PFSweb, Inc.
Aug 7, 2017
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PFSweb Reports Second Quarter 2017 Results

ALLEN, Texas, Aug. 07, 2017 (GLOBE NEWSWIRE) -- PFSweb, Inc. (NASDAQ:PFSW) (PFS), a global commerce service provider, is reporting results for the second quarter ended June 30, 2017.

 Second Quarter 2017 Summary vs. Same Year-Ago Quarter

Management Commentary

"During the June quarter, we continued our efforts toward driving an improved 2017 financial result and executing at a high level on behalf of our client relationships," said Mike Willoughby, CEO of PFS.  "Our June quarter results were highlighted by ongoing strength in our higher margin professional services activity, including our consulting, agency and technology services, where we continue to see support for our wide array of offerings and platform experience for both B2C and B2B engagements.  

"For the remainder of the year, we plan to continue performing at a high level for our clients to ensure an exceptional shopping experience for their customers, while also continuing our focus on operating efficiencies and prudent cost management. We continue to expect the execution of these initiatives to drive strong adjusted EBITDA growth in 2017."

Second Quarter 2017 Financial Results

Total revenues in the second quarter of 2017 increased to $78.1 million compared to $77.2 million in the same period of 2016. Service fee revenue in the second quarter increased 7% to $54.7 million compared to $51.2 million last year. Product revenue from the company's last remaining client under this legacy business model was $9.9 million compared to $11.4 million in the same period of 2016.

Service fee equivalent revenue increased 6% to $55.1 million compared to $51.8 million in the year-ago quarter, driven by both new and expanded client relationships.

Service fee gross margin in the second quarter of 2017 increased 140 basis points to 34.2% compared to 32.8% in the same period of 2016. The increase was due to a higher proportion of agency and technology services in the 2017 quarter.

Net loss in the second quarter of 2017 was $2.6 million or $(0.14) per share, compared to a net loss of $2.2 million or $(0.12) per share in the same period of 2016. Net loss in the second quarter of 2017 includes $1.2 million of stock-based compensation expense, $1.1 million of acquisition-related, restructuring and other costs, $0.8 million in amortization of acquisition-related intangible assets, and $0.2 million of deferred tax expense related to goodwill amortization. This compares to $0.9 million of acquisition-related, restructuring and other costs, $0.8 million in amortization of acquisition-related intangible assets, and $0.6 million of stock-based compensation expense in the same period of 2016.

Adjusted EBITDA increased 12% to $4.4 million compared to $3.9 million in the same period of 2016. As a percentage of service fee equivalent revenue, adjusted EBITDA increased 40 basis points to 7.9% compared to 7.5% in the year-ago quarter due to the aforementioned increase in agency and technology services in 2017.

Non-GAAP net income in the second quarter of 2017 was $0.6 million compared to non-GAAP net income of $0.2 million in the second quarter of 2016.

At June 30, 2017, cash and cash equivalents totaled $19.1 million compared to $24.4 million at December 31, 2016. Total debt was $53.7 million compared to $59.7 million at December 31, 2016.

2017 Outlook

PFS is reiterating its outlook for 2017 service fee equivalent revenue to range between $240 million and $250 million, reflecting growth of 5% to 9% from 2016. The company also maintains its target for adjusted EBITDA to range between $23 million and $26 million, reflecting 26% to 43% growth from 2016.

Conference Call

PFS will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the second quarter ended June 30, 2017.

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

Date: Monday, August 7, 2017
Time: 5:00 p.m. Eastern Time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-888-312-3052
International dial-in number: 1-719-457-2667
Conference ID: 9382702

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 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 21, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9382702

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 USA, Canada Goose, ASICS, Roots Canada Ltd., PANDORA, Charlotte Russe, Anastasia Beverly Hills, David's Bridal, 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, England, 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, 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, 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 2017 includes an estimated gross margin on product sales of approximately $2 million (based on targeted product revenue of $42 million less targeted cost of product revenue of $40 million) plus a targeted range of between $238 million to $248 million of service fee revenue.

The adjusted EBITDA outlook for 2017 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 2017 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, amortization of acquisition-related intangible assets, 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, 2016 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
972-881-2900

Investor Relations:

Scott Liolios or Sean Mansouri
Liolios Investor Relations
949-574-3860
PFSW@liolios.com

PFSweb, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets (A)  
(In Thousands, Except Share Data)  
               
        (Unaudited)      
        June 30,   December 31,  
        2017   2016  
               
      ASSETS        
CURRENT ASSETS:        
  Cash and cash equivalents $ 19,132     $ 24,425    
  Restricted cash   215       215    
  Accounts receivable, net of allowance for doubtful accounts of $564 and        
    $494 at June 30, 2017 and December 31, 2016, respectively   61,656       80,223    
  Inventories, net of reserves of $496 and $568 at June 30, 2017 and        
    December 31, 2016, respectively   7,734       6,632    
  Other receivables   5,100       6,750    
  Prepaid expenses and other current assets   5,440       7,299    
    Total current assets   99,277       125,544    
               
PROPERTY AND EQUIPMENT, net   26,976       30,264    
INTANGIBLE ASSETS, net   5,150       6,864    
GOODWILL   46,210       46,210    
OTHER ASSETS   3,653       2,454    
      Total assets   181,266       211,336    
               
  LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
  Current portion of long-term debt and capital lease obligations $ 7,833     $ 7,300    
  Trade accounts payable   44,697       59,752    
  Deferred revenue   5,345       7,156    
  Performance-based contingent payments   3,902       2,405    
  Accrued expenses   25,901       30,360    
    Total current liabilities   87,678       106,973    
               
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion   45,912       52,399    
DEFERRED REVENUE   4,702       4,127    
DEFERRED RENT   4,869       4,810    
PERFORMANCE-BASED CONTINGENT PAYMENTS   -       1,678    
OTHER  LIABILITIES   2,234       1,066    
    Total liabilities   145,395       171,053    
               
               
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;        
    18,946,818 and 18,768,567 shares issued at June 30, 2017 and        
    December 31, 2016, respectively; and 18,913,351 and 18,735,100        
    shares outstanding as of June 30, 2017 and December 31, 2016, respectively   19       19    
  Additional paid-in capital   148,519       146,286    
  Accumulated deficit   (112,769 )     (105,317 )  
  Accumulated other comprehensive income (loss)   227       (580 )  
  Treasury stock at cost, 33,467 shares   (125 )     (125 )  
    Total shareholders' equity   35,871       40,283    
    Total liabilities and shareholders' equity $ 181,266     $ 211,336    
               
(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, 2016.
 
               

 

PFSweb, Inc. and Subsidiaries  
Unaudited Condensed Consolidated Statements of Operations (A)  
(In Thousands, Except Per Share Data)  
                       
        Three Months Ended   Six Months Ended  
        June 30,   June 30,  
        2017   2016   2017   2016  
REVENUES:                
  Service fee revenue $ 54,700     $ 51,166     $ 111,965     $ 100,484    
    Product revenue, net   9,947       11,380       21,265       24,987    
  Pass-thru revenue   13,419       14,653       23,604       26,809    
    Total revenues   78,066       77,199       156,834       152,280    
                       
COSTS OF REVENUES:                
  Cost of service fee revenue   35,977       34,381       75,561       66,655    
  Cost of product revenue   9,505       10,742       20,230       23,644    
  Cost of pass-thru revenue   13,419       14,653       23,604       26,809    
    Total costs of revenues   58,901       59,776       119,395       117,108    
    Gross profit   19,165       17,423       37,439       35,172    
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   20,735       18,808       42,453       36,358    
  Income (loss) from operations   (1,570 )     (1,385 )     (5,014 )     (1,186 )  
INTEREST EXPENSE (INCOME), NET   710       609       1,347       1,094    
  Income (loss) before income taxes   (2,280 )     (1,994 )     (6,361 )     (2,280 )  
INCOME TAX EXPENSE (BENEFIT)   316       188       1,091       654    
NET INCOME (LOSS) $ (2,596 )   $ (2,182 )   $ (7,452 )   $ (2,934 )  
NON-GAAP NET INCOME (LOSS) $ 648     $ 153     $ (85)     $ 194    
                       
NET INCOME (LOSS) PER SHARE:                
  Basic $ (0.14 )   $ (0.12 )   $ (0.40 )   $ (0.16 )  
  Diluted $ (0.14 )   $ (0.12 )   $ (0.40 )   $ (0.16 )  
                       
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:                
  Basic   18,870       18,627       18,804       18,477    
  Diluted   18,870       18,627       18,804       18,477    
                         
EBITDA $ 2,086     $ 2,415     $ 2,550     $ 6,217    
ADJUSTED EBITDA   $ 4,381     $ 3,903     $ 8,034     $ 7,654    
                       
(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, 2016.
 
                       

 

PFSweb, Inc. and Subsidiaries  
Unaudited Reconciliation of Certain Non-GAAP Items to GAAP  
(In Thousands, Except Per Share Data)  
                       
        Three Months Ended   Six Months Ended  
        June 30,   June 30,  
        2017   2016   2017   2016  
                       
NET INCOME (LOSS)   $ (2,596 )   $ (2,182 )   $ (7,452 )   $ (2,934 )  
  Income tax expense (benefit)   316       188       1,091       654    
  Interest expense, net   710       609       1,347       1,094    
  Depreciation and amortization   3,656       3,800       7,564       7,403    
EBITDA $ 2,086     $ 2,415     $ 2,550     $ 6,217    
    Stock-based compensation   1,237       629       1,761       1,396    
  Acquisition-related, restructuring and other (income) costs     1,058       859       3,723       41    
ADJUSTED EBITDA   $ 4,381     $ 3,903     $ 8,034     $ 7,654    
                       
                       
        Three Months Ended   Six Months Ended  
        June 30,   June 30,  
        2017   2016   2017   2016  
                       
NET INCOME (LOSS)   $ (2,596 )   $ (2,182 )   $ (7,452 )   $ (2,934 )  
  Stock-based compensation   1,237       629       1,761       1,396    
  Amortization of acquisition-related intangible assets   772       847       1,542       1,691    
  Acquisition-related, restructuring and other (income) costs   1,058       859       3,723       41    
  Deferred tax expense - goodwill amortization   177       -       341       -    
NON-GAAP NET INCOME (LOSS) $ 648     $ 153     $ (85)     $ 194    
                       
                       
        Three Months Ended   Six Months Ended  
        June 30,   June 30,  
        2017   2016   2017   2016  
                       
TOTAL REVENUES   $ 78,066     $ 77,199     $ 156,834     $ 152,280    
  Pass-thru revenue     (13,419 )     (14,653 )     (23,604 )     (26,809 )  
  Cost of product revenue   (9,505 )     (10,742 )     (20,230 )     (23,644 )  
SERVICE FEE EQUIVALENT REVENUE $ 55,142     $ 51,804     $ 113,000     $ 101,827    
                       

 

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Source: PFSweb, Inc.

 

 

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