FlexShopper, Inc. Reports Third Quarter 2022 Financial Results

Rhea-AI Summary

FlexShopper, Inc. (FPAY) reported Q3 2022 financial results revealing a 60.1% increase in total fundings to $25.8 million, though net lease revenues decreased 20.3% to $24.5 million. Despite gross lease originations slightly declining from $15.9 million to $15.7 million, loan participations surged 4,350% to $10.1 million. The company faced a 49.8% drop in gross profit to $6.4 million and reported a net loss of $(6.3 million), or $(0.32) per share. For the first nine months of 2022, total fundings rose 38.3% to $78.9 million, while net income reached $5.7 million.

Positive

• Total fundings increased 60.1% to $25.8 million.
• Loan participations rose 4,350% to $10.1 million.
• Net income for nine months reached $5.7 million, up from $2.6 million.

Negative

• Total net lease revenues decreased 20.3% to $24.5 million.
• Gross profit fell 49.8% to $6.4 million.
• Net loss of $(6.3 million) compared to net income of $1.7 million last year.

BOCA RATON, Fla., Nov. 10, 2022 (GLOBE NEWSWIRE) -- 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 September 30, 2022.

Results for Quarter Ended September 30, 2022 vs. Quarter Ended September 30, 2021:

• Total fundings increased 60.1% to $25.8 million from $16.1 million consisting of gross lease originations decreasing from $15.9 to $15.7 million and loan participations up ~4,350% from $226 thousand to $10.1 million
• Total net lease revenues and fees decreased 20.3% to $24.5 million from $30.7 million
• Total net loan revenues and fees increased 1,249% to $1.6 million from $121 thousand
• Gross profit decreased 49.8% to $6.4 million from $12.7 million
• Adjusted EBITDA¹ decreased to $(2.9) million compared to $4.8 million
• Net loss of $(6.3) million compared with net income of $1.7 million
• Net loss attributable to common stockholders of $(6.9) million, or $(0.32) per diluted share, compared to net income attributable to common stockholders of $1.1 million, or $0.05 per diluted share

Results for Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021:

• Total fundings increased 38.3% to $78.9 million from $57.0 million consisting of gross lease originations decreasing from $56.6 to $51.9 million and loan participations up ~6,753% from $395 thousand to $27.0 million
• Total net lease revenues and fees decreased 12.1% to $82.7 million from $94.2 million
• Total net loan revenues and fees increased 4,864% to $8.9 million from $179 thousand
• Gross profit decreased 2.2% to $33.3 million from $34.0 million
• Adjusted EBITDA¹ decreased to $3.4 million compared to $9.4 million
• Net income of $5.7 million compared with net income of $2.6 million
• Net income attributable to common stockholders of $3.9 million, or $0.17 per diluted share, compared to net income attributable to common stockholders of $810 thousand, or $0.03 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”.

“FlexShopper is feeling the same headwind on consumer demand experienced by both traditional retailers and our peers in this challenging economic environment. As a result, we are observing a decline in response rates and approval rates which has created a gap in our near-term earnings. Despite the decrease in the online marketplace business, our retail partnership channel and repeat volume continue to grow in this environment.” said Richard House, CEO of FlexShopper. 

FlexShopper CEO, Richard House, FlexShopper CFO, Russ Heiser and FlexShopper COO, John Davis will discuss the Company’s recent quarter, including financial and operating results, and strategic outlook on the Company’s earnings conference call and webcast.

Conference Call and Webcast Details

Conference call

Date: Friday, November 11, 2022
Time: 9:30 a.m. Eastern Time

Participant Dial-In Numbers:

Domestic callers: (877) 407-2988
International callers: (201) 389-0923

Webcast 

The 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://event.choruscall.com/mediaframe/webcast.html?webcastid=Fpl90J10

An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	For the three months ended September 30,								For the nine months ended September 30,
	2022				2021				2022				2021
Revenues:
Lease revenues and fees, net	$	24,512,086			$	30,740,119			$	82,746,874			$	94,153,920
Loan revenues and fees, net of changes in fair value		1,629,365				120,816				8,897,964				179,238
Total revenues		26,141,451				30,860,935				91,644,838				94,333,158
Costs and expenses:
Cost of lease revenues and merchandise sold		18,746,897				18,005,170				56,114,813				59,959,590
Loan origination costs and fees		1,027,097				166,805				2,256,838				341,989
Marketing		2,393,185				1,824,402				8,178,120				5,571,237
Salaries and benefits		2,820,033				2,672,864				8,799,395				8,329,188
Operating expenses		5,702,800				4,325,825				17,124,288				13,654,038
Total costs and expenses		30,690,012				26,995,066				92,473,454				87,856,042
Operating (loss)/ income		(4,548,561	)			3,865,869				(828,616	)			6,477,116
Gain on extinguishment of debt		-				-				-				1,931,825
Interest expense including amortization of debt issuance costs		(3,030,142	)			(1,233,617	)			(7,336,048	)			(3,855,014	)
(Loss)/income before income taxes		(7,578,703	)			2,632,252				(8,164,664	)			4,553,927
Benefit /(expense) from income taxes		1,298,269				(936,229	)			13,892,516				(1,914,473	)
Net (loss)/ income		(6,280,434	)			1,696,023				5,727,852				2,639,454
Dividends on Series 2 Convertible Preferred Shares		609,778				609,777				1,829,332				1,829,322
Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders	$	(6,890,212	)			1,086,246				3,898,520				810,132
Basic and diluted income/(loss) per common share:
Basic	$	(0.32	)		$	0.05			$	0.18			$	0.04
Diluted	$	(0.32	)		$	0.05			$	0.17			$	0.03
WEIGHTED AVERAGE COMMON SHARES:
Basic		21,681,853				21,383,647				21,611,879				21,377,978
Diluted		21,681,853				23,577,179				22,403,447				23,682,265

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,				December 31,
	2022				2021
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	5,274,219			$	4,986,559
Restricted cash		481,867				108,083
Lease receivables, net		33,425,123				25,473,154
Loan receivables at fair value		26,591,546				3,560,108
Prepaid expenses and other assets		1,478,800				1,823,256
Lease merchandise, net		30,652,824				40,942,112
Total current assets		97,904,379				76,893,272
Property and equipment, net		7,416,249				5,490,434
Right of use asset, net		1,445,159				1,553,330
Other assets, net		1,726,443				875,020
Deferred tax asset, net		13,607,949				-
Total assets	$	122,100,179			$	84,812,056
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,875,469			$	7,982,180
Accrued payroll and related taxes		703,465				391,078
Promissory notes to related parties, net of $0 at 2022 and $1,274 at 2021 of unamortized issuance costs, including accrued interest		1,182,585				1,053,088
Accrued expenses		3,243,570				2,987,646
Lease liability - current portion		198,853				172,732
Total current liabilities		9,203,942				12,586,724
Loan payable under credit agreement to beneficial shareholder, net of $338,113 at 2022 and $413,076 at 2021 of unamortized issuance costs		77,261,887				50,061,924
Promissory notes to related parties, net of current portion		10,750,000				3,750,000
Deferred income tax liability		178,160				495,166
Lease liabilities net of current portion		1,623,211				1,774,623
Total liabilities		99,017,200				68,668,437
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 and outstanding 21,750,804 shares at September 30, 2022 and 21,442,278 shares at December 31, 2021		2,176				2,144
Additional paid in capital		39,771,593				38,560,117
Accumulated deficit		(39,494,450	)			(45,222,302	)
Total stockholders’ equity		23,082,979				16,143,619
	$	122,100,179			$	84,812,056

FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2022 and 2021
(unaudited)

	2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,727,852			$	2,639,454
Adjustments to reconcile net income to net cash (used in)/ provided by operating activities:
Depreciation and impairment of lease merchandise		56,114,813				59,959,590
Other depreciation and amortization		3,303,591				2,032,811
Amortization of debt issuance costs		163,169				177,647
Compensation expense related to stock-based compensation and warrants		950,003				1,417,699
Provision for doubtful accounts		42,639,102				30,566,352
Proceeds from sale of lease receivables		7,611,586				-
Interest in kind added to promissory notes balance		128,223				9,460
Deferred income tax		(13,924,955	)			700,199
Gain on debt extinguishment		-				(1,931,825	)
Net changes in the fair value of loan receivables at fair value		1,938,570				54,236
Changes in operating assets and liabilities:
Lease receivables		(58,202,657	)			(39,915,536	)
Loan receivables at fair value		(24,970,008	)			(490,995	)
Prepaid expenses and other assets		344,766				(80,795	)
Lease merchandise		(45,825,525	)			(50,470,104	)
Security deposits		(4,956	)			(8,338	)
Lease liabilities		(8,732	)			(2,595	)
Accounts payable		(4,106,711	)			(4,563,434	)
Accrued payroll and related taxes		312,387				277,774
Accrued expenses		264,019				788,228
Net cash (used in)/ provided by operating activities		(27,545,463	)			1,159,828
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, including capitalized software costs		(4,855,150	)			(2,998,044	)
Purchases of data costs		(1,220,722	)			(461,379	)
Net cash used in investing activities		(6,075,872	)			(3,459,424	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable under credit agreement		32,855,000				4,000,000
Repayment of loan payable under credit agreement		(5,730,000	)			(6,575,000	)
Debt issuance related costs		(86,932	)			(529,608	)
Proceeds from exercise of stock options		261,505				24,988
Proceeds from promissory notes		7,000,000				-
Principal payment under finance lease obligation		(8,388	)			(5,684	)
Repayment of installment loan		(8,406	)			(8,406	)
Net cash provided by/(used in) financing activities		34,282,779				(3,093,710	)
INCREASE / (DECREASE) IN CASH and RESTRICTED CASH		661,444				(5,393,306	)
CASH and RESTRICTED CASH, beginning of period		5,094,642				8,541,232
CASH and RESTRICTED CASH, end of period	$	5,756,086			$	3,147,926
Supplemental cash flow information:
Interest paid	$	6,828,663			$	3,702,949

Non-GAAP 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 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 nine months ended September 30, 2022 and 2021 were as follows:

	Three months ended September 30,
	2022				2021				$ Change				% Change
Adjusted EBITDA:
Net (loss)/income	$(6,280,434		)		$1,696,023				$(7,976,457		)			(470.3	)
Income taxes		(1,298,269	)			936,229				(2,234,498	)			(238.7	)
Amortization of debt issuance costs		56,283				43,067				13,216				30.7
Other amortization and depreciation		1,244,267				708,762				535,505				75.6
Interest expense		2,973,859				1,190,550				1,783,309				149.8
Stock-based compensation		387,298				265,407				121,891				45.9
Adjusted EBITDA	$(2,916,996		)		$4,840,038				$(7,757,034		)			(160.3	)

	Nine months ended September 30,
	2022				2021				$ Change				% Change
Adjusted EBITDA:
Net income	$5,727,852				$2,639,454				$3,088,398					117.0
Income taxes		(13,892,516	)			1,914,473				(15,806,989	)			(825.7	)
Amortization of debt issuance costs		163,169				177,647				(14,478	)			(8.1	)
Other amortization and depreciation		3,303,590				2,032,811				1,270,779				62.5
Interest expense		7,172,879				3,677,367				3,495,512				95.1
Stock-based compensation		950,003				894,892				55,111				6.2
Product/ infrastructure expenses		-				10,000				(10,000	)
Gain on debt extinguishment		-				(1,931,825	)			1,931,825				-
Adjusted EBITDA	$3,424,977				$9,414,819				$(5,989,842		)			(63.6	)

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.

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 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 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 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:

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com 

FlexShopper, Inc.

FAQ

What were FlexShopper's total fundings for Q3 2022?

FlexShopper reported total fundings of $25.8 million for Q3 2022.

How much did FlexShopper's net lease revenues decrease in Q3 2022?

Net lease revenues decreased by 20.3% to $24.5 million in Q3 2022.

What was FlexShopper's net loss for Q3 2022?

FlexShopper reported a net loss of $(6.3 million) for Q3 2022.

How many loan participations did FlexShopper achieve in Q3 2022?

In Q3 2022, loan participations surged to $10.1 million, a rise of 4,350%.

What is FlexShopper's earnings per share for Q3 2022?

FlexShopper reported earnings per share of $(0.32) for Q3 2022.