Press Release

ALLEN, TX -- (Marketwired) -- 03/16/17 -- PFSweb, Inc. (NASDAQ: PFSW) (PFS), a global commerce service provider, reported results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Summary vs. Same Year-Ago Quarter

• Total revenues increased 14% to $102.5 million
• Service fee equivalent revenue (a non-GAAP measure defined below) increased 18% to $72.7 million
• Service fee gross margin was 27.7% compared to 31.6%
• Net loss was $3.6 million or $(0.19) per share, compared to a loss of $0.6 million or $(0.03) per share
• Adjusted EBITDA (a non-GAAP measure defined below) was $6.9 million compared to $7.5 million
  
  

Full Year 2016 Summary vs. 2015

• Total revenues increased 16% to $334.6 million
• Service fee equivalent revenue increased 24% to $229.0 million
• Service fee gross margin was 31.2% compared to 32.2%
• Net loss was $7.5 million or $(0.41) per share, compared to a loss of $7.9 million or $(0.45) per share
• Adjusted EBITDA was $18.2 million compared to $20.7 million
  
  

Management Commentary

"2016 marked the largest year of recurring revenue and project bookings in the history of our company," said Mike Willoughby, CEO of PFS. "These strong bookings were enabled by our investments in sales, marketing and infrastructure, as well as multiple acquisitions over the last three years that have expanded our service offering and addressable market.

"During the fourth quarter, we continued to execute on our sales pipeline, resulting in $15 million of new bookings. We also once again successfully completed the holiday season with a high level of client satisfaction during this important period.

"As announced in October, we experienced operational and financial challenges with a newly launched fulfillment client in 2016 related to their unique business requirements. While efforts were made to improve the performance of this client engagement during the quarter, we have mutually agreed to disengage and expect to fully transition them off our platform during the second quarter of 2017. As we evaluate our omni-channel operations in 2017, we will focus on driving higher margin engagements. On a year-over-year basis, this will present a slight revenue headwind, however, we plan to utilize the related infrastructure capacity for more profitable engagements in the second half of the year. As a result, we are slightly paring back our 2017 revenue guidance, while maintaining our expectation for adjusted EBITDA growth of 26% to 43%."

Fourth Quarter 2016 Financial Results

Total revenues in the fourth quarter of 2016 increased 14% to $102.5 million compared to $90.1 million in the same period of 2015. Service fee revenue in the fourth quarter increased 18% to $71.9 million compared to $60.9 million last year. Product revenue was $12.0 million compared to $13.9 million in the same period of 2015 due to ongoing restructuring activities by the company's last remaining client under this business model and their discontinuation of certain product lines.

Service fee equivalent revenue increased 18% to $72.7 million compared to $61.6 million in the year-ago quarter, driven by both new and expanded client relationships, strong client volumes during the holiday period and approximately $1.1 million of incremental service fees generated by the company's acquisition of Conexus in June 2016.

Service fee gross margin in the fourth quarter of 2016 was 27.7% compared to 31.6% in the same period of 2015. The decrease was primarily due to higher facility, labor and operating costs applicable to certain new, large fulfillment clients implemented during the year. This was partially offset by higher-margin professional services activity.

Net loss in the fourth quarter of 2016 was $3.6 million or $(0.19) per share, compared to a net loss of $0.6 million or $(0.03) per share in the same period of 2015. Net loss in the fourth quarter of 2016 included $4.0 million of acquisition-related, restructuring and other costs, $1.1 million in amortization of acquisition-related intangible assets, and $0.4 million in stock-based compensation expense. This compares to $1.3 million of acquisition-related, restructuring and other costs, $1.2 million in amortization of acquisition-related intangible assets, and $1.2 million in stock-based compensation expense in the same period of 2015.

Adjusted EBITDA (a non-GAAP measure defined below) was $6.9 million compared to $7.5 million in the same period of 2015. As a percentage of service fee equivalent revenue, adjusted EBITDA was 9.5% compared to 12.1% in the year-ago quarter. The decline in adjusted EBITDA margin was primarily driven by incremental 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 and reduced incentive-based compensation.

Non-GAAP net loss (a non-GAAP measure defined below) in the fourth quarter of 2016 was $2.0 million compared to $3.1 million in the fourth quarter of 2015.

At December 31, 2016, cash and cash equivalents totaled $24.4 million compared to $21.8 million at December 31, 2015. Total debt was $59.7 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 capital expenditure requirements.

Full Year 2016 Financial Results

Total revenues in 2016 increased 16% to $334.6 million compared to $288.3 million in 2015. Service fee revenue in 2016 increased 24% to a record $226.2 million compared to $182.2 million last year, while product revenue was $48.7 million compared to $58.7 million in the prior year. Service fee equivalent revenue increased 24% to a record $229.0 million compared to $185.3 million in 2015, including approximately $18 million of incremental revenue generated applicable to the company's acquisition of CrossView and Moda in 2015 and Conexus in 2016.

Service fee gross margin in 2016 decreased 100 basis points to 31.2% compared to 32.2% last year, primarily due to increased costs to support certain new fulfillment clients in 2016, partially offset by increased higher-margin professional services activity.

Net loss in 2016 was $7.5 million or $(0.41) per share, compared to a net loss of $7.9 million or $(0.45) per share in 2015. Net loss in 2016 included $3.5 million in acquisition-related, restructuring and other costs, $4.0 million in amortization of acquisition-related intangibles, and $2.1 million in stock-based compensation expense. This compares to $5.8 million in acquisition-related, restructuring and other costs, $2.8 million in amortization of acquisition-related intangibles, and $4.6 million in stock-based compensation expense in 2015.

Adjusted EBITDA was $18.2 million in 2016 compared to $20.7 million in 2015.

Non-GAAP net income in 2016 was $2.1 million compared to $5.4 million in 2015.

2017 Outlook

PFS is revising its outlook for 2017 service fee equivalent revenue to range between $240 million and $250 million (previously $245 million to $260 million), reflecting growth of 5% to 9% from 2016. The company 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 11:00 a.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2016.

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

Date: Thursday, March 16, 2017
Time: 11:00 a.m. Eastern Time (8:00 a.m. Pacific time)
Toll-free dial-in number: 1-877-548-7911
International dial-in number: 1-719-325-4907
Conference ID: 9392101

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=123341 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 2:00 p.m. Eastern Time on the same day through March 30, 2017.

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9392101

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, 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 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 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 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, 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.

PFSweb, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (A)
(In Thousands, Except Share Data)
				December 31,				December 31,
				2016				2015
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	24,425			$	21,781
	Restricted cash				215				275
	Accounts receivable, net of allowance for doubtful accounts of $494 and $600 at December 31, 2016 and December 31, 2015, respectively				80,223				70,700
	Inventories, net of reserves of $568 and $739 at December 31, 2016 and December 31, 2015, respectively				6,632				9,262
	Other receivables				6,750				8,704
	Prepaid expenses and other current assets				7,299				5,662
		Total current assets			125,544				116,384
PROPERTY AND EQUIPMENT, net					30,264				24,093
INTANGIBLE ASSETS, net					6,864				8,810
GOODWILL					46,210				39,829
OTHER ASSETS					2,454				2,174
		Total assets			211,336				191,290
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations			$	7,300			$	3,153
	Trade accounts payable				59,752				51,170
	Deferred revenue				7,156				7,390
	Performance-based contingent payments				2,405				11,679
	Accrued expenses				30,360				30,563
		Total current liabilities			106,973				103,955
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion					52,399				32,238
DEFERRED REVENUE					4,127				4,499
DEFERRED RENT					4,810				4,362
PERFORMANCE-BASED CONTINGENT PAYMENTS					1,678				2,478
OTHER LIABILITIES					1,066				-
		Total liabilities			171,053				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; 18,768,567 and 18,136,218 shares issued at December 31, 2016 and December 31, 2015, respectively; and 18,735,100 and 18,012,751 shares outstanding as of December 31, 2016 and December 31, 2015, respectively				19				18
	Additional paid-in capital				146,286				141,948
	Accumulated deficit				(105,317	)			(97,787	)
	Accumulated other comprehensive income (loss)				(580	)			(296	)
	Treasury stock at cost, 33,467 shares				(125	)			(125	)
		Total shareholders' equity			40,283				43,758
		Total liabilities and shareholders' equity		$	211,336			$	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

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)
					Three Months Ended								Year ended
					December 31,								December 31,
					2016				2015				2016				2015
REVENUES:
	Service fee revenue				$	71,894			$	60,865			$	226,165			$	182,175
	Product revenue, net					12,037				13,928				48,695				58,659
	Pass-thru revenue					18,524				15,271				59,783				47,435
			Total revenues			102,455				90,064				334,643				288,269
COSTS OF REVENUES:
	Cost of service fee revenue					51,966				41,633				155,513				123,574
	Cost of product revenue					11,234				13,215				45,883				55,587
	Cost of pass-thru revenue					18,524				15,271				59,783				47,435
			Total costs of revenues			81,724				70,119				261,179				226,596
			Gross profit			20,731				19,945				73,464				61,673
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES						22,378				19,212				76,304				66,280
		Income (loss) from operations				(1,647	)			733				(2,840	)			(4,607	)
INTEREST EXPENSE (INCOME), NET						516				509				2,323				1,757
		Income (loss) before income taxes				(2,163	)			224				(5,163	)			(6,364	)
INCOME TAX EXPENSE (BENEFIT)						1,394				822				2,367				1,497
NET INCOME (LOSS)					$	(3,557	)		$	(598	)		$	(7,530	)		$	(7,861	)
NON-GAAP NET INCOME (LOSS)					$	1,956			$	3,132			$	2,090			$	5,435
NET INCOME (LOSS) PER SHARE:
	Basic				$	(0.19	)		$	(0.03	)		$	(0.41	)		$	(0.45	)
	Diluted				$	(0.19	)		$	(0.03	)		$	(0.41	)		$	(0.45	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
	Basic					18,714				18,080				18,542				17,608
	Diluted					18,714				18,080				18,542				17,608
EBITDA					$	2,524			$	4,918			$	12,537			$	10,224
ADJUSTED EBITDA					$	6,911			$	7,453			$	18,163			$	20,692
(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								Year ended
		December 31,								December 31,
		2016				2015				2016				2015
NET INCOME (LOSS)		$	(3,557	)		$	(598	)		$	(7,530	)		$	(7,861	)
	Income tax expense (benefit)		1,394				822				2,367				1,497
	Interest expense, net		516				509				2,323				1,757
	Depreciation and amortization		4,171				4,185				15,377				14,831
EBITDA		$	2,524			$	4,918			$	12,537			$	10,224
	Stock-based compensation		368				1,191				2,111				4,637
	Acquisition-related, restructuring and other (income) costs		4,019				1,344				3,515				5,831
ADJUSTED EBITDA		$	6,911			$	7,453			$	18,163			$	20,692
		Three Months Ended								Year ended
		December 31,								December 31,
		2016				2015				2016				2015
NET INCOME (LOSS)		$	(3,557	)		$	(598	)		$	(7,530	)		$	(7,861	)
	Stock-based compensation		368				1,191				2,111				4,637
	Amortization of acquisition-related intangible assets		1,126				1,195				3,994				2,828
	Acquisition-related, restructuring and other (income) costs		4,019				1,344				3,515				5,831
NON-GAAP NET INCOME (LOSS)		$	1,956			$	3,132			$	2,090			$	5,435
		Three Months Ended								Year ended
		December 31,								December 31,
		2016				2015				2016				2015
TOTAL REVENUES		$	102,455			$	90,064			$	334,643			$	288,269
	Pass-thru revenue		(18,524	)			(15,271	)			(59,783	)			(47,435	)
	Cost of product revenue		(11,234	)			(13,215	)			(45,883	)			(55,587	)
SERVICE FEE EQUIVALENT REVENUE		$	72,697			$	61,578			$	228,977			$	185,247

PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended December 31, 2016
(In Thousands)
								Business &
				PFSweb				Retail Connect				Eliminations				Consolidated
REVENUES:
	Service fee revenue			$	64,448			$	7,446			$	-			$	71,894
	Service fee revenue - affiliate				7,120				189				(7,309	)			-
	Product revenue, net				-				12,037				-				12,037
	Pass-thru revenue				18,524				-				-				18,524
			Total revenues		90,092				19,672				(7,309	)			102,455
COSTS OF REVENUES:
	Cost of service fee revenue				51,908				6,504				(6,446	)			51,966
	Cost of product revenue				-				11,234				-				11,234
	Cost of pass-thru revenue				18,524				-				-				18,524
			Total costs of revenues		70,432				17,738				(6,446	)			81,724
			Gross profit		19,660				1,934				(863	)			20,731
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					22,876				365				(863	)			22,378
		Income (loss) from operations			(3,216	)			1,569				-				(1,647	)
INTEREST EXPENSE (INCOME), NET					443				73				-				516
		Income (loss) before income taxes			(3,659	)			1,496				-				(2,163	)
INCOME TAX EXPENSE (BENEFIT)					874				520				-				1,394
NET INCOME (LOSS)				$	(4,533	)		$	976			$	-			$	(3,557	)
NON-GAAP NET INCOME (LOSS)				$	980			$	976			$	-			$	1,956
EBITDA				$	951			$	1,573			$	-			$	2,524
ADJUSTED EBITDA				$	5,338			$	1,573			$	-			$	6,911
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)				$	(4,533	)		$	976			$	-				(3,557	)
		Income tax expense (benefit)			874				520				-				1,394
		Interest expense (income), net			443				73				-				516
		Depreciation and amortization			3,041				4				-				3,045
		Amortization of acquisition-related intangible assets			1,126				-				-				1,126
EBITDA				$	951			$	1,573			$	-			$	2,524
		Stock-based compensation			368				-				-				368
		Acquisition-related, restructuring and other income			4,019				-				-				4,019
ADJUSTED EBITDA				$	5,338			$	1,573			$	-			$	6,911
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)				$	(4,533	)		$	976			$	-			$	(3,557	)
		Stock-based compensation			368				-				-				368
		Amortization of acquisition-related intangible assets			1,126				-				-				1,126
		Acquisition-related, restructuring and other income			4,019				-				-				4,019
NON-GAAP NET INCOME (LOSS)				$	980			$	976			$	-			$	1,956
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 Twelve Months Ended December 31, 2016
(In Thousands)
									Business &
					PFSweb				Retail Connect			Eliminations				Consolidated
REVENUES:
	Service fee revenue				$	207,641			$	18,524		$	-			$	226,165
	Service fee revenue - affiliate					16,907				878			(17,785	)			-
	Product revenue, net					-				48,695			-				48,695
	Pass-thru revenue					59,783				-			-				59,783
			Total revenues			284,331				68,097			(17,785	)			334,643
COSTS OF REVENUES:
	Cost of service fee revenue					154,985				17,319			(16,791	)			155,513
	Cost of product revenue					-				45,883			-				45,883
	Cost of pass-thru revenue					59,783				-			-				59,783
			Total costs of revenues			214,768				63,202			(16,791	)			261,179
			Gross profit			69,563				4,895			(994	)			73,464
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES						75,295				2,003			(994	)			76,304
		Income (loss) from operations				(5,732	)			2,892			-				(2,840	)
INTEREST EXPENSE (INCOME), NET						1,994				329			-				2,323
		Income (loss) before income taxes				(7,726	)			2,563			-				(5,163	)
INCOME TAX EXPENSE (BENEFIT)						1,467				900			-				2,367
NET INCOME (LOSS)					$	(9,193	)		$	1,663		$	-			$	(7,530	)
NON-GAAP NET INCOME (LOSS)					$	427			$	1,663		$	-			$	2,090
EBITDA					$	9,623			$	2,914		$	-			$	12,537
ADJUSTED EBITDA					$	15,249			$	2,914		$	-			$	18,163
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)					$	(9,193	)		$	1,663		$	-				(7,530	)
		Income tax expense (benefit)				1,467				900			-				2,367
		Interest expense (income), net				1,994				329			-				2,323
		Depreciation and amortization				11,361				22			-				11,383
		Amortization of acquisition-related intangible assets				3,994				-			-				3,994
EBITDA					$	9,623			$	2,914		$	-			$	12,537
		Stock-based compensation				2,111				-			-				2,111
		Acquisition-related, restructuring and other income				3,515				-			-				3,515
ADJUSTED EBITDA					$	15,249			$	2,914		$	-			$	18,163
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)					$	(9,193	)		$	1,663		$	-			$	(7,530	)
		Stock-based compensation				2,111				-			-				2,111
		Amortization of acquisition-related intangible assets				3,994				-			-				3,994
		Acquisition-related, restructuring and other income				3,515				-			-				3,515
NON-GAAP NET INCOME (LOSS)					$	427			$	1,663		$	-			$	2,090
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 December 31, 2015
(In Thousands)
									Business &
					PFSweb				Retail Connect			Eliminations				Consolidated
REVENUES:
	Service fee revenue				$	54,771			$	6,094		$	-			$	60,865
	Service fee revenue - affiliate					5,422				250			(5,672	)			-
	Product revenue, net					-				13,928			-				13,928
	Pass-thru revenue					15,271				-			-				15,271
			Total revenues			75,464				20,272			(5,672	)			90,064
COSTS OF REVENUES:
	Cost of service fee revenue					41,345				5,777			(5,489	)			41,633
	Cost of product revenue					-				13,215			-				13,215
	Cost of pass-thru revenue					15,271				-			-				15,271
			Total costs of revenues			56,616				18,992			(5,489	)			70,119
			Gross profit			18,848				1,280			(183	)			19,945
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES						18,899				496			(183	)			19,212
		Income (loss) from operations				(51	)			784			-				733
INTEREST EXPENSE (INCOME), NET						414				95			-				509
		Income (loss) before income taxes				(465	)			689			-				224
INCOME TAX EXPENSE (BENEFIT)						592				230			-				822
NET INCOME (LOSS)					$	(1,057	)		$	459		$	-			$	(598	)
NON-GAAP NET INCOME (LOSS)					$	2,673			$	459		$	-			$	3,132
EBITDA					$	4,124			$	794		$	-			$	4,918
ADJUSTED EBITDA					$	6,659			$	794		$	-			$	7,453
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)					$	(1,057	)		$	459		$	-				(598	)
		Income tax expense (benefit)				592				230			-				822
		Interest expense (income), net				414				95			-				509
		Depreciation and amortization				2,980				10			-				2,990
		Amortization of acquisition-related intangible assets				1,195				-			-				1,195
EBITDA					$	4,124			$	794		$	-			$	4,918
		Stock-based compensation				1,191				-			-				1,191
		Acquisition-related, restructuring and other costs				1,344				-			-				1,344
ADJUSTED EBITDA					$	6,659			$	794		$	-			$	7,453
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)					$	(1,057	)		$	459		$	-			$	(598	)
		Stock-based compensation				1,191				-			-				1,191
		Amortization of acquisition-related intangible assets				1,195				-			-				1,195
		Acquisition-related, restructuring and other costs				1,344				-			-				1,344
NON-GAAP NET INCOME (LOSS)					$	2,673			$	459		$	-			$	3,132

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 Twelve Months Ended December 31, 2015
(In Thousands)
								Business &
				PFSweb				Retail Connect			Eliminations				Consolidated
REVENUES:
	Service fee revenue			$	165,510			$	16,665		$	-			$	182,175
	Service fee revenue - affiliate				15,559				818			(16,377	)			-
	Product revenue, net				-				58,659			-				58,659
	Pass-thru revenue				47,435				-			-				47,435
			Total revenues		228,504				76,142			(16,377	)			288,269
COSTS OF REVENUES:
	Cost of service fee revenue				122,981				16,193			(15,600	)			123,574
	Cost of product revenue				-				55,587			-				55,587
	Cost of pass-thru revenue				47,435				-			-				47,435
			Total costs of revenues		170,416				71,780			(15,600	)			226,596
			Gross profit		58,088				4,362			(777	)			61,673
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					64,427				2,630			(777	)			66,280
		Income (loss) from operations			(6,339	)			1,732			-				(4,607	)
INTEREST EXPENSE (INCOME), NET					1,326				431			-				1,757
		Income (loss) before income taxes			(7,665	)			1,301			-				(6,364	)
INCOME TAX EXPENSE (BENEFIT)					954				543			-				1,497
NET INCOME (LOSS)				$	(8,619	)		$	758		$	-			$	(7,861	)
NON-GAAP NET INCOME (LOSS)				$	4,357			$	1,078		$	-			$	5,435
EBITDA				$	8,424			$	1,800		$	-			$	10,224
ADJUSTED EBITDA				$	18,572			$	2,120		$	-			$	20,692
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
		Amortization of acquisition-related intangible assets
NET INCOME (LOSS)				$	(8,619	)		$	758		$	-				(7,861	)
		Income tax expense (benefit)			954				543			-				1,497
		Interest expense (income), net			1,326				431			-				1,757
		Depreciation and amortization			11,935				68			-				12,003
		Amortization of acquisition-related intangible assets			2,828				-			-				2,828
EBITDA				$	8,424			$	1,800		$	-			$	10,224
		Stock-based compensation			4,637				-			-				4,637
		Acquisition-related, restructuring and other costs			5,511				320			-				5,831
ADJUSTED EBITDA				$	18,572			$	2,120		$	-			$	20,692
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)				$	(8,619	)		$	758		$	-			$	(7,861	)
		Stock-based compensation			4,637				-			-				4,637
		Amortization of acquisition-related intangible assets			2,828				-			-				2,828
		Acquisition-related, restructuring and other costs			5,511				320			-				5,831
NON-GAAP NET INCOME (LOSS)				$	4,357			$	1,078		$	-			$	5,435
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 December 31, 2016
(In Thousands)
								Business &
				PFSweb				Retail Connect				Eliminations				Consolidated
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	5,166			$	19,259			$	-			$	24,425
	Restricted cash				-				215				-				215
	Accounts receivable, net				59,292				22,243				(1,312	)			80,223
	Inventories, net				-				6,632				-				6,632
	Other receivables				362				6,388				-				6,750
	Prepaid expenses and other current assets				6,511				788				-				7,299
		Total current assets			71,331				55,525				(1,312	)			125,544
PROPERTY AND EQUIPMENT, net					30,230				34				-				30,264
RECEIVABLE/INVESTMENT IN AFFILIATES					10,063				-				(10,063	)			-
INTANGIBLE ASSETS, net					6,864				-				-				6,864
GOODWILL					46,210				-				-				46,210
OTHER ASSETS					2,454				-				-				2,454
		Total assets			167,152				55,559				(11,375	)			211,336
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations			$	7,300			$	-			$	-			$	7,300
	Trade accounts payable				19,687				41,377				(1,312	)			59,752
	Deferred revenue				7,156				-				-				7,156
	Performance-based contingent payments				2,405				-				-				2,405
	Accrued expenses				26,048				4,312				-				30,360
		Total current liabilities			62,596				45,689				(1,312	)			106,973
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion					52,399				-				-				52,399
PAYABLE TO AFFILIATES					-				22,045				(22,045	)			-
DEFERRED REVENUE					4,127				-				-				4,127
DEFERRED RENT					4,810				-				-				4,810
PERFORMANCE-BASED CONTINGENT PAYMENTS					1,678				-				-				1,678
OTHER LIABILITIES					1,066				-				-				1,066
		Total liabilities			126,676				67,734				(23,357	)			171,053
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
	Common stock				19				19				(19	)			19
	Capital contributions				-				1,000				(1,000	)			-
	Additional paid-in capital				146,286				28,060				(28,060	)			146,286
	Retained earnings (accumulated deficit)				(105,317	)			(42,230	)			42,230				(105,317	)
	Accumulated other comprehensive income (loss)				(387	)			976				(1,169	)			(580	)
	Treasury stock				(125	)			-				-				(125	)
		Total shareholders' equity			40,476				(12,175	)			11,982				40,283
		Total liabilities and shareholders' equity		$	167,152			$	55,559			$	(11,375	)		$	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 Consolidating Balance Sheets
as of December 31, 2015
(In Thousands)
									Business &
					PFSweb				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, 2016.

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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