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PFSweb Reports Record Second Quarter 2020 Results

- Strong eCommerce Demand and Fulfillment Volumes Drive Record Q2 Results -

ALLEN, Texas, Aug. 07, 2020 (GLOBE NEWSWIRE) -- PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the second quarter ended June 30, 2020.

Q2 2020 Highlights vs. Q2 2019

  • Total revenues increased 20% to $82.4 million.

  • Service fee equivalent (SFE) revenue (a non-GAAP measure defined and reconciled below) increased 23% to $62.3 million.

  • Service fee gross margin was 34.2% compared to 34.8%.

  • Net loss remained flat at $1.0 million or $(0.05) per share.

  • Adjusted EBITDA (a non-GAAP measure defined and reconciled below) more than doubled to $7.2 million compared to $3.4 million.

Management Commentary

“Our business continues to benefit from heightened eCommerce demand in this new COVID-19 environment,” said Mike Willoughby, CEO of PFSweb. “We had a record second quarter for PFS fulfillment volumes, SFE revenue and adjusted EBITDA, and the growth was spread across our client portfolio as most of our core verticals experienced strong momentum, including health & beauty, jewelry, activewear and consumer-packaged goods. More specifically, we witnessed peak levels of consumer demand through online channels in April when stay-at-home mandates were implemented across the country, and we continued to see strong demand even as various economies re-opened in May and June.

“We recently published research on rapidly evolving consumer behavior including adoption of curb-side delivery as an extension of ‘buy online, pick up in store’ and the emergence of a new online conscious consumer. These trends intersect strategically with our PFS product strategy for RetailConnect and CloudPick, as well as LiveArea’s productized offerings including the innovative ‘Scan and Go’ prototype we have developed in collaboration with one of our clients to provide fast, efficient and safe shopping experiences.

“In PFS, we have continued to serve as a vital partner to our clients as we help them navigate this dynamic environment. We increased personnel in our distribution centers, and added at-home personnel and new technology solutions to our virtual contact center environment to better align with the holiday-like volumes. We also experienced our strongest level of Mother’s Day related fulfillment volumes in company history as an increased number of consumers shopped online for their gifts. We believe this is a likely indication of what to expect for the Q4 holiday season, as many analysts predict this will be the strongest digital holiday of all time.

“In LiveArea, as we previously communicated, we experienced a few project delays and lower bookings early in the quarter due to COVID-19 related uncertainties. However, we exited June with a very robust pipeline of prospects looking to enhance their digital capabilities in response to recent online shopping trends resulting from COVID-19. We still have work to do to convert these prospective engagements in order to continue the strong LiveArea performance into the back half of the year and build up our project and engagement backlog as we look ahead to 2021.

“Given the record level of activity in PFS and strong LiveArea backlog and pipeline, we are increasing our 2020 outlook and now expect consolidated SFE revenue growth to be between 9% to 12%, subject to the unknown effects of the pandemic. We also expect adjusted EBITDA margin expansion for the year driven by our improved revenue performance and continued cost focus, partially offset by incremental investments in both the PFS and LiveArea segments in preparation for the upcoming holiday season and 2021, as well as certain anticipated labor cost increases.

“Although we remain comfortable with our balance sheet, liquidity and client receivables, we will continue to monitor the effects of the pandemic on our clients’ operations and prudently manage our own costs and liquidity as a precautionary measure. The incremental investments we are making, including our recently announced new fulfillment center, are imperative in supporting our clients as we begin preparing for the expected record online holiday shopping season. Ensuring we have the necessary capacity and capabilities to support our clients during these unprecedented times will only strengthen our partnerships over the long term, as we anticipate eCommerce will remain a key, if not primary, fixture of consumer shopping long after the pandemic is gone.”

Second Quarter 2020 Financial Results
Total revenues in the second quarter of 2020 increased 20% to $82.4 million compared to $68.5 million in the same period of 2019. Service fee revenue in the second quarter increased 23% to $62.0 million compared to $50.3 million in the second quarter last year. Product revenue from the company’s last remaining client under this legacy business model was $5.9 million compared to $6.1 million in the same period of 2019.

SFE revenue in the second quarter increased 23% to $62.3 million compared to $50.7 million in the year-ago quarter. The increase was primarily driven by the benefit of higher fulfillment activity in PFS.

Service fee gross margin in the second quarter of 2020 was 34.2% compared to 34.8% in the same period of 2019. The slight decrease was primarily due to revenue mix. Gross margins for both segments continued to be within the guidance range of 25% to 30% for the PFS segment and 40% to 50% for the LiveArea segment.

Net loss in the second quarter of 2020 remained flat at $1.0 million or $(0.05) per share compared to the same period of 2019.

Adjusted EBITDA in the second quarter increased significantly to $7.2 million compared to $3.4 million in the year-ago quarter. As a percentage of SFE revenue, adjusted EBITDA margin increased 480 basis points to 11.6% compared to 6.8%. The increase was primarily due to strong growth in SFE revenue and operating leverage.

Non-GAAP net income (a non-GAAP measure defined and reconciled below) increased significantly to $4.5 million in the second quarter of 2020 compared to $0.4 million in the second quarter of 2019.

At June 30, 2020, net debt (a non-GAAP measure defined and reconciled below as total debt, excluding operating lease liabilities, less cash and cash equivalents) was $31.0 million compared to $25.4 million at December 31, 2019. The expected increase was primarily due to a change in the credit card collection program for one of the company’s PFS clients.

Cash and cash equivalents at June 30, 2020 totaled $9.7 million compared to $12.4 million at December 31, 2019, and total debt was $40.6 million compared to $37.8 million at the end of last year.

2020 Outlook
In light of heightened demand in the company’s PFS segment and the robust LiveArea backlog and pipeline, PFSweb has increased its expectations for consolidated SFE revenue growth to be between 9% to 12% compared to 2019 (previously expected mid-to-high single digit growth), while continuing to expect growth for each of its business units in 2020. Coupled with an ongoing focus on costs, PFSweb also continues to expect to improve adjusted EBITDA margin in 2020.

COVID-19 Response
PFSweb maintains information related to its ongoing response to the COVID-19 crisis on its corporate website at www.pfsweb.com/covid-19-response/.

Conference Call
PFSweb will conduct a conference call today at 8:30 a.m. Eastern time to discuss its results for the second quarter ended June 30, 2020.

PFSweb management will host the conference call, followed by a question and answer period.

Date: Friday, August 7, 2020
Time: 8:30 a.m. Eastern time (7:30 a.m. Central time)
Toll-free dial-in number: (866) 220-4153
International dial-in number: (864) 663-5228
Conference ID: 9670505

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the company’s website at www.pfsweb.com.

A replay of the conference call will be available after 11:30 a.m. Eastern time on the same day through August 21, 2020.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 9670505

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

Non-GAAP Financial Measures
This news release contains certain non-GAAP measures, including non-GAAP net income (loss), net debt, earnings before interest, income taxes, depreciation and amortization (EBITDA), adjusted EBITDA and service fee equivalent revenue.

Non-GAAP net income (loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for the impact of non-cash stock-based compensation expense, acquisition-related, restructuring and other costs (including certain client related bankruptcy costs), amortization of acquisition-related intangible assets and deferred tax expense for goodwill amortization.

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

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

Non-GAAP net income (loss), EBITDA, adjusted EBITDA and service fee equivalent revenue are used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry. The calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation, acquisition-related, restructuring and other costs (including certain client related bankruptcy costs), amortization of acquisition-related intangible assets, and deferred tax expense for goodwill amortization, and EBITDA and adjusted EBITDA further eliminate the effect of financing, remaining income taxes and the accounting effects of capital spending, which items may vary from different companies for reasons unrelated to overall operating performance. Service fee equivalent revenue allows client contracts with similar operational support models but different financial models to be combined as if all contracts were being operated on a service fee revenue basis.

Net debt represents total debt, excluding operating lease liabilities, less cash and cash equivalents.

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. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “intend,” “plan,” “potential,” “project,” “seek,” “strive,” “predict,” “continue,” “target,” and “estimate” and other similar expressions. These forward-looking statements involve risks and uncertainties and may include assumptions as to how we may perform in the future, including the impact of the COVID-19 pandemic on our business, results of operations and global economic conditions. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee these expectations will actually be achieved. PFS' Annual Report on Form 10-K, as amended, for the year ended December 31, 2019 and any subsequent amendments or quarterly reports on Form 10-Q identify 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 periodic reports of the company and the Risk Factors described therein. PFS undertakes no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

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

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


PFSweb, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)
       
  (Unaudited)    
  June 30,   December 31,
    2020       2019  
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $ 9,680     $ 12,434  
Restricted cash   214       214  
Accounts receivable, net of allowance for doubtful accounts of $1,696 and $1,071 at June 30, 2020 and December 31, 2019, respectively   64,597       72,262  
Inventories, net of reserves of $164 and $291 at June 30, 2020 and December 31, 2019, respectively   4,399       3,281  
Other receivables   4,005       3,324  
Prepaid expenses and other current assets   8,282       6,954  
Total current assets   91,177       98,469  
       
PROPERTY AND EQUIPMENT, net   17,439       18,436  
OPERATING LEASE RIGHT-OF-USE ASSETS, net   32,399       36,403  
IDENTIFIABLE INTANGIBLES, net   889       1,135  
GOODWILL   44,868       45,393  
OTHER ASSETS   3,853       3,772  
Total assets $ 190,625     $ 203,608  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Trade accounts payable $ 29,146     $ 44,640  
Accrued expenses   22,663       21,625  
Current portion of operating lease liabilities   8,798       8,904  
Current portion of long-term debt and capital lease obligations   3,121       2,971  
Deferred revenues   5,072       6,058  
Total current liabilities   68,800       84,198  
       
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion   37,514       34,829  
DEFERRED REVENUES, less current portion   1,671       1,398  
OPERATING LEASE LIABILITIES   28,629       33,295  
OTHER LIABILITIES   4,461       3,046  
Total liabilities   141,075       156,766  
       
COMMITMENTS AND CONTINGENCIES      
       
SHAREHOLDERS' EQUITY:      
Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or outstanding   -       -  
Common stock, $0.001 par value; 35,000,000 shares authorized; 19,976,731 and 19,465,877 issued at June 30, 2020 and December 31, 2019, respectively; and 19,943,264 and 19,432,410 outstanding at June 30, 2020 and December 31, 2019, respectively   19       19  
Additional paid-in capital   163,139       158,192  
Accumulated deficit   (111,161 )     (109,943 )
Accumulated other comprehensive income   (2,322 )     (1,301 )
Treasury stock at cost, 33,467 shares   (125 )     (125 )
Total shareholders' equity   49,550       46,842  
Total liabilities and shareholders' equity $ 190,625     $ 203,608  



PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2020       2019       2020       2019  
REVENUES:              
  Service fee revenue $ 61,996     $ 50,331     $ 116,294     $ 101,769  
  Product revenue, net   5,915       6,138       13,447       13,638  
  Pass-through revenue   14,524       12,041       29,393       25,253  
  Total revenues   82,435       68,510       159,134       140,660  
               
COSTS OF REVENUES:              
  Cost of service fee revenue   40,765       32,809       75,481       66,767  
  Cost of product revenue   5,590       5,791       12,713       12,868  
  Cost of pass-through revenue   14,524       12,041       29,393       25,253  
  Total costs of revenues   60,879       50,641       117,587       104,888  
  Gross profit   21,556       17,869       41,547       35,772  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   21,541       18,096       40,911       36,443  
  Income (loss) from operations   15       (227 )     636       (671 )
INTEREST EXPENSE, NET   375       448       788       959  
  Income (loss) before income taxes   (360 )     (675 )     (152 )     (1,630 )
INCOME TAX EXPENSE   627       300       1,066       509  
NET LOSS   (987 )     (975 )     (1,218 )     (2,139 )
NON-GAAP NET INCOME $ 4,531     $ 442     $ 5,608     $ 620  
               
NET LOSS PER SHARE:              
  Basic $ (0.05 )   $ (0.05 )   $ (0.06 )   $ (0.11 )
  Diluted $ (0.05 )   $ (0.05 )   $ (0.06 )   $ (0.11 )
               
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:              
  Basic   19,800       19,444       19,739       19,465  
  Diluted   19,800       19,444       19,739       19,465  
               
EBITDA $ 1,979     $ 2,326     $ 4,885     $ 4,597  
ADJUSTED EBITDA $ 7,245     $ 3,446     $ 11,202     $ 6,763  



PFSweb, Inc. and Subsidiaries
Unaudited Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2020       2019       2020       2019  
               
NET LOSS $ (987 )   $ (975 )   $ (1,218 )   $ (2,139 )
  Income tax expense   627       300       1,066       509  
  Interest expense, net   375       448       788       959  
  Depreciation and amortization   1,964       2,553       4,249       5,268  
EBITDA   1,979       2,326       4,885       4,597  
  Stock-based compensation   5,154       679       5,699       1,330  
  Acquisition-related, restructuring and other costs   112       441       618       836  
ADJUSTED EBITDA $ 7,245     $ 3,446     $ 11,202     $ 6,763  
               
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2020       2019       2020       2019  
               
NET LOSS $ (987 )   $ (975 )   $ (1,218 )   $ (2,139 )
  Stock-based compensation   5,154       679       5,699       1,330  
  Amortization of acquisition-related intangible assets   122       168       245       334  
  Acquisition-related, restructuring and other costs   112       441       618       836  
  Deferred tax expense - goodwill amortization   130       129       264       259  
NON-GAAP NET INCOME $ 4,531     $ 442     $ 5,608     $ 620  
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2020       2019       2020       2019  
               
TOTAL REVENUES $ 82,435     $ 68,510     $ 159,134     $ 140,660  
  Pass-through revenue   (14,524 )     (12,041 )     (29,393 )     (25,253 )
  Cost of product revenue   (5,590 )     (5,791 )     (12,713 )     (12,868 )
SERVICE FEE EQUIVALENT REVENUE $ 62,321     $ 50,678     $ 117,028     $ 102,539  



PFSweb, Inc. and Subsidiaries
Unaudited Consolidated Segment Information
 and Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands)
               
The segment financial data for the three and six months ended June 30, 2020 and 2019, reflect the financial performance for each of the segments based on the current financial presentation reviewed by the company’s Chief Operating Decision Makers. The company is continuing to evaluate its segregation of costs among the business units, including an effort to further allocate certain Corporate costs into the two operating business units to enhance cost focus and responsibility.
               
  Three Months Ended   Six months ended
  June 30,   June 30,
    2020       2019       2020       2019  
PFS Operations              
Revenues:              
Service fee revenue $ 41,414     $ 31,700     $ 74,845     $ 64,754  
Product revenue, net   5,915       6,138       13,447       13,638  
Pass-through revenue   13,916       11,412       27,873       24,289  
Total revenues   61,245       49,250       116,165       102,681  
Costs of revenues:              
Cost of service fee revenue   29,434       22,755       52,739       46,675  
Cost of product revenue   5,590       5,791       12,713       12,868  
Cost of pass-through revenue   13,916       11,412       27,873       24,289  
Total costs of revenues   48,940       39,958       93,325       83,832  
Gross profit   12,305       9,292       22,840       18,849  
Direct operating expenses   7,903       7,163       15,348       14,195  
Direct contribution   4,402       2,129       7,492       4,654  
Depreciation and amortization   1,421       1,981       3,195       4,033  
Stock-based compensation   871       119       940       236  
Acquisition-related, restructuring and other costs   97       23       737       487  
ADJUSTED EBITDA $ 6,791     $ 4,252     $ 12,364     $ 9,410  
               
TOTAL REVENUES $ 61,245     $ 49,250     $ 116,165     $ 102,681  
Pass-through revenue   (13,916 )     (11,412 )     (27,873 )     (24,289 )
Cost of product revenue   (5,590 )     (5,791 )     (12,713 )     (12,868 )
SERVICE FEE EQUIVALENT REVENUE $ 41,739     $ 32,047     $ 75,579     $ 65,524  



PFSweb, Inc. and Subsidiaries
Unaudited Consolidated Segment Information
 and Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands)
               
  Three Months Ended   Six months ended
  June 30,   June 30,
    2020       2019       2020       2019  
LiveArea Professional Services              
Revenues:              
Service fee revenue $ 20,582     $ 18,631     $ 41,449     $ 37,015  
Pass-through revenue   608       629       1,520       964  
Total revenues   21,190       19,260       42,969       37,979  
Costs of revenues:              
Cost of service fee revenue   11,331       10,054       22,742       20,092  
Cost of pass-through revenue   608       629       1,520       964  
Total costs of revenues   11,939       10,683       24,262       21,056  
Gross profit   9,251       8,577       18,707       16,923  
Direct operating expenses   8,802       6,276       15,076       12,749  
Direct contribution   449       2,301       3,631       4,174  
Depreciation and amortization   206       284       429       615  
Stock-based compensation   2,256       147       2,391       297  
Acquisition-related, restructuring and other costs   5       25       6       58  
ADJUSTED EBITDA $ 2,916     $ 2,757     $ 6,457     $ 5,144  
               
Corporate              
Selling, general and administrative expenses $ (4,836 )   $ (4,657 )   $ (10,487 )   $ (9,499 )
Depreciation and amortization   337       288       625       620  
EBITDA   (4,499 )     (4,369 )     (9,862 )     (8,879 )
Stock-based compensation   2,027       413       2,368       797  
Acquisition-related, restructuring and other costs   10       393       (125 )     291  
ADJUSTED EBITDA $ (2,462 )   $ (3,563 )   $ (7,619 )   $ (7,791 )

PFSweb logo.png

Source: PFSweb, Inc.

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