FPAY FlexShopper Inc

FlexShopper, Inc. (Nasdaq: FPAY) (“FlexShopper”), a leading national online lease-to-own (“LTO”) retailer and payment solution provider for underserved consumers, today announced its financial results for the quarter ended September 30, 2024.

Russ Heiser, Jr, Chief Executive Officer, stated, “2024 is shaping up to be a transformative year for FlexShopper as the strategies we are pursuing to profitably grow our business take hold and more retail partners and consumers recognize the value of our unique payment solutions. We are successfully adding new retail partners, and to date, have expanded our signed store count to over 7,800 retail locations – a nearly 250% increase since the beginning of the year. In addition, we continue to grow retail revenue and gross margin through our FlexShopper.com marketplace.”

Mr. Heiser continued, “As we pursue multiple growth initiatives, we remain focused on managing risk, improving customer performance, and attracting higher credit quality customers. As a result, the provision for doubtful accounts as a percentage of gross lease billings was 22% for the third quarter of 2024, a 1,000-basis point improvement over the prior year period. Strong payment performance, combined with the benefits of our strategic plan, are driving significant improvements in profitability, and I am encouraged by the return to GAAP net income, as well as the 45% increase in adjusted EBITDA during the third quarter of 2024.”

“We continue to follow strategies to profitably grow our business, while pursuing multiple corporate actions that we believe have the potential to create significant value for our shareholders. This includes the patent infringement lawsuits we filed initially against two of our competitors in which we expect a favorable outcome. In addition, we are working to complete our previously announced accretive rights offering to reduce our cost of capital and pursue the opportunity to redeem 91% of our Series 2 Preferred Stock at a 50+% discount to its liquidation preference. Overall, we believe tailwinds from the growth strategies we are pursuing will continue to support our business in 2025 and beyond, while we simultaneously pursue opportunities to create lasting value for our shareholders,” concluded Mr. Heiser.

Results for the Third Quarter Ended September 30, 2024, vs. the Third Quarter Ended September 30, 2023:

• Total lease funding approvals increased 33.0% to $77.0 million from $57.9 million
• Total revenues increased 22.9% to $38.6 million from $31.4 million
• Gross profit increased 32.9% to $22.5 million from $16.9 million
• Gross profit margin increased 400 basis points to 58% from 54%
• Adjusted EBITDA(1) increased by 44.9% to $12.2 million from $8.4 million
• Operating income of $9.6 million, compared with operating income of $6.0 million
• Net income attributable to common stockholders of $1.2 million, or $0.05 per diluted share, compared to net loss attributable to common stockholders of ($129,000), or ($0.01) per diluted share

Results for the Nine Months Ended September 30, 2024, vs. the Nine Months Ended September 30, 2023:

• Total lease funding approvals increased 53.1% to $195.2 million from $127.5 million
• Total revenues increased 20.3% to $104.3 million from $86.7 million
• Gross profit increased 44.6% to $56.3 million from $38.9 million
• Gross profit margin increased 900 basis points to 54% from 45%
• Adjusted EBITDA(1) increased 63.4% to $24.6 million, compared to $15.1 million
• Operating income of $17.0 million, compared with operating income of $8.1 million
• Net loss attributable to common stockholders of ($2.8) million, or ($0.13) per diluted share, compared to net loss attributable to common stockholders of ($7.6) million, or ($0.35) per diluted share

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

Conference Call and Webcast Details

Conference Call Information: Date: November 14, 2024 Time: 8:30 a.m. Eastern Time Toll Free Dial In: (877) 407-2988 International Dial In: (201) 389-0923 Conference ID: 13749662

Webcast Link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=L7CNW8vm

The call will also be simultaneously webcast over the Internet via the “Investor” section of the Company’s website at https://investors.flexshopper.com/.

An audio replay of the call will be archived on the Company’s website at https://investors.flexshopper.com/.

About FlexShopper FlexShopper, Inc. is a leading national financial technology company that offers innovative payment options to consumers. FlexShopper provides a variety of flexible funding options for underserved consumers through its direct-to-consumer online marketplace at Flexshopper.com and in partnership with merchants both online and at brick-and-mortar locations. FlexShopper’s solutions are crafted to meet the needs of a wide range of consumer segments through lease-to-own and lending products.

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, 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 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.

FLEXSHOPPER, INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (unaudited)
	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2024				2023				2024				2023
Revenues:
Lease revenues and fees, net	$	28,364,190			$	21,082,199			$	81,271,973			$	68,703,201
Loan revenues and fees, net of changes in fair value		9,047,165				10,304,247				19,692,817				18,001,057
Retail revenues		1,177,146				-				3,327,468				-
Total revenues		38,588,501				31,386,446				104,292,258				86,704,258
Costs and expenses:
Depreciation and impairment of lease merchandise		14,486,564				13,061,958				43,021,351				42,893,163
Loan origination costs and fees		677,913				1,389,107				2,395,780				4,878,158
Cost of retail revenues		923,203				-				2,593,505				-
Marketing		2,005,559				1,671,137				6,316,945				4,258,904
Salaries and benefits		4,049,422				3,231,100				12,357,955				8,933,998
Operating expenses		6,888,348				6,080,725				20,628,182				17,666,366
Total costs and expenses		29,031,009				25,434,027				87,313,718				78,630,589
Operating income		9,557,492				5,952,419				16,978,540				8,073,669
Interest expense including amortization of debt issuance costs		(5,672,594	)			(4,746,801	)			(16,213,843	)			(13,846,685	)
Income/ (loss) before income taxes		3,884,898				1,205,618				764,697				(5,773,016	)
Income taxes (expense)/ benefit		(1,518,514	)			(265,517	)			(215,550	)			1,185,247
Net income/ (loss)		2,366,384				940,101				549,147				(4,587,769	)
Dividends on Series 2 Convertible Preferred Shares		(1,176,402	)			(1,069,456	)			(3,337,600	)			(3,034,182	)
Net income/ (loss) attributable to common and Series 1 Convertible Preferred shareholders	$	1,189,982			$	(129,355	)		$	(2,788,453	)		$	(7,621,951	)
Basic and diluted income/ (loss) per common share:
Basic	$	0.05			$	(0.01	)		$	(0.13	)		$	(0.35	)
Diluted	$	0.05			$	(0.01	)		$	(0.13	)		$	(0.35	)
WEIGHTED AVERAGE COMMON SHARES:
Basic		21,586,935				21,716,852				21,547,702				21,740,027
Diluted		22,231,788				21,716,852				21,547,702				21,740,027

FLEXSHOPPER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30, 2024				December 31, 2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	7,330,542			$	4,413,130
Lease receivables, net		66,181,471				44,795,090
Loan receivables at fair value		47,116,140				35,794,290
Prepaid expenses and other assets		4,583,392				3,300,677
Lease merchandise, net		24,087,010				29,131,440
Total current assets		149,298,555				117,434,627
Property and equipment, net		9,495,192				9,308,859
Right of use asset, net		1,093,551				1,237,010
Intangible assets, net		12,064,118				13,391,305
Other assets, net		2,528,397				2,175,215
Deferred tax asset, net		12,781,946				12,943,361
Total assets	$	187,261,759			$	156,490,377
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,604,816			$	7,139,848
Accrued payroll and related taxes		744,371				578,197
Promissory notes to related parties, including accrued interest, and net of unamortized issuance costs of $305,860 at September 30, 2024		10,616,988				198,624
Accrued expenses		3,477,386				3,972,397
Lease liability - current portion		275,029				245,052
Total current liabilities		18,718,590				12,134,118
Loan payable under credit agreement to beneficial shareholder, net of unamortized issuance costs of $1,142,325 at September 30, 2024 and $70,780 at December 31, 2023		130,274,365				96,384,220
Promissory notes to related parties, net of unamortized issuance costs of $649,953 at December 31, 2023 and net of current portion		-				10,100,047
Loan payable under Basepoint credit agreement, net of unamortized issuance costs of $64,113 at September 30, 2024 and $92,964 at December 31, 2023		7,348,492				7,319,641
Lease liabilities, net of current portion		1,111,740				1,321,578
Total liabilities		157,453,187				127,259,604
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 21,988,711 shares at September 30, 2024 and 21,752,304 shares at December 31, 2023		2,200				2,176
Treasury shares, at cost- 526,822 shares at September 30, 2024 and 164,029 shares at December 31, 2023		(563,537	)			(166,757	)
Additional paid in capital		42,841,302				42,415,894
Accumulated deficit		(35,275,053	)			(35,824,200	)
Total stockholders’ equity		29,808,572				29,230,773
	$	187,261,759			$	156,490,377

FLEXSHOPPER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2024 and 2023 (unaudited)
	2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/ (loss)	$	549,147			$	(4,587,769	)
Adjustments to reconcile net income/ (loss) to net cash (used in)/ provided by operating
Depreciation and impairment of lease merchandise		43,021,351				42,893,163
Other depreciation and amortization		7,134,573				5,674,931
Amortization of debt issuance costs		824,499				376,857
Amortization of discount on the promissory note related to acquisition		-				177,714
Compensation expense related to stock-based compensation		528,920				1,336,367
Provision for doubtful accounts		25,373,485				32,123,950
Deferred income tax		161,415				(1,192,223	)
Net changes in the fair value of loans receivables at fair value		(11,165,374	)			(6,258,279	)
Changes in operating assets and liabilities:
Lease receivables		(46,759,866	)			(38,004,947	)
Loans receivables at fair value		(156,476	)			7,510,901
Prepaid expenses and other assets		(1,404,487	)			641,039
Lease merchandise		(37,976,921	)			(34,939,330	)
Purchase consideration payable related to acquisition		-				208,921
Lease liabilities		(31,801	)			(19,566	)
Accounts payable		(3,535,032	)			(2,501,399	)
Accrued payroll and related taxes		166,174				293,018
Accrued expenses		(520,787	)			(1,170,585	)
Net cash (used in)/ provided by operating activities		(23,791,180	)			2,562,763
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, including capitalized software costs		(4,889,386	)			(4,565,819	)
Purchases of data costs		(1,335,743	)			(570,820	)
Net cash used in investing activities		(6,225,129	)			(5,136,639	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan payable under credit agreement		34,961,690				7,800,000
Repayment of loan payable under credit agreement		-				(2,795,000	)
Repayment of loan payable under Basepoint credit agreement		-				(1,500,000	)
Repayment of promissory notes to related parties		-				(1,000,000	)
Debt issuance related costs		(1,523,100	)			(115,403	)
Proceeds from exercise of stock options		-				1,185
Principal payment under finance lease obligation		(4,601	)			(7,308	)
Repayment of purchase consideration payable related to acquisition						(144,913	)
Tax payments associated with equity-based compensation transactions		(103,488	)			-
Purchase of treasury stock		(396,780	)			(100,225	)
Net cash provided by financing activities		32,933,721				2,138,336
INCREASE/ (DECREASE) IN CASH		2,917,412				(435,540	)
CASH, beginning of period		4,413,130				6,173,349
CASH, end of period	$	7,330,542			$	5,737,809
Supplemental cash flow information:
Interest paid	$	14,759,775			$	12,811,332
Noncash investing and financing activities
Due date extension of warrants	$	-			$	917,581

Non-GAAP Financial 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 merchandise), 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, 2024, and September 30, 2023 are as follows:

	Three Months Ended September 30,
	2024				2023				$ Change				% Change
Gross Profit:
Gross lease billings and fees	$	36,381,080			$	31,266,666			$	5,114,414				16.4
Provision for doubtful accounts		(8,083,009	)			(10,038,122	)			1,955,113				(19.5	)
Gain on sale of lease receivables		15,791				(146,345	)			162,136				(110.8	)
Lease placement collections		50,328				-				50,328				-
Net lease billing and fees	$	28,364,190			$	21,082,199			$	7,281,991				34.5
Loan revenues and fees		2,780,667				3,208,920				(428,253	)			(13.3	)
Net changes in the fair value of loans receivable		6,266,498				7,095,327				(828,829	)			(11.7	)
Net loan revenue		9,047,165				10,304,247				(1,257,082	)			(12.2	)
Retail revenue		1,177,146				-				1,177,146				-
Total revenues	$	38,588,501			$	31,386,446			$	7,202,055				22.9
Depreciation and impairment of lease merchandise		(14,486,564	)			(13,061,958	)			(1,424,606	)			10.9
Loans origination costs and fees		(677,913	)			(1,389,107	)			711,194				(51.2	)
Cost of retail revenues		(923,203	)			—				(923,203	)			—
Gross profit	$	22,500,821			$	16,935,381			$	5,565,440				32.9
Gross profit margin		58	%			54	%

	Three Months Ended September 30,
	2024				2023				$ Change				% Change
Adjusted EBITDA:
Net income	$	2,366,384			$	940,101			$	1,426,283				151.7
Income taxes expense		1,518,514				265,517				1,252,997				471.9
Amortization of debt issuance costs		314,702				194,682				120,020				61.6
Amortization of discount on the promissory note related to acquisition		-				59,238				(59,238	)			(100.0	)
Other amortization and depreciation		2,436,357				1,964,229				472,128				24.0
Interest expense		5,357,892				4,492,881				865,011				19.3
Stock-based compensation		156,922				471,819				(314,897	)			(66.7	)
Adjusted EBITDA	$	12,150,771			$	8,388,467			$	3,762,304				44.9

Key performance metrics for the nine months ended September 30, 2024 and 2023 are as follows:

	Nine Months Ended September 30,
	2024				2023				$ Change				% Change
Gross Profit:
Gross lease billings and fees	$	106,352,849			$	98,023,406			$	8,329,443				8.5
Provision for doubtful accounts		(25,373,485	)			(32,123,950	)			6,750,465				(21.0	)
Gain on sale of lease receivables		77,225				2,803,745				(2,726,520	)			(97.2	)
Lease placement collections		215,384				-				215,384				-
Net lease billing and fees	$	81,271,973			$	68,703,201			$	12,568,772				18.3
Loan revenues and fees		8,527,443				11,742,778				(3,215,335	)			(27.4	)
Net changes in the fair value of loans receivable		11,165,374				6,258,279				4,907,095				78.4
Net loan revenues	$	19,692,817			$	18,001,057			$	1,691,760				9.4
Retail revenues		3,327,468				-				3,327,468				-
Total revenues	$	104,292,258			$	86,704,258			$	17,588,000				20.3
Depreciation and impairment of lease merchandise		(43,021,351	)			(42,893,163	)			(128,188	)			0.3
Loans origination costs and fees		(2,395,780	)			(4,878,158	)			2,482,378				(50.9	)
Cost of retail revenues		(2,593,505	)			-				(2,593,505	)			-
Gross profit	$	56,281,622			$	38,932,937			$	17,348,685				44.6
Gross profit margin		54	%			45	%

	Nine Months Ended September 30,
	2024				2023				$ Change				% Change
Adjusted EBITDA:
Net income/ (loss)	$	549,147			$	(4,587,769	)		$	5,136,916				(112.0	)
Income taxes expense/ (benefit)		215,550				(1,185,247	)			1,400,797				(118.2	)
Amortization of debt issuance costs		824,499				376,857				447,642				118.8
Amortization of discount on the promissory note related to acquisition		-				177,714				(177,714	)			(100.0	)
Other amortization and depreciation		7,134,573				5,674,931				1,459,642				25.7
Interest expense		15,389,344				13,292,114				2,097,230				15.8
Stock-based compensation		528,920				1,336,367				(807,447	)			(60.4	)
Adjusted EBITDA	$	24,642,033			$	15,084,967			$	9,557,066				63.4

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.