Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 8, 2019
 
PFSweb, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
000-28275
 
75-2837058
 
 
(STATE OR OTHER JURISDICTION
OF INCORPORATION)
 
(COMMISSION FILE NUMBER)
 
(IRS EMPLOYER
IDENTIFICATION NO.)
 
 
 
505 MILLENNIUM DRIVE
ALLEN, TX 75013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
 
(972) 881-2900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
N/A
(FORMER NAME OR ADDRESS, IF CHANGED SINCE LAST REPORT)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[  ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 








 
INFORMATION TO BE INCLUDED IN THE REPORT
 
ITEM 2.02. Results of Operations and Financial Condition
 
On August 8, 2019, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2019. Attached as an exhibit to this current report on Form 8-K is a copy of the related press release dated August 8, 2019. The information in this Report on Form 8-K, and the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section.
 
ITEM 9.01. Financial Statements and Exhibits.
 
(d) Exhibits.  The following exhibit is filed with this document:
 
Exhibit No.
 
Description
99.1
 
 

 








 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
PFSweb, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
Dated: August 12, 2019
By:
/s/ Thomas J. Madden
 
 
 
 
Thomas J. Madden
 
 
 
 
Executive Vice President,
Chief Financial and
Accounting Officer 
 
 
 
 
 
 
 
 


Exhibit



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Exhibit 99.1
 






PFSweb Reports Second Quarter 2019 Results

Allen, TX - August 8, 2019 - PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the second quarter ended June 30, 2019.

Second Quarter 2019 Summary vs. Same Year-Ago Quarter
Total revenues were $68.5 million compared to $77.1 million.
Service fee equivalent (SFE) revenue (a non-GAAP measure defined below) was $50.7 million compared to $53.6 million.
Service fee gross margin was 34.8% compared to 37.3%.
Net loss was $1.0 million or $(0.05) per share, compared to a net loss of $0.6 million or $(0.03) per share.
Adjusted EBITDA (a non-GAAP measure defined below) was $3.4 million compared to $5.3 million.

Management Commentary
“As expected, our second quarter results were largely in-line with our first quarter,” said Mike Willoughby, CEO of PFSweb. “The second quarter was highlighted by strong progress in driving new client contracts in our PFS business unit, while simultaneously resetting the LiveArea business with new executive and sales leadership. We believe both developments establish a strong foundation for our expected return to growth in 2020.

“During the quarter, we appointed Jim Butler as the new executive vice president and general manager of LiveArea, and we are thrilled to have him join our senior leadership team. Jim brings a wealth of experience in technology and digital consulting and will be a strong partner as we quickly revamp LiveArea’s go-to-market strategy and enhance our sales team in that business unit.

“Jim’s immediate priority is to assess and grow the LiveArea sales pipeline while increasing our market visibility and expanding our addressable market with new services and productized offerings. Since appointing Jim, we have hired proven sales, marketing, product and strategy experts with a track record of executing high-performance sales and marketing programs for commerce consultancies and digital professional services companies.

“Our PFS business has performed exceptionally well from a new sales perspective. The annual contract value from our second quarter bookings were more than three times higher than the year-ago quarter, and we are currently on pace to have one of the strongest years of new PFS bookings in company history. These new wins have been both direct-to-consumer and B2B engagements within our core target verticals-health & beauty, fashion & apparel and CPG. While these new clients will partially contribute in 2019, we expect 2019 PFS SFE revenue to be relatively flat compared to 2018 as we strive to make up for the revenue lost from two unexpected retail client bankruptcies and resulting liquidations in 2019. Also of note, our current client base and sales pipeline mix is now more diversified with a greater proportion of mid-market brands and less ‘brick-and-mortar’ general merchandise retailers.






“We continue to make strides in ramping our new Fulfillment-as-a-Service (FaaS) offerings, including both RetailConnect and CloudPick. Although we just introduced these new solutions to market earlier this year, we have already received strong indications of interest and are exploring multiple avenues to accelerate growth from these ‘asset-light’ products, including bundling both RetailConnect and CloudPick with our other service offerings in existing proposals and selling each product on a stand-alone basis.

“Looking at the second half of the year, as a result of the two retail client bankruptcies in the PFS business and our sales challenges with LiveArea, revenue and AEBITDA performance will be below our original expectations for the year. For the remainder of 2019, we plan to continue executing for our clients as they approach the key holiday season, working diligently to make the most of the opportunities in our PFS and LiveArea sales pipelines and quickly rebuilding the LiveArea sales pipeline as we head into 2020. We will also continue our strong focus on cost management, building on the savings already delivered over the past year.

“Looking toward the future, with Jim Butler onboard and a revamped LiveArea team staffed with experienced high-performance sales and marketing leaders, I am confident in the direction of LiveArea as we head into next year. Additionally, the exceptionally strong sales bookings in PFS along with the anticipated recurring revenue streams provide us with good visibility into the next 12-18 months for PFS. As a result, we are well into our financial planning process for next year and look forward to introducing our 2020 growth outlook during the next quarterly update in November.”

Second Quarter 2019 Financial Results
Total revenues in the second quarter of 2019 were $68.5 million compared to $77.1 million in the same period of 2018. Service fee revenue in the second quarter was $50.3 million compared to $53.1 million in the second quarter last year. Product revenue from the company’s last remaining client under this legacy business model was $6.1 million compared to $8.8 million in the same period of 2018.

SFE revenue was $50.7 million compared to $53.6 million in the year-ago quarter. The decline was primarily driven by the loss of revenue from one of the client bankruptcies in PFS, as well as reduced system integration project activity in the LiveArea business.

Service fee gross margin in the second quarter of 2019 was 34.8% compared to 37.3% in the same period of 2018. The decrease was primarily due to revenue mix in the PFS segment, with a higher percentage of revenues coming from lower margin fulfillment and transportation services as compared to higher margin technology related revenues. LiveArea gross margins also declined during the quarter as the company experienced increased labor costs and incremental costs on certain client projects. Gross margins for both segments continued to be within the guidance range of 25% to 30% for the PFS segment and 40% to 50% for the LiveArea segment.

Net loss in the second quarter of 2019 was $1.0 million or $(0.05) per share, compared to a net loss of $0.6 million or $(0.03) per share in the same period of 2018. Net loss in the second quarter of 2019 included $0.7 million of stock-based compensation expense, $0.4 million of acquisition-related, restructuring and other costs, $0.2 million in amortization of acquisition-related intangible assets, and $0.1 million of deferred tax expense related to goodwill amortization. This compares to $1.4 million of stock-based compensation expense, $0.5 million of acquisition-related, restructuring and other costs, $0.4 million in amortization of acquisition-related intangible assets, and a $0.1 million deferred tax credit related to goodwill amortization in the same period of 2018.

Adjusted EBITDA in the second quarter was $3.4 million compared to $5.3 million in the year-ago quarter. As a percentage of SFE revenue, adjusted EBITDA was 6.8% compared to 10.0%, with the decrease primarily due to the aforementioned lower sales and gross margin in both the PFS and LiveArea businesses.

Non-GAAP net income in the second quarter of 2019 was $0.4 million compared to $1.7 million in the second quarter of 2018.






At June 30, 2019, net debt (defined as total debt, excluding operating lease liabilities, less cash and cash equivalents) was $22.8 million compared to $26.5 million at December 31, 2018. Cash and cash equivalents totaled $11.8 million compared to $15.4 million at December 31, 2018. Total debt at June 30, 2019 was $34.7 million compared to $42.0 million at the end of last year.

Subsequent Event & Revised 2019 Outlook
One of the company’s clients, Charming Charlie, serviced by the PFS Operations segment, filed for bankruptcy on July 11, 2019. The SFE revenue earned from this client in 2019 was originally estimated to be $2 million, of which more than half was expected in the second half of the year. PFS operations services for this client ended during the second quarter and pre-paid transition services are expected to conclude within the next two weeks. PFSweb wrote down approximately $0.7 million of service fee and freight program receivables related to this client bankruptcy in the second quarter of 2019.

As a result of the impact of the two client bankruptcies and unplanned excess capacity in the company’s distribution facilities, as well as the current sales challenges in its LiveArea business unit, PFSweb now expects 2019 SFE revenue to range between $215 million and $225 million, with adjusted EBITDA ranging between $14 million and $17 million.

Conference Call
PFSweb will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the second quarter ended June 30, 2019.

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

Date: Thursday, August 8, 2019
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-888-220-8474
International dial-in number: 1-323-794-2591
Conference ID: 9068313

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 Gateway Investor Relations at 1-949-574-3860.

The conference call will be broadcast live and available for replay here 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 August 22, 2019.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9068313






About PFSweb, Inc.
PFSweb (NASDAQ:PFSW) is a global commerce services company that manages the online customer shopping experience on behalf of major branded manufacturers and retailers. Across two business units - LiveArea for strategy consulting, creative design, digital marketing, and web development services, and PFS for order fulfillment, contact center, payment processing/fraud management, and order management services - they provide solutions to a broad range of Fortune 500® companies and household brand names such as Procter & Gamble, L’Oréal USA, Ralph Lauren, PANDORA, ASICS, the United States Mint, and many more. PFSweb enables these brands to provide a more convenient and brand-centric online shopping experience through both traditional and online business channels. The company is headquartered in Allen, TX with additional locations around the globe. For more information, please visit www.pfsweb.com.

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 costs (including certain client related bankruptcy costs), amortization of acquisition-related intangible assets and deferred tax expense for goodwill amortization.

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

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

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 costs (including certain client related bankruptcy costs), amortization of acquisition-related intangible assets, and deferred tax expense for goodwill amortization, and EBITDA and adjusted EBITDA further eliminate the effect of financing, remaining 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, 2018 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.






Company Contact:
Michael C. Willoughby
Chief Executive Officer
Or
Thomas J. Madden
Chief Financial Officer
1-972-881-2900

Investor Relations:
Sean Mansouri, CFA or Scott Liolios
Gateway Investor Relations
1-949-574-3860
PFSW@gatewayir.com







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