Executive Summary

Q2 2024 delivered strong YoY growth: total revenue rose 29.8% to $31.8M, gross profit up 90% to $15.95M, and adjusted EBITDA surged to $4.91M (15.5% margin), while operating income turned positive to $2.38M .
Mix shift and improving asset quality drove results: provision for doubtful accounts as a percent of gross lease billings fell to 22.5% vs. 33.4% last year, and depreciation/impairment cost ratio improved to 39.9% vs. 44.6% .
Strategic distribution expansion accelerated: total lease funding approvals doubled to $74.8M, 150 new retail partner locations added in Q2 with 500 more expected in 2H24; pipeline supported by partnerships with PayTomorrow, Terrace Finance, and Versatile Credit .
Estimates context: Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was unavailable to retrieve; comparisons to estimates cannot be provided at this time.

What Went Well and What Went Wrong

What Went Well

Asset quality improved markedly: provision for doubtful accounts as % of gross lease billings declined to 22.5% from 33.4% YoY; management highlighted a $3.7M benefit vs prior year from improved provision rates and favorable performance of new originations .
Profitability expanded: gross profit increased 90% YoY to $15.95M (50% margin vs. 34% last year), driven by retail margin introduced via FlexShopper.com and better lease merchandise economics .
Platform and distribution growth: total lease funding approvals climbed 102% to $74.8M; management added 150 new storefronts in Q2 and expects 500 incremental in 2H24, positioning for continued origination growth .

Quote: “We experienced strong growth with total revenue up 29.8%… total lease funding approvals increasing 102.2%… and we added 150 new retail partner locations” .

What Went Wrong

Higher interest expense and net loss: despite operating income of $2.38M, net loss was $(1.60)M, with interest expense of $(5.23)M; diluted EPS remained a loss at $(0.13), though improved YoY .
QoQ moderation in revenue and operating income: Q2 revenue was $31.76M vs. $33.94M in Q1; operating income decreased to $2.38M from $5.04M in Q1 as marketing and salaries scaled with growth initiatives .
Loan net revenues mixed: state‑licensed loan business net revenue declined YoY as management prioritized risk and profitability, although better collections on bank partner portfolio supported net loan revenue via fair value changes .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Total Revenues ($USD Millions)	$24.53	$33.94	$31.76
Gross Profit ($USD Millions)	$8.39	$17.80	$15.95
Gross Margin (%)	34%	—	50%
Operating Income ($USD Millions)	$(2.03)	$5.04	$2.38
Interest Expense ($USD Millions)	$(4.57)	$(5.32)	$(5.23)
Net Income (Loss) - (IS) ($USD Millions)	$(5.30)	$(0.21)	$(1.60)
Diluted EPS ($USD)	$(0.29)	$(0.06)	$(0.13)
Adjusted EBITDA ($USD Millions)	$0.30	$7.58	$4.91
Adjusted EBITDA Margin (%)	—	—	15.5%

Segment revenue breakdown:

Revenue Line ($USD Millions)	Q2 2023	Q1 2024	Q2 2024
Lease revenues and fees, net	$22.91	$25.83	$27.07
Loan revenues and fees, net of changes in fair value	$1.63	$7.33	$3.31
Retail revenues	—	$0.78	$1.37
Total revenues	$24.53	$33.94	$31.76

KPIs and operating metrics:

KPI	Q2 2023	Q1 2024	Q2 2024
Total lease funding approvals ($USD Millions)	$37.0	—	$74.8
Gross lease billings and fees ($USD Millions)	$32.50	—	$34.69
Provision for doubtful accounts (% of gross lease billings)	33.4%	26.9%	22.5%
Depreciation & impairment of lease merchandise (% of gross lease billings)	44.6%	41.6%	39.9%
Retail partner locations added (period)	—	~580 by end of April (rollout context)	+150 in Q2; +500 expected in 2H24

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/EPS formal guidance	FY 2024	Not provided	Not provided	Maintained (no formal guidance)
Retail storefront additions	2H 2024	—	+500 expected by mid-Oct (before holiday freeze)	Raised visibility (quantified rollout cadence)
Payment solutions expansion	2H 2024–Q4 2024	—	Add large prime credit issuer in time for holiday season	New initiative
Micro sites rollout	2H 2024	First micro site live in Q1	Two additional micro sites targeted by year-end	Expansion
Adjusted EBITDA trajectory	FY 2024	—	Management expects supportive margins given asset quality trends	Positive qualitative stance

Note: Company did not issue numeric revenue/EPS margin guidance ranges; management provided operational targets and qualitative trajectory .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
AI/technology initiatives	Generative AI for micro sites; risk/fraud ML modeling	Expanding use of AI in customer targeting and prospecting; enhanced underwriting/collections tech	Broadening application; deeper integration
Marketplace retail strategy	Retail margin rollout; selling non-lease items; ~23% markup, ~$750k sales in first 2 months	Retail revenue grew from $0.78M in Q1 to $1.37M in Q2; broadened product assortment and micro sites	Scaling with QoQ growth
Distribution/retail partnerships	+720 units since YE23; ~580 additional by mid‑May; pilot to double lease throughput in ~1,600 stores	+150 stores in Q2; +500 expected in 2H; partnerships with PayTomorrow, Terrace Finance, Versatile Credit	Accelerating rollout
Asset quality & provisioning	Q4 bad debt ratio improved; full-year 2023 provisioning improved	Provision % down to 22.5% from 33.4%; continued YoY favorability expected	Improving
Macro/non-prime consumer	Monitoring headwinds; tightening underwriting; monetization via waterfall partners	Non-prime headwinds persist; risk-based pricing and fraud algorithm enhancements	Vigilant posture
Loan portfolio & bank partner	Bank partner exited high APR; pursuing new bank partner	Better-than-expected collections; pursuing new bank partner for future offerings	Transitioning; exploring alternatives

Management Commentary

Strategy and momentum: “Our second-quarter and year-to-date results are encouraging… total revenue up 29.8%… approvals increasing 102.2%… added 150 new retail partner locations… expect to add an additional 500… during the second half of 2024” .
Profit focus: “Provision for doubtful accounts as a percentage of gross lease billings and fees decreased by 32.4%… and we experienced a 1,533.3% increase in adjusted EBITDA… $4.9 million – the highest second-quarter level in two years” .
Marketplace evolution: “We have partnered with multiple technology and funding partners… platform consists of… LTO offerings, unsecured consumer loan products and a traditional e-commerce retail business… broadened product assortment… retail revenue increased from $780,000… to $1.4 million” .
Risk management: “Increased focus on enhancements to our risk-based pricing… significant enhancements to our fraud algorithms… to grow a portfolio that produces the correct level of asset returns” .
Margin mechanics: “Depreciation and impairment of lease merchandise costs as a percentage of gross lease billings… 39.9% in Q2 2024 vs. 44.6%… driven by product margin on goods sold… recognized over the term of the lease” .

Q&A Highlights

New KPI disclosure: Lease funding approvals introduced to reflect demand backlog; approvals often convert over time, with take rates ~75% in “need-to-have” categories (e.g., tires) and ~30% in consumer electronics; approval windows are being extended beyond historical ~90 days .
Micro sites cadence: First micro site (gaming/electronics) live; plan to launch two more by year-end to improve marketing efficiency and category relevance .
Store rollout timeline: Most retailers prefer installs prior to mid-October; expectation is 500 incremental stores in 2H24, with training and partner engagement critical to ramp .
Partner footprint: With 500 2H adds, total locations approach “just short of 5,000” by year-end, reflecting strong adoption across partners .

Estimates Context

Efforts to retrieve S&P Global consensus for Q2 2024 EPS and revenue (and # of estimates) failed due to system rate limits; therefore, comparisons to Street consensus are unavailable at this time.
Investors should note the absence of formal numeric guidance and rely on operational targets (store additions, marketplace expansion, payment solutions roadmap) for near-term modeling .

Key Takeaways for Investors

Asset quality is a core driver of profitability: materially lower provision ratios and improved lease merchandise cost ratios underpin gross margin expansion and adjusted EBITDA leverage .
Distribution breadth is scaling rapidly: partnerships (PayTomorrow, Terrace Finance, Versatile Credit) expand merchant count and approvals, with a clear 2H rollout cadence ahead of holiday season .
Marketplace monetization is working: retail revenue ramp and broader SKUs improve conversion, diversify economics beyond LTO, and support higher gross margins .
Near-term trading catalysts: continued store onboarding by mid-October, micro site launches, and potential addition of a prime issuer for Q4 could drive origination and retail revenue momentum .
Medium-term thesis: FlexShopper’s asset-light model, underwriting/fraud analytics, and payment waterfall partnerships position it to capture share as other providers tighten credit standards .
Watch interest expense and funding costs: elevated interest expense remains a headwind to net income; monitor financing mix and credit facility utilization .
Street estimates unavailable: model sensitivity should focus on store ramp timing, approval conversion rates by category, and retail margin progression until consensus data can be refreshed.

Sources: Q2 2024 press release and 8‑K (financials, KPIs) ; Q2 2024 call transcript (themes, quotes, margins) ; Prior quarters (trend context) ; Additional press releases (partnerships/events) .

FlexShopper, Inc. (FPAY)·Q2 2024 Earnings Summary