NEW
YORK, Dec. 16, 2024 /PRNewswire/ -- Argus
Research, an independent investment research firm, has launched
Equity Research Report coverage on FlexShopper, Inc.
(NasdaqCM:FPAY).
Click Here to view full Argus Equity Research
Report.
COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus
Analyst Steve Silver) include:
FPAY: A Leader in LTO Financing
- Leader in the LTO Financing Market: In our view,
FlexShopper is executing on a growth strategy to establish leading
DTC and B2B solutions for nonprime consumers (typically those with
FICO scores below 660). The company operates an Amazon-like
marketplace to purchase goods in their DTC channel and provides
multiple financing options (including internal and third-party) to
serve a wider base of customers with limited access to credit.
FlexShopper also works with B2B retail channel partners, both
online and offline, to provide financing for customers that
traditional "buy now pay later" (BNPL) companies, such as Affirm,
would typically not fund.
- New Leadership Drives Transition to Profitability: Over
the past two years, a new leadership team has repositioned
FlexShopper's operating model, which resulted in the achievement of
positive net income in 3Q24. We expect the company's profitability
to continue to expand moving forward, and see multiple operational
catalysts in 2025 that should continue to drive improved investor
sentiment.
- Analytical, Risk-Based Algorithms Driving Loan Growth and
Improved Asset Quality: We view positively FlexShopper's
investments in its digital and analytics infrastructure, which is
supporting improved underwriting decisions and improving portfolio
asset quality. Since late 2022, FlexShopper has seen growth in loan
originations, with better asset yield and with bad debt declining
by nearly 1000 basis points year over year. In 3Q24, improved asset
quality drove a $2 million benefit
compared to the prior-year period.
- Expanding Retail Channel and Payment Provider
Partnerships: Across 2024, FlexShopper has expanded a retail
partner channel built upon largely exclusive relationships that we
see driving loan originations both in-store and on retailer
websites while driving traffic back to FlexShopper's e-commerce
marketplace. Year-to-date, the company has signed partnerships for
approximately 7,800 retail locations, representing a 250% increase
over the end of 2023, and has exceeded its initial 2024 retail
store count goal by the third quarter of the year. FlexShopper has
also launched partnerships with multiple payment solution providers
to expand customer payment options and expand its reach. Despite
these results, we still see the company as being in the early
stages of its growth cycle.
- Discount Purchase of Series 2 Preferred Stock: In
October 2024, FlexShopper entered
into a purchase option agreement with the majority holder of its
Series 2 preferred stock, which gives FlexShopper a one-year option
to redeem 91% of the preferred stock at a substantial discount of
more than 50% to its liquidation value of around $43 million. If fully executed, the deal would
transfer $23 million of equity value
to shareholders, around $1 per share,
while eliminating more than $4
million currently paid in annual dividends to operating
income. We expect the retirement of this obligation in an accretive
manner to help FlexShopper to delever its balance sheet from a
position of strength, further accelerating its growth
trajectory.
- Rights Offering Launched to Equitize its Balance
Sheet: FlexShopper has filed an S-1 with the SEC for an up to
70 million share rights offering, at a price of $1.70 per share, which we see as accretive to pro
forma 2024 results and increasingly accretive the more capital that
is raised. In its filed free writing prospectus in November 2024, FlexShopper said for every
$25 million of capital raised, the
company would enhance its bottom line by reducing its annual
dividend and interest by $4.5
million, representing an immediate yield of 13% for new
investors, starting with the elimination of the Series 2 preferred
stock.
- Defending IP Position: On September 30, 2024, FlexShopper filed patent
infringement lawsuits against Upbound Group Inc. and Katapult
Holdings Inc., alleging infringement and unauthorized use of five
key FlexShopper patents that protect FlexShopper's
computer-implemented LTO technology. We expect initial responses to
be filed by early 2025 and view the Eastern District of
Texas, a jurisdiction that tends
to move quickly, positively for a swift adjudication pathway, which
we think could lead to similar suits against other LTO
companies.
- Fair Value: FPAY is trading below its LTO peers, even
those low-growth companies whose operations are largely offline and
operate out of legacy brick-and-mortar locations. We expect this
gap to narrow significantly over time, as FlexShopper executes on
its growth strategy and commands multiple expansion. Based on our
enterprise value (EV)/EBITDA analysis, we see a fair value of
$5.50 per share.
INVESTMENT THESIS: Click Here to view full Argus Equity
Research Report and Investment Thesis.
About FlexShopper, Inc. (NasdaqCM:FPAY)
www.flexshopper.com
Founded in 2013, Boca Raton,
Florida–based FlexShopper Inc. is a leading national financial
technology company that offers innovative payment options to
consumers. FlexShopper provides a variety of flexible funding
options for underserved consumers through its direct-to-consumer
(DTC) online marketplace at FlexShopper.com and via partnerships
with merchants (B2B) both online and at brick-and-mortar locations.
FlexShopper's solutions are crafted to meet the needs of a wide
range of consumer segments through lease-to-own (LTO) and other
flexible lending products.
For more information please contact:
For FlexShopper:
Investor Relations
ir@flexshopper.com
Investor and Media Contact:
Andrew Berger, Managing Director
SM Berger & Company, Inc.
Tel: (216) 464-6400
andrew@smberger.com
About Argus Research Corp.
Headquartered in NYC, Argus Research (www.argusresearch.com) is
a leading independent equity research firm (est. 1934) ̶ providing
fundamental and quantitative research coverage on more than 1,600
companies across all 11 sectors of the S&P 500, as well as
macroeconomic and equity market forecasts, thematic research, model
portfolios and IPO research. In addition, Argus has recently
committed to providing a company sponsored research solution for
small & mid-cap companies seeking coverage. Argus's CSR
Research Reports & earnings estimates (if applicable) are
available on major research / earnings estimate aggregator
platforms, including Bloomberg, Thomson Reuters, Factset and
S&P Global.
For more Information please contact:
Darrell Stone
646-747-5438
dstone@argusresearch.com
Argus Research Co. has received a flat fee from the company
discussed in this report as part of a Sponsored Research agreement
between Argus and the company. No part of Argus Research's
compensation is directly or indirectly related to the content of
this assessment or to other opinions expressed in this report.
Please refer to the full Argus report and the disclaimer for
complete disclosures.
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SOURCE Argus Research
