PFSweb, Inc.

PFSweb Reports Strong Growth in its First Quarter 2011 Results

Wednesday 11 May 2011

First Quarter Service Fee Revenue Increases 18% Year-over-year

PLANO, Texas, May 11, 2011 -- PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing services provider of end-to-end web commerce solutions, today announced its financial results for the three months ended March 31, 2011.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “We are off to a strong start in 2011, building positive momentum with new and existing client programs. This is reflected in our year-over-year revenue growth for the first quarter of 2011, including an 18% increase in Service Fee revenue, which is primarily attributable to the ongoing ramp up of new client relationships implemented in 2010 and 2011.

“We have also remained busy marketing our services to new clients, signing three new or expanded client agreements thus far in 2011, which, along with several other clients signed in late 2010, are targeted to be fully implemented later this year. We are also nearing execution on several additional new client contracts. These recent client wins primarily operate in three industries where the manufacturer focus has increasingly been shifting towards direct-to-consumer web commerce, including the exciting trends in consumer packaged goods (CPG), fashion and health and beauty industries. We continue to see strong demand for PFSweb’s End2End eCommerce® solution. Our pipeline for potential new service fee business continues to exceed $50 million in annual service fee revenue, based on current client projections.”

Summary of consolidated results for the first quarter ended March 31, 2011:

· Total revenue increased 6.1% to $72.4 million for the first quarter of 2011 compared to $68.2 million for first quarter of 2010;

· Service Fee revenue increased more than 18% to $18.9 million, compared with $16.0 million for the same period in 2010;

· Adjusted EBITDA (as defined) was $0.5 million versus $0.8 million for the first quarter of 2010;

· Net loss was $2.3 million, or $0.19 per basic and diluted share, compared to net loss of $1.2 million, or $0.12 per basic and diluted share, for the first quarter of 2010. Net loss for the first quarter of 2011 included a $0.6 million loss from discontinued operations related to eCOST.com (including certain costs associated with exiting the business), compared to a $6,000 net loss from discontinued operations related to eCOST.com for the same period last year;

· Non-GAAP net loss (as defined) was $1.4 million, or $0.11 per basic and diluted share, compared to a non-GAAP net loss of $1.1 million, or $0.11 per basic and diluted share, for the first quarter of 2010;

· Total cash, cash equivalents and restricted cash was $19.8 million as of March 31, 2011 compared to $20.3 million as of December 31, 2010.

“Our bottom-line results for the first quarter of 2011 reflect an increase in costs associated with strategic investments to support our targeted growth of our business, including investments in technology development, operational and support management and sales and marketing expenses. Additionally, we have recently made further investments with the addition of a new ‘Food Grade’ distribution facility in Memphis to support specific facility requirements for certain new clients in the CPG industry. We also plan to expand our distribution operations in Belgium to support current and potential growth across Europe, and to make additions to certain of our call centers, which will provide us with better flexibility to react to changes in client demands. We continue to target service fee revenue growth of 20% and an Adjusted EBITDA of $6 million to $7 million in 2011,” concluded Mr. Layton.

As previously reported, in February 2011, the Company made the strategic decision to divest the eCOST.com business. As a result of this divestiture, the Company has reported certain financial results as “discontinued operations” in the periods presented.

Conference Call Information

Management will host a conference call at 11:00 am Eastern Time (10:00 am Central Time) on Wednesday, May 11, 2011, to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number 62638305 at least five minutes before the scheduled start time. Investors can also access the call in a “listen only” mode via the Internet at the Company’s website, www.pfsweb.com. Please allow extra time prior to the call to visit the site and download any necessary audio software.

A digital replay of the conference call will be available through June 11, 2011 at (800) 642-1687, pin number 62638305. The replay also will be available at the Company’s website for a limited time.

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”) and Adjusted EBITDA.

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 and loss from discontinued operations.

EBITDA represents earnings (or losses) before loss from discontinued operations, interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation.

Non-GAAP net income (loss), EBITDA and Adjusted EBITDA 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 and loss from discontinued operations 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.

PFSweb believes these non-GAAP measures provide useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating 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.

About PFSweb, Inc.

PFSweb develops and deploys comprehensive end-to-end eCommerce solutions for Fortune 1000, Global 2000 and brand name companies, including interactive marketing services, global fulfillment and logistics and high-touch customer care. The company serves a multitude of industries and company types, including such clients as P&G, LEGO, Carter's, Lucky Brand Jeans, Juicy Couture, Kensie, Monet, kate spade new york, AAFES, Riverbed, InfoPrint Solutions Company, Hawker Beechcraft Corp., Roots Canada Ltd. and Xerox.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit the company's website at http://www.pfsweb.com.

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, 2010 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 and Quarterly Reports 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.

(TABLES FOLLOW)


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

			Three Months Ended
			March 31,
			2011			2010
REVENUES:
	Product revenue, net		$	45,283		$	45,622
	Service fee revenue			18,900			15,979
	Pass-thru revenue			8,206			6,634
		Total revenues		72,389			68,235

COSTS OF REVENUES:
	Cost of product revenue			42,466			42,362
	Cost of service fee revenue			13,783			11,454
	Cost of pass-thru revenue			8,206			6,634
		Total costs of revenues		64,455			60,450
		Gross profit		7,934			7,785
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				9,288			8,608
	Loss from operations			(1,354	)		(823	)
INTEREST EXPENSE, NET				191			254
	Loss before income taxes			(1,545	)		(1,077	)
INCOME TAX PROVISION				135			126
LOSS FROM CONTINUING OPERATIONS				(1,680	)		(1,203	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX				(603	)		(6	)
NET LOSS			$	(2,283	)	$	(1,209	)
NON-GAAP LOSS			$	(1,370	)	$	(1,107	)

NET LOSS PER SHARE:
	Basic and Diluted		$	(0.19	)	$	(0.12	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
	Basic and Diluted			12,268			9,936

EBITDA			$	141		$	731
ADJUSTED EBITDA			$	451		$	827

(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, 2010.


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

		Three Months Ended
		March 31,
		2011			2010
NET LOSS		$	(2,283	)	$	(1,209	)
	Loss from discontinued operations, net of tax		603			6
	Income tax expense		135			126
	Interest expense		191			254
	Depreciation and amortization		1,495			1,554
EBITDA		$	141		$	731
	Stock-based compensation		310			96
ADJUSTED EBITDA		$	451		$	827


		Three Months Ended
		March 31,
		2011			2010

NET LOSS		$	(2,283	)	$	(1,209	)
	Loss from discontinued operations, net of tax		603			6
	Stock-based compensation		310			96
NON-GAAP LOSS		$	(1,370	)	$	(1,107	)

NET LOSS PER SHARE:
	Basic and Diluted	$	(0.19	)	$	(0.12	)

NON-GAAP LOSS Per Share:
	Basic and Diluted	$	(0.11	)	$	(0.11	)


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)


			March 31,			December 31,
			2011			2010
		ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	18,830		$	18,430
	Restricted cash			947			1,853
	Accounts receivable, net of allowance for doubtful accounts of $752 and
	$754 at March 31, 2011 and December 31, 2010, respectively			41,336			41,438
	Inventories, net of reserves of $1,618 and $1,561 at March 31, 2011 and
	December 31, 2010, respectively			32,511			35,161
	Assets of discontinued operations			-			2,776
	Other receivables			13,732			14,539
	Prepaid expenses and other current assets			3,801			3,580
		Total current assets		111,157			117,777

PROPERTY AND EQUIPMENT, net				9,432			9,124
ASSETS OF DISCONTINUED OPERATIONS				-			1,126
OTHER ASSETS				2,080			2,203
		Total assets		122,669			130,230

	LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	20,404		$	18,320
	Trade accounts payable			46,698			55,692
	Deferred revenue			4,979			5,254
	Accrued expenses			17,313			15,870
		Total current liabilities		89,394			95,136

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				1,249			2,136
OTHER LIABILITIES				3,991			3,608
		Total liabilities		94,634			100,880


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; 37,300,000 shares authorized;
	12,299,243 and 12,255,064 shares issued at March 31, 2011 and
	December 31, 2010, respectively; and 12,280,882 and 12,236,703
	outstanding as of December 31, 2010 and December 31, 2009, respectively			12			12
	Additional paid-in capital			101,602			101,229
	Accumulated deficit			(75,615	)		(73,332	)
	Accumulated other comprehensive income			2,121			1,526
	Treasury stock at cost, 18,361 shares			(85	)		(85	)
		Total shareholders' equity		28,035			29,350
		Total liabilities and shareholders' equity	$	122,669		$	130,230


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Statements of Operations
For the Three Months Ended March 31, 2011
(In Thousands)

					Business &
		PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net	$	-		$	45,283	$	-		$	-		$	45,283
	Service fee revenue		18,900			-		-			-			18,900
	Service fee revenue - affiliate		1,664			-		-			(1,664	)		-
	Pass-thru revenue		8,206			-		-						8,206
	Total revenues		28,770			45,283		-			(1,664	)		72,389

COSTS OF REVENUES:
	Cost of product revenue		-			42,466		-			-			42,466
	Cost of service fee revenue		14,348			-		-			(565	)		13,783
	Cost of pass-thru revenue		8,206			-		-			-			8,206
	Total costs of revenues		22,554			42,466		-			(565	)		64,455
	Gross profit		6,216			2,817		-			(1,099	)		7,934
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			8,215			2,172		-			(1,099	)		9,288
	Income (loss) from operations		(1,999	)		645		-			-			(1,354	)
INTEREST EXPENSE (INCOME), NET			(55	)		246		-			-			191
	Income (loss) before income taxes		(1,944	)		399		-			-			(1,545	)
INCOME TAX PROVISION (BENEFIT)			(25	)		160		-			-			135
INCOME (LOSS) FROM CONTINUING OPERATIONS			(1,919	)		239		-			-			(1,680	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			-			-		(603	)					(603	)
NET INCOME (LOSS)		$	(1,919	)	$	239	$	(603	)	$	-		$	(2,283	)
NON-GAAP NET INCOME (LOSS)		$	(1,609	)	$	239	$	-		$	-		$	(1,370	)

EBITDA		$	(511	)	$	652	$	-		$	-		$	141
ADJUSTED EBITDA		$	(201	)	$	652	$	-		$	-		$	451


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

NET INCOME (LOSS)		$	(1,919	)	$	239	$	(603	)	$	-			(2,283	)
	Loss from discontinued operations, net of tax		-			-		603			-			603
	Income tax expense (benefit)		(25	)		160		-			-			135
	Interest expense (income)		(55	)		246		-			-			191
	Depreciation and amortization		1,488			7		-			-			1,495
EBITDA		$	(511	)	$	652	$	-		$	-		$	141
	Stock-based compensation		310			-		-			-			310
ADJUSTED EBITDA		$	(201	)	$	652	$	-		$	-		$	451

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

NET INCOME (LOSS)		$	(1,919	)	$	239	$	(603	)	$	-		$	(2,283	)
	Loss from discontinued operations, net of tax		-			-		603			-			603
	Stock-based compensation		310			-		-			-			310
NON-GAAP NET INCOME (LOSS)		$	(1,609	)	$	239	$	-		$	-		$	(1,370	)

Note: Business and Retail Connect includes our Supplies Distributors and PFS Retail Connect operations, which operate similar financial models on behalf of our client relationships. PFSweb
and PFS Retail Connect include certain ongoing activity formerly reported as eCOST.


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Statements of Operations
For the Three Months Ended March 31, 2010
(In Thousands)

					Business &
		PFSweb			Retail Connect		eCOST			Eliminations			Consolidated
REVENUES:
	Product revenue, net	$	-		$	45,622	$	-		$	-		$	45,622
	Service fee revenue		15,979			-		-			-			15,979
	Service fee revenue - affiliate		1,700			-		-			(1,700	)		-
	Pass-thru revenue		6,637			-		-			(3	)		6,634
	Total revenues		24,316			45,622		-			(1,703	)		68,235

COSTS OF REVENUES:
	Cost of product revenue		-			42,362		-			-			42,362
	Cost of service fee revenue		12,101			-		-			(647	)		11,454
	Cost of pass-thru revenue		6,637			-		-			(3	)		6,634
	Total costs of revenues		18,738			42,362		-			(650	)		60,450
	Gross profit		5,578			3,260		-			(1,053	)		7,785
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			7,400			2,261		-			(1,053	)		8,608
	Income (loss) from operations		(1,822	)		999		-			-			(823	)
INTEREST EXPENSE (INCOME), NET			(56	)		310		-			-			254
	Income (loss) before income taxes		(1,766	)		689		-			-			(1,077	)
INCOME TAX PROVISION (BENEFIT)			(130	)		256		-			-			126
INCOME (LOSS) FROM CONTINUING OPERATIONS			(1,636	)		433		-			-			(1,203	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX			-			-		(6	)					(6	)
NET INCOME (LOSS)		$	(1,636	)	$	433	$	(6	)	$	-		$	(1,209	)
NON-GAAP NET INCOME (LOSS)		$	(1,540	)	$	433	$	-		$	-		$	(1,107	)

EBITDA		$	(276	)	$	1,007	$	-		$	-		$	731
ADJUSTED EBITDA		$	(180	)	$	1,007	$	-		$	-		$	827


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

NET INCOME (LOSS)		$	(1,636	)	$	433	$	(6	)	$	-			(1,209	)
	Loss from discontinued operations, net of tax		-			-		6			-			6
	Income tax expense (benefit)		(130	)		256		-			-			126
	Interest expense (income)		(56	)		310		-			-			254
	Depreciation and amortization		1,546			8		-			-			1,554
EBITDA		$	(276	)	$	1,007	$	-		$	-		$	731
	Stock-based compensation		96			-		-			-			96
ADJUSTED EBITDA		$	(180	)	$	1,007	$	-		$	-		$	827

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

NET INCOME (LOSS)		$	(1,636	)	$	433	$	(6	)	$	-		$	(1,209	)
	Loss from discontinued operations, net of tax		-			-		6			-			6
	Stock-based compensation		96			-		-			-			96
NON-GAAP NET INCOME (LOSS)		$	(1,540	)	$	433	$	-		$	-		$	(1,107	)

Note: Business and Retail Connect includes our Supplies Distributors and PFS Retail Connect operations, which operate similar financial models on behalf of our client relationships. PFSweb
and PFS Retail Connect include certain ongoing activity formerly reported as eCOST.


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of March 31, 2011
(In Thousands)


						Business &
			PFSweb			Retail Connect			Eliminations			Consolidated
		ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	14,034		$	4,796		$	-		$	18,830
	Restricted cash			138			809			-			947
	Accounts receivable, net			20,179			21,488			(331	)		41,336
	Inventories, net			-			32,511			-			32,511
	Other receivables			-			13,732			-			13,732
	Prepaid expenses and other current assets			2,151			1,650			-			3,801
	Total current assets			36,502			74,986			(331	)		111,157

PROPERTY AND EQUIPMENT, net				9,303			129			-			9,432
RECEIVABLE/INVESTMENT IN AFFILIATES				14,960			-			(14,960	)		-
OTHER ASSETS				1,903			177			-			2,080
	Total assets			62,668			75,292			(15,291	)		122,669

	LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations		$	8,781		$	11,623		$	-		$	20,404
	Trade accounts payable			5,123			41,906			(331	)		46,698
	Accrued expenses			14,703			7,589			-			22,292
	Total current liabilities			28,607			61,118			(331	)		89,394

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion				1,179			70			-			1,249
PAYABLE TO AFFILIATES				-			22,745			(22,745	)		-
OTHER LIABILITIES				3,991			-			-			3,991
	Total liabilities			33,777			83,933			(23,076	)		94,634

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock			12			19			(19	)		12
	Capital contributions			-			1,000			(1,000	)		-
	Additional paid-in capital			101,602			28,059			(28,059	)		101,602
	Retained earnings (accumulated deficit)			(74,766	)		(40,314	)		39,465			(75,615	)
	Accumulated other comprehensive income			2,128			2,595			(2,602	)		2,121
	Treasury stock			(85	)		-			-			(85	)
	Total shareholders' equity			28,891			(8,641	)		7,785			28,035
	Total liabilities and shareholders' equity		$	62,668		$	75,292		$	(15,291	)	$	122,669


PFSweb, Inc. and Subsidiaries
Unaudited Condensed Consolidating Balance Sheets
as of December 31, 2010
(In Thousands)


							Supplies
				PFSweb			Distributors		eCOST			Eliminations			Consolidated
			ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	13,471		$	3,110	$	1,849		$	-		$	18,430
	Restricted cash				777			884		192			-			1,853
	Accounts receivable, net				21,234			19,524		987			(307	)		41,438
	Inventories, net				-			35,161		-			-			35,161
	Assets of discontinued operations				-			-		2,776			-			2,776
	Other receivables				-			13,822		717			-			14,539
	Prepaid expenses and other current assets				2,006			1,469		105			-			3,580
		Total current assets			37,488			73,970		6,626			(307	)		117,777

PROPERTY AND EQUIPMENT, net					8,861			22		241			-			9,124
RECEIVABLE/INVESTMENT IN AFFILIATES					14,255			-		-			(14,255	)		-
ASSETS OF DISCONTINUED OPERATIONS					-			-		1,126			-			1,126
OTHER ASSETS					2,013			-		190			-			2,203
		Total assets			62,617			73,992		8,183			(14,562	)		130,230

	LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt and capital lease obligations			$	8,332		$	9,953	$	35		$	-		$	18,320
	Trade accounts payable				6,356			44,896		4,747			(307	)		55,692
	Accrued expenses				12,994			6,260		1,870			-			21,124
		Total current liabilities			27,682			61,109		6,652			(307	)		95,136

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion					2,031			-		105			-			2,136
PAYABLE TO AFFILIATES					-			4,255		18,490			(22,745	)		-
OTHER LIABILITIES					3,608			-		-			-			3,608
		Total liabilities			33,321			65,364		25,247			(23,052	)		100,880

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
	Common stock				12			-		19			(19	)		12
	Capital contributions				-			1,000		-			(1,000	)		-
	Additional paid-in capital				101,229			-		28,059			(28,059	)		101,229
	Retained earnings (accumulated deficit)				(73,387	)		5,410		(45,148	)		39,793			(73,332	)
	Accumulated other comprehensive income				1,527			2,218		6			(2,225	)		1,526
	Treasury stock				(85	)		-		-			-			(85	)
		Total shareholders' equity			29,296			8,628		(17,064	)		8,490			29,350
		Total liabilities and shareholders' equity		$	62,617		$	73,992	$	8,183		$	(14,562	)	$	130,230

Contact:

PFSweb, Inc.
Mark C. Layton, 972-881-2900
Chief Executive Officer
or
Thomas J. Madden, 972-881-2900
Chief Financial Officer
or
Investor Relations
KCSA Strategic Communications
Todd Fromer/ Garth Russell, 212-896-1215 / 212-896-1250
tfromer@kcsa.com / grussell@kcsa.com