Press Release: 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

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

Gross Margin Expands to 37% Compared With 30% in the Prior Year Quarter

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, 2018(1) :

-- 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, 2018(1) :

-- 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 For the nine months ended
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
merchandise 14,248,969 10,289,709 43,787,216 29,684,867
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 issuance
costs 1,061,794 1,061,827 3,265,771 3,040,832
Net
income/(loss) 1,387,982 (2,717,403) 1,581,579 (6,978,653)

Dividends on
Series 2
Convertible
Preferred
Shares 609,717 609,168 1,828,167 1,817,672
Net
income/(loss)
attributable to
common
shareholders $ 778,265 $(3,326,571) $ (246,588) $(8,796,325)

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.

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Press Release: FlexShopper Reports 2019 Third -2-

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 costs $ - $ 14,252,717
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 unamortized issuance
costs, including accrued interest 1,062,810 1,814,771
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 current portion 20,233,281 14,020,335
Promissory notes to related parties
net of $28,966 at 2019 and $0 at
2018 of unamortized issuance costs
and current portion 3,721,034 -
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 2018 at
$5.00 stated value 855,955 1,197,025
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 17,666,193
shares at 2019 and 17,579,870
shares at 2018 1,767 1,758
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 FLOWS

For 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 interest - $ 2,089,266
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

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