Executive Summary / Key Takeaways

• Lendway ($LDWY) has fundamentally transformed its business, divesting its legacy in-store marketing operations to focus on specialty agricultural investments, primarily through its majority ownership of Bloomia, a fresh-cut tulip producer.
• The Bloomia acquisition has significantly reshaped Lendway's financial profile, driving substantial revenue growth and improved gross margins in the most recent quarter (Q1 2025), albeit introducing seasonality and increased debt.
• Bloomia leverages hydroponic growing and automation in its U.S. facilities, alongside global sourcing, to offer premium tulips with potentially higher margins due to reduced freight costs compared to importing stems.
• While recent financial results show positive operational momentum post-acquisition, the company faces challenges including debt service obligations, customer concentration risk, and the need to scale its niche operations in a competitive landscape dominated by larger, more technologically advanced players in related lending markets.
• Investors should monitor the successful integration and scaling of the Bloomia business, management's ability to manage debt and liquidity through seasonal cycles, and the execution of strategies to mitigate customer concentration and technological gaps relative to competitors.

A Seed Change: From Marketing Aisles to Tulip Fields

Lendway, Inc., trading under the ticker $LDWY, has undergone a dramatic metamorphosis, shedding its decades-long identity as a provider of in-store marketing solutions to emerge as a specialty agricultural company. This strategic pivot, culminating in the sale of its legacy business in August 2023 and the subsequent acquisition of a majority stake in Bloomia B.V. in February 2024, represents a fundamental reorientation of the company's focus and risk profile. No longer primarily navigating the competitive currents of retail advertising, Lendway is now cultivating growth in the fresh-cut flower market, specifically focusing on tulips.

The core of this new identity is Bloomia, a producer and seller of fresh-cut tulips with operations spanning the United States, the Netherlands, and South Africa, complemented by a minority interest in a Chilean greenhouse business. Bloomia's operational model is centered on hydroponic growing in its U.S. and South Africa facilities, allowing for year-round production. A key operational advantage highlighted is the investment in automation within the U.S. greenhouse, aimed at increasing production efficiency. By sourcing tulip bulbs globally and growing stems domestically in the U.S., Bloomia seeks to offer premium products with a longer shelf life, leveraging substantially lower freight costs associated with importing bulbs by sea compared to the higher costs of importing finished stems by air. This operational approach forms a foundational element of Lendway's strategy to achieve higher margins in its new market.

Within the broader competitive landscape, Lendway's Bloomia business operates in a niche segment of the specialty agriculture market. While direct public competitors in large-scale tulip production are limited, the company's strategic positioning emphasizes its integrated supply chain and domestic growing capabilities as key differentiators. In the related non-bank lending space, which forms part of Lendway's broader "ag investments" focus, the company faces competition from larger, more diversified fintech and lending platforms like LendingClub (LC), Upstart (UPST), and SoFi Technologies (SOFI). These competitors often possess greater scale, more advanced technological platforms (such as AI-driven credit scoring), and broader service offerings. Lendway's competitive stance in this context relies on its specialized focus on agricultural lending, potentially offering tailored products and leveraging industry-specific knowledge, though it currently operates at a significantly smaller scale and with less technological sophistication compared to these larger players.

Cultivating Financial Performance: Early Harvest from Bloomia

The financial results for the three months ended March 31, 2025, offer the first look at Lendway's performance with a full quarter of Bloomia's operations included, providing a stark contrast to the prior year period which only included Bloomia from the February 22, 2024 acquisition date.

Revenue for the three months ended March 31, 2025, surged to $12.44 million, a significant increase from $8.03 million in the same period of 2024. This substantial growth of $4.41 million, or 55%, is primarily attributable to the inclusion of Bloomia's results for the entire quarter. The timing of the Easter holiday, which fell in April in 2025 compared to March in 2024, also influenced the period-over-period comparison, with management anticipating higher revenue in the subsequent quarter ending June 30, 2025, as a result.

Gross profit saw an even more dramatic improvement, rising from $1.74 million in Q1 2024 to $3.89 million in Q1 2025. This resulted in a notable expansion of the gross profit margin, from 21.7% to 31.3%. The increase in gross profit and margin is largely due to the full inclusion of Bloomia's operations and the absence of a $1.36 million amortization cost related to the fair value write-up of inventory from the acquisition date, which impacted the prior year's margin. The company notes that gross margin percentage is typically higher in the first and second calendar quarters due to the seasonal nature of tulip sales, allowing for better leverage of fixed costs.

Operating results also reflected the positive impact of the Bloomia business. The company moved from an operating loss of $1.64 million in the three months ended March 31, 2024, to operating income of $1.43 million in the current period. This swing was driven by the significant increase in gross profit and a decrease in sales, general, and administrative (SG&A) expenses, which fell from $3.39 million to $2.46 million. The reduction in SG&A was primarily due to lower acquisition-related costs ($24,000 in Q1 2025 vs. $1.54 million in Q1 2024), partially offset by a full quarter of Bloomia's operating expenses.

However, the acquisition also introduced substantial interest expense. Interest expense, net, jumped from $225,000 in Q1 2024 to $970,000 in Q1 2025, reflecting the debt incurred to finance the Bloomia purchase. The company's non-GAAP EBITDA, which management uses to evaluate performance and debt covenant compliance, increased from $1.31 million to $2.58 million year-over-year, reflecting the improved operational profitability before accounting for interest, taxes, depreciation, and amortization.

Income from discontinued operations, related to the legacy In-Store Marketing Business, was minimal in both periods ($10,000 in Q1 2025 vs. $72,000 in Q1 2024), stemming from adjustments to sales tax accruals.

Capital Structure and Liquidity: Navigating Seasonal Flows and Debt Obligations

Lendway's liquidity profile is now heavily influenced by the seasonality of the Bloomia business. Cash collection is strongest in the first half of the calendar year following the spring sales season, while significant payments, particularly for tulip bulbs, occur in the second half.

As of March 31, 2025, the company held $1.31 million in cash and cash equivalents, down from $1.76 million at December 31, 2024. Working capital decreased from $11.03 million to $6.27 million over the same period, as cash generated from sales was used to partially pay down debt.

Net cash provided by operating activities of continuing operations was $1.74 million for the three months ended March 31, 2025, an increase from $1.38 million in the prior year period, consistent with the seasonal cash flow pattern and the full inclusion of Bloomia.

Investing activities used significantly less cash in Q1 2025 ($68,000) compared to Q1 2024 ($34.37 million), as the prior year included the cash portion of the Bloomia acquisition consideration.

Financing activities in Q1 2025 used $2.13 million, primarily for repayments on the revolving credit line (approximately $2.00 million) and the related party note (approximately $150,000 net). This contrasts sharply with Q1 2024, which saw $21.84 million provided by financing activities to fund the acquisition.

The Bloomia acquisition was financed through a combination of cash, seller bridge loans ($15.45 million), and a Credit Agreement totaling $24 million, comprising an $18 million term loan and a $6 million revolving credit facility (temporarily increased to $8 million until March 31, 2025). The revolving facility's availability is tied to a borrowing base of eligible receivables and inventory. Additionally, the company entered into a related party unsecured Delayed Draw Term Note with Air T Inc. (AIRT), a significant shareholder, providing access to up to $3.75 million with 8% PIK interest, maturing in August 2029 (though Air T can demand payment earlier).

The Credit Agreement contains financial covenants, including a maximum senior cash flow leverage ratio. Due to the shift in the Easter holiday, the company was in breach of this covenant as of March 31, 2025. However, the lender provided a waiver, indicating flexibility. Management expects to be in compliance with financial covenants for at least the next twelve months, projecting sufficient liquidity from operations, the Credit Facility, and the Related Party Note to cover ongoing operations, debt service, capital expenditures, and working capital. Nevertheless, future growth initiatives or strategic transactions may necessitate additional capital, potentially leading to stockholder dilution or restrictive debt covenants.

Competitive Positioning and Strategic Execution

Lendway's competitive position is defined by its niche focus in specialty agriculture and its operational model. Bloomia is described as a "leader in the fresh cut tulip industry in the U.S.," leveraging its hydroponic growing facilities and automation investments to enhance efficiency and product quality. The ability to grow domestically provides a cost advantage by reducing reliance on expensive air freight for imported stems.

Compared to larger, more diversified competitors in the broader lending or even general agriculture sectors, Lendway operates at a significantly smaller scale. While the competitive analysis highlights larger non-bank lenders like LC, UPST, and SOFI with superior technological capabilities (AI, faster processing) and greater scale, Lendway's differentiation lies in its specific agricultural expertise and integrated model, potentially offering advantages in niche ag lending markets and supply chain management through Bloomia. For instance, the competitive analysis suggests LDWY's niche focus could yield higher margins in ag lending and better recovery rates in defaults due to asset-backed loans, countering the scale and tech advantages of broader lenders.

However, Lendway's smaller scale translates to potential disadvantages, including higher customer acquisition costs and less leverage for economies of scale compared to its larger counterparts. Technological gaps, particularly in advanced lending platforms, could also hinder efficiency and innovation speed relative to fintech-focused competitors like UPST.

Customer concentration is a notable risk, with a small number of mass-market retailers accounting for a significant portion of Bloomia's revenue and accounts receivable. The loss of a major customer could materially impact financial results. The company also has a purchase obligation to buy a portion of a third-party's tulip bulb production through 2028, representing a fixed cost commitment.

Management's strategic focus appears centered on integrating and optimizing the Bloomia operations, leveraging its operational strengths and niche market position. The change in fiscal year end to June 30 aligns reporting cycles with the seasonal nature of the tulip business, potentially providing investors with a clearer view of performance relative to the peak sales season.

Conclusion

Lendway's transformation into a specialty agricultural company, anchored by the Bloomia acquisition, marks a decisive shift in its strategic direction. The initial financial results post-acquisition demonstrate significant top-line growth and margin expansion, validating the potential of the new business focus. Bloomia's operational model, emphasizing domestic hydroponic growing, automation, and global sourcing, provides a foundation for competitive differentiation and potentially higher profitability in the niche fresh-cut tulip market.

However, this transition comes with inherent challenges. The increased debt burden requires careful management, particularly given the seasonal nature of cash flows and the need to comply with financial covenants. Customer concentration remains a key vulnerability, and the company's smaller scale and technological capabilities lag behind larger competitors in related financial sectors. The investment thesis hinges on Lendway's ability to successfully integrate and scale the Bloomia business, effectively manage its capital structure through seasonal fluctuations, and leverage its niche expertise to sustain growth and improve profitability while mitigating operational and market risks. Investors should closely monitor execution on these fronts as Lendway cultivates its new path in specialty agriculture.