• Total Revenue: Increased 23% to nearly $39 million.
• Adjusted EBITDA: Increased 45% to over $12 million.
• Net Income: $1.2 million or 5 cents per diluted share.
• Lease Funding Approvals: Increased 33% to $77 million.
• Signed Store Count: Approximately 7,800 locations, a 250% increase from the end of 2023.
• Provision for Doubtful Accounts: Improved to 22.2% from 32.1% in Q3 2023.
• Gross Margin: Expanded to 58% from 54% in Q3 2023.
• Gross Lease Revenues: Increased by $5.1 million to $36.4 million.
• Net Lease Revenues: Increased by $7.3 million to $28.4 million.
• Adjusted EBITDA Margin: 31.5% compared to 26.7% in the same period last year.

• Warning! GuruFocus has detected 6 Warning Signs with FPAY.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FlexShopper Inc (NASDAQ:FPAY) reported a 23% increase in total revenue, reaching a quarterly record of nearly $39 million.
• Adjusted EBITDA increased by 45% to a quarterly record of more than $12 million.
• The company achieved a net income attributable to common stockholders of $1.2 million or 5 cents per diluted share.
• FlexShopper Inc (NASDAQ:FPAY) expanded its B2B channel significantly, with a 33% increase in total lease funding approvals to $77 million.
• The company has grown its signed store count by approximately 250%, reaching around 7,800 locations.

Negative Points

• FlexShopper Inc (NASDAQ:FPAY) is facing patent infringement lawsuits against competitors, which could lead to legal expenses and uncertainties.
• The company plans to redeem 91% of its series two preferred stock, which may require significant financial resources.
• There is a potential need for an automatic extension to finalize the audit of the company's third quarter financial results.
• Net loan revenues decreased, with a loss in the bank partner loan model compared to a gain last year.
• The company is planning a rights offering to raise capital, which could be viewed negatively by investors due to potential dilution.

Q & A Highlights

Q: Can you explain the improvement in payment performance and what factors contributed to it? A: John Davis, Chief Operating Officer, explained that the improvement is primarily due to enhanced underwriting and fraud evaluation, followed by better customer quality and servicing capabilities. Investments in risk and analytics have been significant, and the company plans to introduce AI-driven automation in collector servicing capabilities in 2025 to further improve performance.

Q: How long does it take for new B2B locations to become fully operational, and is there a significant variance in lease generation among locations? A: H. Russell Heiser, CEO and CFO, noted that while not exactly 80-20, a small percentage of locations generate the majority of leases. It typically takes 6 to 9 months for new locations to plateau in performance, with some variance due to seasonality and individual store management.

Q: With the holiday season approaching, should we expect a shift in revenue mix among your business verticals? A: Heiser mentioned that while the fourth quarter is significant for retail, the revenue impact is often seen in the first quarter of the following year due to the timing of originations. Marketing spend and origination counts will increase in Q4, but revenue recognition will follow in Q1.

Q: Is the improvement in gross margin to 58% sustainable, and what are the future expectations for credit quality? A: Davis stated that while they do not expect bad debt to decrease significantly from current levels, they anticipate continued contribution from retail margin improvements. The focus will be on growing the top line and maintaining current bad debt levels, with potential improvements from AI-driven servicing capabilities.

Q: What factors contributed to the acceleration in your retail pipeline, and how do you see this continuing into 2025? A: Heiser attributed the acceleration to successful large partnerships and ongoing efforts to close deals with high-volume retailers. The company plans to maintain this momentum, with success in closing large deals potentially leading to further opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.