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FlexShopper Reports 2019 Third Quarter Financial Results; Net Revenues of $22.3 million, up 52.4%, with Adjusted EBITDA of $3.2 Million and Record Net Income of $1.4 Million

November 4, 2019 GMT

BOCA RATON, Fla., Nov. 04, 2019 (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 both the third quarter and first nine months of 2019, highlighted by continued growth in originations, revenues and profitability. Improved lease portfolio performance enabled gross margin expansion, driving significant growth in Net Income and Adjusted EBITDA.

Results for the Quarter Ended September 30, 2019 vs. Quarter Ended September 30, 20181:

-- Net lease revenues and fees1 increased 52.4% to $22.3 million from $14.6 million. -- Gross lease originations increased $4.7 million, an increase of 37.9%, to $17.1 million from $12.4 million. -- Lease originations increased to 36,531, up 25.2% from 29,185. -- The average origination value increased to $468 from $424. -- Net income was $1.4 million compared to a net loss of $(2.7) million. -- Net income attributable to common stockholders was $0.8 million, or $0.04 per diluted share, compared to $(3.3) million, or $(0.56) per diluted share. -- Gross Profit increased 84.4% to $8.2 million from $4.5 million. -- Adjusted EBITDA2 increased to $3.2 million compared to ($1.0) million.

Results for the Nine Months Ended September 30, 2019 vs. Nine Months Ended September 30, 20181:

-- Net lease revenues and fees rose 52.7% to $64 million from $41.9 million. -- Gross lease originations increased $13.9 million, an increase of 45.0%, to $44.7 million from $30.8 million. -- Lease originations increased to 95,731, an increase of 28.2% from 74,684. -- The average origination value increased to $466 versus $412. -- Net income was $1.6 million compared to a net loss of $(7.0) million. -- Net loss attributable to common shareholders was $(0.02) million or $(0.01) per diluted share, compared to $(8.8) million, or $(1.59) per diluted share. -- Gross Profit increased 64.5% to $21 million from $12.8 million. -- Adjusted EBITDA2 increased to $7.2 million compared to $(2.3) million.

1 Beginning with Q1 2019 financial results, the Company adopted a new accounting standard which requires revenues to be reported net of bad debt expense. The Company has retroactively adopted the provisions of the new accounting standard to prior periods in order to provide an accurate comparison.2 Adjusted EBITDA is a non-GAAP financial measure. Refer to the definitions and reconciliations of this measure under “Non-GAAP Measures.”

Q3 2019 Highlights and Recent Developments

-- Continued growth in originations.FlexShopper originated gross leases valued at $17.1 million in Q3 2019, which was an improvement of 37.9% from the prior year quarter. The increase was driven by the combination of increased gross lease count and average lease value. For the third quarter of 2019, FlexShopper originated a total of 36,531 gross leases, representing an increase of 25.2% compared with the prior year period, while the average lease value of $468 was up from $424 in the prior year period. Growth continued to be driven by the combination of repeat customer activity, along with strong growth in the Company’s B2B channel. -- The Company’s B2B channel, consisting primarily of lease originations through third-party retail stores, continued to account for an increasing proportion of total originations. Through the first nine months of 2019, retail store lease originations were 30% of total gross lease origination dollars and delivered 18,307 new customers compared with 3,163 in the same period last year. -- The Company’s average cost to acquire a new customer of $67 in Q3 2019 continued to decrease on a year over year basis, compared to $133 for the same period in 2018. As planned, marketing expense increased to $0.9 million in Q3 2019 from $0.3 million in Q2 2019 as the Company increased its marketing activity during the back to school shopping season. Q3 2019 marketing expense compared favorably with $1.6 million in the year-ago period. The Company continues to expect a sequential increase in marketing expense supporting B2C originations in Q4 2019. -- Improved lease portfolio performance resulting from B2B retail channel growth. Leases originated in the Company’s B2B retail channel historically experience lower delinquency rates than the B2C channel. This positively impacted Gross Profit which increased approximately 700 basis points during Q3 2019 to 37% compared with the same period last year.

Rich House, CEO, commented, “I am delighted to have joined FlexShopper at such an exciting time. Brad has set a high bar in growing the company from its inception five years ago to where it is today. 2019 has been an inflection year for the company and I look forward to continuing that momentum. We have expanded our retail channel significantly and that has translated into a substantial increase in margins and bottom line results. We see ample avenues to continue our growth as we look forward to closing out the year with what has historically been our busiest quarter in terms of originations.”

2019 Outlook

The Company is updating its guidance for 2019.

Current Guidance Previous Guidance ----------------------------- ---------------- ----------------- 2019 Gross Lease Originations > $72 million > $72 million ----------------------------- ---------------- ----------------- 2019 Gross Revenue > $115 million > $112 million ----------------------------- ---------------- ----------------- 2019 Gross Profit > $27.5 million > $26.5 million ----------------------------- ---------------- ----------------- 2019 Adjusted EBITDA > $8.0 million > $5.0 million ----------------------------- ---------------- -----------------

The Company’s guidance for Gross Lease Originations, Gross Revenue, 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 EBITDA is a non-GAAP financial measure. Refer to the definition of this measure 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, November 5, 2019 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/33102/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 For the nine months ended September 30, September 30, --------------------------- ---------------------------- 2019 2018 2019 2018 ------------ ------------ ------------ ------------ Revenues: Lease revenues and fees, net $ 22,267,261 $ 14,609,409 $ 63,953,196 $ 41,875,977 Lease merchandise sold 665,074 490,208 2,374,876 1,592,556 - ---------- - ---------- - ---------- - ---------- Total revenues 22,932,335 15,099,617 66,328,072 43,468,533 - ---------- - ---------- - ---------- - ---------- Costs and expenses: Cost of lease revenues, consisting of depreciation and impairment of lease 14,248,969 10,289,709 43,787,216 29,684,867 merchandise Cost of lease merchandise sold 457,399 349,209 1,521,244 1,007,677 Marketing 868,452 1,596,322 2,031,227 4,025,509 Salaries and benefits 2,189,629 2,186,835 5,984,797 6,397,999 Operating expenses 2,718,110 2,206,496 8,156,238 6,163,680 - ---------- - ---------- - ---------- - ---------- Total costs and expenses 20,482,559 16,628,571 61,480,722 47,279,732 - ---------- - ---------- - ---------- - ---------- Operating income/(loss) 2,449,776 (1,528,954 ) 4,847,350 (3,811,199 ) Loss on extinguishment of debt - 126,622 - 126,622 Interest expense including amortization of debt 1,061,794 1,061,827 3,265,771 3,040,832 issuance costs - ---------- - ---------- - ---------- - ---------- Net income/(loss) 1,387,982 (2,717,403 ) 1,581,579 (6,978,653 ) Dividends on Series 2 Convertible Preferred 609,717 609,168 1,828,167 1,817,672 Shares - ---------- - ---------- - ---------- - ---------- Net income/(loss) attributable to common $ 778,265 $ (3,326,571 ) $ (246,588 ) $ (8,796,325 ) shareholders - ---------- - ---------- - ---------- - ---------- Basic and diluted (loss) per common share: Basic $ 0.04 $ (0.56 ) $ (0.01 ) $ (1.59 ) Diluted $ 0.04 $ (0.56 ) $ (0.01 ) $ (1.59 ) - ---------- - ---------- - ---------- - ---------- WEIGHTED AVERAGE COMMON SHARES: Basic 17,666,193 5,950,161 17,661,134 5,539,815 Diluted 19,798,386 5,950,161 17,661,134 5,539,815 - ---------- - ---------- - ---------- - ----------

FLEXSHOPPER, INC.CONSOLIDATED BALANCE SHEETS

September 30, December 31, 2019 2018 ------------- ------------- (unaudited) ASSETS CURRENT ASSETS: Cash $ 3,172,362 $ 6,141,210 Accounts receivable, net 7,976,580 6,375,963 Prepaid expenses 609,605 317,160 Lease merchandise, net 24,341,616 32,364,697 - ----------- - ----------- Total current assets 36,100,163 45,199,030 PROPERTY AND EQUIPMENT, net 5,271,812 3,336,664 OTHER ASSETS, net 86,980 90,621 - ----------- - ----------- $ 41,458,955 $ 48,626,315 - ----------- - ----------- LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current portion of loan payable under credit agreement to beneficial shareholder net of $0 at 2019 and $167,483 at 2018 of unamortized issuance $ - $ 14,252,717 costs Accounts payable 2,660,561 8,317,216 Accrued payroll and related taxes 232,086 393,095 Promissory notes to related parties net of $9,333 at 2019 and $0 at 2018 of 1,062,810 1,814,771 unamortized issuance costs, including accrued interest Accrued expenses 886,028 1,335,505 Lease liability - current portion 121,858 - - ----------- - ----------- Total current liabilities 4,963,343 26,113,304 Loan payable under credit agreement to beneficial shareholder net of $367,346 at 2019 and $164,752 at 2018 of unamortized issuance costs and 20,233,281 14,020,335 current portion Promissory notes to related parties net of $28,966 at 2019 and $0 at 2018 of 3,721,034 - unamortized issuance costs and current portion Lease liabilities less current portion 1,913,171 - - ----------- - ----------- Total liabilities 30,830,829 40,133,639 STOCKHOLDERS’ EQUITY Series 1 Convertible Preferred Stock, $0.001 par value - authorized 250,000 shares, issued and outstanding 171,191 shares at 2019 and 239,405 shares at 855,955 1,197,025 2018 at $5.00 stated value Series 2 Convertible Preferred Stock, $0.001 par value - authorized 25,000 21,952,000 21,952,000 shares, issued and outstanding 21,952 shares at $1,000 stated value Common stock, $0.0001 par value - authorized 40,000,000 shares, issued and 1,767 1,758 outstanding 17,666,193 shares at 2019 and 17,579,870 shares at 2018 Additional paid in capital 34,969,420 34,074,488 Accumulated deficit (47,151,016 ) (48,732,595 ) - ----------- - ----------- Total stockholders’ equity 10,628,126 8,492,676 - ----------- - ----------- $ 41,458,955 $ 48,626,315 - ----------- - -----------

FLEXSHOPPER, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the nine months ended September 30, 2019 and 2018(unaudited)

2019 2018 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $ 1,581,579 $ (6,978,653 ) Adjustments to reconcile net income/(loss) to net cash used in operating activities: Depreciation and impairment of lease merchandise 43,787,216 29,684,866 Other depreciation and amortization 1,879,935 1,850,452 Compensation expense related to issuance of stock options and warrants 530,724 101,025 Provision for doubtful accounts 25,075,156 16,563,888 Loss on debt extinguishment - 126,622 Changes in operating assets and liabilities: Accounts receivable (26,675,773 ) (17,120,096 ) Prepaid expenses and other (290,556 ) 141,126 Lease merchandise (35,764,135 ) (26,595,974 ) Security deposits 1,334 2,025 Accounts payable (5,656,655 ) (1,560,609 ) Accrued payroll and related taxes (161,009 ) (179,265 ) Accrued expenses (317,173 ) 128,766 - ----------- - ----------- Net cash provided by (used in) operating activities 3,990,643 (3,835,827 ) - ----------- - ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment, including capitalized software costs (1,664,580 ) (1,752,095 ) - ----------- - ----------- Net cash used in investing activities (1,664,580 ) (1,752,095 ) - ----------- - ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payment under finance lease obligation (1,243 ) - Refund of equity issuance related costs 23,147 - Proceeds from exercise of warrants - 1,750 Proceeds from public offering - 10,007,500 Equity issuance related costs - (862,810 ) Proceeds from promissory notes, net of fees 3,440,000 3,465,000 Repayment of promissory note (500,000 ) - Proceeds from loan payable under credit agreement 2,523,828 5,185,000 Repayment of loan payable under credit agreement (10,528,488 ) (9,786,487 ) Repayment of installment loan (8,405 ) (8,405 ) Debt issuance related costs (243,750 ) (100,438 ) - ----------- - ----------- Net cash (used in) provided by financing activities (5,294,911 ) 7,901,110 - ----------- - ----------- (DECREASE)/INCREASE IN CASH (2,968,848 ) 2,313,188 CASH, beginning of period 6,141,210 4,968,915 - ----------- - ----------- CASH, end of period $ 3,172,362 $ 7,282,103 - ----------- - ----------- Supplemental cash flow information: Interest paid $ 2,700,709 $ 2,104,110 Non-cash financing activities: Issuance of common stock and warrants to extinguishment debt and accrued - $ 2,089,266 interest Accrued equity issuance costs - $ 160,000 Warrants issued for debt issuance costs - $ 523,250 Conversion of preferred stock to common stock $ 341,070 -

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 September 30, 2019 and 2018 were as follows:

Three months ended September 30, -------------------------- 2019 2018 $ Change % Change ----------- ------------ ----------- ------ Adjusted EBITDA: Net income/(loss) $ 1,387,982 $ (2,717,403 ) $ 4,105,385 - Amortization of debt costs 111,506 167,689 (56,183 ) (33.5 ) Other amortization and depreciation 531,289 491,252 40,037 8.1 Loss on debt extinguishment - 126,622 (126,622 ) - Interest expense 950,288 894,138 56,150 6.3 Stock compensation 117,134 28,544 88,590 310.4 Non-recurring product/infrastructure expenses 79,272 - 79,272 - - --------- - ---------- - --------- ----- Adjusted EBITDA $ 3,177,471 $ (1,009,158 ) $ 4,186,629 - - --------- - ---------- - --------- -----

Key performance metrics for the nine months ended September 30, 2019 and 2018 were as follows:

Nine months ended September 30, -------------------------- 2019 2018 $ Change % Change ----------- ------------ ----------- ------ Adjusted EBITDA: Net income/(loss) $ 1,581,579 $ (6,978,653 ) $ 8,560,232 - Amortization of debt costs 230,340 460,996 (230,656 ) (50.0 ) Other amortization and depreciation 1,649,597 1,389,456 260,141 18.7 Loss on debt extinguishment - 126,622 (126,622 ) Interest expense 3,035,431 2,579,836 455,595 17.7 Stock compensation 445,906 101,025 344,881 341.4 Non-recurring product/infrastructure expenses 306,383 - 306,383 - - --------- - ---------- - --------- ----- Adjusted EBITDA $ 7,249,236 $ (2,320,718 ) $ 9,569,954 - - --------- - ---------- - --------- -----

The Company refers to Adjusted EBITDA in the above tables 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, Inc. 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 21E of the Securities Exchange Act of 1934. These statements include the Company’s financial guidance for fiscal year 2019 appearing under “2019 Outlook” above. 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 U.S. federal securities laws.

Contact:Jeremy HellmanVice PresidentThe Equity Group212-836-9626jhellman@equityny.com

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