Press Release

- Reports Record Q3 Service Fee Revenue Driven by Continued Robust eCommerce Demand and Elevated Fulfillment Volumes -

- Raises 2020 Outlook Ahead of Expected Record Holiday Season -

ALLEN, Texas, Nov. 06, 2020 (GLOBE NEWSWIRE) -- PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the third quarter ended September 30, 2020.

“We continue to experience robust eCommerce demand and significantly elevated fulfillment volumes as we support our clients through a dynamic online retail environment ahead of the holiday season,” said Mike Willoughby, CEO of PFSweb. “This led to strong growth for each business unit and double-digit year-over-year increases in consolidated SFE revenue and adjusted EBITDA for the quarter. Through a combination of our at-home professional services, contact center and corporate teams, along with our front-line fulfillment center personnel, our global workforce is operating at high levels of productivity, while closely adhering to COVID-19 protocols and precautions to enhance employee safety. I am proud of our adaptability and operational strength across both our PFS and LiveArea segments of our business.”

Q3 2020 Highlights vs. Q3 2019

• Total revenues increased 13% to $77.1 million.
• Service fee equivalent (SFE) revenue (a non-GAAP measure defined and reconciled below) increased 21% to $60.4 million.
• Service fee gross margin was 32.1% compared to 34.9%.
• Net loss was $2.8 million or $(0.14) per share, compared to a net loss of $1.6 million or $(0.08).
• Adjusted EBITDA (a non-GAAP measure defined and reconciled below) increased 10% to $3.4 million compared to $3.1 million.

“We have been making both operational and strategic investments across both business segments. Strategically, we recently announced the opening of two new PFS fulfillment centers, added key LiveArea leadership personnel and expanded our service offerings to new geographies, all in preparation for what we anticipate will be durable eCommerce tailwinds as we head into 2021.

“Operationally, we are ramping our front-line work force across our fulfillment centers and expanding our at-home call center teams ahead of what we anticipate will be a record holiday season. While this has increased our PFS operating costs during the quarter, as expected, I believe we are well-positioned for the holiday peak fulfillment period as well as sustained long-term growth for both PFS and LiveArea as the eCommerce landscape continues to evolve.

“As a result of continued heightened PFS fulfillment volumes and strong momentum in LiveArea, we are increasing our 2020 outlook and now expect consolidated SFE revenue growth to be in the mid-teens and continue to expect adjusted EBITDA margin expansion compared to 2019.”

Third Quarter 2020 Financial Results
Total revenues in the third quarter of 2020 increased 13% to $77.1 million compared to $68.0 million in the same period of 2019. Service fee revenue in the third quarter increased 21% to $60.2 million compared to $49.6 million in the third quarter of last year. Product revenue from the company’s last remaining client under this legacy business model was $4.2 million compared to $6.6 million in the same period of 2019.

SFE revenue in the third quarter of 2020 increased 21% to $60.4 million compared to $49.9 million in the year-ago quarter. The increase was primarily driven by ongoing elevated fulfillment activity in PFS, as well as double-digit growth in LiveArea.

Service fee gross margin in the third quarter of 2020 was 32.1% compared to 34.9% in the same period of 2019. The decrease was primarily attributable to changes in revenue mix and increased fulfillment labor costs during the quarter. 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 third quarter of 2020 was $2.8 million or $(0.14) per share compared to a net loss of $1.6 million or $(0.08) in the same period of 2019. Net loss included the impact of $3.2 million of stock-based compensation expense in the third quarter of 2020 as compared to $0.9 million in the same period in the prior year.

Adjusted EBITDA in the third quarter increased 10% to $3.4 million compared to $3.1 million in the year-ago quarter. The increase was primarily due to sustained strength in SFE revenue growth, partially offset by expected increased costs in the PFS segment applicable to fulfillment-related labor costs and preparations for the holiday season. As a percentage of SFE revenue, adjusted EBITDA margin was 5.7% compared to 6.3% in the same period of 2019.

Non-GAAP net income (a non-GAAP measure defined and reconciled below) increased to $0.7 million in the third quarter of 2020 compared to $0.4 million in the third quarter of 2019.

At September 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 $29.1 million compared to $25.4 million at December 31, 2019.

Cash and cash equivalents at September 30, 2020 totaled $10.4 million compared to $12.4 million at December 31, 2019, and total debt was $39.5 million compared to $37.8 million at the end of last year.

2020 Outlook
In light of ongoing high demand in the company’s PFS segment, as well as LiveArea’s continued strong performance and record pipeline, PFSweb has increased its expectations for consolidated SFE revenue growth to be in the mid-teens compared to 2019 (previously expected between 9% and 12% growth), while continuing to expect growth for each of its business units in 2020. Coupled with a sustained focus on prudent cost management, PFSweb also expects adjusted EBITDA margin improvement in 2020 when compared to the prior year.

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 third quarter ended September 30, 2020.

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

Date: Friday, November 6, 2020
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Toll-free dial-in number: (866) 220-4153
International dial-in number: (864) 663-5228
Conference ID: 1176494

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 November 20, 2020.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 1176494

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 data-driven marketing and omnichannel experience design through technology selection, platform implementation and orchestrated 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, 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
Gateway Investor Relations
1-949-574-3860
PFSW@gatewayir.com

 

PFSweb, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)
	(Unaudited)
	September 30,				December 31,
		2020				2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,397			$	12,434
Restricted cash		214				214
Accounts receivable, net of allowance for doubtful accounts of $1,437 and $1,071 at September 30, 2020 and December 31, 2019, respectively		56,156				72,262
Inventories, net of reserves of $128 and $291 at September 30, 2020 and December 31, 2019, respectively		5,086				3,281
Other receivables		3,199				3,324
Prepaid expenses and other current assets		7,213				6,954
Total current assets		82,265				98,469
PROPERTY AND EQUIPMENT, net		19,546				18,436
OPERATING LEASE RIGHT-OF-USE ASSETS, net		36,529				36,403
IDENTIFIABLE INTANGIBLES, net		772				1,135
GOODWILL		45,192				45,393
OTHER ASSETS		3,919				3,772
Total assets	$	188,223			$	203,608
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	22,907			$	44,640
Accrued expenses		23,431				21,625
Current portion of operating lease liabilities		9,491				8,904
Current portion of long-term debt and capital lease obligations		3,155				2,971
Deferred revenues		3,031				6,058
Total current liabilities		62,015				84,198
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion		36,334				34,829
DEFERRED REVENUES, less current portion		1,528				1,398
OPERATING LEASE LIABILITIES		31,777				33,295
OTHER LIABILITIES		5,828				3,046
Total liabilities		137,482				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; 20,281,638 and 19,465,877 issued at September 30, 2020 and December 31, 2019, respectively; and 20,248,171 and 19,432,410 outstanding at September 30, 2020 and December 31, 2019, respectively		20				19
Additional paid-in capital		166,204				158,192
Accumulated deficit		(113,980	)			(109,943	)
Accumulated other comprehensive income		(1,378	)			(1,301	)
Treasury stock at cost, 33,467 shares		(125	)			(125	)
Total shareholders' equity		50,741				46,842
Total liabilities and shareholders' equity	$	188,223			$	203,608

 

PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
REVENUES:
Service fee revenue	$	60,194			$	49,602			$	176,488			$	151,371
Product revenue, net		4,229				6,579				17,677				20,216
Pass-through revenue		12,661				11,810				42,053				37,063
Total revenues		77,084				67,991				236,218				208,650
COSTS OF REVENUES:
Cost of service fee revenue		40,877				32,296				116,358				99,062
Cost of product revenue		4,019				6,250				16,732				19,117
Cost of pass-through revenue		12,661				11,810				42,053				37,063
Total costs of revenues		57,557				50,356				175,143				155,242
Gross profit		19,527				17,635				61,075				53,408
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		21,389				18,886				62,301				55,329
Loss from operations		(1,862	)			(1,251	)			(1,226	)			(1,921	)
INTEREST EXPENSE, net		365				458				1,154				1,418
Loss before income taxes		(2,227	)			(1,709	)			(2,380	)			(3,339	)
INCOME TAX EXPENSE (BENEFIT), net		592				(71	)			1,657				438
NET LOSS		(2,819	)			(1,638	)			(4,037	)			(3,777	)
NON-GAAP NET INCOME	$	687			$	357			$	6,295			$	976
NET LOSS PER SHARE:
Basic	$	(0.14	)		$	(0.08	)		$	(0.20	)		$	(0.19	)
Diluted	$	(0.14	)		$	(0.08	)		$	(0.20	)		$	(0.19	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic		20,211				19,432				19,899				19,454
Diluted		20,211				19,432				19,899				19,454
EBITDA	$	167			$	1,423			$	5,052			$	6,021
ADJUSTED EBITDA	$	3,427			$	3,121			$	14,629			$	9,884

 

PFSweb, Inc. and Subsidiaries
Unaudited Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
NET LOSS	$	(2,819	)		$	(1,638	)		$	(4,037	)		$	(3,777	)
Income tax expense (benefit), net		592				(71	)			1,657				438
Interest expense, net		365				458				1,154				1,418
Depreciation and amortization		2,029				2,674				6,278				7,942
EBITDA		167				1,423				5,052				6,021
Stock-based compensation		3,235				852				8,934				2,181
Acquisition-related, restructuring and other costs		25				846				643				1,682
ADJUSTED EBITDA	$	3,427			$	3,121			$	14,629			$	9,884
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
NET LOSS	$	(2,819	)		$	(1,638	)		$	(4,037	)		$	(3,777	)
Stock-based compensation		3,235				852				8,934				2,181
Amortization of acquisition-related intangible assets		116				167				361				501
Acquisition-related, restructuring and other costs		25				846				643				1,682
Deferred tax expense - goodwill amortization		130				130				394				389
NON-GAAP NET INCOME	$	687			$	357			$	6,295			$	976
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
TOTAL REVENUES	$	77,084			$	67,991			$	236,218			$	208,650
Pass-through revenue		(12,661	)			(11,810	)			(42,053	)			(37,063	)
Cost of product revenue		(4,019	)			(6,250	)			(16,732	)			(19,117	)
SERVICE FEE EQUIVALENT REVENUE	$	60,404			$	49,931			$	177,433			$	152,470

 

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 nine months ended September 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								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
PFS Operations
Revenues:
Service fee revenue	$	39,339			$	31,176			$	114,184			$	95,930
Product revenue, net		4,229				6,579				17,677				20,216
Pass-through revenue		11,836				10,760				39,708				35,049
Total revenues		55,404				48,515				171,569				151,195
Costs of revenues:
Cost of service fee revenue		29,658				22,349				82,397				69,023
Cost of product revenue		4,019				6,250				16,732				19,117
Cost of pass-through revenue		11,836				10,760				39,708				35,049
Total costs of revenues		45,513				39,359				138,837				123,189
Gross profit		9,891				9,156				32,732				28,006
Direct operating expenses		7,353				7,454				22,702				21,649
Direct contribution		2,538				1,702				10,030				6,357
Depreciation and amortization		1,616				2,120				4,811				6,153
Stock-based compensation		817				144				1,757				379
Acquisition-related, restructuring and other costs		25				914				762				1,401
ADJUSTED EBITDA	$	4,996			$	4,880			$	17,360			$	14,290
TOTAL REVENUES	$	55,404			$	48,515			$	171,569			$	151,195
Pass-through revenue		(11,836	)			(10,760	)			(39,708	)			(35,049	)
Cost of product revenue		(4,019	)			(6,250	)			(16,732	)			(19,117	)
SERVICE FEE EQUIVALENT REVENUE	$	39,549			$	31,505			$	115,129			$	97,029

 

PFSweb, Inc. and Subsidiaries
Unaudited Consolidated Segment Information
and Reconciliation of Certain Non-GAAP Items to GAAP
(In Thousands)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
LiveArea Professional Services
Revenues:
Service fee revenue	$	20,855			$	18,426			$	62,304			$	55,441
Pass-through revenue		825				1,050				2,345				2,014
Total revenues		21,680				19,476				64,649				57,455
Costs of revenues:
Cost of service fee revenue		11,219				9,947				33,961				30,039
Cost of pass-through revenue		825				1,050				2,345				2,014
Total costs of revenues		12,044				10,997				36,306				32,053
Gross profit		9,636				8,479				28,343				25,402
Direct operating expenses		7,095				5,885				22,171				18,634
Direct contribution		2,541				2,594				6,172				6,768
Depreciation and amortization		204				276				633				891
Stock-based compensation		892				261				3,283				558
Acquisition-related, restructuring and other costs		-				53				6				111
ADJUSTED EBITDA	$	3,637			$	3,184			$	10,094			$	8,328
Corporate
Selling, general and administrative expenses	$	(6,941	)		$	(5,547	)		$	(17,428	)		$	(15,046	)
Depreciation and amortization		209				278				834				898
EBITDA		(6,732	)			(5,269	)			(16,594	)			(14,148	)
Stock-based compensation		1,526				447				3,894				1,244
Acquisition-related, restructuring and other costs		-				(121	)			(125	)			170
ADJUSTED EBITDA	$	(5,206	)		$	(4,943	)		$	(12,825	)		$	(12,734	)

 

 

Source: PFSweb, Inc.