FlexShopper, Inc. (NASDAQ:FPAY) Q3 2018 Earnings Conference Call - Final Transcript

Nov 05, 2018 • 10:00 am ET


FlexShopper, Inc. (NASDAQ:FPAY) Q3 2018 Earnings Conference Call - Final Transcript


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Greetings and welcome to the FlexShopper's Third Quarter 2018 Conference 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. It is now my pleasure to introduce your host, Jeremy Hellman. Jeremy, please go ahead.

Jeremy Hellman

(Forward-Looking Cautionary Statements).

With that, I would like to turn the call over to FlexShopper's CEO, Brad Bernstein. Go ahead, Brad.

Brad Bernstein

Thank you, Jeremy, and welcome everyone to our 2018 third quarter and three months ended September 30 earnings call. I'll start by providing some -- several business highlights from the third quarter. Then, I'll hand the call off to our CFO, Russ Heiser, who will discuss our financial results and guidance in more detail. And then, we'll open the line up to your questions.

The third quarter was another quarter of solid growth for FlexShopper. In the third quarter, we achieved a 27% increase in gross sales and 90% increase in lease originations compared to the same quarter last year. The continued growth and lease originations is a key metric, because originating more leases drives our revenues, our gross profit dollars, and ultimately our profits. For the third quarter, we had a $600,000 increase in marketing expense compared to the same period last year, and these were wisely invested dollars and within our budget. For the quarter, our average cost to acquire a customer was its lowest ever in the Company's history at $133 compared to $249 for the same quarter last year. This decrease is the result of continued optimization of our marketing and underwriting strategies combined with increased lease originations through retail partners, in particular our recent large-scale tire store rollout. We continue to grow our direct-to-consumer channel with an approximately 50-50 split between direct response TV and digital marketing. I'd also like to add, importantly, that in the third quarter of 2018, we added 11,973 new customers compared to 4,001 in the same period last year. These new customers ultimately expand our returning customer base and our revenue potential going forward. As many of you are aware on this call at the end of September, we completed a $10 million growth capital raise, which was primarily for working capital to continue our pace of growth. Growth plus right-sizing our overhead are key components of our proactive plan to become EBITDA positive and profitable. Hence, in October, we initiated a cost reduction plan with up to $1.4 million in annual cash savings that includes personnel reductions that we have already made. As we move forward, our efficient online and virtual in-store model is designed to enable us to grow without adding large amounts of infrastructure and expense. Our recent 730 location tire store rollout, which we completed in the third quarter also contributed to our significant third quarter growth and lease originations. We are very pleased with the progress of our tire store partnership and its contribution to our business. As a reminder, of