FlexShopper(US:FPAY)2021-11-16 15:34Financial Data and Key Metrics Changes - Year-over-year revenue increased by 25% and EBITDA more than doubled, showing strong topline growth and improved bottom line profitability [4] - Gross margin expanded to 41% from 36% in the same quarter last year, primarily due to a reduction in early payoffs [10][18] - Net lease merchandise balance at the end of the third quarter was $33.3 million, up 7.8% from $30.7 million the prior year [12] Business Line Data and Key Metrics Changes - Originations decreased by almost 30% year-over-year due to the impact of stimulus programs on demand, but year-to-date originations are still up compared to last year [9] - Marketing expense was $1.8 million in the third quarter, a slight increase from $1.7 million in the same quarter of 2020 [12] Market Data and Key Metrics Changes - The company noted that the demand for rent-to-own services was artificially suppressed due to stimulus payments, but this trend is beginning to diminish as the fourth quarter progresses [5][11] - The company is optimistic about the normalization of operations for retail partners as COVID rates decline, which is expected to increase throughput [4] Company Strategy and Development Direction - The company continues to emphasize core priorities: underwriting, liquidity, and distribution, while maintaining a disciplined approach to marketing investments based on internal rate of return [15][16] - The company has signed two additional retail partners, which are expected to drive growth in the fourth quarter and into 2022 [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the upcoming holiday shopping season, indicating that conditions in the industry appear to be normalizing [14] - The company has not experienced significant supply chain issues in its primary category of consumer electronics, which positions it well for the holiday season [14][23] Other Important Information - The company is seeing a return to more normal customer behavior regarding early payoffs, which is favorable for earnings moving forward [5][10] - Average customer acquisition cost for the trailing 12 months was $96, which remains sustainable for returns on capital [13] Q&A Session Summary Question: Impact of store closures on originations - Management indicated that originations were approximately 20% less than forecasted due to COVID-related store closures [17] Question: Improvement in gross margin expectations - The increase in gross margin was primarily driven by a reduction in early payoffs, with expectations for margins to return to the high 30s in the long term [18] Question: Year-over-year decline in originations by product group - The decline in originations was broad across all categories, with management noting a recent pickup in demand in the fourth quarter [19] Question: Marketing spend expectations for the fourth quarter - Marketing spend is expected to be similar to the previous year, aligning with the current demand levels [20] Question: Competition from buy now, pay later services - Management clarified that while competition has increased in online marketing, buy now, pay later services operate in a different market segment and are not direct competitors [22] Question: Supply chain issues and their impact - Management reported no significant supply chain issues affecting their business, particularly in consumer electronics [23] Question: Impact of inflation on the business - Management believes inflation could be neutral or even favorable, as it may lead to higher prices, but they remain cautious about potential affordability issues [24]