FlexShopper, Inc. (NASDAQ:FPAY) is a financial technology company offering lease-to-own (LTO) and consumer loan products. The company has demonstrated resilience and adaptability in the dynamic consumer finance landscape, leveraging proprietary technology and strategic partnerships to drive growth and enhance service offerings.
Business Overview
FlexShopper's core business model revolves around providing consumers with the opportunity to obtain ownership of high-quality durable products, such as consumer electronics, home appliances, computers, smartphones, and furniture, through affordable LTO purchase agreements. FlexShopper's LTO sales channels include selling directly to consumers via the online FlexShopper.com marketplace, utilizing its LTO payment method at checkout on partner e-commerce sites, and facilitating LTO transactions with retailers in their physical locations.In 2021, FlexShopper expanded its product offerings by introducing an unsecured consumer loan product, which it offers through a partnership with a third-party bank. This initiative allows FlexShopper to leverage its marketing, underwriting, and servicing expertise to provide additional financing solutions to consumers, catering to a broader spectrum of credit profiles.
More recently, in late 2022, FlexShopper made a strategic acquisition of the assets of Revolution Financial, Inc., which facilitated the creation of a direct origination model for consumer loans in 11 states. This acquisition has enabled FlexShopper to further diversify its loan portfolio and capitalize on new growth opportunities.
Financial Performance
For the fiscal year ended December 31, 2023, FlexShopper reported annual revenue of $116,975,007, a decrease of 3.2% compared to the previous year. FlexShopper's net income for the year was -$4,233,617, and its operating cash flow and free cash flow were -$6,664,520 and -$14,225,779, respectively.In the first quarter of 2024, FlexShopper continued to demonstrate financial progress, with total revenue increasing by 10.3% year-over-year to $33,944,873. Gross profit increased by a substantial 31.0% to $17,825,979, and adjusted EBITDA grew by 18.4% to $7,576,594.
FlexShopper's lease revenue and fees, net of provision for doubtful accounts and gain on sale of lease receivables, increased by 4.5% to $25,833,736 in the first quarter of 2024, compared to the same period in the prior year. This growth was driven by a higher average origination value per lease, despite a slight decrease in lease volume due to tighter approval rates.
FlexShopper's loan revenue and fees, net of changes in fair value, also saw a significant increase of 20.7% to $7,331,277 in the first quarter of 2024, primarily due to an update in FlexShopper's estimated loss assumptions for its bank partner loan portfolio.
Operational Highlights
During the first quarter of 2024, FlexShopper launched a new initiative to offer alternative lender's payment options on its FlexShopper.com marketplace, broadening the reach to a wider set of customers, both above and below the current credit segment served by its LTO offerings. This retail sales initiative allows FlexShopper to generate profit on product margins, in addition to its traditional LTO and loan revenue streams.FlexShopper also continued to make progress on its strategic initiatives, including the expansion of its retail footprint, with the addition of approximately 580 new doors by the end of April 2024. FlexShopper also plans to offer its LTO services in Spanish in select verticals during the second quarter of 2024, further enhancing its accessibility to diverse consumer segments.
Liquidity and Capital Resources
As of March 31, 2024, FlexShopper had cash of $5,593,750, compared to $9,861,646 at the same date in 2023. FlexShopper's lease receivables, net of allowance for doubtful accounts, stood at $49,316,032, while its loan receivables at fair value amounted to $39,457,230.To support its growth initiatives, FlexShopper has access to substantial capital resources. In March 2024, FlexShopper refinanced its existing credit agreement and entered into a new $150 million credit facility with Powerscourt Investment 50, LP, an affiliate of Waterfall Asset Management, LLC. The new credit agreement provides FlexShopper with increased borrowing capacity and more favorable terms, further strengthening its financial flexibility.
Risks and Challenges
FlexShopper operates in a highly competitive consumer finance industry, which exposes FlexShopper to various risks and challenges. These include the potential impact of macroeconomic conditions, such as rising interest rates and inflation, on its customers' ability to make payments, as well as FlexShopper's ability to maintain compliance with financial covenants under its credit agreement.Additionally, FlexShopper's success is dependent on the continued success of its FlexShopper.com e-commerce platform, as well as its ability to attract and onboard new bank partners for its consumer loan product. Regulatory compliance and the protection of customer and employee information are also critical areas of focus for FlexShopper.
Outlook and Growth Strategies
FlexShopper remains optimistic about its future growth prospects, as it continues to execute on its strategic initiatives. FlexShopper is focused on further enhancing its risk-based pricing and fraud algorithms to optimize its portfolio performance, while also expanding its retail partnerships and diversifying its payment options on the FlexShopper.com marketplace.The launch of the retail sales initiative, which allows FlexShopper to generate profit on product margins, is expected to contribute to FlexShopper's revenue growth in the coming quarters. Additionally, the expansion of FlexShopper's retail footprint and the introduction of Spanish-language LTO services should help drive increased customer engagement and market penetration.
Despite the challenges posed by the macroeconomic environment, FlexShopper remains committed to delivering value to its customers and shareholders. FlexShopper's resilience, innovative spirit, and focus on strategic execution position it well to navigate the evolving consumer finance landscape and capitalize on emerging opportunities.