SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 12, 2020
(Exact name of registrant as specified in its charter)
(STATE OR OTHER JURISDICTION
(COMMISSION FILE NUMBER)
505 MILLENNIUM DRIVE
ALLEN, TX 75013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME OR ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common stock, $0.001 par value
NASDAQ Capital Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2.02. Results of Operations and Financial Condition
On March 12, 2020, PFSweb, Inc. (the "Company") issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2019. Attached as an exhibit to this current report on Form 8-K is a copy of the related press release dated March 12, 2020. This press release contains certain non-GAAP measures, including non-GAAP net income (loss), earnings before interest, income taxes, depreciation and amortization (EBITDA), adjusted EBITDA, net debt and service fee equivalent revenue. The Company 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 the press release have been reconciled to the GAAP results in the tables contained in the press release.
ITEM 7.01 Regulation FD Disclosure
On March 12, 2020, the Company issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.
The information in Items 2.02 and 7.01 of this Form 8-K and the exhibit attached hereto as Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is filed with this document:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 16, 2020
/s/ Thomas J. Madden
Thomas J. Madden
Executive Vice President,
Chief Financial Officer
PFSweb Reports Fourth Quarter and Full Year 2019 Results
Sales Momentum Across LiveArea and PFS Leads to Expected Return to Growth in 2020
Allen, TX - March 12, 2020 - PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the fourth quarter and full year ended December 31, 2019.
Q4 2019 Summary vs. Q4 2018
Total revenues were $85.4 million compared to $93.0 million.
Service fee equivalent (SFE) revenue (a non-GAAP measure defined and reconciled below) was $63.4 million compared to $68.3 million.
Service fee gross margin was 32.5% compared to 34.7%.
Net income was $1.6 million or $0.08 per share, compared to $3.3 million or $0.17 per share.
Adjusted EBITDA (a non-GAAP measure defined and reconciled below) was $6.3 million compared to $9.1 million.
Full Year 2019 Summary vs. Full Year 2018
Total revenues were $294.0 million compared to $326.2 million.
Service fee equivalent (SFE) revenue was $215.8 million compared to $232.1 million.
Service fee gross margin was 33.9% compared to 36.3%.
Net loss was $2.2 million or $(0.11) per share, compared to net income of $1.2 million or $0.06 per share.
Adjusted EBITDA was $16.2 million compared to $24.4 million.
“We continued to execute at a high level for our LiveArea and PFS clients in Q4, and we closed out 2019 with another strong quarter of new client bookings,” said Mike Willoughby, CEO of PFSweb. “As we have previously stated, 2019 was a transition year as we worked to replace lost revenue from two client bankruptcies in PFS and to recover from lower bookings in LiveArea in the first half of the year. As such, during 2019 we made strategic sales and marketing investments in both segments that resulted in significant improvements in our client engagement, bookings and sales pipeline. The benefit of those investments has laid the foundation for our expected return to growth in 2020.
“In the PFS business, we renewed our focus on our core verticals in 2019, and we expanded our service offerings to begin targeting small and medium sized businesses. Both strategic initiatives enabled the strongest year of PFS bookings in company history based on estimated annual contract value. Further, we introduced multiple new products within the FaaS (Fulfillment-as-a-Service) category, including RetailConnect and CloudPick, two potentially disruptive eCommerce offerings that create a new ‘asset-light’ model for PFS. RetailConnect has been successfully piloted in two retail locations in Dallas and we are working to roll out the solution to clients this year.
“In LiveArea, we revamped our go-to-market strategy and hired new executive leadership, sales and marketing personnel to establish a more revenue-focused team. This team has successfully rebuilt our sales pipeline by creating new services and productized offerings that differentiate LiveArea and expand our addressable market. In less than six months, our team has made tremendous progress, including record project and engagement bookings in both Q3 and Q4 2019, and LiveArea has entered 2020 on much stronger footing.
“As we emerge from our transition, we believe the improvements made over the last year across both segments have positioned us for a return to growth. We are reiterating our expectations for 2020 SFE revenue to grow in the mid-to-high single digits compared to 2019, and we continue to expect adjusted EBITDA margin expansion for the year as well.”
Fourth Quarter 2019 Financial Results
Total revenues in the fourth quarter of 2019 were $85.4 million compared to $93.0 million in the same period of 2018. Service fee revenue in the fourth quarter was $63.0 million compared to $68.0 million in the fourth quarter last year. Product revenue from the company’s last remaining client under this legacy business model was $6.4 million compared to $7.3 million in the same period of 2018.
SFE revenue was $63.4 million compared to $68.3 million in the year-ago quarter. The decline was primarily driven by the loss of PFS revenue related to two client bankruptcies earlier in the year and reduced system integration project activity in LiveArea, partially offset by new client wins.
Service fee gross margin in the fourth quarter of 2019 was 32.5% compared to 34.7% in the same period of 2018. The decrease was primarily due to lower gross margins applicable to PFS fulfillment and LiveArea technology services activity. 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 income in the fourth quarter of 2019 was $1.6 million or $0.08 per share, compared to $3.3 million or $0.17 per share in the same period of 2018. Net income in the fourth quarter of 2019 included $0.8 million of stock-based compensation expense, $0.2 million in amortization of acquisition-related intangible assets, $0.2 million of acquisition-related, restructuring and other costs, and $0.1 million of deferred tax expense related to goodwill amortization. This compares to $1.0 million of stock-based compensation expense, $0.8 million of acquisition-related, restructuring and other costs, $0.4 million in amortization of acquisition-related intangible assets, and a $0.1 million deferred tax credit related to goodwill amortization in the same period of 2018.
Adjusted EBITDA in the fourth quarter was $6.3 million compared to $9.1 million in the year-ago quarter. As a percentage of SFE revenue, adjusted EBITDA was 9.9% compared to 13.3%, with the decrease primarily due to decreased gross margins in both segments.
Non-GAAP net income (a non-GAAP measure defined and reconciled below) was $3.0 million in the fourth quarter of 2019 compared to $5.6 million in the fourth quarter of 2018.
At December 31, 2019, net debt (a non-GAAP measure defined as total debt, excluding operating lease liabilities, less cash and cash equivalents) was $25.4 million compared to $26.5 million at December 31, 2018. Cash and cash equivalents totaled $12.4 million compared to $15.4 million at December 31, 2018. Total debt at December 31, 2019 was $37.8 million compared to $42.0 million at the end of last year.
PFSweb expects to report growth for each of its business units in 2020, with consolidated SFE revenue growing mid-to-high single digits compared to 2019. Coupled with an ongoing focus on costs, PFSweb also expects to improve its adjusted EBITDA margin performance in 2020.
At this time, the recent COVID-19 virus outbreak has not had a discernable impact on the company’s business. Accordingly, the company has not included any impact from the outbreak into its 2020 outlook and will provide updates as appropriate when the longer term impact becomes more clear.
PFSweb will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2019.
PFSweb management will host the conference call, followed by a question and answer period.
Date: Thursday, March 12, 2020
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-888-220-8474
International dial-in number: 1-646-828-8193
Conference ID: 3000783
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 8:00 p.m. Eastern time on the same day through March 26, 2020.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 3000783
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, Camping World, 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), 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.
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, 2018 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.
Michael C. Willoughby
Chief Executive Officer
Thomas J. Madden
Chief Financial Officer
Sean Mansouri, CFA or Scott Liolios
Gateway Investor Relations