PFSW
$7.70
Pfsweb
($.01)
(.13%)
Earnings Details
3rd Quarter September 2016
Wednesday, November 09, 2016 4:05:26 PM
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Summary

Pfsweb (PFSW) Recent Earnings

Pfsweb (PFSW) reported a 3rd Quarter September 2016 loss of $0.03 per share on revenue of $79.9 million. The consensus estimate was a loss of $0.04 per share on revenue of $75.4 million. Revenue grew 12.3% on a year-over-year basis.

PFSweb Inc is a provider of integrated ecommerce and business process outsourcing solutions to companies in the United States, Canada and Europe.

Results
Reported Earnings
($0.03)
Earnings Whisper
-
Consensus Estimate
($0.04)
Reported Revenue
$79.9 Mil
Revenue Estimate
$75.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

PFSweb Reports Third Quarter 2016 Results

ALLEN, TX--(Marketwired - Nov 9, 2016) - PFSweb, Inc. (PFSW) ("PFS"), a global commerce service provider, reported results for the third quarter ended September 30, 2016.

Third Quarter 2016 Summary vs. Same Year-Ago Quarter (where applicable)

Total revenues increased 12% to $79.9 million

Service fee equivalent revenue (a non-GAAP measure defined below) increased 18% to $54.5 million

Service fee gross margin was 31.4% compared to 33.7%

Net loss was $1.0 million or $(0.06) per share compared to a loss of $3.7 million or $(0.21) per share

Management Commentary "As described in our October 2016 pre-announcement release, our third quarter results were impacted by an operational challenge with a newly-launched fulfillment client," said Mike Willoughby, CEO of PFS. "This client’s unique business model led to unanticipated operational requirements, including incremental labor and operating costs to support their seasonal peak volumes in late Q3 and early Q4. Now that we’ve supported this client through their seasonal peak, we will continue to work diligently to re-engineer a solution that will bring this client engagement to our desired level of profitability, while continuing to meet the operational needs of the client.

"Our incremental investments in sales, marketing and infrastructure this year continue to drive improved results as we generated another solid quarter of long-term engagements and project wins from new and existing clients. We continue to maintain a strong pipeline and expect 2016 to mark the largest number of bookings in the history of our company.

"As we prepare for the upcoming holiday season, we will continue to strive toward enabling our clients to maximize their holiday sales performance through our support and execution of their ecommerce initiatives."

Third Quarter 2016 Financial Results Total revenues in the third quarter of 2016 increased 12% to $79.9 million compared to $71.2 million in the same period of 2015. Service fee revenue in the third quarter increased 18% to $53.8 million compared to $45.5 million last year. Product revenue was $11.7 million compared to $14.4 million in the same period of 2015 due to ongoing restructuring activities by the company’s last remaining client in this segment and their discontinuation of certain product lines.

Service fee equivalent revenue increased 18% to $54.5 million compared to $46.2 million in the year-ago quarter, driven by both new and expanded client relationships, as well as approximately $2.7 million of incremental service fees generated in the third quarter of 2016 by the company’s acquired entities, CrossView and Conexus, which were acquired in 2015 and 2016, respectively.

Service fee gross margin in the third quarter of 2016 was 31.4% compared to 33.7% in the same period of 2015. The decrease was primarily due to higher facility and other operating costs applicable to certain new large fulfillment clients won during the year, as well as incremental labor and operating costs for the newly launched client referred to above. This was partially offset by higher-margin professional services activity.

Net loss in the third quarter of 2016 was $1.0 million or $(0.06) per share, compared to a net loss of $3.7 million or $(0.21) per share in the same period of 2015. Net loss in the third quarter of 2016 included a $0.5 million net benefit from acquisition-related, restructuring and other (income) costs, $0.3 million in stock-based compensation expense, and $1.2 million in amortization of acquisition-related intangible assets. This compares to $2.6 million expense in acquisition-related, restructuring and other (income) costs, $1.5 million in stock-based compensation expense, and $1.0 million in amortization of acquisition-related intangible assets in the same period of 2015.

Adjusted EBITDA (a non-GAAP measure defined below) was $3.6 million compared to $5.4 million in the same period of 2015. As a percentage of service fee equivalent revenue, adjusted EBITDA was 6.6% compared to 11.8% in the year-ago quarter. The decline in adjusted EBITDA margin was primarily driven by incremental labor and operating costs associated with servicing certain new clients, as well as an increase in sales and marketing and infrastructure resources. This was partially offset by higher-margin professional services activity.

Non-GAAP net loss (a non-GAAP measure defined below) in the third quarter of 2016 was $0.1 million, compared to Non-GAAP net income of $1.5 million in the third quarter of 2015.

At September 30, 2016, cash and cash equivalents totaled $15.7 million compared to $21.8 million at December 31, 2015. Total debt was $60.4 million compared to $35.4 million at December 31, 2015, with the increase primarily driven by funds used to support the June 2016 Conexus acquisition and payment of calendar 2015 related earn-out liabilities applicable to prior acquisitions, as well as funding of incremental working capital and capital expenditure requirements.

2016 & 2017 Outlook As disclosed in the company’s October pre-announcement release, PFS expects 2016 service fee equivalent revenue to range between $222 million and $228 million, reflecting growth of 20% to 23% from 2015. The company also expects adjusted EBITDA to range between $18 million and $20 million, which compares to $20.7 million in 2015.

For 2017, PFS expects continued strong growth in service fee equivalent revenue as the company realizes the full year benefit of 2016 client wins and generates incremental revenue from new and expanded client relationships. At this time, the company is targeting 2017 service fee equivalent revenue to range between $245 million and $260 million. The company is also targeting adjusted EBITDA to range between $23 million and $26 million. This adjusted EBITDA target includes infrastructure expenditures to support the company’s future growth strategies as well as expected costs in early 2017 associated with the continued remediation of the fulfillment client implementation noted above.

Conference Call PFS will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the third quarter ended September 30, 2016.

CEO Michael Willoughby and CFO Tom Madden will host the conference call, followed by a question and answer period.

Date: Wednesday, November 9, 2016 Time: 5:00 p.m. Eastern Time (4:00 p.m. Central time) Toll-free dial-in number: 1-888-452-4005 International dial-in number: 1-719-325-2262 Conference ID: 7262018

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=121850 and via the investor relations section of the company’s website at www.pfsweb.com.

A replay of the conference call will be available after 8:00 p.m. Eastern Time on the same day through November 23, 2016.

Toll-free replay number: 1-844-512-2921 International replay number: 1-412-317-6671 Replay ID: 7262018

About PFSweb, Inc. PFSweb (PFS) (PFSW) is a global commerce service provider of solutions including digital strategy consulting, digital agency and marketing services, technology development services, business process outsourcing services, and a complete omni-channel technology ecosystem. The company provides these solutions and services to major brand names and other companies seeking to optimize every customer experience and enhance their traditional and online business channels. PFS supports organizations across various industries, including Procter & Gamble, L’Oreal, LEGO, Canada Goose, ASICS, Roots Canada Ltd., PANDORA, Diageo, Anastasia Beverly Hills, See’s Candies, T.J. Maxx, the United States Mint, and many more. PFS is headquartered in Allen, TX with additional locations in Tennessee, Mississippi, Minnesota, Washington, New York, Ohio, North Carolina, Canada, Belgium, United Kingdom, Bulgaria, and India. For more information, please visit www.pfsweb.com or download the free PFS IR App on your iPhone, iPad, or Android device.

Non-GAAP Financial Measures This news release contains certain non-GAAP measures, including non-GAAP net income (loss), earnings before interest, income taxes, depreciation and amortization (EBITDA), Adjusted EBITDA and service fee equivalent revenue.

Non-GAAP net income (loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based compensation expense, acquisition-related, restructuring and other (income) costs and the amortization of acquisition-related intangible assets.

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation, acquisition-related, restructuring and other (income) costs.

Service fee equivalent revenue represents service fee revenue plus the gross profit earned on product revenue and does not alter existing revenue recognition.

Our service fee equivalent revenue target for 2016 includes an estimated gross margin on product sales of approximately $3 million (based on targeted product revenue of $50 million less targeted cost of product revenue of $47 million) plus a targeted range of between $219 million to $225 million of service fee revenue.

The adjusted EBITDA outlook for 2016 have not been reconciled to the company’s net loss outlook for the same period because certain items that would impact interest expense, income tax provision (benefit), depreciation and amortization (including amortization of acquisition-related intangible assets), stock-based compensation, and acquisition-related, restructuring and other (income) costs, all of which are reconciling items between net loss and adjusted EBITDA, cannot be reasonably predicted. Accordingly, reconciliation of adjusted EBITDA outlook to net loss outlook for 2016 is not available without unreasonable effort.

Non-GAAP net income (loss), EBITDA, Adjusted EBITDA and service fee equivalent revenue are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation, acquisition-related, restructuring and other (income) costs and amortization of acquisition-related intangible assets and EBITDA and adjusted EBITDA further eliminate the effect of financing, income taxes and the accounting effects of capital spending, which items may vary from different companies for reasons unrelated to overall operating performance. Service fee equivalent revenue allows client contracts with similar operational support models but different financial models to be combined as if all contracts were being operated on a service fee revenue basis.

PFS believes these non-GAAP measures provide useful information to both management and investors by focusing on certain operational metrics and excluding certain expenses in order to present its core operating performance and results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

Forward-Looking Statements The matters discussed herein consist of forward-looking information under the Private Securities Litigation Reform Act of 1995 and is subject to and involves risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. PFS’ Annual Report on Form 10-K for the year ended December 31, 2015 identifies certain factors that could cause actual results to differ materially from those projected in any forward looking statements made and investors are advised to review the Annual Report of the company and the Risk Factors described therein. PFS undertakes no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

 
PFSweb, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (A)
(In Thousands, Except Share Data)
 
 
  (Unaudited)
     
 
 
  September 30,
    December 31,
 
 
  2016
    2015
 
 
   
     
 
ASSETS
   
     
 
CURRENT ASSETS:
   
     
 
 
Cash and cash equivalents
  $
15,699
    $
21,781
 
 
Restricted cash
    219
      275
 
 
Accounts receivable, net of allowance for doubtful accounts of $539 and $600 at September 30, 2016 and December 31, 2015, respectively
    64,934
      70,700
 
 
Inventories, net of reserves of $585 and $739 at September 30, 2016 and December 31, 2015, respectively
    7,155
      9,262
 
 
Other receivables
    4,821
      8,704
 
 
Prepaid expenses and other current assets
    5,017
      5,662
 
 
 
Total current assets
    97,845
      116,384  
 
     
       
 
PROPERTY AND EQUIPMENT, net
    28,812
      24,093
 
INTANGIBLE ASSETS, net
    8,125
      8,810
 
GOODWILL
    45,929
      39,829
 
OTHER ASSETS
    2,433
      2,174
 
 
 
Total assets
    183,144
      191,290  
 
     
       
 
LIABILITIES AND SHAREHOLDERS EQUITY
     
       
 
CURRENT LIABILITIES:
     
       
 
 
Current portion of long-term debt and capital lease obligations
  $
5,672
    $
3,153
 
 
Trade accounts payable
    38,009
      51,170
 
 
Deferred revenue
    6,238
      7,390
 
 
Performance-based contingent payments
    -
      11,679
 
 
Accrued expenses
    25,109
      30,563
 
 
 
Total current liabilities
    75,028
      103,955  
 
     
       
 
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    54,749
      32,238
 
DEFERRED REVENUE
    4,280
      4,499
 
DEFERRED RENT
    4,849
      4,362
 
PERFORMANCE-BASED CONTINGENT PAYMENTS
    380
      2,478
 
 
 
Total liabilities
    139,286
      147,532  
 
     
       
 
 
     
       
 
COMMITMENTS AND CONTINGENCIES
     
       
 
 
     
       
 
SHAREHOLDERS’ EQUITY:
     
       
 
 
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued and outstanding
    -
      -
 
 
Common stock, $.001 par value; 35,000,000 shares authorized; 18,740,100 and 18,136,218 shares issued at September 30, 2016 and December 31, 2015, respectively; and 18,706,633 and 18,012,751 shares outstanding as of September 30, 2016 and December 31, 2015, respectively     19
      18
 
 
Additional paid-in capital
    145,045
      141,948  
 
Accumulated deficit
    (101,760 )
    (97,787 )
 
Accumulated other comprehensive income (loss)
    679
      (296
)
 
Treasury stock at cost, 33,467 shares
    (125
)
    (125
)
 
 
Total shareholders’ equity
    43,858
      43,758
 
 
 
Total liabilities and shareholders’ equity
  $
183,144
    $
191,290  
(A) The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2015.
 
 
PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)
 
   
     
     
     
 
 
  Three Months Ended
    Nine Months Ended
 
 
  September 30,
    September 30,
 
 
  2016
    2015
    2016
    2015
 
REVENUES:
   
     
     
     
 
 
Service fee revenue
  $
53,788     $
45,528     $
154,271     $
121,311  
 
Product revenue, net
    11,671       14,419       36,658
      44,731
 
 
Pass-thru revenue
    14,451       11,236       41,259
      32,163
 
 
 
 
Total revenues
    79,910       71,183       232,188       198,205  
 
                     
       
 
COSTS OF REVENUES:
                     
       
 
 
Cost of service fee revenue
    36,903       30,193       103,547       81,993
 
 
Cost of product revenue
    10,994       13,702       34,649
      42,321
 
 
Cost of pass-thru revenue
    14,451       11,236       41,259
      32,163
 
 
 
 
Total costs of revenues     62,348       55,131       179,455       156,477  
 
 
 
Gross profit
    17,562       16,052       52,733
      41,728
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    17,568       18,778       53,926
      47,068
 
 
 
Income (loss) from operations
    (6
)
    (2,726 )
    (1,193
)
    (5,340
)
INTEREST EXPENSE (INCOME), NET
    714
      706
      1,807
      1,247
 
 
 
Income (loss) before income taxes
    (720
)
    (3,432 )
    (3,000
)
    (6,587
)
INCOME TAX EXPENSE (BENEFIT)
    319
      238
      973
      676
 
NET INCOME (LOSS)
  $
(1,039 )
  $
(3,670 )
  $
(3,973
)
  $
(7,263
)
NON-GAAP NET INCOME (LOSS)
  $
(60
)
  $
1,452
    $
134
    $
2,193
 
 
                     
       
 
NET INCOME (LOSS) PER SHARE:
                     
       
 
 
Basic
  $
(0.06
)
  $
(0.21
)
  $
(0.21
)
  $
(0.42
)
 
Diluted
  $
(0.06
)
  $
(0.21
)
  $
(0.21
)
  $
(0.42
)
 
                     
       
 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
                     
       
 
 
Basic
    18,699       17,829       18,552
      17,449
 
 
Diluted
    18,699       17,829       18,552
      17,449
 
 
                     
       
 
EBITDA
  $
3,797
    $
1,355
    $
10,013
    $
5,305
 
ADJUSTED EBITDA
  $
3,599
    $
5,434
    $
11,252
    $
13,238
 
(A) The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2015.
 
 
PFSweb, Inc. and Subsidiaries
Unaudited Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)
 
   
     
     
     
 
 
  Three Months Ended
    Nine Months Ended
 
 
  September 30,
    September 30,
 
 
  2016
    2015
    2016
    2015
 
 
   
     
     
     
 
NET INCOME (LOSS)
  $
(1,039
)
  $
(3,670
)
  $
(3,973
)
  $
(7,263
)
 
Income tax expense (benefit)
    319
      238
      973
      676
 
 
Interest expense, net
    714
      706
      1,807
      1,247
 
 
Depreciation and amortization
    3,803
      4,081
      11,206
      10,645
 
EBITDA
  $
3,797
    $
1,355
    $
10,013
    $
5,305
 
 
Stock-based compensation
    347
      1,492
      1,743
      3,446
 
 
Acquisition-related, restructuring and other (income) costs     (545
)
    2,587
      (504
)
    4,487
 
ADJUSTED EBITDA
  $
3,599
    $
5,434
    $
11,252
    $
13,238
 
 
     
       
       
       
 
 
     
       
       
       
 
 
  Three Months Ended
    Nine Months Ended
 
 
  September 30,
    September 30,
 
 
  2016
    2015
    2016
    2015
 
 
     
       
       
       
 
NET INCOME (LOSS)
  $
(1,039
)
  $
(3,670
)
  $
(3,973
)
  $
(7,263
)
 
Stock-based compensation
    347
      1,492
      1,743
      3,446
 
 
Amortization of acquisition-related intangible assets
    1,177
      1,043
      2,868
      1,523
 
 
Acquisition-related, restructuring and other (income) costs     (545
)
    2,587
      (504
)
    4,487
 
NON-GAAP NET INCOME (LOSS)
  $
(60
)
  $
1,452
    $
134
    $
2,193
 
 
     
       
       
       
 
 
     
       
       
       
 
 
  Three Months Ended
    Nine Months Ended
 
 
  September 30,
    September 30,
 
 
  2016
    2015
    2016
    2015
 
 
     
       
       
       
 
TOTAL REVENUES
  $
79,910
    $
71,183
    $
232,188     $
198,205  
 
Pass-thru revenue
    (14,451 )
    (11,236 )
    (41,259 )
    (32,163 )
 
Cost of product revenue
    (10,994 )
    (13,702 )
    (34,649 )
    (42,321 )
SERVICE FEE EQUIVALENT REVENUE
  $
54,465
    $
46,245
    $
156,280     $
123,721  
 
 
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2016
(In Thousands)
 
 
   
   
   
 
PFSweb
  Business &
  Eliminations
  Consolidated
Retail Connect
REVENUES:
 
   
   
   
 
Service fee revenue
$
50,339     $
3,449
  $
-
    $
53,788  
 
Service fee revenue - affiliate
  2,978
     
231
    (3,209 )
    -
 
 
Product revenue, net
  -
     
11,671
    -
      11,671  
 
Pass-thru revenue
  14,451      
-
    -
      14,451  
 
 
 
Total revenues
  67,768      
15,351
    (3,209 )
    79,910  
 
         
 
               
COSTS OF REVENUES:
         
 
               
 
Cost of service fee revenue
  36,700      
3,359
    (3,156 )
    36,903  
 
Cost of product revenue
  -
     
10,994
    -
      10,994  
 
Cost of pass-thru revenue
  14,451      
-
    -
      14,451  
 
 
 
Total costs of revenues
  51,151      
14,353
    (3,156 )
    62,348  
 
 
 
Gross profit
  16,617      
998
    (53
)
    17,562  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  17,064      
557
    (53
)
    17,568  
 
 
Income (loss) from operations
  (447
)
   
441
    -
      (6
)
INTEREST EXPENSE (INCOME), NET
  631
     
83
    -
      714
 
 
 
Income (loss) before income taxes
  (1,078 )
   
358
    -
      (720
)
INCOME TAX EXPENSE (BENEFIT)
  195
     
124
    -
      319
 
NET INCOME (LOSS)
$
(1,273 )
  $
234
  $
-
    $
(1,039 )
NON-GAAP NET INCOME (LOSS)
$
(294
)
  $
234
  $
-
    $
(60
)
 
         
 
               
EBITDA
$
3,350
    $
447
  $
-
    $
3,797
 
ADJUSTED EBITDA
$
3,152
    $
447
  $
-
    $
3,599
 
 
         
 
               
 
         
 
               
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:       
 
         
 
               
NET INCOME (LOSS)
$
(1,273 )
  $
234
  $
-
      (1,039 )
 
 
Income tax expense (benefit)
  195
     
124
    -
      319
 
 
 
Interest expense (income), net
  631
     
83
    -
      714
 
 
 
Depreciation and amortization
  2,620
     
6
    -
      2,626
 
 
 
Amortization of acquisition-related intangible assets   1,177
     
-
    -
      1,177
 
EBITDA
$
3,350
    $
447
  $
-
    $
3,797
 
 
 
Stock-based compensation
  347
     
-
    -
      347
 
 
 
Acquisition-related, restructuring and other income
  (545
)
   
-
    -
      (545
)
ADJUSTED EBITDA
$
3,152
    $
447
  $
-
    $
3,599
 
 
         
 
               
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:       
 
         
 
               
NET INCOME (LOSS)
$
(1,273 )
  $
234
  $
-
    $
(1,039 )
 
 
Stock-based compensation
  347
     
-
    -
      347
 
 
 
Amortization of acquisition-related intangible assets   1,177
     
-
    -
      1,177
 
 
 
Acquisition-related, restructuring and other income
  (545
)
   
-
    -
      (545
)
NON-GAAP NET INCOME (LOSS)
$
(294
)
  $
234
  $
-
    $
(60
)
Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.
 
 
PFSweb, Inc. and Subsidiaries      
Unaudited Consolidating Statements of Operations      
For the Nine Months Ended September 30, 2016      
(In Thousands)      
 
   
     
   
     
 
 
   
    Business &
   
     
 
 
PFSweb
 
Retail Connect
Eliminations
 
Consolidated
 
REVENUES:
   
     
   
     
 
 
Service fee revenue
  $
143,193     $
11,078
  $
-
    $
154,271  
 
Service fee revenue - affiliate
    9,787
     
689
    (10,476 )
    -
 
 
Product revenue, net
    -
     
36,658
    -
      36,658
 
 
Pass-thru revenue
    41,259
     
-
    -
      41,259
 
 
 
 
Total revenues
    194,239      
48,425
    (10,476 )
    232,188  
 
     
     
 
     
       
 
COSTS OF REVENUES:
     
     
 
     
       
 
 
Cost of service fee revenue
    103,077      
10,815
    (10,345 )
    103,547  
 
Cost of product revenue
    -
     
34,649
    -
      34,649
 
 
Cost of pass-thru revenue
    41,259
     
-
    -
      41,259
 
 
 
 
Total costs of revenues
    144,336      
45,464
    (10,345 )
    179,455  
 
 
 
Gross profit
    49,903
     
2,961
    (131
)
    52,733
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    52,419
     
1,638
    (131
)
    53,926
 
 
 
Income (loss) from operations
    (2,516
)
   
1,323
    -
      (1,193
)
INTEREST EXPENSE (INCOME), NET
    1,551
     
256
    -
      1,807
 
 
 
Income (loss) before income taxes
    (4,067
)
   
1,067
    -
      (3,000
)
INCOME TAX EXPENSE (BENEFIT)
    593
     
380
    -
      973
 
NET INCOME (LOSS)
  $
(4,660
)
  $
687
  $
-
    $
(3,973
)
NON-GAAP NET INCOME (LOSS)
  $
(553
)
  $
687
  $
-
    $
134
 
 
     
     
 
     
       
 
EBITDA
  $
8,672
    $
1,341
  $
-
    $
10,013
 
ADJUSTED EBITDA
  $
9,911
    $
1,341
  $
-
    $
11,252
 
 
     
     
 
     
       
 
 
     
     
 
     
       
 
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
 
 
     
     
 
     
       
 
NET INCOME (LOSS)
  $
(4,660
)
  $
687
  $
-
      (3,973
)
 
 
Income tax expense (benefit)
    593
     
380
    -
      973
 
 
 
Interest expense (income), net
    1,551
     
256
    -
      1,807
 
 
 
Depreciation and amortization
    8,320
     
18
    -
      8,338
 
 
 
Amortization of acquisition-related intangible assets     2,868
     
-
    -
      2,868
 
EBITDA
  $
8,672
    $
1,341
  $
-
    $
10,013
 
 
 
Stock-based compensation
    1,743
     
-
    -
      1,743
 
 
 
Acquisition-related, restructuring and other income
    (504
)
   
-
    -
      (504
)
ADJUSTED EBITDA
  $
9,911
    $
1,341
  $
-
    $
11,252
 
 
     
     
 
     
       
 
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
 
 
     
     
 
     
       
 
NET INCOME (LOSS)
  $
(4,660
)
  $
687
  $
-
    $
(3,973
)
 
 
Stock-based compensation
    1,743
     
-
    -
      1,743
 
 
 
Amortization of acquisition-related intangible assets     2,868
     
-
    -
      2,868
 
 
 
Acquisition-related, restructuring and other income
    (504
)
   
-
    -
      (504
)
NON-GAAP NET INCOME (LOSS)
  $
(553
)
  $
687
  $
-
    $
134
 
Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.
 
 
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2015
(In Thousands)
 
   
     
     
     
 
 
   
    Business &
     
     
 
 
  PFSweb
    Retail Connect
    Eliminations
    Consolidated
 
REVENUES:
   
     
     
     
 
 
Service fee revenue
  $
42,167     $
3,361
    $
-
    $
45,528  
 
Service fee revenue - affiliate
    3,494
     
195
      (3,689 )
    -
 
 
Product revenue, net
    -
     
14,419
      -
      14,419  
 
Pass-thru revenue
    11,236      
-
      -
      11,236  
 
 
 
Total revenues
    56,897      
17,975
      (3,689 )
    71,183  
 
           
 
                 
COSTS OF REVENUES:
           
 
                 
 
Cost of service fee revenue
    30,369      
3,323
      (3,499 )
    30,193  
 
Cost of product revenue
    -
     
13,702
      -
      13,702  
 
Cost of pass-thru revenue
    11,236      
-
      -
      11,236  
 
 
 
Total costs of revenues
    41,605      
17,025
      (3,499 )
    55,131  
 
 
 
Gross profit
    15,292      
950
      (190
)
    16,052  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    18,049      
919
      (190
)
    18,778  
 
 
Income (loss) from operations
    (2,757 )
   
31
      -
      (2,726 )
INTEREST EXPENSE (INCOME), NET
    584
     
122
      -
      706
 
 
 
Income (loss) before income taxes
    (3,341 )
   
(91
)
    -
      (3,432 )
INCOME TAX EXPENSE (BENEFIT)
    171
     
67
      -
      238
 
NET INCOME (LOSS)
  $
(3,512 )
  $
(158
)
  $
-
    $
(3,670 )
NON-GAAP NET INCOME (LOSS)
  $
1,288
    $
162
    $
-
    $
1,450
 
 
           
 
                 
EBITDA
  $
1,309
    $
46
    $
-
    $
1,355
 
ADJUSTED EBITDA
  $
5,066
    $
366
    $
-
    $
5,432
 
 
           
 
                 
 
           
 
                 
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
 
 
           
 
                 
NET INCOME (LOSS)
  $
(3,512 )
  $
(158
)
  $
-
      (3,670 )
 
 
Income tax expense (benefit)
    171
     
67
      -
      238
 
 
 
Interest expense (income), net
    584
     
122
      -
      706
 
 
 
Depreciation and amortization
    3,023
     
15
      -
      3,038
 
 
 
Amortization of acquisition-related intangible assets     1,043
     
-
      -
      1,043
 
EBITDA
  $
1,309
    $
46
    $
-
    $
1,355
 
 
 
Stock-based compensation
    1,492
     
-
      -
      1,492
 
 
 
Acquisition-related, restructuring and other costs
    2,265
     
320
      -
      2,585
 
ADJUSTED EBITDA
  $
5,066
    $
366
    $
-
    $
5,432
 
 
           
 
                 
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
 
 
           
 
                 
NET INCOME (LOSS)
  $
(3,512 )
  $
(158
)
  $
-
    $
(3,670 )
 
 
Stock-based compensation
    1,492
     
-
      -
      1,492
 
 
 
Amortization of acquisition-related intangible assets     1,043
     
-
      -
      1,043
 
 
 
Acquisition-related, restructuring and other costs
    2,265
     
320
      -
      2,585
 
NON-GAAP NET INCOME (LOSS)
  $
1,288
    $
162
    $
-
    $
1,450
 
Note:
Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships. 
 
 
PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Nine Months Ended September 30, 2015
(In Thousands)
 
   
     
   
     
 
 
   
    Business &
   
     
 
 
  PFSweb
    Retail Connect
  Eliminations
    Consolidated
 
REVENUES:
   
     
   
     
 
 
Service fee revenue
  $
110,740     $
10,571
  $
-
    $
121,311  
 
Service fee revenue - affiliate
    10,137
     
568
    (10,705 )
    -
 
 
Product revenue, net
    -
     
44,731
    -
      44,731
 
 
Pass-thru revenue
    32,163
     
-
    -
      32,163
 
 
 
 
Total revenues
    153,040      
55,870
    (10,705 )
    198,205  
 
     
     
 
     
       
 
COSTS OF REVENUES:
     
     
 
     
       
 
 
Cost of service fee revenue
    81,637
     
10,467
    (10,111 )
    81,993
 
 
Cost of product revenue
    -
     
42,321
    -
      42,321
 
 
Cost of pass-thru revenue
    32,163
     
-
    -
      32,163
 
 
 
 
Total costs of revenues
    113,800      
52,788
    (10,111 )
    156,477  
 
 
 
Gross profit
    39,240
     
3,082
    (594
)
    41,728
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    45,528
     
2,134
    (594
)
    47,068
 
 
 
Income (loss) from operations
    (6,288
)
   
948
    -
      (5,340
)
INTEREST EXPENSE (INCOME), NET
    911
     
336
    -
      1,247
 
 
 
Income (loss) before income taxes
    (7,199
)
   
612
    -
      (6,587
)
INCOME TAX EXPENSE (BENEFIT)
    363
     
313
    -
      676
 
NET INCOME (LOSS)
  $
(7,562
)
  $
299
  $
-
    $
(7,263
)
NON-GAAP NET INCOME (LOSS)
  $
1,574
    $
619
  $
-
    $
2,193
 
 
     
     
 
     
       
 
EBITDA
  $
4,299
    $
1,006
  $
-
    $
5,305
 
ADJUSTED EBITDA
  $
11,912
    $
1,326
  $
-
    $
13,238
 
 
     
     
 
     
       
 
 
     
     
 
     
       
 
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
 
 
 
Amortization of acquisition-related intangible assets      
     
 
     
       
 
NET INCOME (LOSS)
  $
(7,562
)
  $
299
  $
-
      (7,263
)
 
 
Income tax expense (benefit)
    363
     
313
    -
      676
 
 
 
Interest expense (income), net
    911
     
336
    -
      1,247
 
 
 
Depreciation and amortization
    9,064
     
58
    -
      9,122
 
 
 
Amortization of acquisition-related intangible assets     1,523
     
-
    -
      1,523
 
EBITDA
  $
4,299
    $
1,006
  $
-
    $
5,305
 
 
 
Stock-based compensation
    3,446
     
-
    -
      3,446
 
 
 
Acquisition-related, restructuring and other costs
    4,167
     
320
    -
      4,487
 
ADJUSTED EBITDA
  $
11,912
    $
1,326
  $
-
    $
13,238
 
 
     
     
 
     
       
 
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
 
 
     
     
 
     
       
 
NET INCOME (LOSS)
  $
(7,562
)
  $
299
  $
-
    $
(7,263
)
 
 
Stock-based compensation
    3,446
     
-
    -
      3,446
 
 
 
Amortization of acquisition-related intangible assets     1,523
     
-
    -
      1,523
 
 
 
Acquisition-related, restructuring and other costs
    4,167
     
320
    -
      4,487
 
NON-GAAP NET INCOME (LOSS)
  $
1,574
    $
619
  $
-
    $
2,193
 
Note: Business and Retail Connect includes our Supplies Distributors and PFSweb Retail Connect operations, which operate similar financial models on behalf of our client relationships.
 
 
PFSweb, Inc. and Subsidiaries      
Unaudited Condensed Consolidating Balance Sheets      
as of September 30, 2016      
(In Thousands)      
 
   
     
     
     
 
 
   
    Business &
     
     
 
 
  PFSweb
    Retail Connect
    Eliminations
    Consolidated
 
 
   
     
     
     
 
ASSETS
   
     
     
     
 
CURRENT ASSETS:
   
     
     
     
 
 
Cash and cash equivalents
  $
5,639
    $
10,060
    $
-
    $
15,699
 
 
Restricted cash
    -
     
219
      -
      219
 
 
Accounts receivable, net
    50,844
     
14,993
      (903
)
    64,934
 
 
Inventories, net
    -
     
7,155
      -
      7,155
 
 
Other receivables
    600
     
4,221
      -
      4,821
 
 
Prepaid expenses and other current assets
    4,173
     
844
      -
      5,017
 
 
 
Total current assets
    61,256
     
37,492
      (903
)
    97,845
 
 
     
     
 
       
       
 
PROPERTY AND EQUIPMENT, net
    28,803
     
9
      -
      28,812
 
RECEIVABLE/INVESTMENT IN AFFILIATES
    9,342
     
-
      (9,342
)
    -
 
INTANGIBLE ASSETS, net
    8,125
     
-
      -
      8,125
 
GOODWILL
    45,929
     
-
      -
      45,929
 
OTHER ASSETS
    2,433
     
-
      -
      2,433
 
Total assets
    155,888
     
37,501
      (10,245 )
    183,144
 
 
     
     
 
       
       
 
LIABILITIES AND SHAREHOLDERS EQUITY
     
     
 
       
       
 
CURRENT LIABILITIES:
     
     
 
       
       
 
 
Current portion of long-term debt and capital lease obligations
  $
5,672
    $
-
    $
-
    $
5,672
 
 
Trade accounts payable
    13,395
     
25,517
      (903
)
    38,009
 
 
Deferred revenue
    6,238
     
-
      -
      6,238
 
 
Performance-based contingent payments
    -
     
-
      -
      -
 
 
Accrued expenses
    22,270
     
2,839
      -
      25,109
 
 
 
Total current liabilities
    47,575
     
28,356
      (903
)
    75,028
 
 
     
     
 
       
       
 
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    54,749
     
-
      -
      54,749
 
PAYABLE TO AFFILIATES
    -
     
22,045
      (22,045 )
    -
 
DEFERRED REVENUE
    4,280
     
-
      -
      4,280
 
DEFERRED RENT
    4,849
     
-
      -
      4,849
 
PERFORMANCE-BASED CONTINGENT PAYMENTS
    380
     
-
      -
      380
 
 
 
Total liabilities
    111,833
     
50,401
      (22,948 )
    139,286
 
 
     
     
 
       
       
 
 
     
     
 
       
       
 
COMMITMENTS AND CONTINGENCIES
     
     
 
       
       
 
 
     
     
 
       
       
 
SHAREHOLDERS’ EQUITY:
     
     
 
       
       
 
 
Common stock
    19
     
19
      (19
)
    19
 
 
Capital contributions
    -
     
1,000
      (1,000
)
    -
 
 
Additional paid-in capital
    145,045
     
28,060
      (28,060 )
    145,045
 
 
Retained earnings (accumulated deficit)
    (101,563 )
   
(43,205 )
    43,008
      (101,760 )
 
Accumulated other comprehensive income (loss)
    679
     
1,226
      (1,226
)
    679
 
 
Treasury stock
    (125
)
   
-
      -
      (125
)
 
 
Total shareholders’ equity
    44,055
     
(12,900 )
    12,703
      43,858
 
 
 
Total liabilities and shareholders’ equity   $
155,888
    $
37,501
    $
(10,245 )
  $
183,144
 
(A) The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2015.
 
 
PFSweb, Inc. and Subsidiaries      
Unaudited Condensed Consolidating Balance Sheets      
as of December 31, 2015      
(In Thousands)      
 
   
     
     
     
 
 
   
    Business &
     
     
 
 
  PFSweb
    Retail Connect
    Eliminations
    Consolidated
 
 
   
     
     
     
 
ASSETS
   
     
     
     
 
CURRENT ASSETS:
   
     
     
     
 
 
Cash and cash equivalents
  $
7,962
    $
13,819
    $
-
    $
21,781
 
 
Restricted cash
    51
     
224
      -
      275
 
 
Accounts receivable, net
    51,231
     
20,348
      (879
)
    70,700
 
 
Inventories, net
    -
     
9,262
      -
      9,262
 
 
Other receivables
    2,621
     
6,083
      -
      8,704
 
 
Prepaid expenses and other current assets
    4,744
     
918
      -
      5,662
 
 
 
Total current assets
    66,609
     
50,654
      (879
)
    116,384  
 
     
     
 
       
       
 
PROPERTY AND EQUIPMENT, net
    24,065
     
28
      -
      24,093
 
RECEIVABLE/INVESTMENT IN AFFILIATES
    9,577
     
-
      (9,577
)
    -
 
INTANGIBLE ASSETS, net
    8,810
     
-
      -
      8,810
 
GOODWILL
    39,829
     
-
      -
      39,829
 
OTHER ASSETS
    2,174
     
-
      -
      2,174
 
 
 
Total assets
    151,064      
50,682
      (10,456 )
    191,290  
 
     
     
 
       
       
 
LIABILITIES AND SHAREHOLDERS EQUITY
     
     
 
       
       
 
CURRENT LIABILITIES:
     
     
 
       
       
 
 
Current portion of long-term debt and capital lease obligations
  $
3,153
    $
-
    $
-
    $
3,153
 
 
Trade accounts payable
    15,329
     
36,710
      (869
)
    51,170
 
 
Deferred revenue
    7,390
     
-
      -
      7,390
 
 
Performance-based contingent payments
    11,679
     
-
      -
      11,679
 
 
Accrued expenses
    26,015
     
4,558
      (10
)
    30,563
 
 
 
Total current liabilities
    63,566
     
41,268
      (879
)
    103,955  
 
     
     
 
       
       
 
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
    32,238
     
-
      -
      32,238
 
PAYABLE TO AFFILIATES
    -
     
22,056
      (22,056 )
    -
 
DEFERRED REVENUE
    4,499
     
-
      -
      4,499
 
DEFERRED RENT
    4,362
     
-
      -
      4,362
 
PERFORMANCE-BASED CONTINGENT PAYMENTS
    2,478
     
-
      -
      2,478
 
 
 
Total liabilities
    107,143      
63,324
      (22,935 )
    147,532  
 
     
     
 
       
       
 
 
     
     
 
       
       
 
COMMITMENTS AND CONTINGENCIES
     
     
 
       
       
 
 
     
     
 
       
       
 
SHAREHOLDERS’ EQUITY:
     
     
 
       
       
 
 
Common stock
    18
     
19
      (19
)
    18
 
 
Capital contributions
    -
     
1,000
      (1,000
)
    -
 
 
Additional paid-in capital
    141,948      
28,060
      (28,060 )
    141,948  
 
Retained earnings (accumulated deficit)
    (97,616 )
   
(42,827 )
    42,656
      (97,787 )
 
Accumulated other comprehensive income (loss)
    (304
)
   
1,106
      (1,098
)
    (296
)
 
Treasury stock
    (125
)
   
-
      -
      (125
)
 
 
Total shareholders’ equity
    43,921
     
(12,642 )
    12,479
      43,758
 
 
 
Total liabilities and shareholders’ equity   $
151,064     $
50,682
    $
(10,456 )
  $
191,290  
(A) The financial data above should be read in conjunction with the audited consolidated financial statements of PFSweb, Inc. included in its Form 10-K for the year ended December 31, 2015.
 

Company Contact: Michael C. Willoughby Chief Executive Officer Or Thomas J. Madden Chief Financial Officer Tel 972-881-2900 Investor Relations: Liolios Scott Liolios or Sean Mansouri Tel 949-574-3860 Email Contact