BOCA RATON, Fla., May 14, 2018 (GLOBE NEWSWIRE) — FlexShopper, Inc. (Nasdaq:FPAY) (“FlexShopper” or the “Company”), a leading national online lease-to-own (“LTO”) retailer and LTO payment solution provider, today announced its financial results for the three months ended March 31, 2018.
Financial Highlights for the Three Months Ended March 31, 2018 vs. Three Months Ended March 31, 2017:
- Lease revenues increased 14% to $19.3 million from $17.0 million
- Lease origination dollars increased 26% to $9.2 million from $7.3 million
- Adjusted Gross Profit(1) increased 7.4% to $4.0 million from $3.8 million
- Adjusted EBITDA(1) was $(867,301) compared to $(104,394)
- Net loss increased to $2.3 million compared to a net loss of $1.1 million
- Net loss after dividends on Series 2 Convertible Preferred Shares increased to $2.9 million, or $0.55 per diluted share, compared to $1.6 million, or $0.30 per diluted share
(1)Adjusted Gross Profit and Adjusted EBITDA are non-GAAP financial measures. Refer to the definitions and reconciliations of these measures under “Non-GAAP Measures”.
Other Operating Highlights and Recent Developments
- Expanded a business to business (“B2B”) retail relationship and launched in approximately 200 store locations with launches in an additional 100 locations expected in the next 30 days
- Hired a Vice President, Retail Partnerships with 22 years of experience in the B2B LTO “save the sale” space to continue B2B expansion
Management Commentary
Brad Bernstein, CEO, stated, “We continued our momentum in the first quarter as lease origination dollars increased by 26% from the first quarter of 2017. Lease revenues also increased by 14% to $19.3 million. Expenses increased, primarily from investments made in technology that occurred in the second half of 2017, but also in marketing to grow the portfolio while maintaining our targeted customer acquisition costs. The company continues to scale successfully in digital channels.”
Mr. Bernstein continued, “We are also pleased to report the expansion of a B2B retail relationship to approximately 300 stores. We are focused on maximizing the ‘save the sale’ opportunity for our retail partner and generating low cost lease originations for FlexShopper.”
| FLEXSHOPPER, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (unaudited) | ||||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2018 | 2017 | |||||||
| Revenues: | ||||||||
| Lease revenues and fees | $ | 19,336,896 | $ | 16,950,892 | ||||
| Lease merchandise sold | 614,518 | 490,725 | ||||||
| Net revenues | 19,951,414 | 17,441,617 | ||||||
| Costs and expenses: | ||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | 10,407,746 | 8,460,783 | ||||||
| Cost of lease merchandise sold | 333,763 | 309,618 | ||||||
| Provision for doubtful accounts | 5,175,318 | 4,915,750 | ||||||
| Marketing | 1,168,950 | 812,182 | ||||||
| Salaries and benefits | 2,179,376 | 1,768,152 | ||||||
| Other operating expenses | 2,038,938 | 1,673,652 | ||||||
| Total costs and expenses | 21,304,091 | 17,940,137 | ||||||
| Operating loss | (1,352,677 | ) | (498,520 | ) | ||||
| Interest expense, including amortization of debt issuance costs | 933,667 | 555,991 | ||||||
| Net loss | (2,286,344 | ) | (1,054,511 | ) | ||||
| Cumulative dividends on Series 2 Convertible Preferred Shares | 603,680 | 548,800 | ||||||
| Net loss attributable to common shareholders | $ | (2,890,024 | ) | $ | (1,603,311 | ) | ||
| Basic and diluted (loss) income per common share: | ||||||||
| Net loss | $ | (0.55 | ) | $ | (0.30 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic and diluted | 5,294,501 | 5,287,391 | ||||||
| FLEXSHOPPER, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| ASSETS | (unaudited) | |||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 1,798,217 | $ | 4,968,915 | ||||
| Accounts receivable, net | 3,774,605 | 4,259,468 | ||||||
| Prepaid expenses | 682,753 | 321,035 | ||||||
| Lease merchandise, net | 18,955,223 | 21,415,322 | ||||||
| Total current assets | 25,210,798 | 30,964,740 | ||||||
| PROPERTY AND EQUIPMENT, net | 2,820,599 | 2,948,164 | ||||||
| OTHER ASSETS, net | 94,953 | 95,722 | ||||||
| $ | 28,126,350 | $ | 34,008,626 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of loan payable under credit agreement to beneficial shareholder net of $26,325 in 2018 and $118,404 in 2017 of unamortized issuance costs | $ | 9,741,890 | $ | 14,094,096 | ||||
| Accounts payable | 4,997,164 | 7,702,145 | ||||||
| Accrued payroll and related taxes | 175,063 | 404,346 | ||||||
| Promissory notes, net of $21,000 of unamortized issuance costs | 3,479,000 | – | ||||||
| Accrued expenses | 782,321 | 786,095 | ||||||
| Total current liabilities | 19,175,438 | 22,986,682 | ||||||
| Loan payable under credit agreement to beneficial shareholder, net of $13,143 in 2018 and $39,468 in 2017 of unamortized issuance costs and current portion | 4,863,642 | 4,698,032 | ||||||
| Total liabilities | 24,039,080 | 27,684,714 | ||||||
| COMMITMENTS | ||||||||
| 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 15,000,000 shares, issued and outstanding 5,294,501 shares | 529 | 529 | ||||||
| Additional paid in capital | 22,495,393 | 22,445,691 | ||||||
| Accumulated deficit | (41,557,677 | ) | (39,271,333 | ) | ||||
| Total stockholders’ equity | 4,087,270 | 6,323,912 | ||||||
| $ | 28,126,350 | $ | 34,008,626 | |||||
| FLEXSHOPPER, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| For the three months ended March 31, 2018 and 2017 | ||||||||
| (unaudited) | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (2,286,344 | ) | $ | (1,054,511 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Depreciation and impairment of lease merchandise | 10,407,746 | 8,460,783 | ||||||
| Other depreciation and amortization | 568,078 | 489,641 | ||||||
| Compensation expense related to issuance of stock options | 49,702 | 22,890 | ||||||
| Provision for doubtful accounts | 5,175,318 | 4,915,750 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (4,690,455 | ) | (4,854,364 | ) | ||||
| Prepaid expenses and other | (361,178 | ) | (130,663 | ) | ||||
| Lease merchandise | (7,947,647 | ) | (6,025,515 | ) | ||||
| Security deposits | – | (5,928 | ) | |||||
| Accounts payable | (2,704,980 | ) | (1,583,747 | ) | ||||
| Accrued payroll and related taxes | (229,283 | ) | (177,551 | ) | ||||
| Accrued expenses | (3,774 | ) | 145,982 | |||||
| Net cash (used in) provided by operating activities | (2,023,358 | ) | 202,767 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment, including capitalized software costs | (307,340 | ) | (477,389 | ) | ||||
| Net cash (used in) investing activities | (307,340 | ) | (477,389 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from promissory note | 3,465,000 | – | ||||||
| Proceeds from loan payable under credit agreement | 1,550,000 | – | ||||||
| Repayment of loan payable under credit agreement | (5,855,000 | ) | – | |||||
| Net cash (used in) financing activities | (840,000 | ) | – | |||||
| DECREASE IN CASH | (3,170,698 | ) | (274,622 | ) | ||||
| CASH, beginning of period | 4,968,915 | 5,412,495 | ||||||
| CASH, end of period | $ | 1,798,217 | $ | 5,137,873 | ||||
Non-GAAP Measures
The Company regularly reviews a number of metrics, including the following key metrics, to evaluate its business, measure its performance, identify trends affecting its business, formulate financial projections and make strategic decisions.
| Three months ended March 31, |
||||||||||||||||
| Adjusted Gross Profit | 2018 | 2017 | $ Change | % Change | ||||||||||||
| Lease revenues and fees | $ | 19,336,896 | $ | 16,950,892 | $ | 2,386,004 | 14.0 | |||||||||
| Lease merchandise sold | 614,518 | 490,725 | 123,793 | 25.2 | ||||||||||||
| Cost of merchandise sold | (333,763 | ) | (309,618 | ) | 24,145 | 7.8 | ||||||||||
| Provision for doubtful accounts | (5,175,318 | ) | (4,915,750 | ) | 259,568 | 5.3 | ||||||||||
| Net revenues | 14,442,333 | 12,216,249 | 2,226,084 | 18.2 | ||||||||||||
| Cost of lease revenues, consisting of depreciation and impairment of lease merchandise | (10,407,746 | ) | (8,460,783 | ) | 1,946,963 | 23.0 | ||||||||||
| Adjusted Gross Profit | $ | 4,034,587 | $ | 3,755,466 | $ | 279,121 | 7.4 | |||||||||
| Gross profit margin | 28 | % | 31 | % | ||||||||||||
| Net revenues as a percentage of cost of lease revenue | 139 | % | 144 | % | ||||||||||||
| Three months ended March 31, |
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| Adjusted EBITDA | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||||
| Net loss | $ | (2,286,344 | ) | $ | (1,054,511 | ) | $ | 1,231,833 | 116.8 | |||||||||||||||||||
| Amortization of debt costs | 132,404 | 118,404 | 14,000 | 11.8 | ||||||||||||||||||||||||
| Other amortization and depreciation | 435,674 | 371,236 | 64,438 | 17.3 | ||||||||||||||||||||||||
| Interest expense | 801,263 | 437,587 | 363,676 | 83.1 | ||||||||||||||||||||||||
| Stock compensation | 49,702 | 22,890 | 26,812 | 117.1 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | (867,301 | )* | $ | (104,394 | )* | $ | 762,907 | 730.5 | |||||||||||||||||||
* Represents loss
The Company refers to Adjusted Gross Profit and Adjusted EBITDA in the above tables as it uses these measures to evaluate its 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 its industry in assessing performance.
Adjusted Gross Profit represents GAAP revenue less the provision for doubtful accounts and cost of leased inventory and inventory sold as a percentage of cost of lease revenues. Adjusted Gross Profit provides us with an understanding of the results from the primary operations of its business. The Company uses Adjusted Gross Profit to evaluate its period-over-period operating performance. This measure may be useful to an investor in evaluating the underlying operating performance of its business.
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) and patent pending LTO payment method. 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 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 file 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
[email protected]
FlexShopper, Inc.
Investor Relations
[email protected]