PFSW Pfsweb Inc

PFSweb, Inc. (Nasdaq: PFSW), an international provider of end-to-end eCommerce solutions, today announced its financial results for the quarter ended March 31, 2013.

“We are very excited about several significant developments in our business that we believe strongly position PFSweb for solid growth and enhanced shareholder value in the future. We have recently won several new and expanded client relationships, including a promising new agreement with a leading Fortune 500 retailer of apparel and home fashion, and we have seen an increase in our sales pipeline to approximately $50 million, based on client projections,” stated Mike Willoughby, Chief Executive Officer at PFSweb.

“We are also excited to announce a definitive agreement to form a strategic relationship with transcosmos inc., through which we will gain access to both their Asian-based global client brands looking to expand into the U.S. and European markets, and their extensive infrastructure to support our clients’ expansion into Asia, including Japan, China and South Korea. As part of the relationship, transcosmos is acquiring a 19.9% equity position in PFSweb through a direct investment of approximately $14.7 million. This influx of capital will play an important role in allowing PFSweb to accelerate its ongoing growth initiatives,” continued Mr. Willoughby.

“While we are pleased with our results from the first quarter ended March 31, 2013, we continue to expect CY2013 to be a transition year for us as we wind down certain previously announced client programs. However, through a combination of organic and new growth opportunities, coupled with operational changes aimed to drive business efficiencies and cost reductions, we believe we are establishing the appropriate framework to usher PFSweb into a period of exciting growth starting in 2014,” Mr. Willoughby added.

Summary of consolidated results for the first quarter ended March 31, 2013:

• Service Fee revenue decreased slightly to $28.0 million, compared to $28.4 million for the same period in 2012; Service Fee Equivalent Revenue (as defined) decreased 4% to $30.0 million, compared to $31.2 million for the same period in 2012;
• Total revenue decreased 13% to $63.1 million, compared to $72.8 million for the first quarter of 2012;
• Adjusted EBITDA (as defined) increased 12% to $2.9 million, compared to $2.6 million for the same period in 2012; Adjusted EBITDA for the first quarter of 2013 included an incremental benefit of approximately $0.6 million applicable to certain client transition related agreements, which we also expect to continue into the second quarter of CY2013;
• Net loss was $2.6 million, or $0.20 per basic and diluted share, compared to net loss of $1.3 million, or $0.10 per basic and diluted share, for the first quarter of 2012; Net loss for the first quarter of 2013 included $2.3 million of restructuring and other charges while net loss for the first quarter of 2012 included $1.0 million of move related expenses and lease termination costs;
• Non-GAAP net income (as defined) was $21,000, or $0.00 per basic and diluted share, compared to non-GAAP net income of $77,000, or $0.01 per basic and diluted share, for the quarter ended March 31, 2012.

Mr. Willoughby continued, “The financial results for the first quarter reflect certain impacts from the previously announced client transitions and restructuring related activities. We continue to expect that we will experience reduced revenue and profit in the second and third quarters of 2013, as compared to the first quarter of 2013, as these client programs continue to transition. We then expect an improvement in our fourth quarter as we realize increased benefits from new and expanded client relationships, including potential new clients through our new transcosmos relationship, and seasonal client volumes. We believe we are making the appropriate adjustments to our operations and staffing to address the reduced revenue level, while still supporting our long-term growth initiatives.

“We are excited about the positive momentum in the business, including the incremental new business opportunities we anticipate from our transcosmos relationship. Given the ramp up time required to contract and implement new client solutions, we expect the benefits of these opportunities will primarily be reflected in our CY014 and forward results. As such, we are reaffirming our guidance for calendar year 2013, with Service Fee Equivalent Revenue expected to be in the range of $110 million to $115 million, and Adjusted EBITDA in the range of $8 million to $10 million, excluding the impact of restructuring and other related expenses which we expect to continue, but to a lesser extent, into the second quarter,” Mr. Willoughby concluded.

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Wednesday, May 15, 2013, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter pin number 69039308 at least five minutes before the scheduled start time. Investors can also access the call in a “listen only” mode via the Internet at the Company’s website, www.pfsweb.com or www.kcsa.com. Please allow extra time prior to the call to visit the site and download any necessary audio software.

A digital replay of the conference call will be available through June 14, 2013 at (855) 859-2056, pin number 69039308. The replay also will be available at the Company’s website for a limited time.

Non-GAAP Financial Measures

This news release may contain 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, restructuring and other charges, lease termination costs and certain move related expenses.

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

Service Fee Equivalent Revenue represents service fee revenue plus the gross profit earned on product revenue.

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, restructuring and other charges, lease termination costs and certain move related expenses 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.

PFSweb believes these non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating 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.

About PFSweb, Inc.

PFSweb is engaged by iconic brands to enable and manage customized eCommerce and omni-channel commerce initiatives. PFSweb’s iCommerce Hub(SM) technology ecosystem offers retailers a multi-channel order management system that allows partner/client data integration and international payment processing. PFSweb’s iCommerce Professional Service(SM) provides interactive marketing services, eCommerce web site development and support services, IT development services, content management, customer intelligence and relationship and account management services. PFSweb’s iCommerce Centers of Excellence(SM) provides global fulfillment and logistics, high-touch customer care, client financial services and technology hosting.

Together, PFSweb’s iCommerce Solutions allows for international reach and expertise in both direct-to-consumer and business-to-business initiatives. PFSweb supports organizations across multiple industries including Procter & Gamble, L’Oreal, LEGO, Columbia Sportswear, Sorel, Carter’s, AAFES, Riverbed, Ricoh, Hawker Beechcraft Corp, Roots Canada Ltd., Diageo, BCBGMAXAZRIA, BCBGENERATION and HERVÉ LÉGER BY MAX AZRIA. PFSweb is headquartered in Allen, TX with additional locations in Tennessee, Mississippi, Canada, Belgium, and the Philippines.

To find out more about PFSweb (NASDAQ: PFSW), visit the company’s website at http://www.PFSweb.com.

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. PFSweb's Annual Report on Form 10-K for the year ended December 31, 2012 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 and Quarterly Reports and the Risk Factors described therein. PFSweb 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

Unaudited Condensed Consolidated Statements of Operations (A) (In Thousands, Except Per Share Data)     Three Months Ended March 31, 2013     2012 REVENUES:

Product revenue, net

$ 25,482 $ 34,551 Service fee revenue 28,002 28,378

Pass-thru revenue

  9,657     9,839  

Total revenues

  63,141     72,768     COSTS OF REVENUES: Cost of product revenue 23,515 31,682 Cost of service fee revenue 19,258 21,655 Cost of pass-thru revenue   9,657     9,839   Total costs of revenues   52,430     63,176   Gross profit 10,711 9,592 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   12,801     10,504   Income (loss) from operations (2,090 ) (912 ) INTEREST EXPENSE, NET   218     264   Income (loss) before income taxes (2,308 ) (1,176 ) INCOME TAX PROVISION (BENEFIT)   267     109   NET INCOME (LOSS) $ (2,575 ) $ (1,285 ) NON-GAAP INCOME (LOSS) $ 21   $ 77     NET INCOME (LOSS) PER SHARE: Basic $ (0.20 ) $ (0.10 ) Diluted $ (0.20 ) $ (0.10 )

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic   12,786     12,765   Diluted   12,786     12,765     EBITDA $ 318   $ 1,230   ADJUSTED EBITDA $ 2,914   $ 2,592    

(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, 2012.

   

PFSweb, Inc. and Subsidiaries

Reconciliation of certain Non-GAAP Items to GAAP (In Thousands, Except Per Share Data)  

 

      Three Months Ended March 31, 2013     2012 NET INCOME (LOSS) $ (2,575 ) $ (1,285 ) Income tax expense 267 109 Interest expense, net 218 264 Depreciation and amortization   2,408     2,142   EBITDA $ 318 $ 1,230 Stock-based compensation 303 340 Restructuring and other charges 2,293 - Lease termination costs - 450 Move related expenses   -     572   ADJUSTED EBITDA $ 2,914   $ 2,592       Three Months Ended March 31, 2013 2012   NET INCOME (LOSS) $ (2,575 ) $ (1,285 ) Stock-based compensation 303 340 Restructuring and other charges 2,293 - Lease terminations costs - 450 Move related expenses   -     572   NON-GAAP INCOME (LOSS) $ 21   $ 77     NET INCOME (LOSS) PER SHARE: Basic $ (0.20 ) $ (0.10 ) Diluted $ (0.20 ) $ (0.10 )   NON-GAAP INCOME (LOSS) Per Share: Basic $ 0.00   $ 0.01   Diluted $ 0.00   $ 0.01         Three Months Ended March 31, 2013 2012   TOTAL REVENUES $ 63,141 $ 72,768 Pass-thru revenue (9,657 ) (9,839 ) Cost of product revenue   (23,515 )   (31,682 ) SERVICE FEE EQUIVALENT REVENUE $ 29,969   $ 31,247      

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets (In Thousands, Except Share Data)        

March 31,

December 31, 2013 2012

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 17,951 $ 19,626 Restricted cash 362 283 Accounts receivable, net of allowance for doubtful accounts of $404 and $450 at March 31, 2013 and December 31, 2012, respectively 40,501 45,684 Inventories, net of reserves of $1,752 and $1,789 at March 31, 2013 and December 31, 2012, respectively 20,643 24,654 Other receivables 7,712 7,675 Prepaid expenses and other current assets   4,325     4,346   Total current assets   91,494     102,268     PROPERTY AND EQUIPMENT, net 27,045 27,917 OTHER ASSETS   3,009     3,286   Total assets   121,548     133,471    

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations $ 19,290 $ 16,660 Trade accounts payable 31,988 40,493 Deferred revenue 6,943 6,648 Accrued expenses   20,860     23,097   Total current liabilities 79,081 86,898   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 4,664 5,400 DEFERRED REVENUE 6,889 7,562 DEFERRED RENT   5,375     5,560   Total liabilities   96,009     105,420       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; 12,825,418 and 12,812,386 shares issued at March 31, 2013 and December 31, 2012, respectively; and 12,791,951 and 12,778,919 shares outstanding as of March 31, 2013 and December 31, 2012, respectively 13 13 Additional paid-in capital 106,340 106,018 Accumulated deficit (81,984 ) (79,409 ) Accumulated other comprehensive income 1,295 1,554 Treasury stock at cost, 33,467 shares   (125 )   (125 ) Total shareholders' equity   25,539     28,051   Total liabilities and shareholders' equity $ 121,548   $ 133,471      

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations For the Three Months Ended March 31, 2013 (In Thousands)         Business &         PFSweb Retail Connect Eliminations Consolidated REVENUES: Product revenue, net $ - $ 25,482 $ - $ 25,482 Service fee revenue 26,441 1,561 - 28,002 Service fee revenue - affiliate 2,355 362 (2,717 ) - Pass-thru revenue   9,657     -   -     9,657   Total revenues   38,453     27,405   (2,717 )   63,141     COSTS OF REVENUES: Cost of product revenue - 23,515 - 23,515 Cost of service fee revenue 19,780 1,647 (2,169 ) 19,258 Cost of pass-thru revenue   9,657     -   -     9,657   Total costs of revenues   29,437     25,162   (2,169 )   52,430   Gross profit 9,016 2,243 (548 ) 10,711 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   11,563     1,786   (548 )   12,801   Income (loss) from operations (2,547 ) 457 - (2,090 ) INTEREST EXPENSE, NET   67     151   -     218   Income (loss) before income taxes (2,614 ) 306 - (2,308 ) INCOME TAX PROVISION (BENEFIT)   120     147   -     267   NET INCOME (LOSS) $ (2,734 ) $ 159 $ -   $ (2,575 ) NON-GAAP NET INCOME (LOSS) $ (138 ) $ 159 $ -   $ 21     EBITDA $ (178 ) $ 496 $ -   $ 318   ADJUSTED EBITDA $ 2,418   $ 496 $ -   $ 2,914       A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:   NET INCOME (LOSS) $ (2,734 ) $ 159 $ - (2,575 ) Income tax expense (benefit) 120 147 - 267 Interest expense, net 67 151 - 218 Depreciation and amortization   2,369     39   -     2,408   EBITDA $ (178 ) $ 496 $ - $ 318 Stock-based compensation 303 - - 303 Restructuring and other charges   2,293     -   -     2,293   ADJUSTED EBITDA $ 2,418   $ 496 $ -   $ 2,914     A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:   NET INCOME (LOSS) $ (2,734 ) $ 159 $ - $ (2,575 ) Stock-based compensation 303 - - 303 Restructuring and other charges   2,293     -   -     2,293   NON-GAAP NET INCOME (LOSS) $ (138 ) $ 159 $ -   $ 21    

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 March 31, 2012 (In Thousands)         Business &         PFSweb Retail Connect Eliminations Consolidated REVENUES: Product revenue, net $ - $ 34,551 $ -

$

34,551 Service fee revenue 28,378 - - 28,378 Service fee revenue - affiliate 1,462 174 (1,636 ) - Pass-thru revenue   9,839     -   -     9,839   Total revenues   39,679     34,725   (1,636 )   72,768     COSTS OF REVENUES: Cost of product revenue - 31,682 - 31,682 Cost of service fee revenue 22,270 174 (789 ) 21,655 Cost of pass-thru revenue   9,839     -   -     9,839   Total costs of revenues   32,109     31,856   (789 )   63,176   Gross profit 7,570 2,869 (847 ) 9,592 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   9,310     2,041   (847 )   10,504   Income (loss) from operations (1,740 ) 828 - (912 ) INTEREST EXPENSE, NET   34     230   -     264   Income (loss) before income taxes (1,774 ) 598 - (1,176 ) INCOME TAX PROVISION (BENEFIT)   (116 )   225   -     109   NET INCOME (LOSS) $ (1,658 ) $ 373 $ -   $ (1,285 ) NON-GAAP NET INCOME (LOSS) $ (296 ) $ 373 $ -   $ 77     EBITDA $ 386   $ 844 $ -   $ 1,230   ADJUSTED EBITDA $ 1,748   $ 844 $ -   $ 2,592       A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:   NET INCOME (LOSS) $ (1,658 ) $ 373 $ - (1,285 ) Income tax expense (benefit) (116 ) 225 - 109 Interest expense, net 34 230 - 264 Depreciation and amortization   2,126     16   -     2,142   EBITDA $ 386 $ 844 $ - $ 1,230 Stock-based compensation 340 - - 340 Lease termination costs 450 450 Move related expenses   572         572   ADJUSTED EBITDA $ 1,748   $ 844 $ -   $ 2,592     A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:   NET INCOME (LOSS) $ (1,658 ) $ 373 $ - $ (1,285 ) Stock-based compensation 340 - - 340 Lease termination costs 450 - - 450 Move related expenses   572     -   -     572   NON-GAAP NET INCOME (LOSS) $ (296 ) $ 373 $ -   $ 77     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 March 31, 2013 (In Thousands)           Business &        

 

PFSweb Retail Connect Eliminations Consolidated

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 11,262 $ 6,689 $ - $ 17,951 Restricted cash - 362 - 362 Accounts receivable, net 29,100 11,669 (268 ) 40,501 Inventories, net - 20,643 - 20,643 Other receivables - 7,712 - 7,712 Prepaid expenses and other current assets   2,850     1,475     -     4,325   Total current assets   43,212     48,550     (268 )   91,494     PROPERTY AND EQUIPMENT, net 26,799 246 - 27,045 RECEIVABLE/INVESTMENT IN AFFILIATES 13,667 - (13,667 ) - OTHER ASSETS   2,898     111     -     3,009   Total assets   86,576     48,907     (13,935 )   121,548    

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations $ 14,099 $ 5,191 $ - $ 19,290 Trade accounts payable 7,900 24,356 (268 ) 31,988 Deferred revenue 6,921 22 - 6,943 Accrued expenses   15,196     5,664     -     20,860   Total current liabilities 44,116 35,233 (268 ) 79,081   LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 4,664 - - 4,664 PAYABLE TO AFFILIATES - 22,995 (22,995 ) - DEFERRED REVENUE 6,889 - - 6,889 DEFERRED RENT   5,333     42     -     5,375   Total liabilities   61,002     58,270     (23,263 )   96,009     COMMITMENTS AND CONTINGENCIES   SHAREHOLDERS' EQUITY: Common stock 13 19 (19 ) 13 Capital contributions - 1,000 (1,000 ) - Additional paid-in capital 106,340 28,059 (28,059 ) 106,340 Retained earnings (accumulated deficit) (81,943 ) (40,447 ) 40,406 (81,984 ) Accumulated other comprehensive income 1,289 2,006 (2,000 ) 1,295 Treasury stock   (125 )   -     -     (125 ) Total shareholders' equity   25,574     (9,363 )   9,328     25,539   Total liabilities and shareholders' equity $ 86,576   $ 48,907   $ (13,935 ) $ 121,548      

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets as of December 31, 2012 (In Thousands)           Business &         PFSweb Retail Connect Eliminations Consolidated

ASSETS

CURRENT ASSETS: Cash and cash equivalents $ 13,079 $ 6,547 $ - $ 19,626 Restricted cash - 283 - 283 Accounts receivable, net 34,831 11,574 (721 ) 45,684 Inventories, net - 24,654 - 24,654 Other receivables - 7,675 - 7,675 Prepaid expenses and other current assets   2,817     1,529     -     4,346   Total current assets   50,727     52,262     (721 )   102,268     PROPERTY AND EQUIPMENT, net 27,651 266 - 27,917 RECEIVABLE/INVESTMENT IN AFFILIATES 13,396 - (13,396 ) - OTHER ASSETS   3,166     120     -     3,286   Total assets   94,940     52,648     (14,117 )   133,471    

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations $ 13,072 $ 3,588 $ - $ 16,660 Trade accounts payable 12,109 29,105 (721 ) 40,493 Deferred revenue 6,573 75 - 6,648 Accrued expenses   16,743     6,354     -     23,097   Total current liabilities 48,497 39,122 (721 ) 86,898  

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

5,400 - - 5,400 PAYABLE TO AFFILIATES - 22,795 (22,795 ) - DEFERRED REVENUE 7,562 - - 7,562 DEFERRED RENT   5,482     78     -     5,560   Total liabilities   66,941     61,995     (23,516 )   105,420     COMMITMENTS AND CONTINGENCIES   SHAREHOLDERS' EQUITY: Common stock 13 19 (19 ) 13 Capital contributions - 1,000 (1,000 ) - Additional paid-in capital 106,018 28,059 (28,059 ) 106,018 Retained earnings (accumulated deficit) (79,461 ) (40,606 ) 40,658 (79,409 ) Accumulated other comprehensive income 1,554 2,181 (2,181 ) 1,554 Treasury stock   (125 )   -     -     (125 ) Total shareholders' equity   27,999     (9,347 )   9,399     28,051   Total liabilities and shareholders' equity $ 94,940   $ 52,648   $ (14,117 ) $ 133,471