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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

PFSweb Reports First Quarter 2019 Results

May 9, 2019

ALLEN, Texas, May 09, 2019 (GLOBE NEWSWIRE) -- PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the first quarter ended March 31, 2019.

First Quarter 2019 Summary vs. Same Year-Ago Quarter

-- Total revenues were $72.1 million compared to $78.4 million. -- Service fee equivalent (SFE) revenue (a non-GAAP measure defined below) was $51.9 million compared to $56.9 million. -- Service fee gross margin was 34.0% compared to 37.0%. -- Net loss was $1.2 million or $(0.06) per share, compared to a net loss of $0.7 million or $(0.04) per share. -- Adjusted EBITDA (a non-GAAP measure defined below) was $3.3 million compared to $4.4 million.

Management Commentary“During the first quarter, we continued to perform at a high level for clients across both our LiveArea and PFS business segments, while introducing several new growth initiatives,” said Mike Willoughby, CEO of PFSweb. “These initiatives include next-generation PFS FaaS products like RetailConnect and CloudPick, as well as expanding our technology expertise with SMB eCommerce platforms including BigCommerce and Shopify Plus. We also made progress in our effort to expand our LiveArea service offering to include implementation and support of the IBM Sterling Commerce order management platform, with our first client launch successfully completed in April.

“Looking ahead, we are keenly focused on revitalizing growth. We believe our enhanced services offering and go-to-market approach across the business will increase our addressable market, providing us the opportunity to accelerate our growth.”

First Quarter 2019 Financial ResultsTotal revenues in the first quarter of 2019 were $72.1 million compared to $78.4 million in the same period of 2018. Service fee revenue in the first quarter was $51.4 million compared to $56.5 million in the first quarter last year. Product revenue from the company’s last remaining client under this legacy business model was $7.5 million compared to $9.8 million in the same period of 2018.

SFE revenue was $51.9 million compared to $56.9 million in the year-ago quarter. The decline was primarily driven by lower new client project activity in LiveArea and the transition of certain client engagements in PFS, partially offset by growth from existing clients.

Service fee gross margin in the first quarter of 2019 was 34.0% compared to 37.0% in the same period of 2018. The decrease was primarily due to lower gross margins in the LiveArea business segment as a result of higher than expected costs incurred on certain client projects.

Net loss in the first quarter of 2019 was $1.2 million or $(0.06) per share, compared to a net loss of $0.7 million or $(0.04) per share in the same period of 2018. Net income in the first quarter of 2019 included $0.7 million of stock-based compensation expense, $0.4 million of acquisition-related, restructuring and other costs, $0.2 million in amortization of acquisition-related intangible assets, and $0.1 million of deferred tax expense related to goodwill amortization. This compares to $0.6 million of stock-based compensation expense, $0.4 million in amortization of acquisition-related intangible assets, $0.1 million of acquisition-related, restructuring and other costs, and a $0.1 million deferred tax credit related to goodwill amortization in the same period of 2018.

Adjusted EBITDA in the first quarter was $3.3 million compared to $4.4 million in the year-ago quarter. As a percentage of SFE revenue, adjusted EBITDA was 6.4% compared to 7.8%, with the decrease primarily due to lower gross margin in the LiveArea segment

Non-GAAP net income in the first quarter of 2019 was $0.2 million compared to $0.6 million in the first quarter of 2018.

At March 31, 2019, net debt (defined as total debt, excluding operating lease liabilities, less cash and cash equivalents) was $20.9 million compared to $26.5 million at December 31, 2018. Cash and cash equivalents totaled $14.7 million compared to $15.4 million at December 31, 2018. Total debt at March 31, 2019 was $35.5 million compared to $42.0 million at the end of last year.

2019 OutlookPFSweb continues to expect 2019 SFE revenue to increase low-single digits on a percentage basis compared to 2018. The company also continues to expect adjusted EBITDA to increase low to mid-single digits on a percentage basis from last year, reflecting continued expected operating leverage in the business.

Conference CallPFSweb will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2019.

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

Date: Thursday, May 9, 2019Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)Toll-free dial-in number: 1-888-599-8686International dial-in number: 1-323-994-2093Conference ID: 6115831

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 Gateway Investor Relations at 1-949-574-3860.

The conference call will be broadcast live and available for replay here 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 8:00 p.m. Eastern time on the same day through May 23, 2019.

Toll-free replay number: 1-844-512-2921International replay number: 1-412-317-6671Replay ID: 6115831

About PFSweb, Inc.PFSweb (NASDAQ:PFSW) is a global commerce services company that manages the online customer shopping experience on behalf of major branded manufacturers and retailers. Across two business units – LiveArea for strategy consulting, creative design, digital marketing, and web development services, and PFS for order fulfillment, contact center, payment processing/fraud management, and order management services – they provide solutions to a broad range of Fortune 500® companies and household brand names such as Procter & Gamble, L’Oréal USA, Ralph Lauren, PANDORA, ASICS, the United States Mint, and many more. PFSweb enables these brands to provide a more convenient and brand-centric online shopping experience through both traditional and online business channels. The company is headquartered in Allen, TX with additional locations around the globe. For more information, please visit www.pfsweb.com.

Non-GAAP Financial MeasuresThis news release contains 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, restructuring and other costs (including certain client related bankruptcy costs) , amortization of acquisition-related intangible assets and deferred tax expense for goodwill amortization.

EBITDA represents earnings (or losses) before interest, income taxes, depreciation, and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation, as well as acquisition-related, restructuring, and other costs (including certain client related bankruptcy costs).

Service fee equivalent revenue represents service fee revenue plus the gross profit earned on product revenue and does not alter existing revenue recognition.

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, restructuring and other costs (including certain client related bankruptcy costs), amortization of acquisition-related intangible assets, and deferred tax expense for goodwill amortization, and EBITDA and adjusted EBITDA further eliminate the effect of financing, remaining 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.

PFS 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 StatementsThe 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. PFS’ Annual Report on Form 10-K for the year ended December 31, 2018 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. PFS 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. WilloughbyChief Executive OfficerOrThomas J. MaddenChief Financial Officer1-972-881-2900

Investor Relations:Sean Mansouri, CFA or Scott LioliosGateway Investor Relations1-949-574-3860 PFSW@gatewayir.com

PFSweb, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In Thousands, Except Share Data) March 31, December 31, 2019 2018 - -------- - - -------- - ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14,679 $ 15,419 Restricted cash 207 207 Accounts receivable, net of allowance for doubtful accounts of $597 and $585 at 52,545 72,415 March 31, 2019 and December 31, 2018, respectively Inventories, net of reserves of $289 and $298 at March 31, 2019 and December 31, 4,124 6,090 2018, respectively Other receivables 3,906 4,014 Prepaid expenses and other current assets 7,202 6,943 - -------- - - -------- - Total current assets 82,663 105,088 PROPERTY AND EQUIPMENT, net 19,972 21,496 OPERATING LEASE RIGHT-OF-USE ASSETS 38,788 - IDENTIFIABLE INTANGIBLES, net 1,636 1,803 GOODWILL 45,348 45,185 OTHER ASSETS 3,560 3,501 - -------- - - -------- - Total assets 191,967 177,073 - -------- - - -------- - LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Trade accounts payable $ 35,147 $ 47,580 Accrued expenses 19,509 24,623 Current portion of operating lease liabilities 7,835 - Current portion of long-term debt and finance lease obligations 2,846 2,610 Deferred revenues 6,883 7,328 Performance-based contingent payments - - Total current liabilities 72,220 82,141 LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS, less current portion 32,698 39,348 DEFERRED REVENUES, less current portion 1,590 1,927 DEFERRED RENT (0 ) 4,625 OPERATING LEASE LIABILITIES 36,688 OTHER LIABILITIES 2,668 2,449 Total liabilities 145,864 130,490 - -------- - - -------- - COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or - - outstanding Common stock, $0.001 par value; 35,000,000 shares authorized; 19,295,796 and 19,294,296 shares issued at March 31, 2019 and December 31, 2018, respectively; 19 19 and 19,262,329 and 19,260,829 shares outstanding at March 31, 2019 and December 31, 2018, respectively Additional paid-in capital 156,108 155,455 Accumulated deficit (108,937 ) (107,773 ) Accumulated other comprehensive income (962 ) (993 ) Treasury stock at cost, 33,467 shares (125 ) (125 ) Total shareholders’ equity 46,103 46,583 - -------- - - -------- - Total liabilities and shareholders’ equity $ 191,967 $ 177,073 - -------- - - -------- -

PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Data) Three Months Ended March 31, ---------------------- 2019 2018 - ------ - - ------ - REVENUES: Service fee revenue $ 51,439 $ 56,487 Product revenue, net 7,499 9,765 Pass-through revenue 13,211 12,169 Total revenues $ 72,149 $ 78,421 - ------ - - ------ - COSTS OF REVENUES: Cost of service fee revenue $ 33,958 $ 35,608 Cost of product revenue 7,077 9,316 Cost of pass-through revenue 13,211 12,169 Total costs of revenues $ 54,246 $ 57,093 - ------ - - ------ - Gross profit 17,903 21,328 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 18,346 20,659 Income (loss) from operations (443 ) 669 INTEREST EXPENSE, NET 512 605 - ------ - - ------ - Income (loss) before income taxes (955 ) 64 INCOME TAX EXPENSE 209 813 - ------ - - ------ - NET LOSS $ (1,164 ) $ (749 ) - ------ - - ------ - NON-GAAP NET INCOME $ 178 $ 569 - ------ - - ------ - NET LOSS PER SHARE: Basic $ (0.06 ) $ (0.04 ) - ------ - - ------ - Diluted $ (0.06 ) $ (0.04 ) - ------ - - ------ - WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 19,486 19,145 - ------ - - ------ - Diluted 19,486 19,145 - ------ - - ------ - EBITDA $ 2,272 $ 3,647 - ------ - - ------ - ADJUSTED EBITDA $ 3,318 $ 4,415 - ------ - - ------ -

PFSweb, Inc. and Subsidiaries Unaudited Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) Three Months Ended March 31, ------------------------ 2019 2018 - ------- - - ------- - NET LOSS $ (1,164 ) $ (749 ) Income tax expense 209 813 Interest expense, net 512 605 Depreciation and amortization 2,715 2,978 - ------- - - ------- - EBITDA $ 2,272 $ 3,647 Stock-based compensation 651 646 Acquisition-related, restructuring and other costs 395 122 ADJUSTED EBITDA $ 3,318 $ 4,415 - ------- - - ------- - Three Months Ended March 31, ------------------------ 2019 2018 - ------- - - ------- - NET LOSS $ (1,164 ) $ (749 ) Stock-based compensation 651 646 Amortization of acquisition-related intangible assets 166 438 Acquisition-related, restructuring and other costs 395 122 Deferred tax expense - goodwill amortization 130 112 NON-GAAP NET INCOME $ 178 $ 569 - ------- - - ------- - Three Months Ended March 31, ------------------------ 2019 2018 - ------- - - ------- - TOTAL REVENUES $ 72,149 $ 78,421 Pass-through revenue (13,211 ) (12,169 ) Cost of product revenue (7,077 ) (9,316 ) SERVICE FEE EQUIVALENT REVENUE $ 51,862 $ 56,936 - ------- - - ------- -

PFSweb, Inc. and Subsidiaries Unaudited Consolidated Segment Information and Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) Effective January 1, 2018, the company changed its organizational structure in an effort to create more effective and efficient operations and to improve client and service focus. As a result, the company is now presenting supplemental financial data below based on the reportable operating business segments of its PFS Operations and LiveArea Professional Services units, which are comprised of strategic businesses that are defined by the types of service offerings they provide. In addition, certain costs that are not fully directly allocable to a business unit are presented as Corporate selling, general, and administrative expenses. The segment financial data for the three months ended March 31, 2019 and 2018, reflect the financial performance for each of the segments based on the current financial presentation reviewed by the company’s Chief Operating Decision Makers. The company is continuing to evaluate its segregation of costs among the business units, including an effort to further allocate certain Corporate costs into the two operating business units to enhance cost focus and responsibility. Three Months Ended March 31, ------------------------ 2019 2018 - ------- - - ------- - PFS Operations Revenues: Service fee revenue $ 33,055 $ 34,922 Product revenue, net 7,499 9,765 Pass-through revenue 12,876 11,800 - ------- - - ------- - Total revenues $ 53,430 $ 56,487 Costs of revenues: Cost of service fee revenue $ 23,920 $ 25,338 Cost of product revenue 7,077 9,316 Cost of pass-through revenue 12,876 11,800 Total costs of revenues $ 43,873 $ 46,454 - ------- - - ------- - Gross profit 9,557 10,033 Direct operating expenses 7,030 5,731 - ------- - - ------- - Direct contribution 2,527 4,302 Depreciation and amortization 2,052 1,932 Stock-based compensation 117 59 Acquisition-related, restructuring and other costs 464 20 - ------- - - ------- - ADJUSTED EBITDA $ 5,160 $ 6,313 - ------- - - ------- - TOTAL REVENUES $ 53,430 $ 56,487 Pass-thru revenue (12,876 ) (11,800 ) Cost of product revenue (7,077 ) (9,316 ) SERVICE FEE EQUIVALENT REVENUE $ 33,477 $ 35,371 - ------- - - ------- -

PFSweb, Inc. and Subsidiaries Unaudited Consolidated Segment Information and Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) Three Months Ended March 31, ---------------------- 2019 2018 - ------ - - ------ - LiveArea Professional Services Service fee revenue $ 18,384 $ 21,565 Pass-through revenue 335 369 - ------ - - ------ - Total revenues 18,719 21,934 Cost of service fee revenue 10,038 10,270 Cost of pass-through revenue 335 369 - ------ - - ------ - Total cost of revenues 10,373 10,639 Gross profit 8,346 11,295 Direct operating expenses 6,473 9,181 - ------ - - ------ - Direct contribution 1,873 2,114 Depreciation and amortization 331 692 Stock-based compensation 150 80 Acquisition-related, restructuring and other costs 33 87 - ------ - - ------ - ADJUSTED EBITDA $ 2,387 $ 2,973 - ------ - - ------ - Corporate Selling, general and administrative expenses $ (4,843 ) $ (5,747 ) Depreciation and amortization 332 354 - ------ - - ------ - EBITDA $ (4,511 ) $ (5,393 ) Stock-based compensation 384 507 Acquisition-related, restructuring and other costs (102 ) 15 - ------ - - ------ - ADJUSTED EBITDA $ (4,229 ) $ (4,871 ) - ------ - - ------ -