Exhibit 99.1

 

PFSweb Reports Second Quarter Record Results

Q2 Service Fee Equivalent Revenue up 40% to $39.8 Million; Adjusted EBITDA up 138% to $4.1 Million

Allen, TX – August 10, 2015 – PFSweb, Inc. (NASDAQ: PFSW), a global provider of end-to-end eCommerce solutions, reported results for the second quarter ended June 30, 2015.

Second Quarter 2015 Highlights vs. Year-Ago Quarter

 

•

Service fee equivalent revenue (a non-GAAP measure defined below) increased 40% to a Q2 record $39.8 million

 

•

Service fee gross margin increased 180 basis points to 31.8%

 

•

Adjusted EBITDA (a non-GAAP measure defined below) increased 138% to a Q2 record $4.1 million

Management Commentary

“We are pleased to once again report record quarterly results,” said Michael Willoughby, CEO of PFSweb. “These results reflect continued strong execution for our new and existing clients. In addition, our service fee equivalent revenue and Adjusted EBITDA again benefitted from higher margin incremental project activity in our digital agency and technology services businesses. Our second quarter was also highlighted by the acquisition of MODA, which expands our offerings into the U.K. and adds integration capabilities with the Magento software platform. We believe our continuous execution, high level of client referenceability, and expansion of agency and technology service offerings are validating our position as a leader among full-service eCommerce providers.

“As recently announced, the breadth of our agency and technology service offering has been further enhanced through our acquisition of CrossView in August. Through combining CrossView’s IBM WebSphere and SAP hybris related capabilities with our Demandware, Oracle Commerce and Magento experience, we believe we are now the only provider of end-to-end eCommerce solutions in the marketplace supporting all five major eCommerce software platforms. CrossView also provides us with a robust B2B front-end commerce platform which, we believe, when combined with our strong B2B order fulfillment, customer care and financial services capabilities, creates a unique B2B offering. By providing complete platform choice and a strong B2B full-service solution, we believe we will be able to target an even larger addressable market. As a result, we plan to further ramp our sales and marketing efforts to capitalize on the newly added capabilities and the cross sell opportunities from the CrossView acquisition.”

2015 Outlook

As announced in the company’s CrossView acquisition press release dated August 3, 2015, PFSweb has increased its 2015 service fee equivalent revenue guidance to range between $175 million and $185 million, up from $160 million to $170 million. This reflects growth of 26% to 33% from 2014. The company has also increased its adjusted EBITDA target to range between $18 million to $20 million, up from $16 million to $18 million. This reflects growth of 32% to 47% from 2014. This guidance excludes the impact of potential future acquisitions.

 

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The updated guidance is based on the strength of the pre-acquisition PFSweb business and the contribution from the CrossView acquisition. The new service fee equivalent revenue and adjusted EBITDA guidance also reflects the expectation that CrossView revenues will be seasonally lower in the last quarter compared to the first three quarters, which is typical of commerce system integrators. The new guidance also includes the impact from increased sales and marketing expenses in the remainder of 2015, as well as expenses related to preparation for the 2015 holiday season.

Second Quarter 2015 Financial Results

Total revenues in the second quarter of 2015 increased 17% to $63.2 million compared to $54.0 million in the same period of 2014. Service fee revenue in the second quarter of 2015 increased 43% to $39.1 million compared to $27.4 million last year. Product revenue was $13.7 million compared to $18.1 million in the same period of 2014 due to ongoing restructuring activities by the company’s largest client in this segment.

Service fee equivalent revenue in the second quarter of 2015 increased 40% to a second quarter record $39.8 million compared to $28.5 million in the same period of 2014.

Service fee gross margin in the second quarter increased 180 basis points to 31.8% compared to 30.0% in the same period of 2014. The 2015 quarter included a higher proportion of professional and technology services, including the impact from our acquisitions of Rev Solutions and LiveAreaLabs and certain incremental projects.

Adjusted EBITDA increased 138% to a second quarter record $4.1 million in of 2015 compared to $1.7 million in the same period of 2014. As a percentage of service fee equivalent revenue, adjusted EBITDA increased 430 basis points to 10.3% compared to 6.0% in the year-ago quarter.

Net loss in the second quarter was $1.9 million or $(0.11) per diluted share, compared to a net loss of $2.4 million or $(0.14) per diluted share in the same period of 2014. Net loss in the second quarter of 2015 included $1.2 million in stock-based compensation expense and $1.1 million in acquisition related and restructuring costs. This compares to $0.9 million in stock-based compensation expense and $0.2 million in acquisition related and restructuring costs in the same period of 2014.

Non-GAAP net income (a non-GAAP measure defined below) in the second quarter of 2015 was $0.6 million or $0.03 per diluted share, compared to non-GAAP net loss of $1.4 million or $(0.08) per diluted share in the second quarter of 2014.

At June 30, 2015, cash and cash equivalents was $15.7 million compared to $18.1 million at December 31, 2014. Total debt decreased to $9.5 million from $10.9 million at December 31, 2014.

 

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First Half 2015 Financial Results

Total revenues in the first six months of 2015 increased 14% to $127.0 million compared to $111.3 million in the same period of 2014. Service fee revenue in the first six months of 2015 increased 38% to $75.8 million compared to $55.0 million last year. Product revenue was $30.3 million compared to $39.8 million in the same period of 2014.

Service fee equivalent revenue in the first six months of 2015 increased 35% to $77.5 million compared to $57.3 million in the same period of 2014.

Service fee gross margin in the first six months of 2015 increased 140 basis points to 31.6% compared to 30.2% in the same period of 2014.

Adjusted EBITDA increased 97% to $7.8 million in the first six months of 2015 compared to $4.0 million in the same period of 2014. As a percentage of service fee equivalent revenue, adjusted EBITDA increased 320 basis points to 10.1% compared to 6.9% in the year-ago period.

Net loss in the first six months of 2015 was $3.6 million or $(0.21) per diluted share, compared to a net loss of $4.2 million or $(0.25) per diluted share in the same period of 2014. Net loss in the first six months of 2015 included $2.0 million in stock-based compensation expense and $1.9 million in acquisition related and restructuring costs. This compares to $1.7 million in stock-based compensation expense and $0.2 million in acquisition related and restructuring costs in the same period of 2014.

Non-GAAP net income in the first six months of 2015 was $0.7 million or $0.04 per diluted share, compared to non-GAAP net loss of $2.4 million or $(0.14) per diluted share in the same period of 2014.

Conference Call

PFSweb will conduct a conference call today at 4:30 p.m. Eastern time to discuss its results for the second quarter ended June 30, 2015.

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

Date: Monday, August 10, 2015

Time: 4:30 p.m. Eastern time (3:30 p.m. Central time)

Toll-free dial-in number: 1-888-539-3678

International dial-in number: 1-719-325-2454

Conference ID: 8118507

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=115575 and via the investor relations section of the company’s website at www.pfsweb.com.

 

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A replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through August 24, 2015.

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

International replay number: 1-858-384-5517

Replay ID: 8118507

About PFSweb Inc.

PFSweb (NASDAQ: PFSW) is a 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, Ohio, North Carolina, Canada, Belgium, London, Munich and India. 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.

 

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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, 2014 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.

Company Contact:

Michael C. Willoughby

Chief Executive Officer

or

Thomas J. Madden

Chief Financial Officer

Tel 972-881-2900

Investor Relations:

Liolios Group Inc.

Scott Liolios or Sean Mansouri

Tel 949-574-3860

PFSW@liolios.com

 

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PFSweb, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (A)

(In Thousands, Except Share Data)

 

		June 30, 2015				December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	15,721			$	18,128
Restricted cash			374				521
Accounts receivable, net of allowance for doubtful accounts of $446 and $447 at June 30, 2015 and December 31, 2014, respectively			42,961				59,126
Inventories, net of reserves of $635 and $768 at June 30, 2015 and December 31, 2014, respectively			10,333				10,534
Other receivables			4,565				5,638
Prepaid expenses and other current assets			4,551				7,103
Total current assets			78,505				101,050
PROPERTY AND EQUIPMENT, net			23,912				26,604
INTANGIBLE ASSETS, net			1,813				2,170
GOODWILL			10,322				8,366
OTHER ASSETS			2,101				2,556
Total assets			116,653				140,746
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	5,717			$	6,850
Trade accounts payable			27,839				38,842
Deferred revenue			6,806				9,098
Accrued expenses			24,124				28,473
Total current liabilities			64,486				83,263
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			3,739				4,062
DEFERRED REVENUE			4,481				5,355
DEFERRED RENT			4,561				4,870
OTHER LONG-TERM LIABILITIES			368				3,091
Total liabilities			77,635				100,641
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; 17,511,982 and 17,047,093 shares issued at June 30, 2015 and December 31, 2014, respectively; and 17,478,515 and 17,013,622 shares outstanding as of June 30, 2015 and December 31, 2014, respectively			17				17
Additional paid-in capital			132,631				129,457
Accumulated deficit			(93,519	)			(89,926	)
Accumulated other comprehensive income			14				682
Treasury stock at cost, 33,467 shares			(125	)			(125	)
Total shareholders’ equity			39,018				40,105
Total liabilities and shareholders’ equity		$	116,653			$	140,746

 

(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, 2014.

 

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PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations (A)

(In Thousands, Except Per Share Data)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
REVENUES:
Product revenue, net		$	13,658			$	18,120			$	30,312			$	39,842
Service fee revenue			39,075				27,384				75,783				54,982
Pass-thru revenue			10,443				8,539				20,927				16,448
Total revenues			63,176				54,043				127,022				111,272
COSTS OF REVENUES:
Cost of product revenue			12,911				17,039				28,619				37,555
Cost of service fee revenue			26,645				19,160				51,800				38,380
Cost of pass-thru revenue			10,443				8,539				20,927				16,448
Total costs of revenues			49,999				44,738				101,346				92,383
Gross profit			13,177				9,305				25,676				18,889
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			14,676				11,485				28,290				22,507
Income (loss) from operations			(1,499	)			(2,180	)			(2,614	)			(3,618	)
INTEREST EXPENSE (INCOME), NET			223				173				541				316
Income (loss) before income taxes			(1,722	)			(2,353	)			(3,155	)			(3,934	)
INCOME TAX PROVISION (BENEFIT)			178				42				438				271
NET INCOME (LOSS)		$	(1,900	)		$	(2,395	)		$	(3,593	)		$	(4,205	)
NON-GAAP NET INCOME (LOSS)		$	613			$	(1,379	)		$	743			$	(2,395	)
NET INCOME (LOSS) PER SHARE:
Basic		$	(0.11	)		$	(0.14	)		$	(0.21	)		$	(0.25	)
Diluted		$	(0.11	)		$	(0.14	)		$	(0.21	)		$	(0.25	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic			17,368				16,736				17,257				16,630
Diluted			17,368				16,736				17,257				16,630
EBITDA		$	1,810			$	698			$	3,950			$	2,150
ADJUSTED EBITDA		$	4,083			$	1,714			$	7,806			$	3,960

 

(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, 2014.

 

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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 June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
NET INCOME (LOSS)		$	(1,900	)		$	(2,395	)		$	(3,593	)		$	(4,205	)
Income tax expense (benefit)			178				42				438				271
Interest expense, net			223				173				541				316
Depreciation and amortization			3,309				2,878				6,564				5,768
EBITDA		$	1,810			$	698			$	3,950			$	2,150
Stock-based compensation			1,150				862				1,954				1,656
Acquisition related and restructuring costs			1,123				154				1,902				154
ADJUSTED EBITDA		$	4,083			$	1,714			$	7,806			$	3,960

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
NET INCOME (LOSS)		$	(1,900	)		$	(2,395	)		$	(3,593	)		$	(4,205	)
Stock-based compensation			1,150				862				1,954				1,656
Amortization of intangible assets			240				—				480				—
Acquisition related and restructuring costs			1,123				154				1,902				154
NON-GAAP NET INCOME (LOSS)		$	613			$	(1,379	)		$	743			$	(2,395	)
NET INCOME (LOSS) PER SHARE:
Basic		$	(0.11	)		$	(0.14	)		$	(0.21	)		$	(0.25	)
Diluted		$	(0.11	)		$	(0.14	)		$	(0.21	)		$	(0.25	)
NON-GAAP NET INCOME (LOSS) Per Share:
Basic		$	0.04			$	(0.08	)		$	0.04			$	(0.14	)
Diluted		$	0.03			$	(0.08	)		$	0.04			$	(0.14	)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014				2015				2014
TOTAL REVENUES		$	63,176			$	54,043			$	127,022			$	111,272
Pass-thru revenue			(10,443	)			(8,539	)			(20,927	)			(16,448	)
Cost of product revenue			(12,911	)			(17,039	)			(28,619	)			(37,555	)
SERVICE FEE EQUIVALENT REVENUE		$	39,822			$	28,465			$	77,476			$	57,269

 

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended June 30, 2015

(In Thousands)

 

		PFSweb				Business & Retail Connect				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	13,658			$	—			$	13,658
Service fee revenue			35,841				3,234				—				39,075
Service fee revenue - affiliate			3,150				169				(3,319	)			—
Pass-thru revenue			10,443				—				—				10,443
Total revenues			49,434				17,061				(3,319	)			63,176
COSTS OF REVENUES:
Cost of product revenue			—				12,911				—				12,911
Cost of service fee revenue			26,611				3,198				(3,164	)			26,645
Cost of pass-thru revenue			10,443				—				—				10,443
Total costs of revenues			37,054				16,109				(3,164	)			49,999
Gross profit			12,380				952				(155	)			13,177
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			14,249				582				(155	)			14,676
Income (loss) from operations			(1,869	)			370				—				(1,499	)
INTEREST EXPENSE (INCOME), NET			121				102				—				223
Income (loss) before income taxes			(1,990	)			268				—				(1,722	)
INCOME TAX PROVISION (BENEFIT)			86				92				—				178
NET INCOME (LOSS)		$	(2,076	)		$	176			$	—			$	(1,900	)
NON-GAAP NET INCOME (LOSS)		$	437			$	176			$	—			$	613
EBITDA		$	1,421			$	389			$	—			$	1,810
ADJUSTED EBITDA		$	3,694			$	389			$	—			$	4,083
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(2,076	)		$	176			$	—				(1,900	)
Income tax expense (benefit)			86				92				—				178
Interest expense (income), net			121				102				—				223
Depreciation and amortization			3,290				19				—				3,309
EBITDA		$	1,421			$	389			$	—			$	1,810
Stock-based compensation			1,150				—				—				1,150
Acquisition related and restructuring costs			1,123				—				—				1,123
ADJUSTED EBITDA		$	3,694			$	389			$	—			$	4,083
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(2,076	)		$	176			$	—			$	(1,900	)
Stock-based compensation			1,150				—				—				1,150
Amortization of intangible assets			240				—				—				240
Acquisition related and restructuring costs			1,123				—				—				1,123
NON-GAAP NET INCOME (LOSS)		$	437			$	176			$	—			$	613

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 June 30, 2014

(In Thousands)

 

		PFSweb				Business & Retail 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.

 

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Six Months Ended June 30, 2015

(In Thousands)

 

		PFSweb				Business & Retail Connect				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	30,312			$	—			$	30,312
Service fee revenue			68,573				7,210				—				75,783
Service fee revenue - affiliate			6,643				373				(7,016	)			—
Pass-thru revenue			20,927				—				—				20,927
Total revenues			96,143				37,895				(7,016	)			127,022
COSTS OF REVENUES:
Cost of product revenue			—				28,619				—				28,619
Cost of service fee revenue			51,268				7,144				(6,612	)			51,800
Cost of pass-thru revenue			20,927				—				—				20,927
Total costs of revenues			72,195				35,763				(6,612	)			101,346
Gross profit			23,948				2,132				(404	)			25,676
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			27,479				1,215				(404	)			28,290
Income (loss) from operations			(3,531	)			917				—				(2,614	)
INTEREST EXPENSE (INCOME), NET			327				214				—				541
Income (loss) before income taxes			(3,858	)			703				—				(3,155	)
INCOME TAX PROVISION (BENEFIT)			192				246				—				438
NET INCOME (LOSS)		$	(4,050	)		$	457			$	—			$	(3,593	)
NON-GAAP NET INCOME (LOSS)		$	286			$	457			$	—			$	743
EBITDA		$	2,990			$	960			$	—			$	3,950
ADJUSTED EBITDA		$	6,846			$	960			$	—			$	7,806
A reconciliation of NET INCOME (LOSS) to EBITDA and ADJUSTED EBITDA follows:
NET INCOME (LOSS)		$	(4,050	)		$	457			$	—				(3,593	)
Income tax expense (benefit)			192				246				—				438
Interest expense (income), net			327				214				—				541
Depreciation and amortization			6,521				43				—				6,564
EBITDA		$	2,990			$	960			$	—			$	3,950
Stock-based compensation			1,954				—				—				1,954
Acquisition related and restructuring costs			1,902				—				—				1,902
ADJUSTED EBITDA		$	6,846			$	960			$	—			$	7,806
A reconciliation of NET INCOME (LOSS) to NON-GAAP NET INCOME (LOSS) follows:
NET INCOME (LOSS)		$	(4,050	)		$	457			$	—			$	(3,593	)
Stock-based compensation			1,954				—				—				1,954
Amortization of intangible assets			480				—				—				480
Acquisition related and restructuring costs			1,902				—				—				1,902
NON-GAAP NET INCOME (LOSS)		$	286			$	457			$	—			$	743

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 14

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PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Six Months Ended June 30, 2014

(In Thousands)

 

		PFSweb				Business & Retail Connect				Eliminations				Consolidated
REVENUES:
Product revenue, net		$	—			$	39,842			$	—			$	41,703
Service fee revenue			48,576				6,406				—				55,025
Service fee revenue - affiliate			6,866				1,210				(8,076	)			(1,904	)
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				—				36,781
Cost of service fee revenue			39,077				6,709				(7,406	)			39,154
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.

 

Page 12 of 14

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PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of June 30, 2015

(In Thousands)

 

		PFSweb				Business & Retail Connect				Eliminations				Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	9,036			$	6,685			$	—			$	15,721
Restricted cash			—				374				—				374
Accounts receivable, net			30,064				13,727				(830	)			42,961
Inventories, net			—				10,333				—				10,333
Other receivables			160				4,405				—				4,565
Prepaid expenses and other current assets			3,687				864				—				4,551
Total current assets			42,947				36,388				(830	)			78,505
PROPERTY AND EQUIPMENT, net			23,858				54				—				23,912
RECEIVABLE/INVESTMENT IN AFFILIATES			11,039				—				(11,039	)			—
INTANGIBLE ASSETS, net			1,813				—				—				1,813
GOODWILL			10,322				—				—				10,322
OTHER ASSETS			2,101				—				—				2,101
Total assets			92,080				36,442				(11,869	)			116,653
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	3,550			$	2,167			$	—			$	5,717
Trade accounts payable			8,393				20,287				(841	)			27,839
Deferred revenue			6,806				—				—				6,806
Accrued expenses			19,394				4,730				—				24,124
Total current liabilities			38,143				27,184				(841	)			64,486
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			3,739				—				—				3,739
PAYABLE TO AFFILIATES			—				22,045				(22,045	)			—
DEFERRED REVENUE			4,481				—				—				4,481
DEFERRED RENT			4,561				—				—				4,561
OTHER LONG-TERM LIABILITIES			368				—				—				368
Total liabilities			51,292				49,229				(22,886	)			77,635
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock			17				1,019				(1,019	)			17
Capital contributions			—								—				—
Additional paid-in capital			134,557				28,060				(29,986	)			132,631
Retained earnings (accumulated deficit)			(93,661	)			(43,128	)			43,270				(93,519	)
Accumulated other comprehensive income			—				1,262				(1,248	)			14
Treasury stock			(125	)			—				—				(125	)
Total shareholders’ equity			40,788				(12,787	)			11,017				39,018
Total liabilities and shareholders’ equity		$	92,080			$	36,442			$	(11,869	)		$	116,653

 

(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, 2014.

 

Page 13 of 14

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PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2014

(In Thousands)

 

		PFSweb				Business & Retail Connect				Eliminations				Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	6,671			$	11,457			$	—			$	18,128
Restricted cash			—				521				—				521
Accounts receivable, net			42,081				18,415				(1,370	)			59,126
Inventories, net			—				10,534				—				10,534
Other receivables			—				5,638				—				5,638
Prepaid expenses and other current assets			6,141				962				—				7,103
Total current assets			54,893				47,527				(1,370	)			101,050
PROPERTY AND EQUIPMENT, net			26,478				126				—				26,604
RECEIVABLE/INVESTMENT IN AFFILIATES			9,938				—				(9,938	)			—
INTANGIBLE ASSETS, net			2,170				—				—				2,170
GOODWILL			8,366				—				—				8,366
OTHER ASSETS			2,527				29				—				2,556
Total assets			104,372				47,682				(11,308	)			140,746
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations		$	3,583			$	3,267			$	—			$	6,850
Trade accounts payable			13,001				27,211				(1,370	)			38,842
Deferred revenue			9,098				—				—				9,098
Accrued expenses			21,338				7,135				—				28,473
Total current liabilities			47,020				37,613				(1,370	)			83,263
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			4,062				—				—				4,062
PAYABLE TO AFFILIATES			—				22,045				(22,045	)			—
DEFERRED REVENUE			5,355				—				—				5,355
DEFERRED RENT			4,870				—				—				4,870
OTHER LONG-TERM LIABILITIES			3,091				—				—				3,091
Total liabilities			64,398				59,658				(23,415	)			100,641
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock			17				19				(19	)			17
Capital contributions			—				1,000				(1,000	)			—
Additional paid-in capital			129,457				28,060				(28,060	)			129,457
Retained earnings (accumulated deficit)			(90,061	)			(42,711	)			42,846				(89,926	)
Accumulated other comprehensive income			686				1,656				(1,660	)			682
Treasury stock			(125	)			—				—				(125	)
Total shareholders’ equity			39,974				(11,976	)			12,107				40,105
Total liabilities and shareholders’ equity		$	104,372			$	47,682			$	(11,308	)		$	140,746

 

(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, 2014.

 

Page 14 of 14