PFSweb, Inc.
Nov 9, 2016
PDF

PFSweb Reports Third Quarter 2016 Results

ALLEN, TX -- (Marketwired) -- 11/09/16 -- PFSweb, Inc. (NASDAQ: 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)

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) (NASDAQ: 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 &
Retail Connect

Eliminations

Consolidated
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)


PFSweb

Business &
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)



PFSweb


Business &
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)



PFSweb


Business &
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)



PFSweb


Business &
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

Source: PFSweb, Inc.

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