FlexShopper (FPAY) 11 Nov 222022 Q3 Earnings call transcript

Greetings, ladies and gentlemen, and welcome to FlexShopper 2022 Third Quarter Financial Results Conference Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I would like to turn the conference over to your host, Mr. Relations. Investor of Sanchez Carlos

You may begin.

Russ we our Both and good can Thank section Operating quarter Rich Officer. on Investor to be issued be this last earnings of and Officer; Officer; third during Relations Welcome release found earnings you House, John corresponding result Chief We Executive referencing are and our presentation XXXX these today conference investor FlexShopper's me Financial morning. call. Davis, Chief Heiser, night morning, Chief will and call. website. the our With

remarks. available We Q&A will be for following today's prepared

any obligation result These statements. those subject to whether actual statements, quarter by Before These remind including growth information, otherwise. will events call undertake we beliefs, and any expectations the company's regarding law, most or report future would periodic begin, our future revise regarding considered Except new for as contained Form our the and of and I opportunity, a be XX-Q and statements cautionary including like financial assumptions in we our materially statements June are of everyone current management's that statements recent the future of of a our with statements forward-looking differ from to that ended to may our publicly reflect results factors this initiatives number required cause no earnings these and to update third as performance, quarterly in performance. should events SEC reports, financial market or XX. contain release impact conjunction our

be SEC These adjusted Investor non-GAAP section certain is additional our will earnings website. include should on financial measures of income of with we financial included our measures adjusted EBITDA, should discussion income. and to net measurements Reconciliation provide GAAP are today's replacements GAAP together Relations information available today's as net financial release, These and be considered measures which information During certain our results. performance, such that and also constitute read rules. not non-GAAP in under financial our

is being section of be webcast will for the call website. This a replay recorded, Investor on and Relations our available

turn now call Rich. will the over I to

Thanks, Good be for FlexShopper joining Officer, by XXXX Russ Chief earnings the again, quarter third you thank Once us And for call. morning, John joined Chief Officer, the Heiser Carlos. Davis. everyone. I'll Financial Operating and

moment, we an million $X.X loss more through In of and reported walk a you these loss quarter, results. review income the detailed a of a financial Russ third EBITDA $X.X million. net will In of

than current business growth appears opportunities with affecting macroeconomic growth environment this coupled economic by inflationary FlexShopper our environment the traditional more the It earlier purchases the year. in customer. demand the the for slower discretionary impacted is severely we Apparently, has observed high

rates our coupled using we lower combination did Simply the these rate response observed profile. quarter, new of our with criteria. a in the In of we profile stated, customers of And quality demonstrated the direct-to-consumer unfavorable our attracting third were initiatives, credit lower risk resulted lower an consumers or underwriting respond. fewer a we who distribution consumers marketing did The to consumers and attract initiatives. credit approval those

generating environment. proactively quarter, the Last to investments. be third declining we sound the underwriting are not told order deal our in to we We quarter, further with and in tightened proving any you standards economic we a tighten economic assets had are did

of approval lower we lower than because rates response assets less are and rates, However, originating of anticipated. we these

grow. year-over-year, the are volumes be our are to proving bright and are business through we repeat customers. retail assets repeat partner continue The partnerships our volumes our generating XX% spots and to Retail in the up

will currently performing drive storefront the future the business believe Fortunately, that areas of our this that and to our that feeds year, into partnerships growth. pivot are increasing we earlier began well

provide John and more and detail of immediate updates volume I call. provided by will will the later Russ overview After John, the moving quality provide forward. bit a an credit in regarding our strategy

I or results. the review Russ financial now over for to turn will call

Thanks Rich.

challenging financial our environment manage to reflected customers third Our as these inflationary operating continue quarter results conditions.

initiatives the than track still storefronts, growth new brick-and-mortar previously our focused we as Fortunately, are year the on with finish channel to more on X,XXX indicated.

As face yet demand installations throughput. headwinds own partners storefront our retailer to their maximizing not our are

these we are However, will originations optimized. once expect and than double place installations still more that in

which $XX.X XX.X% down $X.X was XXXX quarter $XX.X the same expenses, are and same year. third total XXXX the Gross G&A now last with from down XX, or million has operating million which line quarter of been benefits the last million administrative aligned million in expenses last million, these $X.X which are for quarter In the funding salaries year-over-year. year, same and period last year. was October $X.X and increased General period XX% the for Since year. includes the And $XX.X and ended than XX% higher expenses of was million, year. revenue environment. G&A current economic September has is Total this to profit versus

$X.X a $X.X was negative of EBITDA decrease million, Adjusted million year-over-year.

it I'll John more discuss to operations our in detail. over now turn

income. X%, rates down growth in in slow approximately employment which the is June increase economic significant remain as rates but has not to and future, time, wage Consumer is of moderated resulting is low, this in an X% has Price are conditions Customer our the deterioration at Index term Russ. at short by which future the At economic in plateaued rate. challenged hourly Thanks, risk. inflation, growth Unemployment same remain predicted for yet year. annualized measured customers. the interest holding puts customer levels disposable in It

were the originations restricted has originations partnership rationalize decline. our sheets, over they and resulted in our of up personal over spending and a year-over-year. partnership has split overall customers channels, were backdrop their XX% down as marketplace our balance When which drop year-over-year, economic year-over-year activity X.X% good a This slight with in marketplace originations between our XX% lease

proprietary found online be those can to through Through marketplace at originate reminder point-of-sale that for As FlexShopper.com. financing secondary a partnerships a as those listening, leases retail customers. our we option

Addressing our marketplace channel first.

application comparison from rates in year last as last year last place. standards than volumes year remain in remained tight this approval Marketplace X% lower year. Our significantly to standards underwriting are that year, XX% down this tighter are underwriting

in contributing also obtained the credit observing credit underwriting some measured are process, rates. we lower We as our quality deterioration during also approval that applicant by which generic is scores to

channel, based are tighter year-over-year, drift this economic our even in effective do in appear be with which Despite to marketplace XX% quality conditions. our significant default on early trends, difference the our standards better

these which are of to continue a eventual rates, approval our be criteria early to return indicator will good in prudent We maintain mature the originations. in on order default

we season debt continue our early As the follow will to these vintages default year-over-year bad keep calculation. as into ratio lower rates, reserve

We experience the the growth, will lower the rates quality leasing cautious the has And never been observe partially asset rates, remain as which value as term. consumer we now nice we how customer to prices are experiencing. we important history as over conversion progressed average also year-over-year right rates of on much employment approval stronger it repeat short company. in is and continue strong approved offsetting and Maintaining are order rates applicants,

with come to credit We the spectrum expect in some their availability lenders credit standards. customers FlexShopper in above quality point at future tighten the us credit also to better as

We standards in occur underwriting not is have assuming going the that are to term. this not yet observed our this short though, managing and

we order benefiting we our origination as our year-over-year lower seeing volume partnership partnership established recent lease Moving within channel, on XX% with are partnerships. approval slightly volume value. to expansion, door growth more average XX% are higher year-over-year as our in from channel, application and from from growth Even rates, well

We continue strong to of pipeline have drive new growth. future storefronts that a will revenue

lower importantly, are to early fall Also, we seeing year-over-year rates. XX%

that seeing this in growth and store as channel. The continue the while maintaining asset seeing So revenue this will favorable within quality. growth as trends are existing comfortable we we accounts within growth future we are we credit with partnerships, are well quality the expected expect

Looking at approximately the this in $XX versus of bank approximately bank $XXX,XXX quarter. loan originated QX product, year partnership million last same year in our or partner

Like our prioritizing in quality the revenue environment. of and other second standards current download are quarter. vigilant are $XX However, growth partners underwriting from approximately the asset economic originations purchases, are our above million very bank the sequentially all in on being and originated we originations

the bank of partner our Similar product, loan also originated some This preserve success recently the a new within lower seeing strategy or by early partnership be to there done in will of with QX, of are last with the product purchased. pay continues product to deals originated the both future. to grow loan we being as in our in what is that The QX asset lease QX will way the quality opportunities announced currently be loans on well than rates default as year. marketing

manufacturers retail FlexShopper.com progress retail as for the make margins making product out is XX% margin Last products distributors starting about our introducing financing. in well are on we Lastly, as marketplace Rich on of and QX. sale our quarter roll in X% at our with a a range This with strategy. to traditional high on balance spoke onto to retail margin, source

We sales larger spending a to our fully are allow selecting powerful their marketplace becomes limits profitability has of existing these our products that the more mix additional to volume are to margin as partner complementary potential a and wider to a revenue. overall This of with of approved goods. the improvement selection utilize be customers selections, which increases

business. asset conditions prioritize to over of within sustainable, growth strengthen challenge I'm growth conditions growth we low across for our be default quality quality the I are distribution seeing channel. channels. our parts to by all rates lease we're as continue remain origination And poised economic the am will all FlexShopper revenue And we summary, partnership with customer high seeing early pleased In of economic base. encouraged will across our drive well

let that, to me the Rich. turn over back call With

closing, changed. has Thanks, our John. In strategy not

We disciplined growth of to view risk. credit profitable a with continue pursue

growth bridge Our our far the with business to to through of partners. provide growth, a more direct-to-consumer plan volume leading significant was retail growth expansion future storefront for our in

and created decline going exclusive the by our continue to strategy, October made partnership strategy. approval announcement in forward with recently Tax. in rates our which near regarding not a but is to marketing gap we term has We're retail in with our most Unfortunately, rates the earnings, press does the it highlighted storefront change fundamental Liberty aforementioned response

than more storefront services for FlexShopper Tax As as a in United Liberty reminder, establishes this financial for partnership the locations X,XXX exclusive the provider States. new

providing to the financial profile anticipate match the these customer. traditional products FlexShopper largely consumers demographic of who We

Liberty's storefronts, plan to addition growing we Liberty Tax distributes app In use products. website, online FlexShopper's the to their including presence, also the that and

are look storefronts the into forward as online Liberty season upcoming holiday tax enjoy some will the And this we period. move from to we hopeful shopping and from XXXX beyond. expansion over benefiting presence We benefits we the significantly into

based on front service focused expanding who is on opportunity significant is growth other aggressively the sales Our existing partner retail and partnership higher with an door services. automotive

partners In like or to John difficult going we originated, It are wholesale very we're how match and the credit for reduce of irrespective committed directly currently the strategy retail a our us Increasing environment current the distributors to our know with us we're to the we approach risk, disciplined fundings retail Therefore, will retail observing. retail expansion, level marketplace partner improve our online margins is consumers. needle and through to costs to either of earlier. uses going discussed partnerships, continue macroeconomic through manufacturers enable to or to our addition -- to partnerships maintain will the the to be profitability of to retail Shopper.com, improve. when

XX% in and employees, anticipate marketing of operating our associated and costs, XXXX we outsourced excluding October, to many in technology As end reductions base XXXX. made expenses lower have We of substantial our approximately level the partnerships. be of with

grow discipline, Our the network our as structure, that profitably maintaining the improves. current partnership will our cost rapidly enable to view push environment is and macroeconomic minimizing retail economy us credit and and expanding through

time. Thanks for your

We of the associated bullish challenges are current are well but with environment, long-term shareholders. aware regarding the prospects we the FlexShopper for

may will now questions answer you have. We any

H.C. with with will [Operator Instructions] we comes be first Please time, conducting your session. our line question question-and-answer of the Scott this from Wainwright. And Buck proceed questions? a At

strength as Hi. Good should quarter these I'm of canceled is challenges of kind year? the be this we curious, mean, the morning, about Rich quarter Christmas seasonal here, demand I thinking through fourth the historically? just everybody. how move given

the Christmas, Grinch. canceling not not I'm I'm

see that in You volume. are correct, our a normally increase seasonal in we

continue drive giving that to to us to online But that for will It's We people our to adjustments be. not some that. believe difficult we're certainly what and And going continue be there. to that's that certain to up predict can will and regarding on on happen. our cautious marketplace. hopeful market to that volume ahead be We're the it's We're boost gone the about. get amount season, why from but may something nothing of we've holiday we cost volume made we We're structure. a try

landscape. dealing with everybody curious good really any competitors behavior That's I'm seeing boat that, color. exact of the Great. by or some on that you're making actions maybe Are the worse? the competitive in Or is same headaches you here?

for me seem I read past. do appears to I'm people we press are doing. unfavorable see that. you, be to they who the in releases. are difficult sure compared quality, for competitors to all the be about applying in It's their same talking many the the of of credit things are profile to what The times credit And like

everyone a of is think I discipline. declines more everyone of result so in And volume a amount reasonable credit lower experiencing exercising as

seeing chain not folks your into you're dig -- of kind the and move and down credit so Okay,

that. have we No, not seen

We that. have seen not

going speculate In it. to we're fact

that mentioned in spectrum recession, above tighten wouldn't repeats like actually volume if be think getting may and commentary, as we and lenders overtime. in we us us credit down that itself into their increase they the history the from the his John liquidity, they spectrum, speculate our in the drift then credit our I lenders people should above lose past did will in -- space. Because

in phenomenon not on getting have that we cost would seen yet. we're once that that that, again, if not as are that will not we is something happen. our generally Unfortunately, But anticipate. But we planning place, structure

this room And or for to me got the do reductions. those kind to one, were extend then this cost for on sense. you through of guys last bit period the have a you a just now more environment makes like at significant feel to of of you gone bone? that some Yep, Do If muscle cut you're time. little point you've

them. cuts we the need made we've to where were initiatives. think at I new make looking We some

what enterprise, and the you're in you -- may future. at what look would any do As doing you currently,

to about We dollars doing talking going are not -- -- environment, expense holiday we back but reduction. what -- we're justify on sure our of we're after probably all make this really marketing we're marketing about really the particular in talking that cutting We're this that cuts in today. season not

probably may expense very keep in what marketing bullish lower reductions will far go, we Marketing according retail And to we're enough to. rates, are adjust clear our about the I expansion. think we commentary, as in we we're phenomenon been while same need partners. my market. But in efforts, have seeing And as and not retail cut seeing approval significantly in our direct-to-consumer that our mind not

retail quickly back roll in a we move coming we as the we'll out relatively into believe So these growth mode year. partners,

get guys in running all just rolls Yep, confirm Tax and time season squeezed I that and it like locations I Correct? around in January. sense. now the makes by you one the sounds If be want up Liberty more, tax to will

plan. season, that plan, move holiday that were their with mentioned starts pretty profile, is very holiday you season. this storefronts hard our to working you where Liberty That we get time, Tax current now. right a Tax efforts we same is marketing want as that as game a channels into to season. to have separate we because know on the place to of to Specific Tax tax tax their the And digital the At mobilizing begin into season enable Liberty in the working prior with team early. Liberty We get game

to to a in out now storage have system the rolling Tax beginning we team the Liberty mobilized begin January. So right into

I appreciate the you. Okay, Thank guys. time, perfect.

Sure.

the reached to back turn the call it looks like over now for of end I'll the session. question-and-answer have remarks. Rich closing And we

joining Thank you very guys for And much to talk next us you quarter. today. we will

your And Thank line this concludes your you this today's conference. And disconnect participation. you may time. at for