FlexShopper (FPAY) 15 Aug 232023 Q2 Earnings call transcript

Greetings and welcome to the FlexShopper's Second Quarter 2023 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

[Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carlos Sanchez, Investor Relations for FlexShopper. you. Thank

begin. may You

our Monday good Results release Welcome today Conference our Chief John these this our referencing corresponding Heiser, Investor and the We Quarter are FlexShopper's Investor found XXXX website. in call today. Relations issued morning, on our Davis, and Relations we'll Officer; of and Financial Call. Executive Operating our morning, you, and Officer. earnings to everyone. be section Second be Russ Chief during Thank With presentation Both me can

We following will answers be available for question today's and today prepared remarks.

growth I to and regarding and and contain statements and These differ performance. release XX-Q statements Before most statements would earnings those cause we assumptions beliefs, considered future call quarter our future to are financial this factors actual our number that everyone our results statements. June may from will market begin, conjunction of periodic our financial reflect statements events XX, initiatives ending regarding in with be like the XXXX. These subject to expectations cautionary our should SEC current remind opportunity, including including that in a the performance, forward-looking materially company's contained and of management's recent impact

as any publicly we of Except required undertake revise law, to update these or by no obligation statements.

such that During non-GAAP today's measures discussion net net non-GAAP EBITDA, financial contains provide information measures. under of we measures rules. financial financial performance, income our include as financial income, certain SEC These will and adjusted

is over section website. our webcast website. now will section This CEO, and Investor for and call available I Russ to also being Investors in a which yesterday's Reconciliation for available read release, not certain These the turn measurements should results. with replacements of replay on together is our considered our our be and considered GAAP is Heiser. our earnings GAAP included information recorded, additional of be be should the -- in will be call these should

Good Carlos. everyone appreciate morning. in. dialing I Thanks,

listeners we initiatives on Before the quarter, this second with company the primary of to share goals. progress results into of our dive the achieving those I'd like year

FlexShopper.com On focused growing initiatives: marketplace, we've the and improving through originations. front, level asset X performance direct-to-consumer on our been

asset economic achieved levels cushion On history to a our we underwriting combination face the our retail level margin headwinds. products as this the both to performance, increase with disciplined in staying highest improving our company sites in of wholesalers continues have the these, of of provide the growing the relationships on significant segment a first and to through cutoffs consumer on

continue further can see expect we in wholesale will lease to revenues. be impact more these partners. decreases seen margins Investors onboard revenues lease as relative to of to distributor cost grow as This

for will our this, quarters. In gross percentage revenues of it's side our substantially is lower several up mature the our even small approval that expense visitors rate lease last to over that addition, product. flip continue as a lease as noticed to over site than as next this applying of of a The the underwriting only that years. silver changes to decrease that though, underwriting is lining we The percentage several have end been disciplined

FlexShopper margin holiday a origination other launch to the fees only the season. will checkout are this to this additional of on capture in will expect of process time sources. On site result, to adding take and the customers, larger options from traffic to financing a and financing not incoming our in As of the product, monetize occur receive but the we broader set the advantage of percentage

items resulting by on and in for this lease facilitated year-round marketing offset the margins will financing higher basis, much with will a spend Our other that spend channel higher on origination this be expectation catalyst is higher provide much options. financial marketing the through product

our timing significant the Rollout has quickly on has and enterprise our goes store retailer to X retailer a of of as partnerships. as count based moving growth continue full Shifting substantially rollout. as tenured our growth into summer but we pilot never seen this significant partners our longer business, see X we grown to is brick-and-mortar of would like, running

In addition, on business to late-stage we are enterprise XX%. of discussions their with the our large another has increase by originations portion in potential partner this

be Of long, can mentioned equally previously, the rollout for process partners large sales many course, times have be and as we as long. cycle these the can

the cases, smaller an have to on team added the over growing them their as In questions teams external retailers, we easy the focus parts, heavier our summer, answering smaller with lift. Therefore, supporting most selling retailers. the exposure training to internal to the complement and

We our levels team internal we support will to optimize initiatives. add the continue smaller as our enterprise both for in to proper retailer

to the XXXX. The late in acquired final lending business piece discuss is storefront

are have We offerings the product asset state. been for a to fronts way performance successful level and on stabilizing our in on few terms there optimizing each of

need to current originations expand grow more by out our footprint we Now and within locations. both rolling our footprint

are quickly. the that accomplish leadership making some to modifications end, to we structure To that more

to this leverage the store will results. able now once our business the base grow to operating call in business, we're we through on start quarterly see traction gain the walk to to Given earnings hand measurably. should originations, John significant inherent from I

I into be approximately review in XXXX. million and of to begin, down, items increased comparison financial in EBITDA performance last business. quarterly reviewing EBITDA onetime when some year wanted there to underlying of our in in the To year's $XXX,XXX Russ. $X.X Breaking this taken performance account performance FlexShopper QX Thanks, should that year. compared are last to last earned

past forward in in $XX.X lease receivables $X.X XXXX net revenue due arrangement. lease Gross the $X.X $XX.X million due from net XXXX, approximately from fees approximately bulk a of $XX.X revenue past In XXXX a versus XXXX. lease billings lease in from in QX had sale business. million number included sales With lease-to-own our receivables. million were we and million quarter. with flow of million $XX.X and for fees year Starting billing last million versus

Excluding of was variance. was to the most approximately standards. year-over-year million down This tighter year-over-year these slightly $X.X origination lower due EBITDA credit of higher in accounted volume lease sales, net for QX this versus the year-over-year primarily QX versus year-over-year XX% was number. revenue X% that year, unadjusted Lease

As the our next we QX changes year, calls, expect discussed last in continued have previous inflationary will we into due tightening This subsequent year be of which increasing had impacted fully the tightening we quarter. these of to so that lapping last negatively realized grounds environment, customers.

growth provide in partnership We are also current enterprise of QX this we significant year, from rollout levels. origination accelerating programs currently which lease of expect the will

sales use smaller and continue programs, of number lease new balance we leasing launched over the have on growth initiatives storefronts that which to we continued enterprise both the year. of products our the Additionally, drive in partnership will expect

we sales As year. lease which QX versus lease year higher this generate unit last $XXX average we in $XXX QX growth, have tailwind were will from in

of have last bad Results resulted million for our debt by year-over-year reduction Provision accounts year. credit our dropped versus or tightening expense $X.X significant a expense. in doubtful QX of a decrease in XX%

a moderation result this revenue, revenue to performance While asset has drop is was tightening lower drop part gross the percentage year. year. in with resulting XX% lease year XX% increases, number, in profitable a due greatly credit versus debt in exceeded XX% versus our the more which in a bad expense improved as expense reduction a in last dollar inflation in as last as XX% lease Payment a of well a

expense and -- manufacturers introduction lease seasoning distributors million versus the to of year. from year. and QX the in of was contributing last $XX.X is margins with versus Also XXXX or profitability products a decrease improving impairment Depreciation $XX.X last sourced lease year the of lease merchandise XX% continuing retail of product last million launched

our expense, over dollar the expense, lower larger our was the lower revenue. of lower financials, in revenue product debt realization which into resulting results term but in our percentage expense the drop lease levels continues margin bad season to is drop to on lease in revenue. The than of Similar

QX lease Even past costs. in $X.X loss our of the product million impacts and lower with versus gross revenue the product this year revenues sales of made consisting lease more depreciation gross we of billings net cost with less in QX of rates due and in lease improvement actually last of million year. this receivables, year-over-year, $X.X with year net revenue the was Excluding provision

have Asset always has quality our underlying levels team us. we is ratios through And moved a channels. profitability our to been more favorable that to originations now and both top a partnership priority for leadership our marketplace grow as focus

QX no we of front, last program. QX $XX QX participation $XX.X program our platform. And year which lending originated through originations compares On loan participation evolution, acquired million for Revolution of loan million we in in with our to in $X.X through million last our This year. and our finance

locations within Tax a physical issued of within virtual and XXX licenses. stores Liberty lending locations we storefronts consisting As reminder, approximately using loans consumer state own

our our pivoted modeling further lending go-forward have of towards on marketing people, we are new risk origination strategies. there and IT in various through We and investments growth planning Revolution strategy generation platform,

of are asset business growing we business, and our with our case originations the performance is revenue. of lease happy As underlying are and the now loan on focused

primarily million $X.X lower which QX, for expenses operating driven lower Overall marketing was year-over-year were costs. by

place we segment. in have our in conservative been marketplace within marketing our spending lease While standards we underwriting have prudent

revenue marketing visitors to will improved the at spend will rates revenue to discussed make initiatives higher of on we expect As earlier. that progress increase in conversion increase we that levels result flexshopper.com,

summarize, have that happy on To made returns asset we with. to level levels we of progress are a getting lot

and the second to call Our originate of these to customers me growth. profitable back top-line focus let in the that, more With XXXX over turn is half Russ. of generate

our John. growth. questions to to With The earnings focus I'll to might continues for have. at any that, order team take improvements position in long-term Thanks, you ourselves on FlexShopper business

with you. first of question from line Buck Scott the Thank Wainwright. H.C. comes Our Instructions] [Operator

small the retail terms what in this large how on retailer? market guess, Russ, I the of opportunity? And to smaller qualified is initiative,

Scott.

as smaller the customers. our defined we different enterprise from retailer So

or this Our terms market, locations I the handholding. the though, -- locations. the enterprise that lot more not retailers that There's limit, typically it's XXX handle And have mentioned The to et these up less. much is a being as sky typically more resources requires smaller cetera. really internal size ends in training, XX as individual think customers of are of I in retailer

stores, that where that large they they they signed. So training that's a increase a originations we've assigned with of number bit what of are the lease cetera. is come can to internal footprint methodology thought the the managers, employees fairly process et how And these salespeople, that by a locations, number of within some is in, with visiting constant contact but a are of farming new implemented

said, of entirely -- a have could of I And Most us. through number for large grown be good that process. initiative peers that like a very our

have the to compete to we that So now look technology be we environment also. forward to in that able

second to do I environment, Russ. need the I'm helpful, happen in pressure some And mean That's one, to core get they then to off occur what curious, take macro consumer? what I more, guess, active. your could

I making on as sure been good mentioned, Well, cushion. we've there's focused a

in think to us beyond that the impact consumer next minds, But the turning stimulus. our off, is we're we're school think sure we're the just the caught always out of repaying good back not that thing would behavior. position is programs things I that heels the this in other to One of industry change inflation are about in significant some a et can loans, that decrease. significant a make And there it's now cetera, happen. of a what's was going of number that I that starting end severe have if in to that there we want we still our Obviously, federal of concerned whether

the of question from next Michael Group. line with Our comes Maxim Diana

Russ.

then And some season. have quarter your multiple really kick for I it Could fourth the in, were channels. making obviously you of go that in that channels was think You over changes you're FlexShopper And channel. the X should again? describing just you holiday

course. of Sure,

feel existing customers traffic comes So X either unique visitors they're the repeats what that convert the very or eventually that our new to of the -- to hypothesis costs are our it's site is should of because of percentage -- that because just site that lease-to-own for what that it, And around the they is small a that a looking credit they expensive, the is consumers option. think they their they're their examining decide cost when given looking But then of they're eventually, and like too be. credit the visitors number we noticed site. they're have they see

not additional check And by So adding for options financing the choice to out. necessarily it's consumer. a

which for financing the do of what options range the of most internally, upon But that them. makes might Based sense then longer do into the have to a is scoring we'll some enable us By option what longer we a financing. that and will our decide just no the get a be wider we're is expanding FlexShopper where XX% product. be as as lease-to-own come APR people will lease-to-own and no having -- low net, that place

a to where in core so options variety card the It's they increase decide use But really a case hopefully I options shopping consumers giving a of of by are consumers wider also come credit priced providing should site into ability receive conversion and then products. different consumers of flexible and assortment if this substantially. rates what options, to our very now I to do think from lease-to-own higher we said, and transition able to can the like low own do APR, a their being credit these

and Okay. idea? And holiday Is that fourth the go quarter be ready out that's for rolled the going season. to

correct. That's

Okay.

And then you in X because customer that growing biggest enterprise, just business. I doing growth more or of part themselves there? are think your expense the enterprise programs Is your indices are saying the those -- were Okay. are customers the

but acquisitions themselves. only growing that they're large more business, Correct. tenure doing a partners Not through also are

we've XXX from benefit X from that partner store also. increased we about that had has acquisitions, to through their locations X,XXX So count and locations

session. that Ladies comments. Heiser our concludes I'll question-and-answer to the floor gentlemen, back for and final any turn Mr.

in everyone, a this half look Thanks, year. the of terrific We for second dialing to forward morning.

conference Thank you. call. This concludes today's

lines your at You for may participation. time. your you Thank disconnect this