FlexShopper, Inc. Reports First Quarter 2021 Financial Results

Boca Raton, Florida, UNITED STATES


Q1 2021 Net Revenues Up 32.7% to $31.9 million

Lease Merchandise, net, Up 31.4% at March 31, 2021 Compared With Prior Year

BOCA RATON, Fla., May 10, 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 ended March 31, 2021, highlighted by continued growth in lease activity from repeat customers, along with new customer additions.

Results for Quarter Ended March 31, 2021 vs. Quarter Ended March 31, 2020:

  • Total net revenues and fees increased 31.9% to $32.7 million from $24.8 million
  • Originated 39,299 gross leases, up 8.7% from 36,153; average origination value increased to $532 from $475
  • Gross lease originations increased $3.7 million, or 21.7%, to $20.9 million from $17.2 million
  • Gross profit increased 28% to $10.3 million from $8.0 million
  • Net income of $1.2 thousand compared with net income of $51.6 thousand
  • Net loss attributable to common stockholders of $(608) thousand, or $(0.03) per diluted share, compared to net loss attributable to common stockholders of $(1.3) million, or $(0.06) per diluted share
  • Adjusted EBITDA1 increased to $2.4 million compared to $2.0 million
  • Lease merchandise, net, increase 31.4% to $39.3 from $29.9 million

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

First Quarter 2021 Highlights and Recent Developments

  • Pilot program with a national retailer continues to expand from one state to four states. As noted in the Company’s Q4 2020 earnings release, FlexShopper’s payment option was due to roll-out to three additional states as of March 15th. This further roll-out has resulted in FlexShopper now being available in over 300 storefronts with this retail partner.
  • Digital advertising rates continue to support an aggressive marketing stance. Through the first quarter, FlexShopper continued to invest in digital marketing programs as the company was able to attract customers at its targeted acquisition cost.
  • Origination growth through Q1 2021. The Company previously announced origination growth of 23% in January and February combined, compared with the same two-month period in 2020. Overall Q1 2021 originations grew 21.7%, while average origination value increased to $532 from $475.
  • Repeat customer trends continue to be favorable. During the first quarter, the Company originated $8.2 million from existing customers compared with $7.3 million repeat customer leases in the first quarter of 2020.
  • Pre-marketing EBITDA continues to demonstrate growth. Excluding marketing expense, which is the Company’s most significant variable expense category, pre-marketing EBITDA for Q1 was $4.2 million, up from $3 million in the prior year quarter.
  • Net lease merchandise up compared with prior year. Representing the value of actual goods on which customers are due to make lease payments, Net Lease Merchandise grew 31.4% to $39.3 million at March 31, 2020, compared with $29.9 million a year ago

Rich House, CEO, stated, “Our first quarter was generally in-line with our expectations. Through the fall of 2020 and into early 2021, we saw solid growth in our originations and those leases helped drive the top line growth we enjoyed in the first quarter. Those customers have also exhibited payment behavior at, or better, than expected, with government stimulus programs helping many customers who may have been delinquent get caught up. We have also commented on our recent calls that stimulus programs enacted during 2020 led to an increase in early payoff activity and this round of stimulus has been no exception. Our focus remains on recycling that capital, with an emphasis on driving repeat customer activity, which is our most profitable business.”

Mr. House continued, “On our fourth quarter call we noted that our pilot program with a national retailer was due to expand to four states from one in mid-March and that rollout has gone well. We are now in over 300 stores with this retail partner and seeing good adoption of our FlexShopper payment option at the store level. We are confident this success will translate into further expansion with this partner over the balance of the year. We are also very active in looking to add additional retail partners and expect that the broader national trend toward ending pandemic restrictions will help accelerate our retail channel activity.”

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, May 11, 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/44878/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
March 31,
 
 2021  2020 
      
Revenues:     
Lease revenues and fees, net$31,104,664  $23,697,705 
Lease merchandise sold 1,679,006   1,145,042 
Total revenues 32,783,670   24,842,747 
        
Costs and expenses:       
Cost of lease revenues, consisting of depreciation and impairment of lease merchandise 21,200,510   16,196,949 
Cost of lease merchandise sold 1,326,443   630,781 
Marketing 1,832,740   1,031,145 
Salaries and benefits 2,909,319   2,548,869 
Operating expenses 4,114,424   3,171,692 
Total costs and expenses 31,383,436   23,579,436 
        
Operating income 1,400,234   1,263,311 
        
Interest expense including amortization of debt issuance costs 1,398,997   1,211,626 
Net income 1,237   51,685 
        
Dividends on Series 2 Convertible Preferred Shares 609,772   609,717 
Deemed dividend from exchange offer of warrants -   713,212 
Net loss attributable to common shareholders$(608,535) $(1,271,244)
        
Basic and diluted (loss) per common share:       
Basic and diluted$(0.03) $(0.06)
        
WEIGHTED AVERAGE COMMON SHARES:       
Basic and diluted 21,369,904   19,903,435 



FLEXSHOPPER, INC.
CONSOLIDATED BALANCE SHEETS

 March 31,  December 31, 
 2021  2020 
 (unaudited)    
ASSETS     
CURRENT ASSETS:     
Cash$6,315,815  $8,541,232 
Accounts receivable, net 11,028,554   10,032,714 
Prepaid expenses 923,093   869,081 
Lease merchandise, net 39,320,781   42,822,340 
Total current assets 57,588,243   62,265,367 
        
PROPERTY AND EQUIPMENT, net 5,945,497   5,911,696 
        
OTHER ASSETS, net 67,267   72,316 
Total assets$63,601,007  $68,249,379 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY       
CURRENT LIABILITIES:       
Accounts payable$3,126,214  $7,907,619 
Accrued payroll and related taxes 560,332   352,102 
Current portion of promissory notes to related parties, net $8,276 at 2020 of unamortized issuance costs, including accrued interest 59,811   4,815,546 
Current portion of promissory note – Paycheck Protection Program, including accrued interest 1,291,951   1,184,952 
Accrued expenses 2,866,607   2,646,800 
Lease liability - current portion 148,301   160,726 
Total current liabilities 8,053,216   17,067,745 
        
Loan payable under credit agreement to beneficial shareholder, net of $499,661 at 2021 and $61,617 at 2020 of unamortized issuance costs and current portion 36,290,339   37,134,009 
Promissory notes to related parties, net of $5,093 at 2021 of unamortized issuance costs and current portion 4,744,904   - 
Promissory note – Paycheck Protection Program, net of current portion 639,510   741,787 
Accrued payroll and related taxes net of current portion 204,437   204,437 
Lease liabilities net of current portion 1,907,220   1,947,355 
Total liabilities 51,839,626   57,095,333 
        
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 21,375,945 shares at 2021 and 21,359,945 shares at 2020 2,138   2,136 
Additional paid in capital 37,449,422   36,843,326 
Accumulated deficit (48,493,839)  (48,495,076)
Total stockholders’ equity 11,761,381   11,154,046 
 $63,601,007  $68,249,379 



FLEXSHOPPER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2021 and 2020
(unaudited)

 2021  2020 
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net income$1,237  $51,685 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:       
Depreciation and impairment of lease merchandise 21,200,510   16,196,949 
Other depreciation and amortization 651,394   460,013 
Amortization of debt issuance costs 91,703   94,346 
Compensation expense related to issuance of stock options and warrants 593,186   215,814 
Provision for doubtful accounts 8,833,349   7,682,927 
Interest in kind added to promissory notes balance 9,098   141,038 
Changes in operating assets and liabilities:       
Accounts receivable (9,829,189)  (7,870,539)
Prepaid expenses and other (53,683)  (87,873)
Lease merchandise (17,698,951)  (15,032,521)
Security deposits 4,280   2,943 
Lease Liabilities (1,033)  100,014 
Accounts payable (4,781,405)  (1,406,398)
Accrued payroll and related taxes 208,230   (220,263)
Accrued expenses 208,271   230,394 
Net cash provided by (used in) operating activities (563,003)  558,529 
        
CASH FLOWS FROM INVESTING ACTIVITIES       
Purchases of property and equipment, including capitalized software costs (734,122)  (646,414)
Net cash used in investing activities (734,122)  (646,414)
        
CASH FLOWS FROM FINANCING ACTIVITIES       
Proceeds from loan payable under credit agreement 3,500,000   1,900,000 
Repayment of loan payable under credit agreement (3,910,000)  (3,353,000)
Debt issuance related costs (526,565)  - 
Proceeds from exercise of warrants -   131,250 
Proceeds from exercise of stock options 12,912   - 
Principal payment under finance lease obligation (1,833)  (1,515)
Repayment of installment loan (2,802)  (2,802)
Net cash used in financing activities (928,290)  (1,326,067)
        
DECREASE IN CASH (2,225,417)  (1,413,952)
        
CASH, beginning of period$8,541,232  $6,868,472 
        
CASH, end of period$6,315,815  $5,454,520 
        


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 months ended March 31, 2021 and 2020 were as follows:

 Three months ended
March 31,
       
 2021  2020  $ Change  % Change 
Adjusted EBITDA:           
Net income$1,237  $51,685  $(50,448)  (97.6)
Amortization of debt costs 91,704   94,345   (2,641)  (2.8)
Other amortization and depreciation 651,396   460,013   191,383   41.6 
Interest expense 1,307,293   1,117,281   190,012   17.0 
Stock compensation 380,264   171,815   208,449   121.3 
Product/infrastructure expenses 10,000   104,664   (94,664)  (90.4)
Adjusted EBITDA$2,441,894  $1,999,803  $442,091   22.1 

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.