PFSweb, Inc.
PFSWEB INC (Form: 8-K, Received: 05/12/2017 16:08:19)

 

 

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): May 10, 2017

 

 

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 May 10, 2017, PFSweb, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2017. Attached to this current report on Form 8-K is a copy of the related press release dated May 10, 2017. 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.

 

Exhibit
No.

  

Description

99.1    Press Release Issued May 10, 2017


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: May 12, 2017     By:  

/s/ Thomas J. Madden

      Thomas J. Madden
      Executive Vice President,
     

Chief Financial and

Accounting Officer

Exhibit 99.1

 

LOGO

PFSweb Reports First Quarter 2017 Results

Allen, TX – May  10, 2017 – PFSweb, Inc. (NASDAQ: PFSW) (PFS), a global commerce service provider, is reporting results for the first quarter ended March 31, 2017.

First Quarter 2017 Summary vs. Same Year-Ago Quarter

 

    Total revenues increased 5% to $78.8 million.

 

    Service fee equivalent revenue (a non-GAAP measure defined below) increased 16% to $57.9 million.

 

    Service fee gross margin was 30.9% compared to 34.6%.

 

    Net loss was $4.9 million or $(0.26) per share, compared to a loss of $0.8 million or $(0.04) per share. The net loss in 2017 included a $2.7 million expense from acquisition, restructuring and other costs compared to a $0.8 million benefit in the prior year.

 

    Adjusted EBITDA (a non-GAAP measure defined below) was $3.7 million compared to $3.8 million.

Management Commentary

“We are keenly focused in 2017 on driving improved financial results and delivering optimal performance in support of our new and existing client relationships,” said Mike Willoughby, CEO of PFS. “During the first quarter, we made strong progress on both of these objectives. Our existing client satisfaction was evidenced through continued contract expansion, including the three-year contract extension we signed in March with our long-time customer, L’Oreal USA. Additionally, our new client wins reflect support for the breadth and strength of our service offering for both professional services and operations related engagements, as well as an ongoing improvement in B2B project wins.

“We continue to manage our omni-channel operations activity with a focus on driving higher-margin engagements, while also taking ongoing actions to reduce overhead and other costs where possible. We expect the benefit of our profitability initiatives to take hold in the second half of the year, driving targeted adjusted EBITDA growth of 26% to 43% in 2017.”

First Quarter 2017 Financial Results

Total revenues in the first quarter of 2017 increased 5% to $78.8 million compared to $75.1 million in the same period of 2016. Service fee revenue in the first quarter increased 16% to $57.3 million compared to $49.3 million last year. Product revenue from the company’s last remaining client under this legacy business model was $11.3 million compared to $13.6 million in the same period of 2016.

Service fee equivalent revenue increased 16% to $57.9 million compared to $50.0 million in the year-ago quarter, driven by both new and expanded client relationships.

Service fee gross margin in the first quarter of 2017 was 30.9% compared to 34.6% in the same period of 2016. The decrease was due to the impact of several large fulfillment clients that were implemented subsequent to the March 2016 quarter which operated at lower than targeted margin performance.


Through various initiatives, the company is targeting to improve the financial performance of its omni-channel operations activity while also continuing to focus on higher margin professional services engagements.

Net loss in the first quarter of 2017 was $4.9 million or $(0.26) per share, compared to a net loss of $0.8 million or $(0.04) per share in the same period of 2016. Net loss in the first quarter of 2017 included $2.7 million of acquisition-related, restructuring and other costs, $0.8 million in amortization of acquisition-related intangible assets, $0.5 million in stock-based compensation expense, and $0.2 million of deferred tax expense related to goodwill amortization. This compares to $0.8 million in amortization of acquisition-related intangible assets, $0.8 million in stock-based compensation expense, and a $0.8 million benefit from acquisition-related, restructuring and other costs in the same period of 2016.

Adjusted EBITDA was $3.7 million compared to $3.8 million in the same period of 2016. As a percentage of service fee equivalent revenue, adjusted EBITDA was 6.3% compared to 7.5% in the year-ago quarter. The decline in adjusted EBITDA margin was primarily driven by the aforementioned decline in service fee gross margin.

Non-GAAP net loss in the first quarter of 2017 was $0.8 million compared to non-GAAP net income of $41,000 in the first quarter of 2016.

At March 31, 2017, cash and cash equivalents totaled $15.6 million compared to $24.4 million at December 31, 2016. Total debt was $53.0 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 first quarter ended March 31, 2017.

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

Date: Wednesday, May 10, 2017

Time: 5:00 p.m. Eastern Time (2:00 p.m. Pacific time)

Toll-free dial-in number: 1-888-395-3237

International dial-in number: 1-719-457-2081

Conference ID: 1609872

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=124116 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 May 24, 2017.

Toll-free replay number: 1-844-512-2921

International replay number: 1-412-317-6671

Replay ID: 1609872

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, LEGO, 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, 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, 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)

 

     March 31,
2017
    December 31,
2016
 
ASSETS     

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 15,640     $ 24,425  

Restricted cash

     215       215  

Accounts receivable, net of allowance for doubtful accounts of $485 and $494 at March 31, 2017 and December 31, 2016, respectively

     60,762       80,223  

Inventories, net of reserves of $487 and $568 at March 31, 2017 and December 31, 2016, respectively

     8,047       6,632  

Other receivables

     5,347       6,750  

Prepaid expenses and other current assets

     6,706       7,299  
  

 

 

   

 

 

 

Total current assets

     96,717       125,544  

PROPERTY AND EQUIPMENT, net

     28,265       30,264  

INTANGIBLE ASSETS, net

     5,881       6,864  

GOODWILL

     46,210       46,210  

OTHER ASSETS

     3,643       2,454  
  

 

 

   

 

 

 

Total assets

     180,716       211,336  
  

 

 

   

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

CURRENT LIABILITIES:

    

Current portion of long-term debt and capital lease obligations

   $ 6,662     $ 7,300  

Trade accounts payable

     43,257       59,752  

Deferred revenue

     5,827       7,156  

Performance-based contingent payments

     2,425       2,405  

Accrued expenses

     26,338       30,360  
  

 

 

   

 

 

 

Total current liabilities

     84,509       106,973  

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

     46,353       52,399  

DEFERRED REVENUE

     4,073       4,127  

DEFERRED RENT

     4,658       4,810  

PERFORMANCE-BASED CONTINGENT PAYMENTS

     3,005       1,678  

OTHER LIABILITIES

     2,125       1,066  
  

 

 

   

 

 

 

Total liabilities

     144,723       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; 18,830,426 and 18,768,567 shares issued at March 31, 2017 and December 31, 2016, respectively; and 18,796,959 and 18,735,100 shares outstanding as of March 31, 2017 and December 31, 2016, respectively

     19       19  

Additional paid-in capital

     146,556       146,286  

Accumulated deficit

     (110,173     (105,317

Accumulated other comprehensive income (loss)

     (284     (580

Treasury stock at cost, 33,467 shares

     (125     (125
  

 

 

   

 

 

 

Total shareholders’ equity

     35,993       40,283  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 180,716     $ 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
March 31,
 
     2017     2016  

REVENUES:

    

Service fee revenue

   $ 57,265     $ 49,318  

Product revenue, net

     11,318       13,607  

Pass-thru revenue

     10,185       12,155  
  

 

 

   

 

 

 

Total revenues

     78,768       75,080  
  

 

 

   

 

 

 

COSTS OF REVENUES:

    

Cost of service fee revenue

     39,584       32,274  

Cost of product revenue

     10,725       12,903  

Cost of pass-thru revenue

     10,185       12,155  
  

 

 

   

 

 

 

Total costs of revenues

     60,494       57,332  
  

 

 

   

 

 

 

Gross profit

     18,274       17,748  

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     21,718       17,550  
  

 

 

   

 

 

 

Income (loss) from operations

     (3,444     198  

INTEREST EXPENSE (INCOME), NET

     637       484  
  

 

 

   

 

 

 

Income (loss) before income taxes

     (4,081     (286

INCOME TAX EXPENSE (BENEFIT)

     775       466  
  

 

 

   

 

 

 

NET INCOME (LOSS)

   $ (4,856   $ (752
  

 

 

   

 

 

 

NON-GAAP NET INCOME (LOSS)

   $ (733   $ 41  
  

 

 

   

 

 

 

NET INCOME (LOSS) PER SHARE:

    

Basic

   $ (0.26   $ (0.04
  

 

 

   

 

 

 

Diluted

   $ (0.26   $ (0.04
  

 

 

   

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:

    

Basic

     18,736       18,325  
  

 

 

   

 

 

 

Diluted

     18,736       18,325  
  

 

 

   

 

 

 

EBITDA

   $ 463     $ 3,801  
  

 

 

   

 

 

 

ADJUSTED EBITDA

   $ 3,652     $ 3,750  
  

 

 

   

 

 

 

 

(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
March 31,
 
     2017     2016  

NET INCOME (LOSS)

   $ (4,856   $ (752

Income tax expense (benefit)

     775       466  

Interest expense, net

     637       484  

Depreciation and amortization

     3,907       3,603  
  

 

 

   

 

 

 

EBITDA

   $ 463     $ 3,801  

Stock-based compensation

     524       766  

Acquisition-related, restructuring and other (income) costs

     2,665       (817
  

 

 

   

 

 

 

ADJUSTED EBITDA

   $ 3,652     $ 3,750  
  

 

 

   

 

 

 
     Three Months Ended
March 31,
 
     2017     2016  

NET INCOME (LOSS)

   $ (4,856   $ (752

Stock-based compensation

     524       766  

Amortization of acquisition-related intangible assets

     770       844  

Acquisition-related, restructuring and other (income) costs

     2,665       (817

Deferred tax expense - goodwill amortization

     164       —    
  

 

 

   

 

 

 

NON-GAAP NET INCOME (LOSS)

   $ (733   $ 41  
  

 

 

   

 

 

 
     Three Months Ended
March 31,
 
     2017     2016  

TOTAL REVENUES

   $ 78,768     $ 75,080  

Pass-thru revenue

     (10,185     (12,155

Cost of product revenue

     (10,725     (12,905
  

 

 

   

 

 

 

SERVICE FEE EQUIVALENT REVENUE

   $ 57,858     $ 50,020