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FlexShopper(FPAY) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a year-over-year increase in EBITDA of over $11 million and a net income increase of over $7 million compared to the same quarter last year [43] - The provision for bad debt expense decreased to $10.2 million in Q3 2023 from $14.1 million in Q3 2022, reflecting a year-over-year improvement of $3.9 million [53] - Depreciation and impairment of lease merchandise expense was $13.1 million in Q3 2023, down from $18.8 million in Q3 2022, indicating a $5 million reduction year-over-year [54] Business Line Data and Key Metrics Changes - Lease fundings were 4% higher compared to Q2 2023 but 11% lower than Q3 2022, with September showing the first positive year-over-year comp since July 2022 [52] - The enterprise leasing originations are expected to grow by at least 25% due to a new contract involving over 1,000 stores [23][32] - Marketing costs decreased to $1.7 million in Q3 2023 from $2.4 million in Q3 2022, showing a 30% reduction year-over-year [55] Market Data and Key Metrics Changes - The partner door count for the enterprise and smaller partnership point of sale lease channel increased by approximately 15% from the previous quarter [57] - The company is experiencing a 42% year-over-year increase in overall lending related to fundings through its Revolution finance platform [58] Company Strategy and Development Direction - The company is transitioning to a direct-to-consumer marketplace as its primary growth engine, focusing on merchandising efforts to capture retailer margins [20] - Generative AI tools are being utilized to create microsites focused on product verticals, aimed at reducing customer acquisition costs [21] - The company is exploring partnerships with other financing channels to provide broader selection options for consumers lacking liquidity [45] Management's Comments on Operating Environment and Future Outlook - Management noted a difficult operating environment due to inflation but highlighted resilience in customer behavior, particularly in the non-prime sector [19] - The company expects continued growth in originations during the holiday season and early next year, driven by improvements in the FlexShopper marketplace and new enterprise partners [24] - Management believes the company is at an inflection point and looks forward to demonstrating progress [25] Other Important Information - The company has upgraded its operational leadership team and added new collection agencies to improve past due portfolios [28] - The company is investing in technology to enhance flexibility and scalability, which is expected to add significant value [29] Q&A Session Summary Question: Can you provide an update on the competitive environment? - Management indicated that there has been no new entrants in their space, but some sectors have seen a pullback due to challenges in bank partnership programs [71] Question: What is the expected cadence for the enterprise door rollout? - The company aims to add approximately 1,500 to 2,000 stores a year, with recent performance exceeding expectations [70] Question: How does the company expect Q1 2024 to compare to Q4 2023? - Management anticipates a typical seasonal downturn but expects a higher year-over-year Q1 compared to 2023 due to ongoing trends [77]