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 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/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
FLOWSFor 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 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.
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 FlexShopperFlexShopper,
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
FlexShopper, Inc.
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