FlexShopper, Inc.

Greetings. Welcome to the Flex Shopper third quarter financial results conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the former presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, Carlos Sanchez of Investor Relations. You may begin.

Thank you, and good morning. Welcome to Flex Shopper's third 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 yesterday 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 will be available for Q&A 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 and our financial performance, including statements regarding our market opportunity, the impact of our growth initiatives, and 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 reports, including our quarterly report, 10Q, for the quarter ending September 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, whether as a result of new information, future events, or otherwise. 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, and adjusted net income. These non-GAAP financial measures should not be considered replacements and should be read together with our GAAP results. Reconciliation to GAAP measurements and certain additional information are also included in today's earning release. which is available on the investor section of our website. This call is being recorded and a webcast will be available for replay on our investor relations section of our website. I will now turn the call over to our CEO, Russ Heiser. Thanks, Carlos.

Good morning, everyone. Thank you for joining us. Yesterday, we reported Q3 financial results that are, on the whole, a good bit better than prior quarter and the same quarter last year. EBITDA increased over 11 million versus the same quarter last year. and net income was up over $7 million versus the same quarter last year. We continue to be in a difficult operating environment, with inflation continuing to significantly impact our customer base, but balanced by an economy that still hasn't experienced meaningful job loss in the non-prime sector. Out of an abundance of caution, we continue to be selective in our underwriting and are very active in monitoring and managing our portfolio to provide significant cushion in case the environment and customer payment behavior does start to move away from us. While historically our customers have demonstrated resilience in a recessionary environment, we face uncertain times and want to be positioned for any negative shifts, whether from the resumption of student loan payments or continued deterioration of the economy. FlexShopper has continued to evolve its direction over the last several months. We are leaning into the direct-to-consumer marketplace as our primary growth engine going forward. We have worked diligently over the last two quarters to evolve from utilizing our website solely as a method of generating leases. We are transitioning to a more fulsome e-commerce site that focuses on merchandising efforts to enable the company to profit not only from generating leases on our site, but also capturing a retailer margin on more of our goods. Furthermore, we have worked to increase conversion opportunities on our site by enabling risk-based pricing initiatives that recognize that all of our customers are not the same or fit into a single lease-to-own offer while maintaining attractive asset-level returns. Studying that idea even further, we are exploring partnerships with other financing channels to provide an even broader selection of purchase options to consumers that do not have the current liquidity to transact on more traditional e-commerce platforms. FlexShopper is positioning itself as a marketplace with an assortment of payment options for the larger universe of credit challenge consumers that will extend beyond our historical lease-to-own options. In addition, we are utilizing generative AI tools to create smaller versions of our main site focused on product verticals. These microsites are expected to provide significant marketing leverage that will allow us to reach and monetize customers at decreased acquisition costs. With all these changes in place, we believe FlexShopper and our marketplace will have greater control of its growth opportunities. First, it allows us to direct marketing spend where it is most efficient. Our marketing spend online is only constrained by acquisition costs, and achieving the appropriate return on capital, unlike other verticals where we might be dependent upon foot traffic to a store. Second, it allows us to be focused on achieving the ideal asset level return without trying to hit benchmark approval rates or spending limits as can occur with our enterprise customers. This doesn't mean that we aren't continuing to grow the direct brick and mortar and online enterprise relationships. In fact, a lot of the technologies developed for our marketplace are providing more value to our large enterprise customers and permitting higher approval rates and conversion rates among these customers. Our enterprise experience continues to result in big wins. We are in the final stages of another thousand plus store contract that will grow our enterprise leasing originations by at least 25%. We just want to be thoughtful in terms of making sure that we don't chase new doors or originations instead stay focused on the bottom line. Finally, the storefront lending business that we acquired late last year is gaining momentum. As we have mentioned in the past, The goal is to develop a framework that can allow us to reach large, non-prime customer segments with our combination of state-licensed and lease-to-own products complemented by other liquidity providers. We continue to believe that by providing the widest assortment of products and payment options to consumers, we can leverage and grow the exclusive arrangements we have with a wider assortment of retailers and service providers. Looking forward to the holiday season and early next year, we expect to see continued growth and originations as a result of our improvements to the FlexShopper marketplace and new enterprise partners. Combined with the focus on asset level performance, our allowance for doubtful accounts as a percentage of gross billings will decline, resulting in a leap forward in net revenue. The continued merchandising efforts should continue to increase the margin on our products, resulting in relative declines in the depreciation of lease merchandise. All of this will enhance gross profit over the near term. The management team at Flex Shopper believes we are at an inflection point in the business and look forward to demonstrating our progress going forward. With that, I will turn the call over to our COO, John Davis.