PFSweb Reports Second Quarter 2019 Results
Second Quarter 2019 Summary vs. Same Year-Ago Quarter
- Total revenues were
$68.5 million compared to$77.1 million . - Service fee equivalent (SFE) revenue (a non-GAAP measure defined below) was
$50.7 million compared to$53.6 million . - Service fee gross margin was 34.8% compared to 37.3%.
- Net loss was
$1.0 million or$(0.05) per share, compared to a net loss of$0.6 million or$(0.03) per share. - Adjusted EBITDA (a non-GAAP measure defined below) was
$3.4 million compared to$5.3 million .
Management Commentary
“As expected, our second quarter results were largely in-line with our first quarter,” said
“During the quarter, we appointed
“Jim’s immediate priority is to assess and grow the LiveArea sales pipeline while increasing our market visibility and expanding our addressable market with new services and productized offerings. Since appointing Jim, we have hired proven sales, marketing, product and strategy experts with a track record of executing high-performance sales and marketing programs for commerce consultancies and digital professional services companies.
“Our PFS business has performed exceptionally well from a new sales perspective. The annual contract value from our second quarter bookings were more than three times higher than the year-ago quarter, and we are currently on pace to have one of the strongest years of new PFS bookings in company history. These new wins have been both direct-to-consumer and B2B engagements within our core target verticals—health & beauty, fashion & apparel and CPG. While these new clients will partially contribute in 2019, we expect 2019 PFS SFE revenue to be relatively flat compared to 2018 as we strive to make up for the revenue lost from two unexpected retail client bankruptcies and resulting liquidations in 2019. Also of note, our current client base and sales pipeline mix is now more diversified with a greater proportion of mid-market brands and less ‘brick-and-mortar’ general merchandise retailers.
“We continue to make strides in ramping our new Fulfillment-as-a-Service (FaaS) offerings, including both RetailConnect and CloudPick. Although we just introduced these new solutions to market earlier this year, we have already received strong indications of interest and are exploring multiple avenues to accelerate growth from these ‘asset-light’ products, including bundling both RetailConnect and CloudPick with our other service offerings in existing proposals and selling each product on a stand-alone basis.
“Looking at the second half of the year, as a result of the two retail client bankruptcies in the PFS business and our sales challenges with LiveArea, revenue and AEBITDA performance will be below our original expectations for the year. For the remainder of 2019, we plan to continue executing for our clients as they approach the key holiday season, working diligently to make the most of the opportunities in our PFS and LiveArea sales pipelines and quickly rebuilding the LiveArea sales pipeline as we head into 2020. We will also continue our strong focus on cost management, building on the savings already delivered over the past year.
“Looking toward the future, with
Second Quarter 2019 Financial Results
Total revenues in the second quarter of 2019 were
SFE revenue was
Service fee gross margin in the second quarter of 2019 was 34.8% compared to 37.3% in the same period of 2018. The decrease was primarily due to revenue mix in the PFS segment, with a higher percentage of revenues coming from lower margin fulfillment and transportation services as compared to higher margin technology related revenues. LiveArea gross margins also declined during the quarter as the company experienced increased labor costs and incremental costs on certain client projects. 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 2019 was
Adjusted EBITDA in the second quarter was
Non-GAAP net income in the second quarter of 2019 was
At
Subsequent Event & Revised 2019 Outlook
One of the company’s clients, Charming Charlie, serviced by the PFS Operations segment, filed for bankruptcy on
As a result of the impact of the two client bankruptcies and unplanned excess capacity in the company’s distribution facilities, as well as the current sales challenges in its LiveArea business unit,
Conference Call
Date:
Time:
Toll-free dial-in number: 1-888-220-8474
International dial-in number: 1-323-794-2591
Conference ID: 9068313
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
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 9068313
About
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 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.
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
Company Contact:
Chief Executive Officer
Or
Chief Financial Officer
1-972-881-2900
Investor Relations:
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, | |||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 11,812 | $ | 15,419 | ||||
Restricted cash | 207 | 207 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,282 and | ||||||||
$585 at June 30, 2019 and December 31, 2018, respectively | 52,916 | 72,415 | ||||||
Inventories, net of reserves of $295 and $298 at June 30, 2019 and | ||||||||
December 31, 2018, respectively | 6,536 | 6,090 | ||||||
Other receivables | 3,531 | 4,014 | ||||||
Prepaid expenses and other current assets | 6,355 | 6,943 | ||||||
Total current assets | 81,357 | 105,088 | ||||||
PROPERTY AND EQUIPMENT, net | 19,718 | 21,496 | ||||||
OPERATING LEASE RIGHT-OF-USE ASSETS | 38,269 | - | ||||||
IDENTIFIABLE INTANGIBLES, net | 1,469 | 1,803 | ||||||
GOODWILL | 45,167 | 45,185 | ||||||
OTHER ASSETS | 3,684 | 3,501 | ||||||
Total assets | 189,664 | 177,073 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade accounts payable | $ | 35,009 | $ | 47,580 | ||||
Accrued expenses | 19,946 | 24,623 | ||||||
Current portion of operating lease liabilities | 8,164 | - | ||||||
Current portion of long-term debt and finance lease obligations | 2,824 | 2,610 | ||||||
Deferred revenues | 5,843 | 7,328 | ||||||
Performance-based contingent payments | - | - | ||||||
Total current liabilities | 71,786 | 82,141 | ||||||
LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS, less current portion | 31,831 | 39,348 | ||||||
DEFERRED REVENUES, less current portion | 1,648 | 1,927 | ||||||
DEFERRED RENT | - | 4,625 | ||||||
OPERATING LEASE LIABILITIES | 35,921 | - | ||||||
OTHER LIABILITIES | 2,869 | 2,449 | ||||||
Total liabilities | 144,055 | 130,490 | ||||||
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; 19,465,877 and 19,294,296 shares issued at June 30, 2019 and December 31, 2018, respectively; and 19,432,410 and 19,260,829 shares outstanding at June 30, 2019 and December 31, 2018, respectively | 19 | 19 | ||||||
Additional paid-in capital | 156,494 | 155,455 | ||||||
Accumulated deficit | (109,912 | ) | (107,773 | ) | ||||
Accumulated other comprehensive income | (867 | ) | (993 | ) | ||||
Treasury stock at cost, 33,467 shares | (125 | ) | (125 | ) | ||||
Total shareholders' equity | 45,609 | 46,583 | ||||||
Total liabilities and shareholders' equity | $ | 189,664 | $ | 177,073 | ||||
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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
REVENUES: | |||||||||||||||
Service fee revenue | $ | 50,331 | $ | 53,141 | $ | 101,769 | $ | 109,628 | |||||||
Product revenue, net | 6,138 | 8,847 | 13,638 | 18,612 | |||||||||||
Pass-through revenue | 12,041 | 15,063 | 25,253 | 27,232 | |||||||||||
Total revenues | $ | 68,510 | $ | 77,051 | $ | 140,660 | $ | 155,472 | |||||||
COSTS OF REVENUES: | |||||||||||||||
Cost of service fee revenue | $ | 32,809 | $ | 33,294 | $ | 66,767 | $ | 68,902 | |||||||
Cost of product revenue | 5,791 | 8,403 | 12,868 | 17,719 | |||||||||||
Cost of pass-through revenue | 12,041 | 15,063 | 25,253 | 27,232 | |||||||||||
Total costs of revenues | $ | 50,641 | $ | 56,760 | $ | 104,888 | $ | 113,853 | |||||||
Gross profit | 17,869 | 20,291 | 35,772 | 41,619 | |||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 18,096 | 19,756 | 36,443 | 40,415 | |||||||||||
Income (loss) from operations | (227 | ) | 535 | (671 | ) | 1,204 | |||||||||
INTEREST EXPENSE, NET | 448 | 585 | 959 | 1,190 | |||||||||||
Income (loss) before income taxes | (675 | ) | (50 | ) | (1,630 | ) | 14 | ||||||||
INCOME TAX EXPENSE | 300 | 576 | 509 | 1,389 | |||||||||||
NET LOSS | $ | (975 | ) | $ | (626 | ) | $ | (2,139 | ) | $ | (1,375 | ) | |||
NON-GAAP NET INCOME | $ | 442 | $ | 1,712 | $ | 620 | $ | 2,281 | |||||||
NET LOSS PER SHARE: | |||||||||||||||
Basic | $ | (0.05 | ) | $ | (0.03 | ) | $ | (0.11 | ) | $ | (0.07 | ) | |||
Diluted | $ | (0.05 | ) | $ | (0.03 | ) | $ | (0.11 | ) | $ | (0.07 | ) | |||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | |||||||||||||||
Basic | 19,444 | 19,174 | 19,465 | 19,160 | |||||||||||
Diluted | 19,444 | 19,174 | 19,465 | 19,160 | |||||||||||
EBITDA | $ | 2,326 | $ | 3,514 | $ | 4,597 | $ | 7,161 | |||||||
ADJUSTED EBITDA | $ | 3,446 | $ | 5,340 | $ | 6,763 | $ | 9,755 | |||||||
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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
NET LOSS | $ | (975 | ) | $ | (626 | ) | $ | (2,139 | ) | $ | (1,375 | ) | |||
Income tax expense | 300 | 576 | 509 | 1,389 | |||||||||||
Interest expense, net | 448 | 585 | 959 | 1,190 | |||||||||||
Depreciation and amortization | 2,553 | 2,979 | 5,268 | 5,957 | |||||||||||
EBITDA | $ | 2,326 | $ | 3,514 | $ | 4,597 | $ | 7,161 | |||||||
Stock-based compensation | 679 | 1,360 | 1,330 | 2,006 | |||||||||||
Acquisition-related, restructuring and other costs | 441 | 466 | 836 | 588 | |||||||||||
ADJUSTED EBITDA | $ | 3,446 | $ | 5,340 | $ | 6,763 | $ | 9,755 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
NET LOSS | $ | (975 | ) | $ | (626 | ) | $ | (2,139 | ) | $ | (1,375 | ) | |||
Stock-based compensation | 679 | 1,360 | 1,330 | 2,006 | |||||||||||
Amortization of acquisition-related intangible assets | 168 | 395 | 334 | 833 | |||||||||||
Acquisition-related, restructuring and other costs | 441 | 466 | 836 | 588 | |||||||||||
Deferred tax expense - goodwill amortization | 129 | 117 | 259 | 229 | |||||||||||
NON-GAAP NET INCOME | $ | 442 | $ | 1,712 | $ | 620 | $ | 2,281 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
TOTAL REVENUES | $ | 68,510 | $ | 77,051 | $ | 140,660 | $ | 155,472 | |||||||
Pass-through revenue | (12,041 | ) | (15,063 | ) | (25,253 | ) | (27,232 | ) | |||||||
Cost of product revenue | (5,791 | ) | (8,403 | ) | (12,868 | ) | (17,719 | ) | |||||||
SERVICE FEE EQUIVALENT REVENUE | $ | 50,678 | $ | 53,585 | $ | 102,539 | $ | 110,521 | |||||||
PFSweb, Inc. and Subsidiaries | |||||||||||||||
Unaudited Consolidated Segment Information | |||||||||||||||
and Reconciliation of Certain Non-GAAP Items to GAAP | |||||||||||||||
(In Thousands) | |||||||||||||||
Effective January 1, 2018, the company changed its organizational structure in an effort to create more effective and efficient operations and to improve client and service focus. As a result, the company is now presenting supplemental financial data below based on the reportable operating business segments of its PFS Operations and LiveArea Professional Services units, which are comprised of strategic businesses that are defined by the types of service offerings they provide. In addition, certain costs that are not fully directly allocable to a business unit are presented as Corporate selling, general, and administrative expenses. The segment financial data for the three and six months ended June 30, 2019 and 2018, 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. |
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Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
PFS Operations | |||||||||||||||
Revenues: | |||||||||||||||
Service fee revenue | $ | 31,700 | $ | 33,193 | $ | 64,754 | $ | 68,115 | |||||||
Product revenue, net | 6,138 | 8,847 | 13,638 | 18,612 | |||||||||||
Pass-through revenue | 11,412 | 14,575 | 24,289 | 26,375 | |||||||||||
Total revenues | $ | 49,250 | $ | 56,615 | $ | 102,681 | $ | 113,102 | |||||||
Costs of revenues: | |||||||||||||||
Cost of service fee revenue | $ | 22,755 | $ | 22,963 | $ | 46,675 | $ | 48,302 | |||||||
Cost of product revenue | 5,791 | 8,403 | 12,868 | 17,719 | |||||||||||
Cost of pass-through revenue | 11,412 | 14,575 | 24,289 | 26,375 | |||||||||||
Total costs of revenues | $ | 39,958 | $ | 45,941 | $ | 83,832 | $ | 92,396 | |||||||
Gross profit | 9,292 | 10,674 | 18,849 | 20,706 | |||||||||||
Direct operating expenses | 7,163 | 6,741 | 14,195 | 12,472 | |||||||||||
Direct contribution | 2,129 | 3,933 | 4,654 | 8,234 | |||||||||||
Depreciation and amortization | 1,981 | 2,124 | 4,033 | 4,056 | |||||||||||
Stock-based compensation | 119 | 228 | 236 | 287 | |||||||||||
Acquisition-related, restructuring and other costs | 23 | 208 | 487 | 228 | |||||||||||
ADJUSTED EBITDA | $ | 4,252 | $ | 6,493 | $ | 9,410 | $ | 12,805 | |||||||
TOTAL REVENUES | $ | 49,250 | $ | 56,615 | $ | 102,681 | $ | 113,102 | |||||||
Pass-thru revenue | (11,412 | ) | (14,574 | ) | (24,288 | ) | (26,374 | ) | |||||||
Cost of product revenue | (5,791 | ) | (8,403 | ) | (12,868 | ) | (17,719 | ) | |||||||
SERVICE FEE EQUIVALENT REVENUE | $ | 32,047 | $ | 33,638 | $ | 65,525 | $ | 69,009 | |||||||
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, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
LiveArea Professional Services | |||||||||||||||
Service fee revenue | $ | 18,631 | $ | 19,948 | $ | 37,015 | $ | 41,513 | |||||||
Pass-through revenue | 629 | 488 | 964 | 857 | |||||||||||
Total revenues | 19,260 | 20,436 | 37,979 | 42,370 | |||||||||||
Cost of service fee revenue | 10,054 | 10,331 | 20,092 | 20,600 | |||||||||||
Cost of pass-through revenue | 629 | 488 | 964 | 857 | |||||||||||
Total cost of revenues | 10,683 | 10,819 | 21,056 | 21,457 | |||||||||||
Gross profit | 8,577 | 9,617 | 16,923 | 20,913 | |||||||||||
Direct operating expenses | 6,276 | 7,731 | 12,749 | 16,912 | |||||||||||
Direct contribution | 2,301 | 1,886 | 4,174 | 4,001 | |||||||||||
Depreciation and amortization | 284 | 554 | 615 | 1,246 | |||||||||||
Stock-based compensation | 147 | 219 | 297 | 299 | |||||||||||
Acquisition-related, restructuring and other costs | 25 | 205 | 58 | 292 | |||||||||||
ADJUSTED EBITDA | $ | 2,757 | $ | 2,864 | $ | 5,144 | $ | 5,838 | |||||||
Corporate | |||||||||||||||
Selling, general and administrative expenses | $ | (4,657 | ) | $ | (5,284 | ) | $ | (9,499 | ) | $ | (11,031 | ) | |||
Depreciation and amortization | 288 | 301 | 620 | 655 | |||||||||||
EBITDA | $ | (4,369 | ) | $ | (4,983 | ) | $ | (8,879 | ) | $ | (10,376 | ) | |||
Stock-based compensation | 413 | 913 | 797 | 1,420 | |||||||||||
Acquisition-related, restructuring and other costs | 393 | 53 | 291 | 68 | |||||||||||
ADJUSTED EBITDA | $ | (3,563 | ) | $ | (4,017 | ) | $ | (7,791 | ) | $ | (8,888 | ) | |||
Source: PFSweb, Inc.