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 June 30, 2020, highlighted by growth in adjusted EBITDA and
net revenues.
Results for Quarter Ended June 30, 2020
vs. Quarter Ended June 30, 2019:
- Net lease revenues and fees increased 15.1% to $22.9 million
from $19.9 million
- FlexShopper originated 33,941 gross leases, up 16.0% from
29,252
- Gross lease originations increased $2.1 million, or 15.8%, to
$15.3 million from $13.2 million
- The average origination value remained flat at $452
- Net loss of $(262) thousand compared with a net loss of $(310)
thousand
- Net loss attributable to common stockholders of $(0.9) million,
or $(0.04) per diluted share, compared to $(0.9) million, or
$(0.05) per diluted share
- Gross profit increased 25.8% to $7.4 million from $5.9
million
- Adjusted EBITDA1 increased to $2.0 million compared to $1.8
million
Results for Six Months Ended June 30,
2020 vs. Six Months Ended June 30, 2019:
- Net lease revenues and fees increased 11.8% to $46.6 million
from $41.7 million
- FlexShopper originated 70,068 gross leases, up 18.3% from
59,245
- Gross lease originations increased $4.8 million, or 17.3%, to
$32.5 million from $27.7 million
- The average origination value decreased to $464 from $467
- Net loss of $(210) thousand compared with net income of $194
thousand
- Net loss attributable to common stockholders, inclusive of
deemed dividend expense of $0.7 million in Q1, of $(2.1) million,
or $(0.10) per diluted share, compared to $(1.0) million, or
$(0.06) per diluted share
- Gross profit increased 20.0% to $15.4 million from $12.8
million
- Adjusted EBITDA1 remained flat at $4.1 million
¹Adjusted EBITDA is a non-GAAP financial
measure. Refer to the definition and reconciliation of this measure
under “Non-GAAP Measures”.
Second 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 second quarter.
Retail partner lease originations saw improvement from COVID-19
restriction-driven lows experienced at the end of Q1/early in Q2
but remained below pre-pandemic levels.
- Payments activity remains firm. As of
June 30, 2020, FlexShopper observed an improvement in payments
activity by its customers compared to the same period last year.
The Company continues to closely monitor payments on a weekly basis
and intends to modify its marketing and underwriting as
needed.
- Retailer rollouts were delayed due to
COVID-19. Previously-planned programs with new retail
partners that were originally scheduled for late Q1 and/or Q2 were
delayed. Since the end of Q2, the Company has been able to move
forward with some of these new programs.
Rich House, CEO, stated, “Over the course of the
second quarter we saw states progress through phased economic
reopenings. As they did so, we followed suit as we felt an
increased marketing push would yield a positive return. On our
first quarter earnings call we noted that our payment activity had
remained firm and that continues to be the case.
Mr. House continued, “Our retail partners have
seen their store traffic begin to return as states moved through
phased reopening of in-person businesses. That has, in turn, led to
an increase in leases originated through this channel although
activity remains below levels experienced prior to COVID-19. We are
now moving forward with new partner trials and rollouts that were
delayed earlier in the year.”
Additionally, Adjusted EBITDA is a non-GAAP
financial measure. Refer to the definition of this measure under
“Non-GAAP Measures.”
Conference Call Details |
Date:Time: |
Tuesday ,
August 11, 20209:00 a.m. Eastern Time |
|
|
Participant Dial-In Numbers: |
Domestic callers:International callers: |
(877) 407-3944(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 June 30, |
|
|
For the six months ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Lease revenues and fees, net |
$ |
22,900,280 |
|
|
$ |
19,901,156 |
|
|
$ |
46,597,985 |
|
|
$ |
41,685,935 |
|
Lease merchandise sold |
|
1,629,850 |
|
|
|
763,184 |
|
|
|
2,774,892 |
|
|
|
1,709,802 |
|
Total revenues |
|
24,530,130 |
|
|
|
20,664,340 |
|
|
|
49,372,877 |
|
|
|
43,395,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of lease revenues, consisting of depreciation and impairment
of lease merchandise |
|
15,898,255 |
|
|
|
14,260,308 |
|
|
|
32,095,204 |
|
|
|
29,538,247 |
|
Cost of lease merchandise
sold |
|
1,291,090 |
|
|
|
498,838 |
|
|
|
1,921,871 |
|
|
|
1,063,845 |
|
Marketing |
|
938,049 |
|
|
|
314,229 |
|
|
|
1,969,194 |
|
|
|
1,162,775 |
|
Salaries and benefits |
|
2,276,516 |
|
|
|
2,037,081 |
|
|
|
4,825,385 |
|
|
|
3,795,168 |
|
Operating expenses |
|
3,337,162 |
|
|
|
2,841,846 |
|
|
|
6,508,853 |
|
|
|
5,438,128 |
|
Total costs and expenses |
|
23,741,072 |
|
|
|
19,952,302 |
|
|
|
47,320,507 |
|
|
|
40,998,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
789,058 |
|
|
|
712,038 |
|
|
|
2,052,370 |
|
|
|
2,397,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense including
amortization of debt issuance costs |
|
1,051,120 |
|
|
|
1,021,984 |
|
|
|
2,262,747 |
|
|
|
2,203,977 |
|
Net (loss)/
income |
|
(262,062 |
) |
|
|
(309,946 |
) |
|
|
(210,377 |
) |
|
|
193,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividend from exchange
offer of warrants |
|
- |
|
|
|
- |
|
|
|
713,212 |
|
|
|
- |
|
Dividends on Series 2
Convertible Preferred Shares |
|
609,728 |
|
|
|
609,282 |
|
|
|
1,219,445 |
|
|
|
1,218,450 |
|
Net loss attributable
to common shareholders |
$ |
(871,790 |
) |
|
$ |
(919,228 |
) |
|
$ |
(2,143,034 |
) |
|
$ |
(1,024,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.04 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
21,351,914 |
|
|
|
17,666,193 |
|
|
|
20,627,674 |
|
|
|
17,658,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FLEXSHOPPER,
INC.CONSOLIDATED BALANCE SHEETS
|
June 30, |
|
|
December 31, |
|
|
2020 |
|
|
2019 |
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash |
$ |
9,851,009 |
|
|
$ |
6,868,472 |
|
Accounts receivable, net |
|
7,969,997 |
|
|
|
8,272,332 |
|
Prepaid expenses |
|
591,276 |
|
|
|
672,242 |
|
Lease merchandise, net |
|
26,081,242 |
|
|
|
31,063,104 |
|
Total current assets |
|
44,493,524 |
|
|
|
46,876,150 |
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT,
net |
|
5,489,986 |
|
|
|
5,260,407 |
|
|
|
|
|
|
|
|
|
OTHER ASSETS, net |
|
73,854 |
|
|
|
78,335 |
|
|
$ |
50,057,364 |
|
|
$ |
52,214,892 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable |
$ |
3,079,283 |
|
|
$ |
4,567,889 |
|
Accrued payroll and related
taxes |
|
513,098 |
|
|
|
513,267 |
|
Loan payable under credit
agreement to beneficial shareholder, net of $36,838 at 2020 of
unamortized issuance costs |
|
8,541,037 |
|
|
|
- |
|
Promissory notes to related
parties, net of $16,552 at 2020 and $5,333 at 2019 of unamortized
issuance costs, including accrued interest |
|
4,793,918 |
|
|
|
1,067,740 |
|
Promissory note |
|
845,047 |
|
|
|
- |
|
Accrued expenses |
|
1,210,665 |
|
|
|
1,372,901 |
|
Lease liability - current
portion |
|
151,146 |
|
|
|
27,726 |
|
Total current liabilities |
|
19,134,194 |
|
|
|
7,549,523 |
|
|
|
|
|
|
|
|
|
Loan payable under credit
agreement to beneficial shareholder, net of $73,676 at 2020 and
$281,138 at 2019 of unamortized issuance costs and current
portion |
|
17,082,075 |
|
|
|
28,904,738 |
|
Promissory notes to related
parties, net of $24,828 at 2019 of unamortized issuance costs and
current portion |
|
- |
|
|
|
3,725,172 |
|
Promissory note |
|
1,072,042 |
|
|
|
- |
|
Accrued payroll and related
taxes less current portion |
|
85,091 |
|
|
|
- |
|
Lease liabilities less current
portion |
|
2,028,852 |
|
|
|
2,067,184 |
|
Total liabilities |
|
39,402,254 |
|
|
|
42,246,617 |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Series 1 Convertible Preferred
Stock, $0.001 par value - authorized 250,000 shares, issued and
outstanding 170,332 shares at 2020 and 171,191 shares at 2019 at
$5.00 stated value |
|
851,660 |
|
|
|
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
21,356,112 shares at 2020 and 17,783,960 shares at 2019 |
|
2,136 |
|
|
|
1,779 |
|
Additional paid in
capital |
|
36,214,871 |
|
|
|
35,313,721 |
|
Accumulated deficit |
|
(48,365,557 |
) |
|
|
(48,155,180 |
) |
Total stockholders’
equity |
|
10,665,110 |
|
|
|
9,968,275 |
|
|
$ |
50,057,364 |
|
|
$ |
52,214,892 |
|
|
|
|
|
|
|
|
|
FLEXSHOPPER,
INC.CONSOLIDATED STATEMENTS OF CASH
FLOWSFor the six months ended June 30, 2020 and
2019(unaudited)
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
Net (loss)/ income |
$ |
(210,377 |
) |
|
$ |
193,597 |
|
Adjustments to reconcile net
income/(loss) to net cash provided by operating
activities: |
|
|
|
|
|
|
|
Depreciation and impairment of
lease merchandise |
|
32,095,204 |
|
|
|
29,538,247 |
|
Other depreciation and
amortization |
|
1,246,372 |
|
|
|
1,237,143 |
|
Compensation expense related
to issuance of stock options and warrants |
|
763,328 |
|
|
|
371,972 |
|
Provision for doubtful
accounts |
|
15,564,198 |
|
|
|
15,774,830 |
|
Interest in kind added to
promissory notes balance |
|
2,989 |
|
|
|
- |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(15,261,863 |
) |
|
|
(16,296,288 |
) |
Prepaid expenses and other |
|
81,916 |
|
|
|
(198,666 |
) |
Lease merchandise |
|
(27,113,342 |
) |
|
|
(21,598,717 |
) |
Security deposits |
|
2,943 |
|
|
|
(40,801 |
) |
Accounts payable |
|
(1,488,607 |
) |
|
|
(5,745,326 |
) |
Accrued payroll and related taxes |
|
84,922 |
|
|
|
(28,436 |
) |
Accrued expenses |
|
27,258 |
|
|
|
(511,712 |
) |
Net cash provided by operating
activities |
|
5,794,941 |
|
|
|
2,695,843 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
Purchases of property and
equipment, including capitalized software costs |
|
(1,399,360 |
) |
|
|
(1,105,122 |
) |
Net cash used in investing
activities |
|
(1,399,360 |
) |
|
|
(1,105,122 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
Principal payment under
finance lease obligation |
|
(3,175 |
) |
|
|
- |
|
Refund of equity issuance
related costs |
|
- |
|
|
|
23,147 |
|
Proceeds from exercise of
warrants |
|
131,250 |
|
|
|
- |
|
Proceeds from exercise of
stock options |
|
2,634 |
|
|
|
- |
|
Proceeds from promissory
notes, net of fees |
|
1,914,100 |
|
|
|
3,440,000 |
|
Proceeds from loan payable
under credit agreement |
|
2,412,000 |
|
|
|
1,358,343 |
|
Repayment of loan payable
under credit agreement |
|
(5,864,250 |
) |
|
|
(9,255,988 |
) |
Repayment of promissory
note |
|
- |
|
|
|
(500,000 |
) |
Repayment of instalment
loan |
|
(5,603 |
) |
|
|
(5,604 |
) |
Net cash used in financing
activities |
|
(1,413,044 |
) |
|
|
(4,940,102 |
) |
|
|
|
|
|
|
|
|
INCREASE/ (DECREASE) IN
CASH |
|
2,982,537 |
|
|
|
(3,349,381 |
) |
|
|
|
|
|
|
|
|
CASH, beginning of period |
$ |
6,868,472 |
|
|
$ |
6,141,210 |
|
|
|
|
|
|
|
|
|
CASH, end of period |
$ |
9,851,009 |
|
|
$ |
2,791,829 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
|
|
|
|
Interest paid |
$ |
2,120,502 |
|
|
$ |
1,936,218 |
|
Deemed dividend from exchange
offer of warrants |
$ |
713,212 |
|
|
$ |
- |
|
Conversion of preferred stock
to common stock |
$ |
4,295 |
|
|
$ |
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 and six
months ended June 30, 2020 and 2019 were as follows:
|
Three months ended June 30, |
|
|
|
|
|
2020 |
|
|
2019 |
|
|
$ Change |
|
% Change |
Adjusted
EBITDA: |
|
|
|
|
|
|
|
Net loss |
$ |
(262,062 |
) |
|
$ |
(309,946 |
) |
|
$ |
47,884 |
|
|
(15.4 |
) |
Amortization of debt
costs |
|
89,888 |
|
|
|
58,569 |
|
|
|
31,319 |
|
|
53.5 |
|
Other amortization and
depreciation |
|
602,126 |
|
|
|
593,605 |
|
|
|
8,521 |
|
|
1.4 |
|
Interest expense |
|
961,233 |
|
|
|
963,415 |
|
|
|
(2,182 |
) |
|
(0.2 |
) |
Stock compensation |
|
452,033 |
|
|
|
303,243 |
|
|
|
148,790 |
|
|
49.1 |
|
Non-recurring
product/infrastructure expenses |
|
63,376 |
|
|
|
134,814 |
|
|
|
(71,438 |
) |
|
(53.0 |
) |
Warrants compensation-
consulting agreement |
|
95,481 |
|
|
|
32,000 |
|
|
|
63,481 |
|
|
198.4 |
|
Adjusted EBITDA |
$ |
2,002,075 |
|
|
$ |
1,775,700 |
|
|
$ |
226,375 |
|
|
12.7 |
|
|
Six months ended June 30, |
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
$ Change |
|
% Change |
Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
|
Net income/ (loss) |
$ |
(210,377 |
) |
|
$ |
193,597 |
|
|
$ |
(403,974 |
) |
|
(208.7 |
) |
Amortization of debt
costs |
|
184,233 |
|
|
|
118,834 |
|
|
|
65,399 |
|
|
55.0 |
|
Other amortization and
depreciation |
|
1,062,139 |
|
|
|
1,118,308 |
|
|
|
(56,169 |
) |
|
(5.0 |
) |
Interest expense |
|
2,078,514 |
|
|
|
2,085,143 |
|
|
|
(6,629 |
) |
|
(0.3 |
) |
Stock compensation |
|
623,848 |
|
|
|
328,772 |
|
|
|
295,076 |
|
|
89.8 |
|
Non-recurring
product/infrastructure expenses |
|
184,440 |
|
|
|
227,111 |
|
|
|
(42,671 |
) |
|
(18.8 |
) |
Warrants compensation-
consulting agreement |
|
139,480 |
|
|
|
43,200 |
|
|
|
96,280 |
|
|
222.9 |
|
Adjusted EBITDA |
$ |
4,062,277 |
|
|
$ |
4,114,965 |
|
|
$ |
(52,688 |
) |
|
(1.3 |
) |
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 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 HellmanVice
PresidentThe Equity Group212-836-9626jhellman@equityny.com
FlexShopper, Inc.Investor
Relationsir@flexshopper.com
FlexShopper, Inc.
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