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 March 31, 2020, highlighted by growth in gross lease
originations and net revenues.
Results for Quarter ended March 31, 2020
vs. Quarter ended March 31, 2019:
- Net lease revenues and fees increased 8.8% to $23.7 million
from $21.8 million.
- FlexShopper originated 36,153 gross leases, up 20.6% from
29,972 leases.
- Gross lease originations increased by $3.1 million, or 21.9%,
to $17.2 million from $14.1 million.
- Average origination value increased to $475 from $470.
- Net income was $52,000 compared with net income of
$504,000.
- Net loss attributable to common stockholders increased to
$(1.2) million, or $(0.06) per diluted share, compared to $(0.1)
million, or $(0.01) per diluted share.
- Gross profit increased 16.4% to $8.0 million from $6.9
million.
- Adjusted EBITDA1 decreased to $2.0 million compared to $2.3
million.
¹Adjusted EBITDA is a non-GAAP financial
measure. Refer to the definition and reconciliation of this measure
under “Non-GAAP Measures.”
First Quarter 2020 Highlights and Recent
Developments
- Growth in originations and net revenues.
FlexShopper recorded growth in both gross lease originations and
net revenues in the first quarter of 2020, although the pace of
growth moderated later in the quarter due to the broader COVID-19
driven slowdown in economic activity.
- Payments activity remains firm. As of
March 31, 2020, FlexShopper had not observed a material decline in
payments activity by its customers. FlexShopper continues to
closely monitor payments on a weekly basis and intends to modify
its marketing and underwriting guidelines as needed.
- B to B to C channel rollouts are delayed due to
COVID-19. Previously-planned pilot programs with new
retail partners that were originally scheduled to take place in
late Q1 and Q2 2020 have been put on hold. The Company
remains in close communication with its retail partners and intends
to move forward with the roll-out of pilot programs as soon as
practicable.
- Withdrawing 2020 financial guidance. In
light of the unknown duration and ultimate impact of COVID-19
mitigation measures by governmental authorities, FlexShopper is
withdrawing previously-issued 2020 financial guidance.
Rich House, CEO, stated, “2020 got off to a
solid start although the COVID-19 driven economic contraction began
to impact our business late in the quarter. Gross lease
originations in Q1 were up 20.6% versus the same period last
year. As of March 31, we had not observed a material change
in customer payment activity and continue to monitor this weekly
data point. Our online lease-to-own platform is fully
operational and provides customers a valuable shopping option while
adhering to ‘stay at home’ restrictions.”
Mr. House continued, “Our retail partners have
seen a decrease in store traffic and that has negatively impacted
our originations in that channel, as well as the delay of the
launch of pilot programs that were due to begin in late Q1 or early
Q2. We remain in regular communication with all of our retail
partners and expect the lifting of ‘stay at home’ restrictions to
have a positive impact on retail partner originations and pilot
rollouts, although the timing is unknown. Given that
uncertainty, we are withdrawing our previously-issued financial
guidance.”
Additionally, Adjusted EBITDA is a non-GAAP
financial measure. Refer to the definition of this measure under
“Non-GAAP Measures.”
Conference Call Details |
Date:
|
Thursday, May
7, 2020 |
Time: |
11:00 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/37617/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, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Lease revenues and fees, net |
|
$ |
23,697,705 |
|
|
$ |
21,784,779 |
|
Lease merchandise sold |
|
|
1,145,042 |
|
|
|
946,618 |
|
Total revenues |
|
|
24,842,747 |
|
|
|
22,731,397 |
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of lease revenues,
consisting of depreciation and impairment of lease merchandise |
|
|
16,196,949 |
|
|
|
15,277,939 |
|
Cost of lease merchandise
sold |
|
|
630,781 |
|
|
|
565,007 |
|
Marketing |
|
|
1,031,145 |
|
|
|
848,546 |
|
Salaries and benefits |
|
|
2,548,869 |
|
|
|
1,758,087 |
|
Operating expenses |
|
|
3,171,692 |
|
|
|
2,596,282 |
|
Total costs and
expenses |
|
|
23,579,436 |
|
|
|
21,045,861 |
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
1,263,311 |
|
|
|
1,685,536 |
|
Interest expense including
amortization of debt issuance costs |
|
|
1,211,626 |
|
|
|
1,181,993 |
|
Net
Income |
|
|
51,685 |
|
|
|
503,543 |
|
|
|
|
|
|
|
|
|
|
Dividends on Series 2
Convertible Preferred Shares |
|
|
609,717 |
|
|
|
609,168 |
|
Deemed dividend from exchange
offer of warrants |
|
|
713,212 |
|
|
|
- |
|
Net loss attributable
to common shareholders |
|
$ |
(1,271,244 |
) |
|
$ |
(105,625 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted
(loss) per common share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.06 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
19,903,435 |
|
|
|
17,650,847 |
|
FLEXSHOPPER,
INC.CONSOLIDATED BALANCE SHEETS
|
|
March 31, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
Cash |
|
$ |
5,454,520 |
|
|
$ |
6,868,472 |
|
Accounts receivable, net |
|
|
8,459,944 |
|
|
|
8,272,332 |
|
Prepaid expenses |
|
|
760,610 |
|
|
|
672,242 |
|
Lease merchandise, net |
|
|
29,898,676 |
|
|
|
31,063,104 |
|
Total current assets |
|
|
44,573,750 |
|
|
|
46,876,150 |
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT,
net |
|
|
5,414,740 |
|
|
|
5,260,407 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS, net |
|
|
74,623 |
|
|
|
78,335 |
|
|
|
$ |
50,063,113 |
|
|
$ |
52,214,892 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,161,491 |
|
|
$ |
4,567,889 |
|
Accrued payroll and related
taxes |
|
|
293,004 |
|
|
|
513,267 |
|
Loan payable under credit
agreement to beneficial shareholder, net of $16,244 at 2020 of
unamortized issuance costs |
|
|
2,294,829 |
|
|
|
- |
|
Promissory notes to related
parties, net of $1,333 at 2020 and $5,333 at 2019 of unamortized
issuance costs, including accrued interest |
|
|
1,212,777 |
|
|
|
1,067,740 |
|
Accrued expenses |
|
|
1,600,988 |
|
|
|
1,372,901 |
|
Lease liability - current
portion |
|
|
129,203 |
|
|
|
27,726 |
|
Total current liabilities |
|
|
8,692,292 |
|
|
|
7,549,523 |
|
|
|
|
|
|
|
|
|
|
Loan payable under credit
agreement to beneficial shareholder, net of $178,687 at 2020 and
$281,138 at 2019 of unamortized issuance costs and current
portion |
|
|
25,243,117 |
|
|
|
28,904,738 |
|
Promissory notes to related
parties, net of $20,690 at 2020 and $24,828 at 2019 of unamortized
issuance costs and current portion |
|
|
3,729,310 |
|
|
|
3,725,172 |
|
Lease liabilities less current
portion |
|
|
2,031,370 |
|
|
|
2,067,184 |
|
Total liabilities |
|
|
39,696,089 |
|
|
|
42,246,617 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Series 1 Convertible Preferred
Stock, $0.001 par value - authorized 250,000 shares, issued and
outstanding 171,191 shares at $5.00 stated value |
|
|
855,955 |
|
|
|
855,955 |
|
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
21,351,643 shares at 2020 and 17,783,960 shares at 2019 |
|
|
2,135 |
|
|
|
1,779 |
|
Additional paid in
capital |
|
|
35,660,429 |
|
|
|
35,313,721 |
|
Accumulated deficit |
|
|
(48,103,495 |
) |
|
|
(48,155,180 |
) |
Total stockholders’
equity |
|
|
10,367,024 |
|
|
|
9,968,275 |
|
|
|
$ |
50,063,113 |
|
|
$ |
52,214,892 |
|
FLEXSHOPPER,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWSFor the three months ended March 31, 2020 and
2019(unaudited)
|
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
51,685 |
|
|
$ |
503,543 |
|
Adjustments to reconcile net
income/(loss) to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and impairment of
lease merchandise |
|
|
16,196,949 |
|
|
|
15,277,939 |
|
Other depreciation and
amortization |
|
|
554,359 |
|
|
|
584,968 |
|
Compensation expense related
to issuance of stock options and warrants |
|
|
215,814 |
|
|
|
36,729 |
|
Provision for doubtful
accounts |
|
|
7,682,927 |
|
|
|
7,344,944 |
|
Interest in kind added to
promissory notes balance |
|
|
141,038 |
|
|
|
167,119 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(7,870,539 |
) |
|
|
(7,479,319 |
) |
Prepaid expenses and
other |
|
|
(87,873 |
) |
|
|
(17,624 |
) |
Lease merchandise |
|
|
(15,032,521 |
) |
|
|
(11,095,183 |
) |
Security deposits |
|
|
2,943 |
|
|
|
(60,000 |
) |
Accounts payable |
|
|
(1,406,398 |
) |
|
|
(5,211,226 |
) |
Accrued payroll and related
taxes |
|
|
(220,263 |
) |
|
|
(197,565 |
) |
Accrued expenses |
|
|
330,408 |
|
|
|
(320,979 |
) |
Net cash provided by (used in)
operating activities |
|
|
558,529 |
|
|
|
(466,654 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases of property and
equipment, including capitalized software costs |
|
|
(646,414 |
) |
|
|
(553,184 |
) |
Net cash used in investing
activities |
|
|
(646,414 |
) |
|
|
(553,184 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Principal payment under
finance lease obligation |
|
|
(1,515 |
) |
|
|
- |
|
Refund of equity issuance
related costs |
|
|
- |
|
|
|
13,147 |
|
Proceeds from exercise of
warrants |
|
|
131,250 |
|
|
|
- |
|
Proceeds from promissory
notes, net of fees |
|
|
- |
|
|
|
2,940,000 |
|
Proceeds from loan payable
under credit agreement |
|
|
1,900,000 |
|
|
|
1,241,328 |
|
Repayment of loan payable
under credit agreement |
|
|
(3,353,000 |
) |
|
|
(6,665,989 |
) |
Repayment of installment
loan |
|
|
(2,802 |
) |
|
|
(2,802 |
) |
Net cash used in financing
activities |
|
|
(1,326,067 |
) |
|
|
(2,474,316 |
) |
|
|
|
|
|
|
|
|
|
DECREASE IN CASH |
|
|
(1,413,952 |
) |
|
|
(3,494,154 |
) |
|
|
|
|
|
|
|
|
|
CASH, beginning of period |
|
$ |
6,868,472 |
|
|
$ |
6,141,210 |
|
|
|
|
|
|
|
|
|
|
CASH, end of period |
|
$ |
5,454,520 |
|
|
$ |
2,647,056 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
985,763 |
|
|
$ |
993,544 |
|
Deemed dividend from exchange
offer of warrants |
|
$ |
713,212 |
|
|
$ |
- |
|
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.
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 March 31,
2020 and 2019 were as follows:
|
|
Three months ended March 31, |
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
$ Change |
|
|
% Change |
|
Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
51,685 |
|
|
$ |
503,543 |
|
|
$ |
(451,858 |
) |
|
|
(89.7 |
) |
Amortization of debt
costs |
|
|
94,346 |
|
|
|
60,265 |
|
|
|
34,081 |
|
|
|
56.6 |
|
Other amortization and
depreciation |
|
|
460,013 |
|
|
|
524,703 |
|
|
|
(64,690 |
) |
|
|
(12.3 |
) |
Interest expense |
|
|
1,117,281 |
|
|
|
1,121,728 |
|
|
|
(4,447 |
) |
|
|
(0.4 |
) |
Stock compensation |
|
|
171,815 |
|
|
|
25,529 |
|
|
|
146,286 |
|
|
|
573.0 |
|
Non-recurring
product/infrastructure expenses |
|
|
104,663 |
|
|
|
92,297 |
|
|
|
12,366 |
|
|
|
13.4 |
|
Adjusted EBITDA |
|
$ |
1,999,803 |
|
|
$ |
2,328,065 |
|
|
$ |
(328,262 |
) |
|
|
- |
|
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 21E of the Securities Exchange Act of 1934.
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 impact of the COVID-19 pandemic on our
business and industry, and the other risks and uncertainties
described in the Risk Factors and Management’s Discussion and
Analysis sections of our Annual Report on Form 10-K and 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
required by federal securities laws.
Contact:Jeremy HellmanVice
PresidentThe Equity Group212-836-9626jhellman@equityny.com
FlexShopper, Inc.Investor
Relationsir@flexshopper.com
FlexShopper, Inc.
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