FlexShopper, Inc. Reports 2020 Fourth Quarter and Year End Financial Results

Boca Raton, Florida, UNITED STATES


Q4 2020 Net Revenues Up 25.3% to $28.1 million

Lease Merchandise, net, Up 37.8% at December 31, 2020 Compared With Prior Year

BOCA RATON, Fla., March 08, 2021 (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 fiscal year ended December 31, 2020, highlighted by continued growth in lease activity from repeat customers, along with new customer additions.

Results for Quarter Ended December 31, 2020 vs. Quarter Ended December 31, 2019:

Total net revenues and fees increased 25.3% to $28.1 million from $22.4 million
  
Originated 71,350 gross leases, up 26.5% from 56,391; average origination value increased by 8.7% to $464
  
Gross lease originations increased $8.9 million, or 37.3%, to $33.1 million from $24.1 million         
  
Net loss of $(419) thousand compared with net loss of $(1.0) million
  
Net loss attributable to common stockholders of $(1.0) million, or $(0.05) per diluted share, compared to net loss of $(1.6) million, or $(0.09) per diluted share
  
Gross profit increased 46.7% to $11.1 million from $7.5 million
  
Adjusted EBITDA1 increased to $2.6 million compared to $1.1 million

Results for Twelve Months Ended December 31, 2020 vs. Twelve Months Ended December 31, 2019:

Total net revenues and fees increased 15% to $102.1 million from $88.8 million
  
Originated 188,554 gross leases, up 23.95% from 152,122; average origination value increased by 3.4% to $468
  
Gross lease originations increased $19.4 million, or 28.2%, to $88.2 million from $68.8 million
  
Net loss of $(340) thousand compared with net income of $577 thousand
  
Net loss attributable to common stockholders, inclusive of deemed dividend expense of $0.7 million in Q1, of $(3.5) million, or $(0.17) per diluted share, compared to $(1.9) million, or $(0.11) per diluted share in the prior year, which included no deemed dividend expense
  
Gross profit increased 23.7% to $35.4 million from $28.6 million
  
Adjusted EBITDA1 improved to $8.7 million from $8.4 million
  
Lease merchandise, net, of $42.8 million at December 31, 2020 increased 37.8%

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

Fourth Quarter 2020 Highlights and Recent Developments

 Pilot program with a national retailer has been expanded from one state to four states. Following a successful introduction, the program will expand to three additional states as of March 15th.  
   
 Credit facility maturity extended along with important modifications. The Company’s credit facility was extended until April 1, 2024 and included eligibility and covenant modifications which improve liquidity.
   
 Origination growth continuing into 2021. The strong origination growth experienced in the fourth quarter has continued into 2021, with originations rising 23% in January and February combined, compared with the same two-month period in 2020.
   
 Leases originated in the fourth quarter driving favorable results in the first months of 2021. Adjusted EBITDA for January 2021 was approximately $1.59 million.
   
 Repeat customer trends continue to be favorable. During 2020, the Company originated $37.7 million from existing customers, representing approximately 43% of total gross lease originations. This compared with $27.4 million repeat customer leases in 2019, or 38% of total existing gross lease originations.

Rich House, CEO, stated, “We closed 2020 with excellent momentum as our originations in the fourth quarter grew 37.3%, resulting in year-end a Net Merchandise balance of $42.8 million, which was similarly up 37.8%. Our asset quality continued to be solid and with our recently extended credit facility, we believe we are well-positioned to continue our growth. Subsequent to year end, we expanded our pilot program with a national retailer and now are a payment option in four states with them. We are also continuing to focus on securing additional retail partners and are optimistic regarding the progress of those discussions.”

Mr. House continued, “Against the challenging backdrop that 2020 posed for everyone, our business proved its resilience as our underwriting remained solid. Additionally, our FlexShopper platform continues to be a key differentiator for our business by providing our partners a robust direct to consumer option alongside our integrationless payment option in their stores and on their websites. We took a methodical approach during the pandemic and, after thorough data analysis, resumed our emphasis on growth. In addition to growing originations with new customers, we are also having good success driving repeat business which leads to expanding margins. Combined with our return on capital framework, we expect this strategy to drive increased value for FlexShopper.”

Additionally, Adjusted EBITDA is a non-GAAP financial measure. Refer to the definition of this measure under “Non-GAAP Measures.”

Conference Call Details
Date: Tuesday, March 9, 2021
Time: 9:00 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/43735/indexl.html. An audio replay of the call will be archived on the Company’s website.

FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

 For the three months ended For the twelve months ended
 December 31, December 31,
  2020   2019   2020   2019 
Revenues:       
Lease revenues and fees, net 26,950,434   21,378,164   96,939,767   85,331,360 
Lease merchandise sold 1,191,139   1,083,653   5,144,747   3,458,529 
Total revenues 28,141,573   22,461,817   102,084,514   88,789,889 
        
Costs and expenses:       
Cost of lease revenues, consisting of depreciation 16,326,208   14,152,683   63,308,210   57,939,899 
and impairment of lease merchandise       
Cost of lease merchandise sold 739,281   760,792   3,424,880   2,282,036 
Marketing 2,260,152   1,618,065   5,880,063   3,649,292 
Salaries and benefits 3,116,073   2,484,537   10,440,693   8,469,334 
Operating expenses 4,367,210   3,188,853   14,404,953   11,345,091 
Total costs and expenses 26,808,924   22,204,930   97,458,799   83,685,652 
        
Operating income 1,332,649   256,887   4,625,715   5,104,237 
        
Interest expense including amortization of debt issuance costs 1,088,478   1,044,651   4,302,561   4,310,422 
Income/(loss) before income taxes 244,171   (787,764)  323,154   793,815 
Provision for income taxes 663,050   216,400   663,050   216,400 
Net income/(loss) (418,879)  (1,004,164)  (339,896)  577,415 
        
Deemed dividend from exchange offer of warrants -   -   713,212   - 
Dividends on Series 2 Convertible Preferred Shares 609,771   609,717   2,438,988   2,437,884 
Net income/(loss) attributable to common shareholders$(1,028,650) $(1,613,881) $(3,492,096) $(1,860,469)
        
        
Basic and diluted (loss) per common share:       
Basic and diluted$(0.05) $(0.09) $      (0.17) $(0.11)
        
WEIGHTED AVERAGE COMMON SHARES:       
Basic and diluted 21,359,912   17,704,865   20,995,349   17,672,156 
        

FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS

  December 31,  December 31, 
  2020  2019 
       
ASSETS      
CURRENT ASSETS:      
Cash $8,541,232  $6,868,472 
Accounts receivable, net  10,032,714   8,272,332 
Prepaid expenses  869,081   672,242 
Lease merchandise, net  42,822,340   31,063,104 
Total current assets  62,265,367   46,876,150 
         
PROPERTY AND EQUIPMENT, net  5,911,696   5,260,407 
         
OTHER ASSETS, net  72,316   78,335 
Total assets $68,249,379  $52,214,892 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES:        
Accounts payable $7,907,619  $4,567,889 
Accrued payroll and related taxes  352,102   513,267 
Current portion of promissory notes to related parties, net of $8,276 at 2020 and $5,333 at 2019 of unamortized issuance costs, including accrued interest  4,815,546   1,067,740 
Current portion of promissory note – Paycheck Protection Program  1,184,952   - 
Accrued expenses  2,646,800   1,372,901 
Lease liability - current portion  160,726   27,726 
Total current liabilities  17,067,745   7,549,523 
         
Loan payable under credit agreement to beneficial shareholder, net of $61,617 at 2020 and $281,138 at 2019 of unamortized issuance costs and current portion  37,134,009   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 – Paycheck Protection Program, net of current portion  741,787   - 
Accrued payroll and related taxes net of current portion  204,437   - 
Lease liabilities less current portion  1,947,355   2,067,184 
Total liabilities  57,095,333   42,246,617 
         
STOCKHOLDERS’ EQUITY        
Series 1 Convertible Preferred Stock, $0.001 par value - designated 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 - designated 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 21,359,945 shares at 2020 and 17,783,960 shares at 2019  2,136   1,779 
Additional paid in capital  36,843,326   35,313,721 
Accumulated deficit  (48,495,076)  (48,155,180)
Total stockholders’ equity  11,154,046   9,968,275 
  $68,249,379  $52,214,892 

 FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2020 and 2019

  2020  2019 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net (loss)/ income $(339,896) $577,415 
Adjustments to reconcile net (loss)/ income to net cash used in operating activities:        
Depreciation and impairment of lease merchandise  63,308,210   58,253,095 
Other depreciation and amortization  2,577,084   2,524,422 
Compensation expense related to issuance of stock options and warrants  1,388,755   723,394 
Provision for doubtful accounts  (31,930,714)  34,838,046 
Interest in kind added to promissory notes balance  13,388   - 
Payment of interest in kind under promissory notes  -   73,073 
Payment of interest in kind under credit agreement  -   170,550 
Changes in operating assets and liabilities:        
Accounts receivable  30,170,332   (36,734,415)
Prepaid expenses and other  (195,104)  (352,710)
Lease merchandise  (75,067,446)  (56,951,502)
Security deposits  2,943   9,210 
Accounts payable  3,339,730   (3,814,098)
Lease liabilities  198,528   (124,319)
Accrued payroll and related taxes  43,271   120,172 
Accrued expenses  1,283,372   218,206 
Net cash used in operating activities  (5,207,547)  (469,461)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchases of property and equipment, including capitalized software costs  (3,098,194)  (2,241,172)
Net cash used in investing activities  (3,098,194)  (2,241,172)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Proceeds from loan payable under credit agreement  15,033,000   12,396,078 
Repayment of loan payable under credit agreement  (7,023,250)  (11,815,488)
Proceeds from promissory notes to related parties, net of fees  -   3,440,000 
Proceeds from promissory notes- Paycheck Protection Program, net of fees  1,914,100   - 
Repayment of promissory note  -   (500,000)
Principal payment under finance lease obligation  (6,664)  (2,527)
Refund of equity issuance related costs  -   61,509 
Proceeds from exercise of warrants  131,250   43,875 
Proceeds from exercise of stock options  5,662   69,406 
Repayment of installment loan  (11,207)  (11,208)
Debt issuance related costs  (64,390)  (243,750)
Net cash provided by financing activities  9,978,501   3,437,895 
         
INCREASE IN CASH  1,672,760   727,262 
         
CASH, beginning of period  6,868,472   6,141,210 
         
CASH, end of period $8,541,232  $6,868,472 

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 twelve months ended December 31, 2020 and 2019 were as follows:

 Three months ended    
 December 31,    
  2020   2019  $ Change % Change
Adjusted EBITDA:       
Net loss (418,879)  (1,004,164)  585,285  (58.3)
Provision for income taxes 663,050   216,400   446,650  206.4 
Amortization of debt costs 71,514   94,346   (22,832) (24.2)
Other amortization and depreciation 615,881   550,140   65,741  11.9 
Interest expense, excluding amortization of debt costs 1,016,964   950,305   66,659  7.0 
Stock compensation 188,020   149,927   38,093  25.4 
Product/infrastructure expense 17,457   95,513   (78,056) (81.7)
Warrants compensation-consulting agreement -   84,361          (84,361) (100.0)
Executive separation agreement 396,090   -   396,090  - 
Adjusted EBITDA$2,550,097  $1,136,828  $1,413,269  124.32 


 Twelve months ended    
 December 31,    
  2020   2019 $ Change % Change
Adjusted EBITDA:       
Net (loss) / income (339,896)  577,415      (917,311) (158.9)
Provision for income taxes 663,050   216,400  446,650  206.4 
Amortization of debt costs 305,797   324,686       (18,889) (5.8)
Other amortization and depreciation 2,271,287   2,199,737  71,550  3.3 
Interest expense, excluding amortization of debt costs 3,996,764   3,985,736  11,028  0.3 
Stock compensation 981,261   595,833  385,428  64.7 
Product/infrastructure expense 299,287   401,896  (102,609)     (25.5)
Warrants compensation-consulting agreement 139,480   127,561  11,919  9.3 
Executive separation agreement 396,090   -  396,090  - 
Adjusted EBITDA$8,713,120  $8,429,264 $283,856  3.4 

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 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
Vice President
The Equity Group
212-836-9626
jhellman@equityny.com

FlexShopper, Inc.
Investor Relations
ir@flexshopper.com
FlexShopper, Inc.