BOCA RATON, Fla., March 11, 2019 (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 and year ended December 31, 2018, highlighted by record revenue and lease originations.
Results for Quarter Ended December 31, 2018 vs. Quarter Ended December 31, 2017:
Results for the Full Year Ended December 31, 2018 vs. Full Year Ended December 31, 2017:
¹Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions and reconciliations of these measures under “Non-GAAP Measures”.
2018 Highlights and Recent Developments
Brad Bernstein, CEO, stated, “We are pleased to report record revenues in 2018, driven by continued lease origination growth. For the full year, we originated 139,949 gross leases with an average origination value of $416, compared with 97,073 leases with an average origination value of $411 last year. Both new and repeat customer demand was strong, and we finished 2018 with an excellent holiday season, positioning us well for 2019. In 2018 we were also able to control our operating expenses, which grew at a much lower rate than revenues and adjusted gross profit. With these factors in mind, we are updating our financial guidance for 2019.”
Financial Outlook – Guidance
Current Guidance | Previous Guidance | |
2019 Gross Lease Originations | > $70 million | > -- |
2019 Gross Revenue | > $110 million | > $105 million |
2019 Adjusted Gross Profit | > $25 million | > $24 million |
2019 Adjusted EBITDA | > $3.5 million | > $3 million |
Bernstein continued, “We are also pleased to report that Howard Dvorkin has been named as Chairman of the Board. As we previously reported, Howard brings a strong knowledge base in consumer finance, particularly the subprime segment, and significant business experience through a portfolio of companies.”
“I am delighted to assume the role of Chairman of the Board of FlexShopper, Inc. where I see an exciting opportunity to continue to penetrate the $25 billion lease-to-own market with FlexShopper's innovative technology and omnichannel approach for consumers and retailers." said Dvorkin. “I look forward to applying my knowledge of the non prime consumer segment and my network for the benefit of the company and its shareholders."
The Company's guidance for Gross Lease Originations, Gross Revenue, Adjusted 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, Adjusted 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: Tuesday, March 12, 2019
Time: 10:00 a.m. Eastern Time
Participant Dial-In Numbers:
Domestic callers: (877) 407-3944
International callers: (412) 902-0038
Access by 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://78449.themediaframe.com/dataconf/productusers/fpay/mediaframe/29063/indexl.html. An audio replay of the call will be archived on the Company’s website.
FLEXSHOPPER, INC. CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
For the years ended | ||||||||
December 31, | ||||||||
2018 | 2017 | |||||||
Revenues: | ||||||||
Lease revenues and fees | $ | 82,458,661 | $ | 65,412,131 | ||||
Lease merchandise sold | 2,269,708 | 1,634,233 | ||||||
Total revenues | 84,728,369 | 67,046,364 | ||||||
Costs and expenses: | ||||||||
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 40,639,232 | 31,453,246 | ||||||
Cost of lease merchandise sold | 1,423,526 | 998,800 | ||||||
Provision for doubtful accounts | 23,239,189 | 19,135,207 | ||||||
Marketing | 7,046,812 | 6,094,330 | ||||||
Salaries and benefits | 8,796,011 | 7,862,714 | ||||||
Other operating expenses | 8,761,815 | 7,664,566 | ||||||
Total costs and expenses | 89,906,585 | 73,208,863 | ||||||
Operating loss | (5,178,216 | ) | (6,162,499 | ) | ||||
Loss on extinguishment of debt | 126,622 | - | ||||||
Interest expense including amortization of debt issuance costs | 4,156,424 | 2,168,262 | ||||||
Net loss | (9,461,262 | ) | (8,330,761 | ) | ||||
Dividends on Series 2 Convertible Preferred Stock | 2,426,840 | 2,316,396 | ||||||
Net loss attributable to common stockholders | $ | (11,888,102 | ) | $ | (10,647,157 | ) | ||
Basic and diluted (loss) per common share: | ||||||||
Net loss | $ | (1.39 | ) | $ | (2.01 | ) | ||
Weighted average common shares outstanding: | ||||||||
Basic and diluted | 8,574,569 | 5,290,944 | ||||||
FLEXSHOPPER, INC. CONSOLIDATED BALANCE SHEETS | ||||||||
December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 6,141,210 | $ | 4,968,915 | ||||
Accounts receivable, net | 6,375,963 | 4,259,468 | ||||||
Prepaid expenses | 317,160 | 321,035 | ||||||
Lease merchandise, net | 32,364,697 | 21,415,322 | ||||||
Total current assets | 45,199,030 | 30,964,740 | ||||||
PROPERTY AND EQUIPMENT, net | 3,336,664 | 2,948,164 | ||||||
OTHER ASSETS, net | 90,621 | 95,722 | ||||||
$ | 48,626,315 | $ | 34,008,626 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current portion of loan payable under credit agreement to beneficial shareholder net of $167,483 at 2018 and $118,404 at 2017 of unamortized issuance costs | $ | 14,252,717 | $ | 14,094,096 | ||||
Accounts payable | 8,317,216 | 7,702,145 | ||||||
Accrued payroll and related taxes | 393,095 | 404,346 | ||||||
Promissory notes to related parties, including interest of $64,771 | 1,814,771 | - | ||||||
Accrued expenses | 1,335,505 | 786,095 | ||||||
Total current liabilities | 26,113,304 | 22,986,682 | ||||||
Loan payable under credit agreement to beneficial shareholder net of $164,752 at 2018 and $39,468 at 2017 of unamortized issuance costs and current portion | 14,020,335 | 4,698,032 | ||||||
Total liabilities | 40,133,639 | 27,684,714 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Series 1 Convertible Preferred Stock, $0.001 par value- authorized 250,000 shares, issued and outstanding 239,405 shares at $5.00 stated value | 1,197,025 | 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 and 15,000,000 shares, issued and outstanding: 17,579,870 shares at 2018 and 5,294,501 at 2017 | 1,758 | 529 | ||||||
Additional paid in capital | 34,074,488 | 22,445,691 | ||||||
Accumulated deficit | (48,732,595 | ) | (39,271,333 | ) | ||||
Total stockholders’ equity | 8,492,676 | 6,323,912 | ||||||
$ | 48,626,315 | $ | 34,008,626 |
FLEXSHOPPER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
For the years ended December 31, | ||||||||
2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (9,461,262 | ) | $ | (8,330,761 | ) | ||
Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
Depreciation and impairment of lease merchandise | 40,639,232 | 31,453,246 | ||||||
Other depreciation and amortization | 2,410,537 | 2,090,581 | ||||||
Compensation expense related to issuance of stock options | 133,428 | 113,952 | ||||||
Provision for doubtful accounts | 23,239,189 | 19,135,207 | ||||||
Loss on debt extinguishment | 126,622 | - | ||||||
Payment of interest in kind under promissory notes | 64,771 | - | ||||||
Payment of interest in kind under credit agreement | 248,535 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (25,355,684 | ) | (21,212,888 | ) | ||||
Prepaid expenses and other | 6,844 | 32,296 | ||||||
Lease merchandise | (51,588,607 | ) | (34,298,108 | ) | ||||
Security deposits | 2,025 | (10,206 | ) | |||||
Accounts payable | 827,715 | 3,784,397 | ||||||
Accrued payroll and related taxes | (11,251 | ) | 108,013 | |||||
Accrued expenses | 557,648 | 535,437 | ||||||
Net cash (used in) operating activities | (18,160,258 | ) | (6,598,834 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment, including capitalized software costs | (2,284,876 | ) | (2,021,538 | ) | ||||
Net cash (used in) investing activities | (2,284,876 | ) | (2,021,538 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from exercise of stock options | - | 15,000 | ||||||
Proceeds from exercise of warrants | 1,750 | - | ||||||
Proceeds from public offering | 10,007,500 | - | ||||||
Costs incurred from public offering | (1,123,419 | ) | - | |||||
Proceeds from promissory notes | 3,465,000 | - | ||||||
Proceeds from loan payable under credit agreement | 19,366,359 | 10,450,000 | ||||||
Repayment of loan payable under credit agreement | (9,959,607 | ) | (2,288,208 | ) | ||||
Repayment of installment loan | (11,208 | ) | - | |||||
Debt issuance related costs | (128,946 | ) | - | |||||
Net cash provided by financing activities | 21,617,429 | 8,176,792 | ||||||
INCREASE/(DECREASE) IN CASH | 1,172,295 | (443,580 | ) | |||||
CASH, beginning of year | 4,968,915 | 5,412,495 | ||||||
CASH, end of year | $ | 6,141,210 | $ | 4,968,915 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | 2,806,285 | $ | 1,649,795 | ||||
Non-cash financing activities: | ||||||||
Issuance of common stock and warrants to extinguish debt and accrued interest | $ | 2,089,266 | $ | - | ||||
Conversion of preferred stock to common stock | $ | - | $ | 18,300 | ||||
Warrants issued for debt issuance costs | $ | 523,251 | $ | - | ||||
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.
Year ended December 31, | ||||||||||||||||
Adjusted Gross Profit | 2018 | 2017 | $ Change | % Change | ||||||||||||
Lease revenues and fees | $ | 82,458,661 | $ | 65,412,131 | $ | 17,046,530 | 26.1 | |||||||||
Lease merchandise sold | 2,269,708 | 1,634,233 | 635,475 | 38.9 | ||||||||||||
Cost of merchandise sold | (1,423,526 | ) | (998,800 | ) | (424,726 | ) | 42.5 | |||||||||
Provision for doubtful accounts | (23,239,189 | ) | (19,135,207 | ) | (4,103,982 | ) | 21.4 | |||||||||
Net revenues | 60,065,654 | 46,912,357 | 13,153,297 | 28.0 | ||||||||||||
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | (40,639,232 | ) | (31,453,246 | ) | (9,185,986 | ) | 29.2 | |||||||||
Adjusted Gross Profit | $ | 19,426,422 | $ | 15,459,111 | $ | 3,967,311 | 25.7 | |||||||||
Gross profit margin | 32 | % | 33 | % |
Adjusted Gross Profit represents GAAP revenue less the provision for doubtful accounts and cost of leased inventory and inventory sold. Adjusted Gross Profit provides us with an understanding of the results from the primary operations of our business. We use Adjusted 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.
Year ended December 31, | ||||||||||||||||
Adjusted EBITDA | 2018 | 2017 | $ Change | % Change | ||||||||||||
Net Loss | $ | (9,461,262 | ) | $ | (8,330,761 | ) | $ | (1,130,501 | ) | (13.6 | ) | |||||
Amortization of debt costs | 511,085 | 473,616 | 37,469 | 7.9 | ||||||||||||
Other amortization and depreciation | 1,914,084 | 1,616,964 | 297,120 | 18.4 | ||||||||||||
Interest expense, excluding amortization of debt costs | 3,645,339 | 1,694,645 | 1,950,694 | 115.1 | ||||||||||||
Loss on debt extinguishment | 126,622 | - | 126,622 | - | ||||||||||||
Stock compensation | 133,428 | 113,952 | 19,476 | 17.1 | ||||||||||||
Adjusted EBITDA | $ | (3,130,704 | ) | $ | (4,431,584 | ) | $ | 1,300,880 | (29.4 | ) |
We refer to Adjusted Gross Profit and Adjusted EBITDA in the above tables as we use these measures to evaluate our operating performance and make strategic decisions about the Company. Management believes that Adjusted 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 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 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 Hellman
Senior Associate
The Equity Group
212-836-9626
jhellman@equityny.com
FlexShopper, Inc.
Investor Relations
ir@flexshopper.com