FPAY - Earnings call transcript Q2 2020

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Operator

Greetings, and welcome to the FlexShopper, Inc. Q2 2020 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jeremy Hellman of The Equity Group. Mr. ahead, go Please Hellman.

Jeremy Hellman

to I would an to Please the updated company over presentation. CEO, encourage of Operator. Page FlexShopper's statement we of to to X IR everyone ahead, turn have go the the everyone and www.flexshopper.com, posted investor that, website, House. the would you, Rich. forward-looking remind on I like With that section review like Thank Rich presentation call within the

Richard House

second and quarter Jeremy, everyone, welcome, our XXXX call. you, earnings Thank to

will Joining President be CFO; with Founder usual current me Brad of I aspects brief key Heiser, make Brad a and and on provide our map comments off results, key few will hand today is other of to current Russ partnership conclude an strategy of But a Bernstein, Russ, business our the our quarter our Russ before I to some regarding road points. it following and expanding on operations. summary We'll second and going FlexShopper. our update with I'm business-to-business conditions.

consistent whole, remained our continues be key of we Most what credit business elements to favorable. last have quality the importantly, said On quarter. with

in were business was was in suppressed as or online restrictive with restrictions broad-based to revenue in reduced COVID-XX. BXC to enabled economic underwriting, more enjoy online BXB our outcome. With traffic. That while retail shelter which and a has online respect place addition approval during due the in pleased of business, algorithms, FlexShopper.com, of growth shopping our coupled out amount that to consumers in-store both and us their marketing it shifted to would quarter trend, rates. speaking, beneficiary slower digital with sheltering additional sophistication our environment. place, our marketplace shutdowns to second Generally naturally And we revenues prove operated that marketplace, and expect, our online implemented EBITDA in Our reasonable in to in do the one a response increased a meaningful

all business of where our the in-store they phased course to do did states to the reopening second we began start Over slowly partners return. through their the see retail quarter, traffic programs. And so, as went

the the those at of physical consumer end in had in low were early quarter, from in second quarter the the seen As of when points traffic norm. place improved stores the orders shelter

our At have the case, today, However, yet you the And retail returned levels. pre-COVID of partners as run end still about in that were those pre-virus rate July, not volume. to trend of quarter, about activity are their pre-virus the although of volume. And the we of speak the is end XX% positive direction. is stores XX% second they of their a at at with the

will improve as hand financial to continues to this this hopeful are economy reopens. discuss We the and Russ over trend now highlights. I the let him

Harold Heiser

Rich. Thanks,

XX-Q on release the provides press significant few focus so a quarter, detail high-level Our and second deck metrics. I'll investor in

up invoice then and traffic. BXB February. more since compared as July same increasing over invoice over the to our last store pre-COVID pandemic our earlier, versus been but the COVID to via volume as the year has Using Our million originations, for baseline lower XX% segment volume, February XX% was quarter quarter specifically, or mentioned as $XX.X a and the BXC down rates, XX% comparison, in second segment XXXX Rich was first of up approval quarter impacted in

BXB for February's revenues performance only the and rebound volume March higher to increase volatility of returned Net where primarily of significant portfolio Both April, BXB was significant since However, of invoice where XX% The XX.X% the volume. volume, were by volume experienced year-over-year quarter segment to XX% were were XX% with in driven February second pre-COVID BXB of has February. $XX.X XX.X% followed to XX% February's in approximately in May XX.X% Gross the second a XXXX. low quarter million, July, was XXXX. June at of point invoices of second balance. revenue the an quarter margins to February's increased compared by compared of volume. profit volume

expense returning and be to Government was these seem over is overall and did the for is versus the is revenue. in customer a lease but quarter in Marketing margins lower the $XXX,XXX percentage increase in line quarter profit time, of sequentially. of significant and some is grows gross in new gross much drove second as transactions However, periods the payoff the this recently, year. previous the to first transactions. quarter levels. decrease year's significant reason $XXX,XXX XX% the spending in the Marketing quarter of early responsible primary monthly increase decline sequential as for stimulus originations, from historical payoff transactions. was quarter with during increase early margin But growth new The driving a second increase quarter what prior a

expense of acquisition by was the New or way, quarter change XX% we $XX. to scale significant another grow little environment. than to expense. line and a versus quarter, XX.X% due Put debt continue the were as in flat of the expense marketing the customer FlexShopper each business, X.X% every item, about to X.X% from prior bad from costs component quarter compared higher variable was margins XX.X% XXXX. the driving in an an in customer mix the in resulting year's second significant this from the million last COVID second Removing expense, marketing new the quarter update relative EBITDA customers to in marketing for growth stayed period, the in quarter. future year the XX.X% is to the it basis salary changes on which BXB in to hand compared $X And BXC over came BXB this business. Brad below quarter for to expense. marketing acquisitions. a This revenue and is quarter increases on through except were underwriting EBITDA versus year between in expense prior quarter last margins our the same new second improved for and and I'll increase driven quarter

Brad Bernstein

Thanks, Russ.

As last have pre-COVID-XX partner existing rebounded call, not originations retail since to Rich levels. our but mentioned,

time normal. to with hope that environment, the retailer Our to and changing originations adverse from enough existing adapt stemming to COVID, is barring conditions will future return retail

method is online pilot an this merchandise, that run instruments. with partner. already More recently. importantly, a electronics on we rate bikes annualized We're e-commerce XX-store an I'm with at pleased wins multimillion-dollar technology. scoreboard lease have put using sells to from musical the some merchant started retail retailer payment to to our One share variety that of a we ranging also a origination

short did a also time this and to team pilot market is a frame, lease-to-own in launching of testament Our very our a to our speed great job technology. mobile

additional lease of instantly apply transact of needs quick retailers headache app sale. our consumers these for seamless a business to retailers that without grow integration to work contactless basis. As a for enables the a at Today's consumers meet pay mobile limit, employees. for We for sign retailer reminder, the process a are looking the their and our to spending and their on lease-to-own and provides point innovative or with a application and ways mobile

partner closely working pilot obviously the new make with are a our success. We to great

with past sales we like believe online many on will that by which now is COVID method continue are last seamless stick the during we call, that very behavior I'd online call focused our we online As e-commerce many, and acceleration experiencing capitalize sites. to of turn And want to on marketing adopted payment also We the will at this retailers are crisis, over consumers on checkout Rich. the to period why believe our lease-to-own to obviously, we that mentioned that.

Richard House

Brad. Thanks,

us last on such have as marketing underwriting, emphasized I've focused capital. to good balance with bad, distribution. in which priorities, those a quarters, risk growth, digital we and on We three elements the believe we maximize For return our investments bit expense. also how core times management our shareholders' and quite in liquidity are enable

not of competitors June can you this and our is Looking back from Government And that was year-over-year more seen have improved. beginning all credit has programs on over favorable XXXX now, quality clear assistant enabled that as credit Data than of our in July the been the degradation payroll, quality. of any our we so driving may in credit the the many likely is until speculate, has quality. employees keep do, what supportive XXXX. performance. credit just have We year favorable to period employers our fact,

when improved the improves. we we to more It the see practices those outlook. positive, policies. note are and if marketing mathematically therefore, know the testing in we quarter, results somewhat that to it environment. we certainly using look a that be testing, date, With more and of helpful. is mind, unemployment were tighten rapidly cut-off appropriate strategies crosscurrents credit is of would although the rate opportunistically Furthermore, underwriting second not we or in in in economic underwriting favorable is stable which conservative our did To we remain hand, conservative algorithms, conduct comes our the other prepared which grow risk sharply, to important the economic we up when quality underwriting all our On economic trends

Of current everyday. monitoring federal of legislation course, are the development we

for extensively rather such not business. our the business comment outcome are in mean of the on that We I'd of ultimately what predicting things, will so not

is our likely stimulus more operate for that FlexShopper, dependent we're to although it on However, business. favorable be additional would stimulus government not

so course shareholders' the marketing on spend doing felt did significant of would Over as digital our we deliver a we the return increase capital. second quarter,

and economic growth months, the during underpinned without marketing, create of very past to X increased We which been sophisticated leases to Over a environment our credit for taking have nice BXC undue were the quarter. power revenues risk. happy and our in business has growth in algorithms suppressed a we've able rate the digital earning net more

a storefront the partners, grow winning with enables the to Brad mentioned our earlier, I three-pronged to This to think modify on as in for strong side believe consumers we we origination have who leases of multiple retail our point retail direct-to-consumer believe we strategy of environment. and of visit view, marketing, growth. to it's customer the making changes X the base. business From our are marketing decisions strategy able progress leases us retail commerce -- appropriate economic We channels a provide will growth. is another customer which have catalyst electronic create, includes new the been to Additionally,

benefit FlexShopper on repeat aware and to increase that investments customers. our a leasing Finally, consumers FlexShopper. to that activity. are improving noted I leverage are focused understand who derivative October, last our these our follow creditworthy risk of and been associated since of profile activity last improved a cash shifted with of is it consumers the become of population with to quarter their This we've who and flow marketing credit a eligible you repeat creates we've types financial portion of former of customer stimulating significant existing Those businesses the portfolio. substantial

these a activities these doing confident are and much segmenting will are increase We job focusing activities and we of forward. better mathematically on moving

on our of strategic direction. view our channels creating Our very quality, are any take experience customer and that we repeat are origination With diversifying emphasis all is said, the drive complementary appropriate that strategies happy credit to questions. an can

Operator

Instructions]. [Operator

question from FBR. Riley is The Scott B. first Buck,

Scott Buck

that yours on checks. want Rich, quarter? of the hoping color enhanced benefits stimulus onetime be I you you on said But maybe the of receiving. third you on impact have What a to some federal the expect talk was to receiving benefits on And do customers could that stimulus what had that didn't quarter? impact I much give may it are know bit you or guys unemployment you more little too

Richard House

particularly Right. don't have we they're benefit, as really any their Well, income. know do roughly how receiving we insight although to

certainly, the have so majority stimulus. for consumers vast would of And the eligible our been

as Russ our pretty see big did we uptick a early mentioned, in payments. So

And quarter, can As case. leases off so is we up that the you the know, suspect we that's picked -- our in pay early. had that

hurting so over time stimulus, Moving once again, forward, also cross us. tightening right? new we've algorithms our which been is is I lot currents to a with of -- is don't underwriting want us. The -- there's helping though, There I emphasize, here, we unemployment the

underwriting is us. helping Our

I the a don't in other of to outlined government. our we been the than would majority really additional in as feel dependent vast insight don't rate. run by business on any So have But for stimulus have eligible customers more our prudent order the stimulus

Scott Buck

helpful. I that's appreciate No, that.

that flat going the kind just me, larger getting quarter. to of to getting rather It one Second for with purchases purchase online? it it was than what's that? price to open or drive going going looked take Or again like average what's last drive of retail the Is and higher? acquisition those some outlets

Richard House

Generally higher a speaking, our online. our retail ticket partners have than

there. that yes, probably mix so And affecting us shift was

prepared also I focused segmentation some as mentioned been think in I We more on more marketing. remarks, our have, in my we've

So to mix flat think I that But the They we call was consumers that quarter price and point afford, the probably shift itself, trying online. higher it between in we're obviously. drive to they a it retail the the would the can performance. say

Operator

[Operator Instructions].

We have a from Securities. Richard National question Deutsch,

Richard Deutsch

on have and back then your a quite initiatives the you've I'll they're taken Congratulations in the I quarter, go couple questions, during of queue. exciting.

that And and your for can what churn thoughts all, the tell of Rich, you in that. take First churn? the the quarter was about you are me are what one? what trends can

Harold Heiser

it. I'll Russ. is This take

to from change rates how to -- perspective did period. going the what during of So going in I'm the were so of repeat we're that it terms take churn, and

as has or obviously, direct-to-consumer the rate the FlexShopper.com higher So customer brick-and-mortar repeat talked a than lower the a about before, churn we locations. obtained customer through rate

is larger part over period the So as shift given those the made overall a actually a there, saw that online repeat -- of pick we customers mix. trends up there up customers mix

Richard House

complementing So our focused it to customer, a more another that, customers. does repeat what the in And our rates. said, remarks. higher more direct-to-consumer way plan mentioned in repeat creating in just I tend business-to-consumer to place the on we few have last is have months channel prepared put put Russ

nice repeat rates, we've our even increase as through into that quarter a we second in and the are continued seeing so has July. And gone

those So and lower I lease. to per that cost customers customer demonstrated quality very for us ability much remarks, are And their in we're they're mentioned pleased performance. profitable with they've the create credit repeat the already as in acquisition prepared

Richard Deutsch

Or you both equally, the more BXC? Are marketing your are you marketing to doing groups in the BXC? BXB and

Richard House

from anybody nature if market nature back We But to of the store, an make in to come our coming sport don't someone tire let's someone both the repeat to different business, -- it want sales against online online to We of It's just as going, be we certainly to that the coming we a the to It's consumers originally is marketplace. discriminate them. to of not have a can. may the consumer say, place. bases. who don't an just in they're is they as came marketplace likely

more it's come that so who marketplace more highly likely And marketplace. the into likely be people would to return to

Richard Deutsch

then down rate acquisition go your goes churn So your as that... Is costs also. down,

Richard House

lease market a but continue a have great whole them whole to our not because you improving feeds creditworthy, we a I you cost. strategy, then done or that's quality into job repeat complementary decrease, increasing group emphasize on cost of much no lower to and people Acquisition right, there's prepared can acquisition to over time because I are remarks, a per who would have credit basically the this right a basis have very strategy may of customer at lease per basis, that yes. -- have On in

Richard Deutsch

of been for a it? that excited are long I'm attention Street into to Can paying you, use time. second question. for going about is that Rich. has my color I third paying about lot leg, more was Thank always hot go Because which premiums was big a the And little a people you option. Wall -- payment Fintech and

Richard House

let He's Brad and on of that. resident it. to sort going that of pioneered I'm kind expert our handle

So I'll handle go that. Brad ahead, let

Brad Bernstein

Yes.

patents to scored in excited dollars where method waterfall approach e-commerce direct fact, is which opportunities. participate directly talk lease. as approach partner doing to check rate feel our quarter. on of we of And integration, taken And both an to other today. at with two-pronged site lease millions the can that a growth and payment annual the e-commerce And our can we we've basically, an method, with run about partner an cascades, payment diligently doing on, in good And we and consumer we are just great integrate that. with we're mentioned, to And are in We're win Rich, is also. So already e-commerce have second One a we obviously originations. out you. seamlessly I've the that a which

And increasingly with agree. environment accelerated in COVID the we this even So consumer everyone more That's saying become important important. significantly. has really behavior of so is online

Richard House

Yes.

from. but online, We I think we're partnering driven. e-commerce as to -- shifts our we're important more uniquely, is retail perhaps the more [indiscernible] we environment own with seeing online not space, for that's right? us online results good to the highlight in competition have And marketplace, on the which certainly, we're feel

we more electronic advantage to of believe commerce. take that So this we're poised wave of

Richard Deutsch

Can a heard with talk exciting. a bit that? you pretty you. and you I little main haven't little about -- creditor, that Waterfall's they've Can your partnered That's us tell bit

Richard House

think of biggest No, a our I little Asset that liquidity a there vernacular may provider. thing Waterfall is here. Management Yes, bit be

like about and was they next someone think a a might Synchrony. retailer I Like into was like -- would or the I was or we -- then Brad come an referring be retailer get phrase, talking what customer Citibank may maybe waterfall as save right? what application And That a by and declined might that that would the would by sale. maybe waterfall, in be we to. someone a

Operator

questions. gentlemen, Ladies and no are [Operator further there Instructions].

remarks. call question-and-answer back have We the over like end closing management the to of for session. I'd the reached to turn

Richard House

joining thank you again Well, third call. to our on us forward guys with all quarter speaking earnings you great. for look Well, today. We

you. thank So

Operator

concludes conference. today's This

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

FlexShopper (FPAY) 11 Aug 202020 Q2 Earnings call transcript