Exhibit 99.1

 

PFSweb Reports Third Quarter 2014 Results

- Q3 Service Fee Equivalent Revenue up 28% to $32.4 Million; Adjusted EBITDA up 107% to $2.9 Million -

- Launched Three New Client Programs and Acquired Two eCommerce Organizations -

Allen, TX – November 12, 2014 – 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.

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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.”

 

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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

 

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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.

 

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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.

 

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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.

 

Page 6 of 15

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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.

 

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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

 

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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.

 

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended September 30, 2013

(In Thousands)

 

		PFSweb				Business & 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.

 

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Nine Months Ended September 30, 2014

(In Thousands)

 

		PFSweb				Business & 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.

 

Page 11 of 15

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Nine Months Ended September 30, 2013

(In Thousands)

 

		PFSweb				Business & 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.

 

Page 12 of 15

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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

 

Page 13 of 15

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PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2013

(In Thousands)

 

		PFSweb				Business & 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

 

Page 14 of 15

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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

PFSW@liolios.com

 

Page 15 of 15