PFSweb, Inc.

PLANO, Texas, November 14, 2008 -- PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing provider of end-to-end web commerce solutions and an online discount retailer, today announced its financial results for the third quarter and nine months ended September 30, 2008.

 

 

·        Total reported revenue was $109.9 million, compared to $112.0 million for the third quarter of 2007;

·        Adjusted EBITDA (as defined) was $2.5 million versus $3.2 million for the same period last year;

·        Net income was $43,000, or $0.00 per basic and diluted share, compared $162,000, or $0.02 per basic and diluted share, for the third quarter of 2007;

·        Non-GAAP net income (as defined) was $0.4 million, or $0.04 per basic and diluted share, compared to non-GAAP net income of $0.5 million, or $0.05 per basic and diluted share, for the third quarter of 2007;

·        Merchandise sales (as defined) totaled approximately $713 million for the third quarter of 2008 versus $751 million for the same period last year;

·        Total cash, cash equivalents and restricted cash equaled $17.5 million as of September 30, 2008 compared to $16.3 million as of December 31, 2007.

 

 

·        Total reported revenue was $339.1 million, compared to $324.8 million for the nine months ended September 30, 2007;

·        Adjusted EBITDA (as defined) was $7.7 million versus $7.3 million for the same period last year;

·        Net income was $0.5 million, or $0.05 per basic and diluted share, compared to a net loss of $2.0 million, or $0.21 per basic and diluted share, for the nine months ended September 30, 2007;

·        Non-GAAP net income (as defined) was $1.6 million, or $0.16 per basic and diluted share, compared to a non-GAAP net loss of $0.9 million, or $0.09 per basic and diluted share, for the same period last year;

·        Merchandise sales (as defined) totaled nearly $2.1 billion in both the 2008 and 2007 nine month periods ended September 30.

 

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, “We are pleased to announce that the third quarter of 2008 represents our sixth consecutive quarter of profitability, which was driven by another strong quarter of measurable growth in our Service Fee business. These positive results are especially significant when considering the economic challenges currently facing the global economy.” ...

 

All share data and per share data in this press release reflects the impact of the Company’s 1 for 4.7 reverse stock split effective June 2, 2008.

 

 

 

Mike Willoughby, President of PFSweb’s services division, commented, “Our Service Fee revenue growth for both the three and nine months ended September 30, 2008 is attributable to new contracts, temporary increased activity occurring from January 2008 and ending September 2008 for our U.S. government contract and incremental project activity.

 

We continue to sign new Service Fee clients and maintain a robust pipeline of potential new business, which is currently in excess of $30 million. In particular, as announced last week, we recently signed agreements with several luxury goods and fashion apparel companies, and plan to launch their programs throughout 2009. Further, our business remains competitive internationally, especially in Europe where we just launched a program for Comptoir des Cotonniers. We are excited about the success we are experiencing in engaging new clients and prospects with the end-to-end ecommerce offering we unveiled earlier this year. This new business is targeted to partially offset the impact of the non-renewal, effective early in 2009, of a large client engagement with an agency of the U.S. government. This nonrenewal, as well as the continuing economic downturn, will affect our service fee revenue and growth outlook for 2009, although our flexible business model should permit us to reduce some of our variable costs and redeploy a portion of our existing infrastructure to other client activities to partially offset the impact of these events.”

 

For the third quarter of 2008, Supplies Distributors revenue was $55.4 million, compared to $58.3 million for the same period last year. Adjusted EBITDA was $1.4 million for the third quarter of 2008, relatively consistent with $1.6 million for the same period last year.

 

For the nine months ended September 30, 2008, Supplies Distributors revenue was $177.8 million, compared to $174.7 million for the same period last year. Adjusted EBITDA was $5.1 million for the nine months ended September 30, 2008, a slight increase compared to $5.0 million for the same period last year.

 

Mr. Willoughby continued, “Our Supplies Distributors business continues to perform well and meet our Adjusted EBITDA expectations. Revenue for the 2008 nine month period reflects an increase year over year due to the negative impact of foreign currency fluctuations during the 2007 period that created alternative purchasing channels for certain customers, which did not occur in 2008.” 

For the third quarter of 2008, eCOST.com revenue was $23.7 million, compared to $27.0 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the quarter was a loss of $0.5 million, relatively consistent with the Adjusted EBITDA loss of $0.4 million for the same period last year.

 

For the nine months ended September 30, 2008, eCOST.com revenues were $74.7 million, compared to $75.7 million for the same period in 2007. Adjusted EBITDA for eCOST.com in the nine months ended September 30, 2008 was a loss of $1.7 million, compared to a loss of $1.9 million for the same period last year.

 

Mr. Layton continued, “While eCOST.com’s revenue declined $4 million for the quarter, we are pleased to report that our business-to-consumer (B2C) segment, which now represents 60% of eCOST.com’s revenue, increased 9% over the same period in the prior year. Because of the more attractive financial characteristics of this B2C segment, including a higher gross margin, we expect to continue to place increased focus on further improving product breath, daily deal offerings and overall service to this segment. This past week, eCOST.com unveiled a number of significant enhancements to its website. These enhancements include a feature packed new edition of our patented Bargain Countdown™ shopping section, 10,000 new products in the office equipment and supply category, and a new, rich shopping cart and checkout experience. Collectively, these improvements will provide shoppers at eCOST.com improved functionality, shopping speed and overall customer experience just in time for the holiday season.”

 

As announced on November 7, 2008, PFSweb’s consolidated financial targets for the year ended December 31, 2008 are total consolidated revenues for 2008 excluding pass-through revenues, of approximately $425 million to $440 million; Adjusted EBITDA of $10 – $12 million; and non-GAAP net income, which excludes the impact of stock-based compensation and amortization of identifiable intangible assets, of approximately $1 - $3 million for 2008.  Further weakening in worldwide economic conditions may cause the Company to fall toward the lower end of these targets.

Management will host a conference call at 9:30 a.m. Central Time (10:30 a.m. Eastern Time) on November 14, 2008 to discuss the latest corporate developments and results. To listen to the call, please dial (888) 562-3356 and enter the pin number (72555898) 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 December 14, 2008 at (800) 642-1687, pin number (72555898). The replay also will be available at the Company’s website for a limited time.

 

This news release contains the non-GAAP measures 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 amortization of identifiable intangible assets.

 

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation and merger integration related expenses. 

 

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, as the calculation of non-GAAP net income (loss) eliminates the effect of stock-based compensation and amortization of intangible assets and EBITDA and Adjusted EBITDA further eliminates the effect of financing, income taxes, the accounting effects of capital spending and certain other merger related expenses, 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. These non-GAAP measures included in this press release have been reconciled to the GAAP results in the attached tables.

 

 

Merchandise sales represent the estimated value of all fulfillment activity that flows through PFSweb including whether or not PFSweb is the seller of the merchandise or records the full amount of such sales on its financial statements, excluding service fee revenues that PFSweb might recognize for the underlying sales transactions. PFSweb uses merchandise sales as an operating metric to allow investors to gain a more thorough understanding of its business and business volume, in addition to GAAP net revenue.

 

PFSweb develops and deploys integrated business infrastructure solutions and fulfillment services for Fortune 1000, Global 2000 and brand name companies, including third party logistics, call center support and e-commerce services. The company serves a multitude of industries and company types, including such clients as LEGO, Discovery Commerce, Riverbed, Hewlett-Packard, International Business Machines, Hawker Beechcraft Corp., Rene Furterer USA, Roots Canada Ltd. and Xerox.

 

Through its wholly owned eCOST.com subsidiary, PFSweb also serves as a leading multi-category online discount retailer of high-quality new, "close-out" and manufacturer recertified brand-name merchandise for consumers and small to medium size business buyers. The eCOST.com brand markets approximately 200,000 different products from leading manufacturers such as Sony, Hewlett-Packard, Onkyo, Denon, JVC, Canon, Nikon, Panasonic, Toshiba, Microsoft, Dyson, Kitchen Aid, Braun, Black & Decker, Cuisinart, Coleman,  and Citizen primarily over the Internet and through direct marketing.

 

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