PFSweb Reports Third Quarter 2014 Results

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PFSweb Reports Third Quarter 2014 Results

PFSweb Reports Third Quarter 2014 Results 91.7 KB

ALLEN, TX -- (Marketwired) -- 11/12/14 -- PFSweb, Inc. (NASDAQ: PFSW), a global provider of end-to-end eCommerce solutions, reported results for the three and nine-months ended September 30, 2014.

Third Quarter 2014 Highlights

Service fee equivalent revenue (a non-GAAP measure defined below) increased 28% to $32.4 million compared to $25.2 million in the same period of 2013
Adjusted EBITDA (a non-GAAP measure defined below) increased 107% to $2.9 million compared to $1.4 million in the same period of 2013
Acquired REV Solutions (REV), an eCommerce system integrator, enhancing PFSweb's Demandware practice and adding Oracle ATG support capabilities
Acquired LiveAreaLabs (LAL), a digital creative agency, strengthening PFSweb's agency service offering and adding support capabilities for hybris, Magento, WebSphere and other leading platforms
Launched new eCommerce solutions for Urban Decay and Canada Goose, as well as the soft launch of the United States Mint website (officially launched October 1, 2014)

First Nine Months of 2014 Financial Summary

Service fee equivalent revenue increased 8% to $89.6 million compared to $83.2 million in the same period of 2013
Adjusted EBITDA remained flat at $6.8 million compared to the same period of 2013

Third Quarter 2014 Financial Results Details
Total revenues in the third quarter of 2014 increased 7% to $57.1 million compared to $53.6 million in the same period of 2013. Service fee revenue in the third quarter of 2014 increased 31% to $31.4 million compared to $23.9 million last year. This increase was primarily due to new client programs launched in the third quarter of 2014 and increased project revenue. Product revenue decreased to $17.3 million compared to $21.5 million in the same period of 2013, primarily due to ongoing restructuring activities by the company's largest client in this segment.

Service fee equivalent revenue in the third quarter of 2014 increased 28% to $32.4 million compared to $25.2 million in the same period of 2013. Excluding the results of the REV and LAL acquisitions, which occurred in September, third quarter service fee equivalent revenue grew by 24% to $31.2 million compared to the same period in 2013.

Service fee gross margin in the third quarter decreased to 29.9% compared to 32.3% in the same period in 2013. While each period includes the benefit of higher margin project activity, the 2014 period includes certain incremental expenses incurred to prepare the operations for the upcoming holiday volume.

Adjusted EBITDA was $2.9 million in the third quarter of 2014 compared to $1.4 million in the same period in 2013.

Net loss in the third quarter of 2014 was $2.5 million or $(0.15) per diluted share, compared to a net loss of $2.0 million or $(0.12) per diluted share in the same period of 2013. Net loss in the third quarter of 2014 included approximately $0.9 million in stock-based compensation expense and $1.5 million in acquisition and restructuring related costs, compared to approximately $0.6 million in stock-based compensation expense and no acquisition or restructuring related costs in the same period of 2013.

Non-GAAP net loss (a non-GAAP measure defined below) in the third quarter of 2014 was $0.1 million or $(0.01) per diluted share, compared to non-GAAP net loss of $1.3 million or $(0.08) per diluted share in the third quarter of 2013.

Cash and cash equivalents decreased to $19.5 million compared to $22.4 million at December 31, 2013, primarily due to the acquisitions of REV and LAL. Debt was $11.3 million at September 30, 2014 compared to $11.1 million at December 31, 2013.

Management Commentary
"The third quarter marked a significant turn for our organization, both strategically and financially," said Michael Willoughby, CEO of PFSweb. "We significantly enhanced our agency and technology service offerings with the acquisitions of REV Solutions and LiveAreaLabs. Both supplement our key partnership with Demandware, while broadening our integration capabilities with Oracle ATG, hybris, Magento and others.

"Our financial results this quarter also reflect our return to strong year-over-year growth in our eCommerce business, as we are now fully past last year's client transitions. This is reflected in our service fee equivalent revenue growth of 28% and adjusted EBITDA growth of 107%. In addition to the incremental benefit from the acquisitions, these results were strengthened by new and expanded client relationships with Urban Decay, which is the ninth L'Oreal Brand in our client portfolio, Canada Goose, and the rolling out of our highly anticipated United States Mint eCommerce solution.

"Looking ahead, we expect this momentum to carry into the holiday season and 2015, driven by continued execution internally and our growth-through-acquisition strategy to support additional software platforms and geographies across the globe. We will also pursue additional opportunities to onboard new clients and expand current client relationships as we fully integrate REV Solutions and LiveAreaLabs. In fact, we are already seeing new opportunities for client engagements that combine unique services from REV, LiveAreaLabs and PFSweb. These cross-selling opportunities are yet another avenue for expansion in our eCommerce service offering."

2014 and 2015 Outlook
PFSweb reiterates its 2014 service fee equivalent revenue guidance to range between $131 million and $137 million, increasing 10% to 15% compared to 2013. The company also reiterates its outlook for 2014 adjusted EBITDA to range between $12 million and $14 million, representing an increase of 12% to 31% compared to 2013.

For 2015, PFSweb currently expects strong growth in service fee equivalent revenue and adjusted EBITDA as the company realizes a full year benefit from recent acquisitions and the United States Mint contract, as well as incremental revenue from future new and expanded client relationships. At this time, the company is targeting 2015 service fee equivalent revenue to range between $165 million and $175 million. The company is also targeting adjusted EBITDA as a percentage of service fee equivalent revenue to improve to a range between 10% and 11%. This adjusted EBITDA target includes the projected impact of incremental sales and marketing expenditures in 2015 to support the company's future revenue growth projections.

Conference Call
PFSweb will conduct a conference call today at 11:00 a.m. Eastern time to discuss its results for the third quarter ended September 30, 2014.

The company's CEO Mike Willoughby and CFO Tom Madden will host the conference call, followed by a question and answer period.

Date: Wednesday, November 12, 2014
Time: 11:00 a.m. Eastern time (10:00 a.m. Central time)
Toll-free dial-in number: 1-888-364-3109
International dial-in number: 1-719-457-2627
Conference ID: 1591635

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 Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=111852 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 November 26, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 1591635

About PFSweb Inc.
PFSweb (NASDAQ: PFSW) is global provider of end-to-end eCommerce solutions including 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. PFSweb supports organizations across various industries, including Procter & Gamble, L'Oreal, LEGO, Columbia Sportswear, Ricoh, Roots Canada Ltd., Diageo, BCBGMAXAZRIA, T.J. Maxx, the United States Mint, and many more. PFSweb is headquartered in Allen, TX with additional locations in Tennessee, Mississippi, Minnesota, Washington, New York, Canada, Belgium, India and the Philippines. For more information, please visit www.pfsweb.com or download the free PFSweb IR App on your iPhone, iPad or Android device.

Non-GAAP Financial Measures
This news release may contain 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 costs and restructuring and other charges.

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

Service fee equivalent revenue represents service fee revenue plus the gross profit earned on product revenue.

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 costs and restructuring and other charges 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.

PFSweb 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. PFSweb's Annual Report on Form 10-K for the year ended December 31, 2013 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. PFSweb 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)

			(Unaudited)
			September 30,			December 31,
			2014			2013
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	19,501		$	22,418
	Restricted cash			202			130
	Accounts receivable, net of allowance for doubtful accounts of $420 and $382 at September 30, 2014 and December 31, 2013, respectively			45,157			55,292
	Inventories, net of reserves of $830 and $962 at September 30, 2014 and December 31, 2013, respectively			14,506			14,169
	Other receivables			4,262			5,241
	Prepaid expenses and other current assets			5,437			4,713
		Total current assets		89,065			101,963

PROPERTY AND EQUIPMENT, net				26,970			27,190
GOODWILL and INTANGIBLE ASSETS				9,851			-
OTHER ASSETS				2,568			2,883
		Total assets		128,454			132,036

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	7,428		$	8,231
	Trade accounts payable			29,590			34,096
	Deferred revenue			11,046			8,181
	Accrued expenses			28,824			25,045
		Total current liabilities		76,888			75,553

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				3,876			2,876
DEFERRED REVENUE				6,066			7,491
DEFERRED RENT				5,069			5,191
		Total liabilities		91,899			91,111


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; 16,842,450 and 16,540,904 shares issued at September 30, 2014 and December 31, 2013, respectively; and 16,808,983 and 16,507,437 shares outstanding as of September 30, 2014 and December 31, 2013, respectively			17			17
	Additional paid-in capital			127,653			124,522
	Accumulated deficit			(92,030	)		(85,300	)
	Accumulated other comprehensive income			1,040			1,811
	Treasury stock at cost, 33,467 shares			(125	)		(125	)
		Total shareholders' equity		36,555			40,925
		Total liabilities and shareholders' equity	$	128,454		$	132,036

(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, 2013.


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (A)
(In Thousands, Except Per Share Data)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2014			2013			2014			2013
REVENUES:
	Product revenue, net			$	17,340		$	21,495		$	57,182		$	69,660
	Service fee revenue				31,411			23,908			86,393			78,708
	Pass-thru revenue				8,344			8,150			24,792			26,511
			Total revenues		57,095			53,553			168,367			174,879

COSTS OF REVENUES:
	Cost of product revenue				16,397			20,221			53,952			65,215
	Cost of service fee revenue				22,007			16,196			60,387			53,265
	Cost of pass-thru revenue				8,344			8,150			24,792			26,511
			Total costs of revenues		46,748			44,567			139,131			144,991
		Gross profit			10,347			8,986			29,236			29,888
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					12,764			10,656			35,271			34,395
		Income (loss) from operations			(2,417	)		(1,670	)		(6,035	)		(4,507	)
INTEREST EXPENSE (INCOME), NET					174			162			490			564
		Income (loss) before income taxes			(2,591	)		(1,832	)		(6,525	)		(5,071	)
INCOME TAX PROVISION (BENEFIT)					(66	)		120			205			411
NET INCOME (LOSS)				$	(2,525	)	$	(1,952	)	$	(6,730	)	$	(5,482	)
NON-GAAP NET INCOME (LOSS)				$	(133	)	$	(1,342	)	$	(2,528	)	$	(1,742	)

NET INCOME (LOSS) PER SHARE:
	Basic			$	(0.15	)	$	(0.12	)	$	(0.40	)	$	(0.38	)
	Diluted			$	(0.15	)	$	(0.12	)	$	(0.40	)	$	(0.38	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
	Basic				16,779			16,121			16,680			14,490
	Diluted				16,779			16,121			16,680			14,490

EBITDA				$	464		$	767		$	2,614		$	3,026
ADJUSTED EBITDA				$	2,856		$	1,377		$	6,816		$	6,766

(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, 2013.


PFSweb, Inc. and Subsidiaries
Reconciliation of certain Non-GAAP Items to GAAP
(In Thousands, Except Per Share Data)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2014			2013			2014			2013
NET INCOME (LOSS)			$	(2,525	)	$	(1,952	)	$	(6,730	)	$	(5,482	)
		Income tax expense (benefit)		(66	)		120			205			411
		Interest expense, net		174			162			490			564
		Depreciation and amortization		2,881			2,437			8,649			7,533
EBITDA			$	464		$	767		$	2,614		$	3,026
		Stock-based compensation		853			610			2,509			1,195
		Acquisition related costs		1,366			-			1,520			-
		Restructuring and other charges		173			-			173			2,545
ADJUSTED EBITDA			$	2,856		$	1,377		$	6,816		$	6,766


			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2014			2013			2014			2013

NET INCOME (LOSS)			$	(2,525	)	$	(1,952	)	$	(6,730	)	$	(5,482	)
		Stock-based compensation		853			610			2,509			1,195
		Acquisition related costs		1,366			-			1,520			-
		Restructuring and other charges		173			-			173			2,545
NON-GAAP NET INCOME (LOSS)			$	(133	)	$	(1,342	)	$	(2,528	)	$	(1,742	)

NET INCOME (LOSS) PER SHARE:
	Basic		$	(0.15	)	$	(0.12	)	$	(0.40	)	$	(0.38	)
	Diluted		$	(0.15	)	$	(0.12	)	$	(0.40	)	$	(0.38	)

NON-GAAP NET INCOME (LOSS) Per Share:
	Basic		$	(0.01	)	$	(0.08	)	$	(0.15	)	$	(0.12	)
	Diluted		$	(0.01	)	$	(0.08	)	$	(0.15	)	$	(0.12	)


			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2014			2013			2014			2013

TOTAL REVENUES			$	57,095		$	53,553		$	168,367		$	174,879
	Pass-thru revenue			(8,344	)		(8,150	)		(24,792	)		(26,511	)
	Cost of product revenue			(16,397	)		(20,221	)		(53,952	)		(65,215	)
SERVICE FEE EQUIVALENT REVENUE			$	32,354		$	25,182		$	89,623		$	83,153


PFSweb, Inc. and Subsidiaries
Unaudited Consolidating Statements of Operations
For the Three Months Ended September 30, 2014
(In Thousands)

				PFSweb			Business & Retail Connect		Eliminations			Consolidated
REVENUES:
	Product revenue, net			$	-		$	17,340	$	-		$	17,340
	Service fee revenue				28,362			3,049		-			31,411
	Service fee revenue - affiliate				3,048			238		(3,286	)		-
	Pass-thru revenue				8,344			-		-			8,344
			Total revenues		39,754			20,627		(3,286	)		57,095

COSTS OF REVENUES:
	Cost of product revenue				-			16,397		-			16,397
	Cost of service fee revenue				21,972			3,145		(3,110	)		22,007
	Cost of pass-thru revenue				8,344			-		-			8,344
			Total costs of revenues		30,316			19,542		(3,110	)		46,748
			Gross profit		9,438			1,085		(176	)		10,347
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					12,255			685		(176	)		12,764
		Income (loss) from operations			(2,817	)		400		-			(2,417	)
INTEREST EXPENSE (INCOME), NET					36			138		-			174
		Income (loss) before income taxes			(2,853	)		262		-			(2,591	)
INCOME TAX PROVISION (BENEFIT)					(209	)		143		-			(66	)
NET INCOME (LOSS)				$	(2,644	)	$	119	$	-		$	(2,525	)
NON-GAAP NET INCOME (LOSS)				$	(252	)	$	119	$	-		$	(133	)

EBITDA				$	22		$	442	$	-		$	464
ADJUSTED EBITDA				$	2,414		$	442	$	-		$	2,856


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)				$	(2,644	)	$	119	$	-			(2,525	)
		Income tax expense (benefit)			(209	)		143		-			(66	)
		Interest expense (income), net			36			138		-			174
		Depreciation and amortization			2,839			42		-			2,881
EBITDA				$	22		$	442	$	-		$	464
		Stock-based compensation			853			-		-			853
		Acquisition related costs			1,366			-		-			1,366
		Restructuring and other charges			173			-		-			173
ADJUSTED EBITDA				$	2,414		$	442	$	-		$	2,856

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)				$	(2,644	)	$	119	$	-		$	(2,525	)
		Stock-based compensation			853			-		-			853
		Acquisition related costs			1,366			-		-			1,366
		Restructuring and other charges			173			-		-			173
NON-GAAP NET INCOME (LOSS)				$	(252	)	$	119	$	-		$	(133	)

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 September 30, 2013
(In Thousands)

							Business &
				PFSweb			Retail Connect			Eliminations			Consolidated
REVENUES:
	Product revenue, net			$	-		$	21,495		$	-		$	21,495
	Service fee revenue				22,123			1,785			-			23,908
	Service fee revenue - affiliate				2,198			312			(2,510	)		-
	Pass-thru revenue				8,150			-			-			8,150
			Total revenues		32,471			23,592			(2,510	)		53,553

COSTS OF REVENUES:
	Cost of product revenue				-			20,221			-			20,221
	Cost of service fee revenue				16,634			1,862			(2,300	)		16,196
	Cost of pass-thru revenue				8,150			-			-			8,150
			Total costs of revenues		24,784			22,083			(2,300	)		44,567
			Gross profit		7,687			1,509			(210	)		8,986
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					9,510			1,356			(210	)		10,656
		Income (loss) from operations			(1,823	)		153			-			(1,670	)
INTEREST EXPENSE (INCOME), NET					11			151			-			162
		Income (loss) before income taxes			(1,834	)		2			-			(1,832	)
INCOME TAX PROVISION (BENEFIT)					58			62			-			120
NET INCOME (LOSS)				$	(1,892	)	$	(60	)	$	-		$	(1,952	)
NON-GAAP NET INCOME (LOSS)				$	(1,282	)	$	(60	)	$	-		$	(1,342	)

EBITDA				$	576		$	191		$	-		$	767
ADJUSTED EBITDA				$	1,186		$	191		$	-		$	1,377


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)				$	(1,892	)	$	(60	)	$	-			(1,952	)
		Income tax expense (benefit)			58			62			-			120
		Interest expense (income), net			11			151			-			162
		Depreciation and amortization			2,399			38			-			2,437
EBITDA				$	576		$	191		$	-		$	767
		Stock-based compensation			610			-			-			610
ADJUSTED EBITDA				$	1,186		$	191		$	-		$	1,377

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)				$	(1,892	)	$	(60	)	$	-		$	(1,952	)
		Stock-based compensation			610			-			-			610
NON-GAAP NET INCOME (LOSS)				$	(1,282	)	$	(60	)	$	-		$	(1,342	)

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 Nine Months Ended September 30, 2014
(In Thousands)

							Business &
				PFSweb			Retail Connect		Eliminations			Consolidated
REVENUES:
	Product revenue, net			$	-		$	57,182	$	-		$	57,182
	Service fee revenue				76,939			9,454		-			86,393
	Service fee revenue - affiliate				9,914			846		(10,760	)		-
	Pass-thru revenue				24,792			-					24,792
			Total revenues		111,645			67,482		(10,760	)		168,367

COSTS OF REVENUES:
	Cost of product revenue				-			53,952		-			53,952
	Cost of service fee revenue				60,446			9,854		(9,913	)		60,387
	Cost of pass-thru revenue				24,792			-		-			24,792
			Total costs of revenues		85,238			63,806		(9,913	)		139,131
			Gross profit		26,407			3,676		(847	)		29,236
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					33,754			2,364		(847	)		35,271
		Income (loss) from operations			(7,347	)		1,312		-			(6,035	)
INTEREST EXPENSE (INCOME), NET					68			422		-			490
		Income (loss) before income taxes			(7,415	)		890		-			(6,525	)
INCOME TAX PROVISION (BENEFIT)					(128	)		333		-			205
NET INCOME (LOSS)				$	(7,287	)	$	557	$	-		$	(6,730	)
NON-GAAP NET INCOME (LOSS)				$	(3,085	)	$	557	$	-		$	(2,528	)

EBITDA				$	1,173		$	1,441	$	-		$	2,614
ADJUSTED EBITDA				$	5,375		$	1,441	$	-		$	6,816


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)				$	(7,287	)	$	557	$	-			(6,730	)
		Income tax expense (benefit)			(128	)		333		-			205
		Interest expense (income), net			68			422		-			490
		Depreciation and amortization			8,520			129		-			8,649
EBITDA				$	1,173		$	1,441	$	-		$	2,614
		Stock-based compensation			2,509			-		-			2,509
		Acquisition related costs			1,520			-		-			1,520
		Restructuring and other charges			173			-		-			173
ADJUSTED EBITDA				$	5,375		$	1,441	$	-		$	6,816

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)				$	(7,287	)	$	557	$	-		$	(6,730	)
		Stock-based compensation			2,509			-		-			2,509
		Acquisition related costs			1,520			-		-			1,520
		Restructuring and other charges			173			-		-			173
NON-GAAP NET INCOME (LOSS)				$	(3,085	)	$	557	$	-		$	(2,528	)

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 Nine Months Ended September 30, 2013
(In Thousands)

							Business &
				PFSweb			Retail Connect			Eliminations			Consolidated
REVENUES:
	Product revenue, net			$	-		$	69,660		$	-		$	69,660
	Service fee revenue				73,868			4,840			-			78,708
	Service fee revenue - affiliate				6,467			1,110			(7,577	)		-
	Pass-thru revenue				26,511			-			-			26,511
			Total revenues		106,846			75,610			(7,577	)		174,879

COSTS OF REVENUES:
	Cost of product revenue				-			65,215			-			65,215
	Cost of service fee revenue				54,815			5,161			(6,711	)		53,265
	Cost of pass-thru revenue				26,511			-			-			26,511
			Total costs of revenues		81,326			70,376			(6,711	)		144,991
			Gross profit		25,520			5,234			(866	)		29,888
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES					30,673			4,588			(866	)		34,395
		Income (loss) from operations			(5,153	)		646			-			(4,507	)
INTEREST EXPENSE (INCOME), NET					113			451			-			564
		Income (loss) before income taxes			(5,266	)		195			-			(5,071	)
INCOME TAX PROVISION (BENEFIT)					200			211			-			411
NET INCOME (LOSS)				$	(5,466	)	$	(16	)	$	-		$	(5,482	)
NON-GAAP NET INCOME (LOSS)				$	(1,726	)	$	(16	)	$	-		$	(1,742	)

EBITDA				$	2,264		$	762		$	-		$	3,026
ADJUSTED EBITDA				$	6,004		$	762		$	-		$	6,766


A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:

NET INCOME (LOSS)				$	(5,466	)	$	(16	)	$	-			(5,482	)
		Income tax expense (benefit)			200			211			-			411
		Interest expense (income), net			113			451			-			564
		Depreciation and amortization			7,417			116			-			7,533
EBITDA				$	2,264		$	762		$	-		$	3,026
		Stock-based compensation			1,195			-			-			1,195
		Restructuring and other charges			2,545			-			-			2,545
ADJUSTED EBITDA				$	6,004		$	762		$	-		$	6,766

A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:

NET INCOME (LOSS)				$	(5,466	)	$	(16	)	$	-		$	(5,482	)
		Stock-based compensation			1,195			-			-			1,195
		Restructuring and other charges			2,545			-			-			2,545
NON-GAAP NET INCOME (LOSS)				$	(1,726	)	$	(16	)	$	-		$	(1,742	)

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 September 30, 2014
(In Thousands)


						Business &
			PFSweb			Retail Connect			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	12,845		$	6,656		$	-		$	19,501
	Restricted cash			-			202			-			202
	Accounts receivable, net			32,126			13,750			(719	)		45,157
	Inventories, net			-			14,506			-			14,506
	Other receivables			-			4,262			-			4,262
	Prepaid expenses and other current assets			4,388			1,049			-			5,437
		Total current assets		49,359			40,425			(719	)		89,065

PROPERTY AND EQUIPMENT, net				26,810			160			-			26,970
RECEIVABLE/INVESTMENT IN AFFILIATES				9,715			-			(9,715	)		-
GOODWILL and INTANGIBLE ASSETS				9,851			-			-			9,851
OTHER ASSETS				2,530			38			-			2,568
		Total assets		98,265			40,623			(10,434	)		128,454

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	3,769		$	3,659		$	-		$	7,428
	Trade accounts payable			7,640			22,669			(719	)		29,590
	Deferred revenue			11,046			-			-			11,046
	Accrued expenses			24,383			4,441			-			28,824
		Total current liabilities		46,838			30,769			(719	)		76,888

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				3,876			-			-			3,876
PAYABLE TO AFFILIATES				-			22,045			(22,045	)		-
DEFERRED REVENUE				6,066			-			-			6,066
DEFERRED RENT				5,069			-			-			5,069
Total liabilities				61,849			52,814			(22,764	)		91,899

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock			17			19			(19	)		17
	Capital contributions			-			1,000			(1,000	)		-
	Additional paid-in capital			127,653			28,060			(28,060	)		127,653
	Retained earnings (accumulated deficit)			(92,169	)		(43,120	)		43,259			(92,030	)
	Accumulated other comprehensive income			1,040			1,850			(1,850	)		1,040
	Treasury stock			(125	)		-			-			(125	)
		Total shareholders' equity		36,416			(12,191	)		12,330			36,555
		Total liabilities and shareholders' equity	$	98,265		$	40,623		$	(10,434	)	$	128,454


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2013
(In Thousands)


						Business &
			PFSweb			Retail Connect			Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	15,028		$	7,390		$	-		$	22,418
	Restricted cash			-			130			-			130
	Accounts receivable, net			37,857			18,697			(1,262	)		55,292
	Inventories, net			-			14,169			-			14,169
	Other receivables			-			5,241			-			5,241
	Prepaid expenses and other current assets			3,552			1,161			-			4,713
		Total current assets		56,437			46,788			(1,262	)		101,963

PROPERTY AND EQUIPMENT, net				26,945			245			-			27,190
RECEIVABLE/INVESTMENT IN AFFILIATES				12,563			-			(12,563	)		-
OTHER ASSETS				2,800			83			-			2,883
		Total assets		98,745			47,116			(13,825	)		132,036

LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	4,419		$	3,812		$	-		$	8,231
	Trade accounts payable			11,602			23,756			(1,262	)		34,096
	Deferred revenue			8,181			-			-			8,181
	Accrued expenses			18,114			6,931			-			25,045
		Total current liabilities		42,316			34,499			(1,262	)		75,553

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				2,876			-			-			2,876
PAYABLE TO AFFILIATES				-			23,045			(23,045	)		-
DEFERRED REVENUE				7,491			-			-			7,491
DEFERRED RENT				5,191			-			-			5,191
		Total liabilities		57,874			57,544			(24,307	)		91,111

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock			17			19			(19	)		17
	Capital contributions			-			1,000			(1,000	)		-
	Additional paid-in capital			124,522			28,060			(28,060	)		124,522
	Retained earnings (accumulated deficit)			(85,360	)		(41,850	)		41,910			(85,300	)
	Accumulated other comprehensive income			1,817			2,343			(2,349	)		1,811
	Treasury stock			(125	)		-			-			(125	)
		Total shareholders' equity		40,871			(10,428	)		10,482			40,925
		Total liabilities and shareholders' equity	$	98,745		$	47,116		$	(13,825	)	$	132,036

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

Investor Relations:
Liolios Group Inc.
Cody Slach or Sean Mansouri
Tel 949-574-3860
Email Contact

Source: PFSweb, Inc.

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