FlexShopper, Inc. Reports Second Quarter 2022 Financial Results

·13 min read
FlexShopper, Inc.
FlexShopper, Inc.

BOCA RATON, Fla., Aug. 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 June 30, 2022.

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

  • Total fundings increased 64.5% to $32.8 million from $19.9 million consisting of gross lease originations with no change of $19.9 million and loan participations up ~16,490% from $78 thousand to $12.9 million

  • Total net lease revenues and fees decreased 0.6% to $30.5 million from $30.7 million

  • Total net loan revenues and fees increased 23,209% to $6.1 million from $26 thousand

  • Gross profit increased 58.2% to $17.5 million from $11.1 million

  • Adjusted EBITDA1 increased to $6.4 million compared to $2.1 million

  • Net income of $14.4 million compared with net income of $942 thousand

  • Net income attributable to common stockholders of $13.8 million, or $0.51 per diluted share, compared to net income attributable to common stockholders of $332 thousand, or $0.01 per diluted share

Results for Six Months Ended June 30, 2022 vs. Six Months Ended June 30, 2021:

  • Total fundings increased 31.9% to $54.0 million from $40.9 million consisting of gross lease originations decreasing from $40.8 to $36.1 million and loan participations up ~10,090% from $175 thousand to $17.9 million

  • Total net lease revenues and fees decreased 8.2% to $58.2 million from $63.4 million

  • Total net loan revenues and fees increased 12,342% to $7.3 million from $58 thousand

  • Gross profit increased 26.1% to $26.9 million from $21.3 million

  • Adjusted EBITDA1 increased to $6.3 million compared to $4.6 million

  • Net income of $12.0 million compared with net income of $943 thousand

  • Net income attributable to common stockholders of $10.8 million, or $0.42 per diluted share, compared to net loss attributable to common stockholders of $(276) thousand, or $(0.01) per diluted share

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

“We are pleased with this quarter’s results in the face of significant economic headwinds. The Company’s historical omni-channel lease capabilities matched more recently with a complementary loan product have enabled us to continue to grow revenues while tightening underwriting standards. The diversity of our platform coupled with new sales initiatives will allow us to continue to grow in the current 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: Thursday, August 11, 2022
Time: 9:00 a.m. Eastern Time

Participant Dial-In Numbers:

Domestic callers: (877) 407-2988
International callers: (412) 902-0038

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=qo9OFRdT

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
June 30,

 

 

For the six months ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Lease revenues and fees, net

 

$

30,468,476

 

 

$

30,662,470

 

 

$

58,234,788

 

 

$

63,413,801

 

Loan revenues and fees, net of changes in fair value

 

 

6,079,675

 

 

 

26,083

 

 

 

7,268,599

 

 

 

58,422

 

Total revenues

 

 

36,548,151

 

 

 

30,688,553

 

 

 

65,503,387

 

 

 

63,472,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of lease revenues and merchandise sold

 

 

18,207,305

 

 

 

19,490,864

 

 

 

37,367,916

 

 

 

41,954,420

 

Loan origination costs and fees

 

 

804,228

 

 

 

111,787

 

 

 

1,229,741

 

 

 

175,184

 

Marketing

 

 

3,770,820

 

 

 

1,914,095

 

 

 

5,784,935

 

 

 

3,746,835

 

Salaries and benefits

 

 

3,014,920

 

 

 

2,747,005

 

 

 

5,979,362

 

 

 

5,656,324

 

Operating expenses

 

 

5,748,286

 

 

 

5,213,789

 

 

 

11,421,488

 

 

 

9,328,213

 

Total costs and expenses

 

 

31,545,559

 

 

 

29,477,540

 

 

 

61,783,442

 

 

 

60,860,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

5,002,592

 

 

 

1,211,013

 

 

 

3,719,945

 

 

 

2,611,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt

 

 

-

 

 

 

1,931,825

 

 

 

-

 

 

 

1,931,825

 

Interest expense including amortization of debt issuance costs

 

 

(2,347,838

)

 

 

(1,222,400

)

 

 

(4,305,906

)

 

 

(2,621,397

)

Income /(loss) before income taxes

 

 

2,654,754

 

 

 

1,920,438

 

 

 

(585,961

)

 

 

1,921,675

 

Benefit /(expense) from income taxes

 

 

11,734,467

 

 

 

(978,244

)

 

 

12,594,247

 

 

 

(978,244

)

Net income

 

 

14,389,221

 

 

 

942,194

 

 

 

12,008,286

 

 

 

943,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on Series 2 Convertible Preferred Shares

 

 

(609,777

)

 

 

(609,773

)

 

 

(1,219,554

)

 

 

(1,219,545

)

Net income/(loss) attributable to common and Series 1 Convertible Preferred shareholders

 

$

13,779,444

 

 

 

332,421

 

 

 

10,788,732

 

 

 

(276,114

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income/(loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.63

 

 

 

0.02

 

 

 

0.49

 

 

 

(0.01

)

Diluted

 

 

0.51

 

 

$

0.01

 

 

 

0.42

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

21,605,234

 

 

 

21,605,461

 

 

 

21,576,312

 

 

 

21,375,096

 

Diluted

 

 

27,898,824

 

 

 

23,603,477

 

 

 

28,193,268

 

 

 

21,375,096

 


FLEXSHOPPER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash

 

$

4,988,308

 

 

$

4,986,559

 

Restricted cash

 

 

461,649

 

 

 

108,083

 

Accounts receivable, net

 

 

33,050,840

 

 

 

26,338,883

 

Loans receivable at fair value

 

 

22,534,033

 

 

 

3,560,108

 

Prepaid expenses

 

 

1,113,554

 

 

 

957,527

 

Lease merchandise, net

 

 

36,136,995

 

 

 

40,942,112

 

Total current assets

 

 

98,285,379

 

 

 

76,893,272

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

9,399,753

 

 

 

7,841,206

 

Other assets, net

 

 

76,040

 

 

 

77,578

 

Deferred tax asset, net

 

 

12,244,068

 

 

 

-

 

Total assets

 

$

120,005,240

 

 

$

84,812,056

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,242,163

 

 

$

7,982,180

 

Accrued payroll and related taxes

 

 

416,734

 

 

 

391,078

 

Promissory notes to related parties, net of $0 at 2022 and $1,274 at 2021 of unamortized issuance costs, including accrued interest

 

 

1,167,871

 

 

 

1,053,088

 

Accrued expenses

 

 

4,777,278

 

 

 

2,987,646

 

Lease liability - current portion

 

 

189,804

 

 

 

172,732

 

Total current liabilities

 

 

11,793,850

 

 

 

12,586,724

 

 

 

 

 

 

 

 

 

 

Loan payable under credit agreement to beneficial shareholder, net of $394,396 at 2022 and $413,076 at 2021 of unamortized issuance costs

 

 

66,755,604

 

 

 

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

 

 

1,675,959

 

 

 

1,774,623

 

Total liabilities

 

 

91,153,573

 

 

 

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 21,605,234 shares at June 30, 2022 and 21,442,278 shares at December 31, 2021

 

 

2,161

 

 

 

2,144

 

Additional paid in capital

 

 

39,259,862

 

 

 

38,560,117

 

Accumulated deficit

 

 

(33,214,016

)

 

 

(45,222,302

)

Total stockholders’ equity

 

 

28,851,667

 

 

 

16,143,619

 

 

 

$

120,005,240

 

 

$

84,812,056

 


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

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

12,008,286

 

 

$

943,431

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and impairment of lease merchandise

 

 

37,367,916

 

 

 

39,064,981

 

Other depreciation and amortization

 

 

2,059,323

 

 

 

1,324,049

 

Amortization of debt issuance costs

 

 

106,886

 

 

 

134,580

 

Compensation expense related to stock-based compensation and warrants

 

 

562,705

 

 

 

1,034,334

 

Provision for doubtful accounts

 

 

27,563,993

 

 

 

18,778,392

 

Proceeds from sale of lease receivables

 

 

6,604,507

 

 

 

-

 

Interest in kind added to promissory notes balance

 

 

113,509

 

 

 

9,461

 

Deferred income tax

 

 

(12,561,074

)

 

 

378,859

 

Gain on debt extinguishment

 

 

-

 

 

 

(1,931,825

)

Net changes in the fair value of loans receivable at fair value

 

 

(2,457,851

)

 

 

58,575

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(40,880,457

)

 

 

(21,775,777

)

Loans receivable at fair value

 

 

(16,516,074

)

 

 

(179,141

)

Prepaid expenses and other

 

 

(155,773

)

 

 

(174,222

)

Lease merchandise

 

 

(32,562,799

)

 

 

(33,875,960

)

Security deposits

 

 

-

 

 

 

4,280

 

Lease liabilities

 

 

(5,091

)

 

 

(2,598

)

Accounts payable

 

 

(2,740,017

)

 

 

(4,105,547

)

Accrued payroll and related taxes

 

 

25,656

 

 

 

438,010

 

Accrued expenses

 

 

1,794,983

 

 

 

(158,248

)

Net cash used in operating activities

 

 

(19,671,372

)

 

 

(34,366

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment, including capitalized software costs and data costs

 

 

(3,687,241

)

 

 

(1,367,154

)

Net cash used in investing activities

 

 

(3,687,241

)

 

 

(1,367,154

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from loan payable under credit agreement

 

 

17,800,000

 

 

 

3,500,000

 

Repayment of loan payable under credit agreement

 

 

(1,125,000

)

 

 

(4,975,000

)

Debt issuance related costs

 

 

(86,932

)

 

 

(526,565

)

Proceeds from exercise of stock options

 

 

137,057

 

 

 

17,126

 

Proceeds from promissory notes, net of fees

 

 

7,000,000

 

 

 

-

 

Principal payment under finance lease obligation

 

 

(5,592

)

 

 

(2,457

)

Repayment of installment loan

 

 

(5,605

)

 

 

(5,603

)

Net cash provided by/(used in) financing activities

 

 

23,713,928

 

 

 

(1,992,499

)

 

 

 

 

 

 

 

 

 

INCREASE / (DECREASE) IN CASH and RESTRICTED CASH

 

 

355,315

 

 

 

(3,394,019

)

 

 

 

 

 

 

 

 

 

CASH and RESTRICTED CASH, beginning of period

 

 

5,094,642

 

 

 

8,541,232

 

 

 

 

 

 

 

 

 

 

CASH and RESTRICTED CASH, end of period

 

$

5,449,957

 

 

$

5,147,213

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

3,953,765

 

 

$

2,506,589

 


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 six months ended June 30, 2022 and 2021 were as follows:

 

 

Three months ended
June 30,

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

14,389,221

 

 

$

942,194

 

 

$

13,447,027

 

 

 

1,427.2

 

Income taxes

 

 

(11,734,467

)

 

 

978,244

 

 

 

(12,712,711

)

 

 

(1,299.5

)

Amortization of debt issuance costs

 

 

56,283

 

 

 

42,877

 

 

 

13,406

 

 

 

31.3

 

Other amortization and depreciation

 

 

1,122,263

 

 

 

672,656

 

 

 

449,607

 

 

 

66.8

 

Interest expense

 

 

2,291,555

 

 

 

1,179,523

 

 

 

1,112,032

 

 

 

94.3

 

Stock-based compensation

 

 

257,476

 

 

 

249,222

 

 

 

8,254

 

 

 

3.3

 

Gain on debt extinguishment

 

 

-

 

 

 

(1,931,825

)

 

 

1,931,825

 

 

 

-

 

Adjusted EBITDA

 

$

6,382,331

 

 

$

2,132,891

 

 

$

4,249,440

 

 

 

199.2

 


 

 

Six months ended
June 30,

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,008,286

 

 

$

943,431

 

 

$

11,064,855

 

 

 

1,172.8

 

Income taxes

 

 

(12,594,247

)

 

 

978,244

 

 

 

(13,572,491

)

 

 

(1,387.4

)

Amortization of debt issuance costs

 

 

106,886

 

 

 

134,580

 

 

 

(27,694

)

 

 

(20.6

)

Other amortization and depreciation

 

 

2,059,323

 

 

 

1,324,049

 

 

 

735,274

 

 

 

55.5

 

Interest expense

 

 

4,199,020

 

 

 

2,486,817

 

 

 

1,712,203

 

 

 

68.9

 

Stock-based compensation

 

 

562,705

 

 

 

629,486

 

 

 

(66,781

)

 

 

(10.6

)

Product/ infrastructure expenses

 

 

-

 

 

 

10,000

 

 

 

(10,000

)

 

 

 

 

Gain on debt extinguishment

 

 

-

 

 

 

(1,931,825

)

 

 

1,931,825

 

 

 

-

 

Adjusted EBITDA

 

$

6,341,973

 

 

$

4,574,782

 

 

$

1,767,191

 

 

 

38.6

 


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.