authorized 250,000
shares, issued and outstanding 239,405 shares at $5.00 stated
value |
|
|
1,197,025 |
|
|
|
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 and 15,000,000
shares, issued and outstanding: 17,579,870 shares at 2018 and
5,294,501 at 2017 |
|
|
1,758 |
|
|
|
529 |
|
Additional paid in capital |
|
|
34,074,488 |
|
|
|
22,445,691 |
|
Accumulated deficit |
|
|
(48,732,595 |
) |
|
|
(39,271,333 |
) |
Total
stockholders’ equity |
|
|
8,492,676 |
|
|
|
6,323,912 |
|
|
|
$ |
48,626,315 |
|
|
$ |
34,008,626 |
|
|
|
FLEXSHOPPER, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS |
|
|
|
|
|
For the years ended December 31, |
|
|
|
2018 |
|
|
2017 |
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net
loss |
|
$ |
(9,461,262 |
) |
|
$ |
(8,330,761 |
) |
Adjustments to reconcile net loss to net cash (used in) operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and impairment of lease merchandise |
|
|
40,639,232 |
|
|
|
31,453,246 |
|
Other
depreciation and amortization |
|
|
2,410,537 |
|
|
|
2,090,581 |
|
Compensation expense related to issuance of stock options |
|
|
133,428 |
|
|
|
113,952 |
|
Provision
for doubtful accounts |
|
|
23,239,189 |
|
|
|
19,135,207 |
|
Loss on
debt extinguishment |
|
|
126,622 |
|
|
|
- |
|
Payment
of interest in kind under promissory notes |
|
|
64,771 |
|
|
|
- |
|
Payment
of interest in kind under credit agreement |
|
|
248,535 |
|
|
|
- |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(25,355,684 |
) |
|
|
(21,212,888 |
) |
Prepaid
expenses and other |
|
|
6,844 |
|
|
|
32,296 |
|
Lease
merchandise |
|
|
(51,588,607 |
) |
|
|
(34,298,108 |
) |
Security
deposits |
|
|
2,025 |
|
|
|
(10,206 |
) |
Accounts
payable |
|
|
827,715 |
|
|
|
3,784,397 |
|
Accrued
payroll and related taxes |
|
|
(11,251 |
) |
|
|
108,013 |
|
Accrued
expenses |
|
|
557,648 |
|
|
|
535,437 |
|
Net cash
(used in) operating activities |
|
|
(18,160,258 |
) |
|
|
(6,598,834 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases
of property and equipment, including capitalized software
costs |
|
|
(2,284,876 |
) |
|
|
(2,021,538 |
) |
Net cash
(used in) investing activities |
|
|
(2,284,876 |
) |
|
|
(2,021,538 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options |
|
|
- |
|
|
|
15,000 |
|
Proceeds
from exercise of warrants |
|
|
1,750 |
|
|
|
- |
|
Proceeds
from public offering |
|
|
10,007,500 |
|
|
|
- |
|
Costs
incurred from public offering |
|
|
(1,123,419 |
) |
|
|
- |
|
Proceeds
from promissory notes |
|
|
3,465,000 |
|
|
|
- |
|
Proceeds
from loan payable under credit agreement |
|
|
19,366,359 |
|
|
|
10,450,000 |
|
Repayment
of loan payable under credit agreement |
|
|
(9,959,607 |
) |
|
|
(2,288,208 |
) |
Repayment
of installment loan |
|
|
(11,208 |
) |
|
|
- |
|
Debt
issuance related costs |
|
|
(128,946 |
) |
|
|
- |
|
Net cash
provided by financing activities |
|
|
21,617,429 |
|
|
|
8,176,792 |
|
|
|
|
|
|
|
|
|
|
INCREASE/(DECREASE) IN CASH |
|
|
1,172,295 |
|
|
|
(443,580 |
) |
|
|
|
|
|
|
|
|
|
CASH, beginning of
year |
|
|
4,968,915 |
|
|
|
5,412,495 |
|
|
|
|
|
|
|
|
|
|
CASH, end of year |
|
$ |
6,141,210 |
|
|
$ |
4,968,915 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
2,806,285 |
|
|
$ |
1,649,795 |
|
Non-cash financing
activities: |
|
|
|
|
|
|
|
|
Issuance
of common stock and warrants to extinguish debt and accrued
interest |
|
$ |
2,089,266 |
|
|
$ |
- |
|
Conversion of preferred stock to common stock |
|
$ |
- |
|
|
$ |
18,300 |
|
Warrants
issued for debt issuance costs |
|
$ |
523,251 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-GAAP MeasuresWe 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.
|
|
Year ended December 31, |
|
|
|
|
|
|
|
Adjusted Gross Profit |
|
2018 |
|
|
2017 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenues and
fees |
|
$ |
82,458,661 |
|
|
$ |
65,412,131 |
|
|
$ |
17,046,530 |
|
|
|
26.1 |
|
Lease merchandise
sold |
|
|
2,269,708 |
|
|
|
1,634,233 |
|
|
|
635,475 |
|
|
|
38.9 |
|
Cost of merchandise
sold |
|
|
(1,423,526 |
) |
|
|
(998,800 |
) |
|
|
(424,726 |
) |
|
|
42.5 |
|
Provision for doubtful
accounts |
|
|
(23,239,189 |
) |
|
|
(19,135,207 |
) |
|
|
(4,103,982 |
) |
|
|
21.4 |
|
Net revenues |
|
|
60,065,654 |
|
|
|
46,912,357 |
|
|
|
13,153,297 |
|
|
|
28.0 |
|
Cost of lease revenues,
consisting of depreciation and impairment of lease merchandise |
|
|
(40,639,232 |
) |
|
|
(31,453,246 |
) |
|
|
(9,185,986 |
) |
|
|
29.2 |
|
Adjusted Gross
Profit |
|
$ |
19,426,422 |
|
|
$ |
15,459,111 |
|
|
$ |
3,967,311 |
|
|
|
25.7 |
|
Gross profit
margin |
|
|
32 |
% |
|
|
33 |
% |
|
|
|
|
|
|
|
|
Adjusted Gross Profit represents GAAP revenue
less the provision for doubtful accounts and cost of leased
inventory and inventory sold. Adjusted Gross Profit provides us
with an understanding of the results from the primary operations of
our business. We use Adjusted 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.
|
|
Year ended December 31, |
|
|
|
|
|
|
|
Adjusted EBITDA |
|
2018 |
|
|
2017 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(9,461,262 |
) |
|
$ |
(8,330,761 |
) |
|
$ |
(1,130,501 |
) |
|
|
(13.6 |
) |
Amortization of debt
costs |
|
|
511,085 |
|
|
|
473,616 |
|
|
|
37,469 |
|
|
|
7.9 |
|
Other amortization and
depreciation |
|
|
1,914,084 |
|
|
|
1,616,964 |
|
|
|
297,120 |
|
|
|
18.4 |
|
Interest expense,
excluding amortization of debt costs |
|
|
3,645,339 |
|
|
|
1,694,645 |
|
|
|
1,950,694 |
|
|
|
115.1 |
|
Loss on debt
extinguishment |
|
|
126,622 |
|
|
|
- |
|
|
|
126,622 |
|
|
|
- |
|
Stock compensation |
|
|
133,428 |
|
|
|
113,952 |
|
|
|
19,476 |
|
|
|
17.1 |
|
Adjusted EBITDA |
|
$ |
(3,130,704 |
) |
|
$ |
(4,431,584 |
) |
|
$ |
1,300,880 |
|
|
|
(29.4 |
) |
We refer to Adjusted Gross Profit and Adjusted
EBITDA in the above tables as we use these measures to evaluate our
operating performance and make strategic decisions about the
Company. Management believes that Adjusted 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 StatementsAll
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 HellmanSenior
AssociateThe Equity
Group212-836-9626jhellman@equityny.com
FlexShopper, Inc.Investor
Relationsir@flexshopper.com
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