FlexShopper, Inc. Reports 2024 Second-Quarter Financial Results

Rhea-AI Summary

FlexShopper, Inc. (Nasdaq: FPAY) reported strong financial results for Q2 2024. Total revenue increased 29.8% to $31.8 million, while gross profit surged 89.3% to $15.9 million. The company saw a significant improvement in Adjusted EBITDA, which rose to $4.9 million from $0.3 million in the same period last year. Total lease funding approvals increased by 102.2% to $74.8 million. Despite these positive metrics, FlexShopper reported a net loss of $2.7 million, or ($0.13) per diluted share. The company added 150 new retail partner locations and expects to add 500 more in H2 2024. FlexShopper's CEO, Russ Heiser, Jr, expressed confidence in the company's long-term growth strategies and its ability to capitalize on market share opportunities.

Positive

• Total revenue increased 29.8% to $31.8 million in Q2 2024
• Gross profit surged 89.3% to $15.9 million
• Adjusted EBITDA rose significantly to $4.9 million from $0.3 million year-over-year
• Total lease funding approvals increased 102.2% to $74.8 million
• Added 150 new retail partner locations with plans for 500 more in H2 2024
• Provision for doubtful accounts as a percentage of gross lease billings and fees decreased by 32.4%

Negative

• Net loss of $2.7 million, or ($0.13) per diluted share in Q2 2024
• Net loss of $4.0 million, or ($0.18) per diluted share for the first six months of 2024

Financial Analyst

FlexShopper's Q2 2024 results show significant improvement, with total revenue up 29.8% and adjusted EBITDA increasing by 1,533.3% to $4.9 million. The company's focus on expanding payment solutions and retail partnerships is yielding results, with total lease funding approvals up 102.2%. However, the net loss of $2.7 million indicates ongoing challenges.

The improved gross profit margin and reduced provision for doubtful accounts suggest better operational efficiency. With $4.9 million in cash and $32.2 million in borrowing capacity, FlexShopper appears to have sufficient liquidity to support its growth strategy. The company's ability to expand in a challenging economic environment could position it well for future market share gains.

Market Research Analyst

FlexShopper's performance indicates a growing demand for alternative payment solutions in the underserved consumer segment. The 102.2% increase in lease funding approvals suggests a significant market opportunity. The addition of 150 new retail partner locations, with 500 more expected in H2 2024, demonstrates strong business development momentum.

However, the company's net loss, despite revenue growth, raises questions about scalability and long-term profitability. The mention of other payment providers adjusting credit standards or exiting the market presents both an opportunity and a potential risk, as it may indicate sector-wide challenges. Investors should monitor FlexShopper's ability to capitalize on these market shifts while managing credit risk effectively.

Risk Management Expert

FlexShopper's risk management efforts show promise, with the provision for doubtful accounts as a percentage of gross lease billings and fees decreasing by 32.4%. This improvement in asset quality is important for a company operating in the high-risk lease-to-own sector. The company's ability to grow lease funding approvals while reducing bad debt provisions suggests effective risk assessment and management practices.

However, the ongoing net losses and the volatile economic environment present continued risks. The company's expansion strategy, while promising, could expose it to new credit risks if not carefully managed. Investors should closely monitor FlexShopper's ability to maintain asset quality as it pursues aggressive growth, particularly in light of changing market conditions and potential shifts in consumer credit profiles.

BOCA RATON, Fla., Aug. 06, 2024 (GLOBE NEWSWIRE) -- FlexShopper, Inc. (Nasdaq: FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and payment solution provider for underserved consumers, today announced its financial results for the quarter ended June 30, 2024.

Russ Heiser, Jr, Chief Executive Officer, stated, “Our second-quarter and year-to-date results are encouraging as the long-term growth strategies we are pursuing begin to take hold. Over the past two quarters we have focused on providing greater payment solutions to more customers, expanding retail revenue, and leveraging our established platform to provide expanded payment options to more retail partners. I am pleased with the progress we are making and during the second quarter we experienced strong growth with total revenue up 29.8%, total lease funding approvals increasing 102.2% compared to the same period last year, and we added 150 new retail partner locations. We expect to add an additional 500 new retail partner locations during the second half of 2024. In addition, we continue to focus on prudently managing risk and driving profitability. During the second quarter, the provision for doubtful accounts as a percentage of gross lease billings and fees decreased by 32.4% over the prior year period, and we experienced a 1,533.3% increase in adjusted EBITDA. Adjusted EBITDA for the 2024 second quarter was $4.9 million – the highest second-quarter level in two years.”

“While the economic environment remains fluid, we believe our expanded platform, strengthened financial model, strong asset quality, and access to capital will drive profitable growth in 2024 and beyond. As other payment providers adjust their credit standards or exit the market, FlexShopper continues to invest in expanding payment offerings, marketing capabilities, and distribution channels to take advantage of market share opportunities that may become available,” concluded Mr. Heiser.

Results for Quarter Ended June 30, 2024, vs. Quarter Ended June 30, 2023:

• Total lease funding approvals increased 102.2% to $74.8 million from $37.0 million
• Total revenues increased 29.8% to $31.8 million from $24.5 million
• Gross profit increased 89.3% to $15.9 million from $8.4 million
• Adjusted EBITDA⁽¹⁾ increased by $4.6 million to $4.9 million from $0.3 million
• Operating income of $2.4 million compared with operating loss of ($2.0) million
• Net loss attributable to common stockholders of ($2.7) million, or ($0.13) per diluted share, compared to net loss attributable to common stockholders of ($6.3) million, or ($0.29) per diluted share

Results for the Six Months Ended June 30, 2024, vs. the Six Months Ended June 30, 2023:

• Total lease funding approvals increased 69.7% to $118.1 million from $69.6 million
• Total revenues increased 18.8% to $65.7 million from $55.3 million
• Gross profit increased 53.6% to $33.8 million from $22.0 million
• Adjusted EBITDA⁽¹⁾increased by $5.8 million to $12.5 million compared to $6.7 million
• Operating income of $7.4 million compared with operating income of $2.1 million
• Net loss attributable to common stockholders of ($4.0) million, or ($0.18) per diluted share, compared to net income attributable to common stockholders of ($7.5) million, or ($0.34) per diluted share

⁽¹⁾ Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition and reconciliation of this measure under “Non-GAAP Measures”.

Liquidity
FlexShopper ended the first quarter of 2024 with cash of $4.9 million and $32.2 million of permitted borrowing capacity.

Conference Call and Webcast Details

Conference Call Information:
Date: August 7, 2024
Time: 8:30 a.m. Eastern Time
Toll Free Dial In: (800) 715-9871
International Dial In: +1 (646) 307-1963
Conference ID: 7545308

Webcast Link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=vEyujKz8

The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at https://investors.flexshopper.com/.

An audio replay of the call will be archived on the Company’s website at https://investors.flexshopper.com/.

About FlexShopper
FlexShopper, Inc. (Nasdaq: FPAY) is a financial technology company that provides electronics, home furnishings and other durable goods to underserved consumers on a lease-to-own (LTO) basis through its patented e-commerce marketplace (www.FlexShopper.com). FlexShopper also provides LTO and loan technology platforms to a growing number of retailers and e-retailers to facilitate transactions with consumers without access to traditional financing.

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. 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, 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 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.

FLEXSHOPPER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
		For the three months ended June 30,								For the six months ended June 30,
		2024				2023				2024				2023
Revenues:
Lease revenues and fees, net		$	27,074,048			$	22,906,843			$	52,907,784			$	47,621,001
Loan revenues and fees, net of changes in fair value			3,314,375				1,625,193				10,645,652				7,696,810
Retail revenues			1,370,462				-				2,150,322				-
Total revenues			31,758,885				24,532,036				65,703,758				55,317,811
Costs and expenses:
Depreciation and impairment of lease merchandise			13,848,925				14,485,417				28,534,788				29,831,205
Loan origination costs and fees			896,040				1,655,424				1,717,867				3,489,051
Cost of retail revenues			1,059,098				-				1,670,302				-
Marketing			2,545,814				1,488,578				4,311,386				2,587,767
Salaries and benefits			4,224,614				2,976,008				8,308,533				5,702,898
Operating expenses			6,807,328				5,957,932				13,739,834				11,585,640
Total costs and expenses			29,381,819				26,563,359				58,282,710				53,196,561
Operating income/ (loss)			2,377,066				(2,031,323	)			7,421,048				2,121,250
Interest expense including amortization of debt issuance costs			(5,226,155	)			(4,568,557	)			(10,541,249	)			(9,099,884	)
Loss before income taxes			(2,849,089	)			(6,599,880	)			(3,120,201	)			(6,978,634	)
Benefit from income taxes			1,246,030				1,302,225				1,302,963				1,450,764
Net loss			(1,603,059	)			(5,297,655	)			(1,817,238	)			(5,527,870	)
Dividends on Series 2 Convertible Preferred Shares			(1,091,742	)			(992,493	)			(2,161,198	)			(1,964,726	)
Net loss attributable to common and Series 1 Convertible Preferred shareholders		$	(2,694,801	)		$	(6,290,148	)		$	(3,978,436	)		$	(7,492,596	)
Basic and diluted loss per common share:
Basic		$	(0.13	)		$	(0.29	)		$	(0.18	)		$	(0.34	)
Diluted		$	(0.13	)		$	(0.29	)		$	(0.18	)		$	(0.34	)
WEIGHTED AVERAGE COMMON SHARES:
Basic			21,469,720				21,752,304				21,527,869				21,751,807
Diluted			21,469,720				21,752,304				21,527,869				21,751,807

FLEXSHOPPER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
		June 30,				December 31,
		2024				2023
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	4,892,912			$	4,413,130
Lease receivables, net			57,151,127				44,795,090
Loan receivables at fair value			40,085,656				35,794,290
Prepaid expenses and other assets			4,452,164				3,300,677
Lease merchandise, net			25,856,542				29,131,440
Total current assets			132,438,401				117,434,627
Property and equipment, net			9,419,105				9,308,859
Right of use asset, net			1,142,104				1,237,010
Intangible assets, net			12,506,545				13,391,305
Other assets, net			2,459,908				2,175,215
Deferred tax asset, net			14,246,325				12,943,361
Total assets		$	172,212,388			$	156,490,377
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	3,811,310			$	7,139,848
Accrued payroll and related taxes			381,929				578,197
Promissory notes to related parties, including accrued interest			174,096				198,624
Accrued expenses			3,763,725				3,972,397
Lease liability - current portion			263,111				245,052
Total current liabilities			8,394,171				12,134,118
Loan payable under credit agreement to beneficial shareholder, net of unamortized issuance costs of $1,332,712 at June 30, 2024 and $70,780 at December 31, 2023			117,483,978				96,384,220
Promissory notes to related parties, net of unamortized issuance costs of $420,558 at June 30, 2024 and $649,953 at December 31, 2023 and net of current portion			10,329,442				10,100,047
Loan payable under Basepoint credit agreement, net of unamortized issuance costs of $73,730 at June 30, 2024 and $92,964 at December 31, 2023			7,338,875				7,319,641
Lease liabilities, net of current portion			1,184,683				1,321,578
Total liabilities			144,731,149				127,259,604
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 21,988,711 shares at June 30, 2024 and 21,752,304 shares at December 31, 2023			2,200				2,176
Treasury shares, at cost- 346,258 shares at June 30, 2024 and 164,029 shares at December 31, 2023			(367,563	)			(166,757	)
Additional paid in capital			42,684,380				42,415,894
Accumulated deficit			(37,641,438	)			(35,824,200	)
Total stockholders’ equity			27,481,239				29,230,773
		$	172,212,388			$	156,490,377

FLEXSHOPPER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended June 30, 2024 and 2023 (unaudited)
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,817,238	)		$	(5,527,870	)
Adjustments to reconcile net loss to net cash (used in)/ provided by operating activities:
Depreciation and impairment of lease merchandise			28,534,788				29,831,205
Other depreciation and amortization			4,698,213				3,710,703
Amortization of debt issuance costs			509,797				182,174
Amortization of discount on the promissory note related to acquisition			-				118,476
Compensation expense related to stock-based compensation			371,998				864,548
Provision for doubtful accounts			17,290,476				22,085,828
Deferred income tax			(1,302,963	)			(1,457,740	)
Net changes in the fair value of loans receivables at fair value			(4,898,876	)			837,048
Changes in operating assets and liabilities:
Lease receivables			(29,646,513	)			(25,773,184	)
Loans receivables at fair value			607,510				6,990,410
Prepaid expenses and other assets			(1,208,258	)			412,391
Lease merchandise			(25,259,890	)			(22,878,600	)
Purchase consideration payable related to acquisition			-				208,921
Lease liabilities			(19,329	)			(12,243	)
Accounts payable			(3,328,538	)			(2,506,724	)
Accrued payroll and related taxes			(196,268	)			(11,079	)
Accrued expenses			(233,202	)			(1,603,202	)
Net cash (used in)/ provided by operating activities			(15,898,293	)			5,471,062
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, including capitalized software costs			(3,207,307	)			(3,114,534	)
Purchases of data costs			(944,313	)			(343,428	)
Net cash used in investing activities			(4,151,620	)			(3,457,962	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable under credit agreement			22,361,690				2,750,000
Repayment of loan payable under credit agreement			-				(2,795,000	)
Repayment of loan payable under Basepoint credit agreement			-				(1,500,000	)
Debt issuance related costs			(1,523,100	)			(115,403	)
Proceeds from exercise of stock options			-				1,185
Principal payment under finance lease obligation			(4,601	)			(4,917	)
Repayment of purchase consideration payable related to acquisition							(143,330	)
Tax payments associated with equity-based compensation transactions			(103,488	)			-
Purchase of treasury stock			(200,806	)			-
Net cash provided by/ (used in) financing activities			20,529,695				(1,807,465	)
INCREASE IN CASH			479,782				205,635
CASH, beginning of period			4,413,130				6,173,349
CASH, end of period		$	4,892,912			$	6,378,984
Supplemental cash flow information:
Interest paid		$	9,414,926			$	8,453,511
Noncash investing and financing activities
Due date extension of warrants		$	-			$	917,581

Non-GAAP Financial 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 merchandise), 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 periods ended June 30, 2024 and June 30, 2023 were as follows:

		Three months ended June 30,
		2024				2023				$ Change				% Change
Gross Profit:
Gross lease billings and fees		$	34,686,893			$	32,501,656			$	2,185,237				6.7
Provision for doubtful accounts			(7,806,427	)			(10,847,413	)			3,040,986				(28.0	)
Gain on sale of lease receivables			28,525				1,252,600				(1,224,075	)			(97.7	)
Lease placement collections			165,057				-				165,057				-
Net lease billing and fees		$	27,074,048			$	22,906,843			$	4,167,205				18.2
Loan revenues and fees			2,626,896				3,446,893				(819,997	)			(23.8	)
Net changes in the fair value of loans receivable			687,479				(1,821,700	)			2,509,179				(137.7	)
Net loan revenue			3,314,375				1,625,193				1,689,182				103.9
Retail revenue			1,370,462				-				1,370,462				-
Total revenues		$	31,758,885			$	24,532,036			$	7,226,849				29.5
Depreciation and impairment of lease merchandise			(13,848,925	)			(14,485,417	)			636,492				(4.4	)
Cost of retail revenues			(1,059,098	)			-				(1,059,098	)			-
Loans origination costs and fees			(896,040	)			(1,655,424	)			759,384				(45.9	)
Gross profit		$	15,954,822			$	8,391,195			$	7,563,627				90.1
Gross profit margin			50	%			34	%

		Three months ended June 30,
		2024				2023				$ Change				% Change
Adjusted EBITDA:
Net loss		$	(1,603,059	)		$	(5,297,655	)		$	3,694,596				(69.7	)
Income taxes			(1,246,030	)			(1,302,225	)			56,195				(4.3	)
Amortization of debt issuance costs			314,702				111,807				202,895				181.5
Amortization of discount on the promissory note related to acquisition			-				59,238				(59,238	)			(100.0	)
Other amortization and depreciation			2,382,726				1,884,544				498,182				26.4
Interest expense			4,911,453				4,397,513				513,940				11.7
Stock-based compensation			154,873				443,800				(288,927	)			(65.1	)
Adjusted EBITDA		$	4,914,665			$	297,022			$	4,617,643				1,554.6

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.

FAQ

What was FlexShopper's (FPAY) revenue growth in Q2 2024?

FlexShopper (FPAY) reported a 29.8% increase in total revenue, reaching $31.8 million in Q2 2024 compared to $24.5 million in the same period last year.

How much did FlexShopper's (FPAY) Adjusted EBITDA improve in Q2 2024?

FlexShopper's (FPAY) Adjusted EBITDA increased by $4.6 million to $4.9 million in Q2 2024, compared to $0.3 million in Q2 2023, representing a 1,533.3% increase.

What was FlexShopper's (FPAY) net loss in Q2 2024?

FlexShopper (FPAY) reported a net loss attributable to common stockholders of $2.7 million, or ($0.13) per diluted share, in Q2 2024.

How many new retail partner locations did FlexShopper (FPAY) add in Q2 2024?

FlexShopper (FPAY) added 150 new retail partner locations in Q2 2024 and expects to add an additional 500 new locations during the second half of 2024.