News Column

PFSweb Reports Second Quarter 2014 Results

August 13, 2014

ALLEN, TX -- (Marketwired) -- 08/13/14 -- PFSweb, Inc. (NASDAQ: PFSW), a global provider of end-to-end eCommerce solutions, reported financial results for the three and six-months ended June 30, 2014.

Overview

Strong existing client activity, including incremental project work, resulted in stronger service fee revenue and operating margin during the second quarter of 2014 than originally anticipated. Prior year comparisons of both the second quarter and year-to-date results for 2014 are impacted by the previously announced client transitions, which were substantially completed by the beginning of the third quarter of 2013. Service fee revenue and operating margin are expected to improve strongly in the second half of 2014, as compared to the prior year, due to anticipated existing and new client growth.

2014 Outlook

PFSweb reiterates its 2014 service fee equivalent revenue guidance to range between $127 million to $133 million, increasing 7% to 12% as compared to 2013. The company also reiterates its outlook for 2014 adjusted EBITDA target to range between $12 million and $14 million, representing an increase of 12% to 31% as compared to 2013.

Second Quarter 2014 Financial Summary

•Service fee equivalent revenue (a non-GAAP measure defined and discussed below) increased to $28.5 million compared to $28.0 million during the same period in 2013 •Service fee gross margin was 30.0% compared to 33.0% during the same period in 2013 •Adjusted EBITDA (a non-GAAP measure defined and discussed below) was $1.7 million compared to $2.5 million during the same period in 2013 •Cash and cash equivalents totaled $23.2 million compared to $22.4 million at December 31, 2013•Debt totaled $10.2 million compared to $11.1 million at December 31, 2013

First Half 2014 Financial Summary

•Service fee equivalent revenue was $57.3 million compared to $58.0 million during the same period in 2013 •Service fee gross margin was 30.2% compared to 32.4% during the same period in 2013 •Adjusted EBITDA was $4.0 million compared to $5.4 million during the same period in 2013

Second Quarter 2014 Financial Results Details

Total revenues in the second quarter of 2014 were $54.0 million compared to $58.2 million in the same period in 2013. Service fee revenue in the second quarter of 2014 increased to $27.4 million compared to $26.6 million last year. This increase was primarily due to higher project activity from existing clients as well as new and expanded client relationships, partially offset by the impact of previously announced client transitions that occurred in 2013. Product revenue decreased to $18.1 million compared to $22.9 million in the same period in 2013 primarily due to ongoing restructuring activities by the company's largest client in this segment.

Service fee equivalent revenue in the second quarter of 2014 was $28.5 million compared to $28.0 million in the same period in 2013.

Service fee gross margin in the second quarter decreased to 30.0% compared to 33.0% in the same period in 2013. Each period included the benefit of higher margin project activity. In addition, the 2013 period included an incremental benefit applicable to client transition related activity occurring during the prior period.

Adjusted EBITDA was $1.7 million in the second quarter of 2014 compared to $2.5 million in the same period in 2013.

Net loss in the second quarter of 2014 was $2.4 million or $(0.14) per diluted share compared to a net loss of $1.0 million or $(0.07) per diluted share in the same period in 2013. Net loss in the second quarter of 2014 included approximately $0.9 million in stock-based compensation expense and $0.2 million of costs related to potential acquisitions, compared to approximately $0.3 million in stock-based compensation expense for the same period in 2013. In addition, the prior period included $0.3 million in restructuring and other charges.

Non-GAAP net loss (a non-GAAP measure defined and discussed below) in the second quarter of 2014 was $1.4 million or $(0.08) per diluted share compared to non-GAAP net loss of $0.4 million or $(0.03) per diluted share in the second quarter of 2013.

Cash and cash equivalents increased to $23.2 million from $22.4 million at December 31, 2013, while debt was reduced to $10.2 million from $11.1 million.

Management Commentary

"The increase in service fee equivalent revenue this quarter was an early indication of our projected return to year-over-year top-line growth in our eCommerce business as we begin to move past the quarterly comparison impact from last year's client transitions," said Mike Willoughby, CEO of PFSweb. "In fact, excluding the impact of these client transitions, service fee equivalent revenue increased approximately 20% compared to the prior year quarter.

"We look forward to launching the eCommerce website for our largest client win from last year, the United States Mint, which is expected to go live around the end of the third quarter. We believe the benefit from this United States Mint activity, coupled with the expansion of new and existing client relationships, positions us for improved financial performance as we exit 2014 and begin 2015."

"We continue to explore the acquisition landscape in the growing eCommerce market, primarily searching for opportunities that would further enhance our technology and agency services capabilities," Willoughby concluded. "We believe such acquisitions will allow us to broaden our range of services, driving higher margins and longer client life cycles."

Conference Call

PFSweb will conduct a conference call today at 11:00 a.m. Eastern time to discuss its results for the second quarter ended June 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, August 13, 2014

Time: 11:00 a.m. Eastern time (10:00 a.m. Central time)

Toll-free dial-in number: 1-888-503-8175

International dial-in number: 1-719-325-2429

Conference ID: 3009322

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=110320 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 August 27, 2014.

Toll-free replay number: 1-877-870-5176

International replay number: 1-858-384-5517

Replay ID: 3009322

About PFSweb Inc.

PFSweb (NASDAQ: PFSW) is a global business process outsourcing provider of end-to-end eCommerce solutions. The company provides these solutions and services to major brand names and other companies seeking to optimize their supply chain and enhance their traditional and online business channels, which include both direct-to-consumer and business-to-business sales 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, Canada, Belgium, 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) June 30, December 31, 2014 2013 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 23,195$ 22,418 Restricted cash 270 130 Accounts receivable, net of allowance for doubtful accounts of $430 and $382 at June 30, 2014 and December 31, 2013, respectively 40,050 55,292 Inventories, net of reserves of $901 and $962 at June 30, 2014 and December 31, 2013, respectively 13,757 14,169 Other receivables 4,696 5,241 Prepaid expenses and other current assets 5,742 4,713 ------------ ------------ Total current assets 87,710 101,963 PROPERTY AND EQUIPMENT, net 25,237 27,190 OTHER ASSETS 2,863 2,883 ------------ ------------ Total assets 115,810 132,036 ============ ============ LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations $ 8,001$ 8,231 Trade accounts payable 27,224 34,096 Deferred revenue 10,230 8,181 Accrued expenses 18,167 25,045 ------------ ------------ Total current liabilities 63,622 75,553 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 2,192 2,876 DEFERRED REVENUE 6,195 7,491 DEFERRED RENT 5,174 5,191 ------------ ------------ Total liabilities 77,183 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; 16,794,832 and 16,540,904 shares issued at June 30, 2014 and December 31, 2013, respectively; and 16,761,365 and 16,507,437 shares outstanding as of June 30, 2014 and December 31, 2013, respectively 17 17 Additional paid-in capital 126,527 124,522 Accumulated deficit (89,505) (85,300) Accumulated other comprehensive income 1,713 1,811 Treasury stock at cost, 33,467 shares (125) (125) ------------ ------------ Total shareholders' equity 38,627 40,925 ------------ ------------ Total liabilities and shareholders' equity $ 115,810$ 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 Six Months Ended June 30, June 30, ---------------------- ---------------------- 2014 2013 2014 2013 ---------- ---------- ---------- ---------- REVENUES: Product revenue, net $ 18,120$ 22,898$ 39,842$ 48,165 Service fee revenue 27,384 26,583 54,982 54,800 Pass-thru revenue 8,539 8,704 16,448 18,361 ---------- ---------- ---------- ---------- Total revenues 54,043 58,185 111,272 121,326 ---------- ---------- ---------- ---------- COSTS OF REVENUES: Cost of product revenue 17,039 21,479 37,555 44,994 Cost of service fee revenue 19,160 17,811 38,380 37,069 Cost of pass-thru revenue 8,539 8,704 16,448 18,361 ---------- ---------- ---------- ---------- Total costs of revenues 44,738 47,994 92,383 100,424 ---------- ---------- ---------- ---------- Gross profit 9,305 10,191 18,889 20,902 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 11,485 10,938 22,507 23,739 ---------- ---------- ---------- ---------- Income (loss) from operations (2,180) (747) (3,618) (2,837) INTEREST EXPENSE (INCOME), NET 173 184 316 402 ---------- ---------- ---------- ---------- Income (loss) before income taxes (2,353) (931) (3,934) (3,239) INCOME TAX PROVISION (BENEFIT) 42 24 271 291 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (2,395)$ (955)$ (4,205)$ (3,530) ========== ========== ========== ========== NON-GAAP NET INCOME (LOSS) $ (1,379)$ (421)$ (2,395)$ (400) ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE: Basic $ (0.14)$ (0.07)$ (0.25)$ (0.26) ========== ========== ========== ========== Diluted $ (0.14)$ (0.07)$ (0.25)$ (0.26) ========== ========== ========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 16,736 14,525 16,630 13,661 ========== ========== ========== ========== Diluted 16,736 14,525 16,630 13,661 ========== ========== ========== ========== EBITDA $ 698$ 1,941$ 2,150$ 2,259 ========== ========== ========== ========== ADJUSTED EBITDA $ 1,714$ 2,475$ 3,960$ 5,389 ========== ========== ========== ========== (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 Six Months Ended June 30, June 30, ---------------------- ---------------------- 2014 2013 2014 2013 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (2,395)$ (955)$ (4,205)$ (3,530) Income tax expense 42 24 271 291 Interest expense, net 173 184 316 402 Depreciation and amortization 2,878 2,688 5,768 5,096 ---------- ---------- ---------- ---------- EBITDA $ 698$ 1,941$ 2,150$ 2,259 Stock-based compensation 862 282 1,656 585 Acquisition related costs 154 - 154 - Restructuring and other charges - 252 - 2,545 ---------- ---------- ---------- ---------- ADJUSTED EBITDA $ 1,714$ 2,475$ 3,960$ 5,389 ========== ========== ========== ========== Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2014 2013 2014 2013 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (2,395)$ (955)$ (4,205)$ (3,530) Stock-based compensation 862 282 1,656 585 Acquisition related costs 154 - 154 - Restructuring and other charges - 252 - 2,545 ---------- ---------- ---------- ---------- NON-GAAP NET INCOME (LOSS) $ (1,379)$ (421)$ (2,395)$ (400) ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE: Basic $ (0.14)$ (0.07)$ (0.25)$ (0.26) ========== ========== ========== ========== Diluted $ (0.14)$ (0.07)$ (0.25)$ (0.26) ========== ========== ========== ========== NON-GAAP NET INCOME (LOSS) Per Share: Basic $ (0.08)$ (0.03)$ (0.14)$ (0.03) ========== ========== ========== ========== Diluted $ (0.08)$ (0.03)$ (0.14)$ (0.03) ========== ========== ========== ========== Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2014 2013 2014 2013 ---------- ---------- ---------- ---------- TOTAL REVENUES $ 54,043$ 58,185$ 111,272$ 121,326 Pass-thru revenue (8,539) (8,704) (16,448) (18,361) Cost of product revenue (17,039) (21,479) (37,555) (44,994) ---------- ---------- ---------- ---------- SERVICE FEE EQUIVALENT REVENUE $ 28,465$ 28,002$ 57,269$ 57,971 ========== ========== ========== ========== PFSweb, Inc. and Subsidiaries Unaudited Consolidating Statements of Operations For the Three Months Ended June 30, 2014 (In Thousands) Business & Retail PFSweb Connect Eliminations Consolidated ---------- ---------- ------------ ------------ REVENUES: Product revenue, net $ - $ 18,120 $ - $ 18,120 Service fee revenue 24,423 2,961 - 27,384 Service fee revenue - affiliate 3,176 595 (3,771) - Pass-thru revenue 8,539 - - 8,539 ---------- ---------- ------------ ------------ Total revenues 36,138 21,676 (3,771) 54,043 ---------- ---------- ------------ ------------ COSTS OF REVENUES: Cost of product revenue - 17,039 - 17,039 Cost of service fee revenue 19,557 3,093 (3,490) 19,160 Cost of pass-thru revenue 8,539 - - 8,539 ---------- ---------- ------------ ------------ Total costs of revenues 28,096 20,132 (3,490) 44,738 ---------- ---------- ------------ ------------ Gross profit 8,042 1,544 (281) 9,305 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 10,719 1,047 (281) 11,485 ---------- ---------- ------------ ------------ Income (loss) from operations (2,677) 497 - (2,180) INTEREST EXPENSE (INCOME), NET 33 140 - 173 ---------- ---------- ------------ ------------ Income (loss) before income taxes (2,710) 357 - (2,353) INCOME TAX PROVISION (BENEFIT) (49) 91 - 42 ---------- ---------- ------------ ------------ NET INCOME (LOSS) $ (2,661)$ 266 $ - $ (2,395) ========== ========== ============ ============ NON-GAAP NET INCOME (LOSS) $ (1,645)$ 266 $ - $ (1,379) ========== ========== ============ ============ EBITDA $ 157$ 541 $ - $ 698 ========== ========== ============ ============ ADJUSTED EBITDA $ 1,173$ 541 $ - $ 1,714 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows: NET INCOME (LOSS) $ (2,661)$ 266 $ - (2,395) Income tax expense (benefit) (49) 91 - 42 Interest expense (income), net 33 140 - 173 Depreciation and amortization 2,834 44 - 2,878 ---------- ---------- ------------ ------------ EBITDA $ 157$ 541 $ - $ 698 Stock-based compensation 862 - - 862 Acquisition related costs 154 - - 154 ---------- ---------- ------------ ------------ ADJUSTED EBITDA $ 1,173$ 541 $ - $ 1,714 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows: NET INCOME (LOSS) $ (2,661)$ 266 $ - $ (2,395) Stock-based compensation 862 - - 862 Acquisition related costs 154 - - 154 ---------- ---------- ------------ ------------ NON-GAAP NET INCOME (LOSS) $ (1,645)$ 266 $ - $ (1,379) ========== ========== ============ ============ 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 June 30, 2013 (In Thousands) Business & Retail PFSweb Connect Eliminations Consolidated ---------- ---------- ------------ ------------ REVENUES: Product revenue, net $ - $ 22,898 $ - $ 22,898 Service fee revenue 25,304 1,279 - 26,583 Service fee revenue - affiliate 1,914 436 (2,350) - Pass-thru revenue 8,704 - - 8,704 ---------- ---------- ------------ ------------ Total revenues 35,922 24,613 (2,350) 58,185 ---------- ---------- ------------ ------------ COSTS OF REVENUES: Cost of product revenue - 21,479 - 21,479 Cost of service fee revenue 18,401 1,501 (2,091) 17,811 Cost of pass-thru revenue 8,704 - - 8,704 ---------- ---------- ------------ ------------ Total costs of revenues 27,105 22,980 (2,091) 47,994 ---------- ---------- ------------ ------------ Gross profit 8,817 1,633 (259) 10,191 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,600 1,597 (259) 10,938 ---------- ---------- ------------ ------------ Income (loss) from operations (783) 36 - (747) INTEREST EXPENSE (INCOME), NET 35 149 - 184 ---------- ---------- ------------ ------------ Income (loss) before income taxes (818) (113) - (931) INCOME TAX PROVISION (BENEFIT) 22 2 - 24 ---------- ---------- ------------ ------------ NET INCOME (LOSS) $ (840)$ (115) $ - $ (955) ========== ========== ============ ============ NON-GAAP NET INCOME (LOSS) $ (306)$ (115) $ - $ (421) ========== ========== ============ ============ EBITDA $ 1,866$ 75 $ - $ 1,941 ========== ========== ============ ============ ADJUSTED EBITDA $ 2,400$ 75 $ - $ 2,475 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows: NET INCOME (LOSS) $ (840)$ (115) $ - (955) Income tax expense (benefit) 22 2 - 24 Interest expense (income), net 35 149 - 184 Depreciation and amortization 2,649 39 - 2,688 ---------- ---------- ------------ ------------ EBITDA $ 1,866$ 75 $ - $ 1,941 Stock-based compensation 282 - - 282 Restructuring and other charges 252 - - 252 ---------- ---------- ------------ ------------ ADJUSTED EBITDA $ 2,400$ 75 $ - $ 2,475 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows: NET INCOME (LOSS) $ (840)$ (115) $ - $ (955) Stock-based compensation 282 - - 282 Restructuring and other charges 252 - - 252 ---------- ---------- ------------ ------------ NON-GAAP NET INCOME (LOSS) $ (306)$ (115) $ - $ (421) ========== ========== ============ ============ 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 Six Months Ended June 30, 2014 (In Thousands) Business & Retail PFSweb Connect Eliminations Consolidated ---------- ---------- ------------ ------------ REVENUES: Product revenue, net $ - $ 39,842 $ - $ 39,842 Service fee revenue 48,576 6,406 - 54,982 Service fee revenue - affiliate 6,866 1,210 (8,076) - Pass-thru revenue 16,448 - 16,448 ---------- ---------- ------------ ------------ Total revenues 71,890 47,458 (8,076) 111,272 ---------- ---------- ------------ ------------ COSTS OF REVENUES: Cost of product revenue - 37,555 - 37,555 Cost of service fee revenue 39,077 6,709 (7,406) 38,380 Cost of pass-thru revenue 16,448 - - 16,448 ---------- ---------- ------------ ------------ Total costs of revenues 55,525 44,264 (7,406) 92,383 ---------- ---------- ------------ ------------ Gross profit 16,365 3,194 (670) 18,889 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 20,895 2,282 (670) 22,507 ---------- ---------- ------------ ------------ Income (loss) from operations (4,530) 912 - (3,618) INTEREST EXPENSE (INCOME), NET 32 284 - 316 ---------- ---------- ------------ ------------ Income (loss) before income taxes (4,562) 628 - (3,934) INCOME TAX PROVISION (BENEFIT) 81 190 - 271 ---------- ---------- ------------ ------------ NET INCOME (LOSS) $ (4,643)$ 438 $ - $ (4,205) ========== ========== ============ ============ NON-GAAP NET INCOME (LOSS) $ (2,833)$ 438 $ - $ (2,395) ========== ========== ============ ============ EBITDA $ 1,151$ 999 $ - $ 2,150 ========== ========== ============ ============ ADJUSTED EBITDA $ 2,961$ 999 $ - $ 3,960 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows: NET INCOME (LOSS) $ (4,643)$ 438 $ - (4,205) Income tax expense (benefit) 81 190 - 271 Interest expense (income), net 32 284 - 316 Depreciation and amortization 5,681 87 - 5,768 ---------- ---------- ------------ ------------ EBITDA $ 1,151$ 999 $ - $ 2,150 Stock-based compensation 1,656 - - 1,656 Acquisition related costs 154 - - 154 ---------- ---------- ------------ ------------ ADJUSTED EBITDA $ 2,961$ 999 $ - $ 3,960 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows: NET INCOME (LOSS) $ (4,643)$ 438 $ - $ (4,205) Stock-based compensation 1,656 - - 1,656 Acquisition related costs 154 - - 154 ---------- ---------- ------------ ------------ NON-GAAP NET INCOME (LOSS) $ (2,833)$ 438 $ - $ (2,395) ========== ========== ============ ============ 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 Six Months Ended June 30, 2013 (In Thousands) Business & Retail PFSweb Connect Eliminations Consolidated ---------- ---------- ------------ ------------ REVENUES: Product revenue, net $ - $ 48,165 $ - $ 48,165 Service fee revenue 51,745 3,055 - 54,800 Service fee revenue - affiliate 4,269 798 (5,067) - Pass-thru revenue 18,361 - - 18,361 ---------- ---------- ------------ ------------ Total revenues 74,375 52,018 (5,067) 121,326 ---------- ---------- ------------ ------------ COSTS OF REVENUES: Cost of product revenue - 44,994 - 44,994 Cost of service fee revenue 38,181 3,299 (4,411) 37,069 Cost of pass-thru revenue 18,361 - - 18,361 ---------- ---------- ------------ ------------ Total costs of revenues 56,542 48,293 (4,411) 100,424 ---------- ---------- ------------ ------------ Gross profit 17,833 3,725 (656) 20,902 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 21,163 3,232 (656) 23,739 ---------- ---------- ------------ ------------ Income (loss) from operations (3,330) 493 - (2,837) INTEREST EXPENSE (INCOME), NET 102 300 - 402 ---------- ---------- ------------ ------------ Income (loss) before income taxes (3,432) 193 - (3,239) INCOME TAX PROVISION (BENEFIT) 142 149 - 291 ---------- ---------- ------------ ------------ NET INCOME (LOSS) $ (3,574)$ 44 $ - $ (3,530) ========== ========== ============ ============ NON-GAAP NET INCOME (LOSS) $ (444)$ 44 $ - $ (400) ========== ========== ============ ============ EBITDA $ 1,688$ 571 $ - $ 2,259 ========== ========== ============ ============ ADJUSTED EBITDA $ 4,818$ 571 $ - $ 5,389 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows: NET INCOME (LOSS) $ (3,574)$ 44 $ - (3,530) Income tax expense (benefit) 142 149 - 291 Interest expense (income), net 102 300 - 402 Depreciation and amortization 5,018 78 - 5,096 ---------- ---------- ------------ ------------ EBITDA $ 1,688$ 571 $ - $ 2,259 Stock-based compensation 585 - - 585 Restructuring and other charges 2,545 - - 2,545 ---------- ---------- ------------ ------------ ADJUSTED EBITDA $ 4,818$ 571 $ - $ 5,389 ========== ========== ============ ============ A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows: NET INCOME (LOSS) $ (3,574)$ 44 $ - $ (3,530) Stock-based compensation 585 - - 585 Restructuring and other charges 2,545 - - 2,545 ---------- ---------- ------------ ------------ NON-GAAP NET INCOME (LOSS) $ (444)$ 44 $ - $ (400) ========== ========== ============ ============ 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 June 30, 2014 (In Thousands) Business & Retail PFSweb Connect Eliminations Consolidated ---------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 17,328$ 5,867 $ - $ 23,195 Restricted cash - 270 - 270 Accounts receivable, net 26,105 14,638 (693) 40,050 Inventories, net - 13,757 - 13,757 Other receivables - 4,696 - 4,696 Prepaid expenses and other current assets 4,679 1,063 - 5,742 ---------- ---------- ------------ ------------ Total current assets 48,112 40,291 (693) 87,710 ---------- ---------- ------------ ------------ PROPERTY AND EQUIPMENT, net 25,040 197 - 25,237 RECEIVABLE/INVESTMENT IN AFFILIATES 10,031 - (10,031) - OTHER ASSETS 2,816 47 - 2,863 ---------- ---------- ------------ ------------ Total assets 85,999 40,535 (10,724) 115,810 ========== ========== ============ ============ LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current portion of long-term debt and capital lease obligations $ 3,651$ 4,350 $ - $ 8,001 Trade accounts payable 6,937 20,980 (693) 27,224 Deferred revenue 10,230 - - 10,230 Accrued expenses 13,134 5,033 - 18,167 ---------- ---------- ------------ ------------ Total current liabilities 33,952 30,363 (693) 63,622 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 2,192 - - 2,192 PAYABLE TO AFFILIATES - 22,045 (22,045) - DEFERRED REVENUE 6,195 - - 6,195 DEFERRED RENT 5,174 - - 5,174 ---------- ---------- ------------ ------------ Total liabilities 47,513 52,408 (22,738) 77,183 ---------- ---------- ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock 17 19 (19) 17 Capital contributions - 1,000 (1,000) - Additional paid-in capital 126,527 28,060 (28,060) 126,527 Retained earnings (accumulated deficit) (89,641) (43,239) 43,375 (89,505) Accumulated other comprehensive income 1,708 2,287 (2,282) 1,713 Treasury stock (125) - - (125) ---------- ---------- ------------ ------------ Total shareholders' equity 38,486 (11,873) 12,014 38,627 ---------- ---------- ------------ ------------ Total liabilities and shareholders' equity $ 85,999$ 40,535$ (10,724)$ 115,810 ========== ========== ============ ============ PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidating Balance Sheets as of December 31, 2013 (In Thousands) Business & Retail PFSweb 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 Greg Falesnik Tel 949-574-3860 Email Contact



Source: PFSweb, Inc.


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