FlexShopper, Inc.

Greetings and welcome to the Flex Shopper second quarter 2023 financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carlos Sanchez, Investor Relations for Flex Shopper. Thank you. You may begin.

Thank you, and good morning, everyone. Welcome to Flex Shopper's second quarter 2023 financial results conference call. With me today are Russ Heiser, our chief executive officer, and John Davis, our chief operating officer. We issued our earnings release on Monday and corresponding investor relations presentation this morning, and we'll be referencing these during the call today. Both can be found in our investor relations section of our website. We'll be available for questions and answers today following today's prepared remarks. Before we begin, I would like to remind everyone that this call will contain forward-looking statements regarding future events in our financial performance, including statements regarding our market opportunity, the impact of our growth initiatives in future financial performance. These should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC, including our 10Q quarter ending June 30th, 2023. These statements reflect management's current beliefs, assumptions, and expectations and are subject to a number of factors that may cause actual results to differ materially from those statements. Except as required by law, we undertake no obligation to publicly update or revise any of these statements. During today's discussion of our financial performance, we will provide certain financial information that contains non-GAAP financial measures under SEC rules. These include measures such as EBITDA, net income, adjusted net income, and non-GAAP financial measures. These should not be considered replacements and should be read together with our GAAP results. Reconciliation for these GAAP measurements and certain additional information is also included in yesterday's earnings release, which is available in the investor section of our website. This call is being recorded, and a webcast will be available for replay on our investor section of our website. I will now turn the call over to our CEO, Russ Heiser. Thanks, Carlos.

Good morning. I appreciate everyone dialing in. Before we dive into the results of the second quarter, I'd like to share with listeners the primary initiatives of the company this year and our progress on achieving those goals. On the direct-to-consumer front, Through our FlexShopper.com marketplace, we've been focused on two initiatives, improving asset level performance and growing originations. On the first of these, improving asset level performance, we have achieved the highest levels in the history of this company through a combination of both growing relationships with wholesalers to increase the retail margin on the products on our site and staying disciplined on our underwriting cutoffs to provide a cushion as our consumer segment continues to face significant economic headwinds. Investors can expect to see these wholesale margins continue to grow as we onboard more distributor partners. This impact will be seen as further decreases in cost of lease revenues relative to lease revenues. In addition, as underwriting changes continue to mature, as that expense as a percentage of gross lease revenues will decrease over the next several quarters. The flip side of this discipline underwriting is that our approval rate is substantially lower than it's been over the last several years. The silver lining to this, though, is that we have noticed that only a small percentage of visitors to our site end up even applying for our lease product. As a result, we are in the process of adding additional checkout and financing options to our site to monetize a larger percentage of the incoming traffic and expect this launch to occur in time to take advantage of the holiday season. On this broader set of customers, FlexShopper will not only capture the margin on the product, but will receive origination fees from the other financing sources. Our expectation is that this will provide the financial catalyst for much higher marketing spend on a year round basis, resulting in much higher lease origination through this channel, and the higher marketing spend will be offset by the product margins on items facilitated with other financing options. Shifting to our brick and mortar based retailer business, we continue to see significant growth on the store count of our enterprise partnerships. Rollout timing never goes as quickly as we would like, This summer has seen significant growth as one of our tenured retailer partners has grown substantially and one of our longer running pilots is moving into a full rollout. In addition, we are in late stage discussions with another large enterprise partner as the potential to increase the originations on this portion of our business by 50%. Of course, as we have mentioned many times previously, the sales cycle for these large partners can be long and the rollout process can be equally as long. Therefore, over the summer, we have added an internal team to complement the external teams to focus on growing our exposure to smaller retailers. In most cases, selling to smaller retailers is the easy part. Supporting them with training and answering their questions is the heavier lift. We will continue to add to our internal team as we optimize the proper support levels for both our enterprise and smaller retailer initiatives. The final piece to discuss is the storefront lending business acquired in late 2022. We have been successful there on a few fronts in terms of stabilizing asset level performance and are on our way to optimizing the product offerings for each state. Now we need to grow both originations within our current footprint and expand our footprint by rolling out more locations. To that end, we're making some modifications to the leadership structure to accomplish that more quickly. Given the operating leverage inherent in the store-based business, once we're able to gain significant traction on originations, we should start to see earnings from this business grow measurably. We'll now hand the call to John to walk through our quarterly results. Thanks, Russ.