PFSweb Reports Third Quarter 2020 Results
11/06/2020 - 07:30 AM
- Reports Record Q3 Service Fee Revenue Driven by Continued Robust eCommerce Demand and Elevated Fulfillment Volumes -
- Raises 2020 Outlook Ahead of Expected Record Holiday Season -
ALLEN, Texas, Nov. 06, 2020 (GLOBE NEWSWIRE) -- PFSweb, Inc. (NASDAQ: PFSW), a global commerce services company, is reporting results for the third quarter ended September 30, 2020.
“We continue to experience robust eCommerce demand and significantly elevated fulfillment volumes as we support our clients through a dynamic online retail environment ahead of the holiday season,” said Mike Willoughby, CEO of PFSweb. “This led to strong growth for each business unit and double-digit year-over-year increases in consolidated SFE revenue and adjusted EBITDA for the quarter. Through a combination of our at-home professional services, contact center and corporate teams, along with our front-line fulfillment center personnel, our global workforce is operating at high levels of productivity, while closely adhering to COVID-19 protocols and precautions to enhance employee safety. I am proud of our adaptability and operational strength across both our PFS and LiveArea segments of our business.”
Q 3 20 20 Highlights vs. Q 3 20 19
Total revenues increased 13% to $77.1 million . Service fee equivalent (SFE) revenue (a non-GAAP measure defined and reconciled below) increased 21% to $60.4 million . Service fee gross margin was 32.1% compared to 34.9% . Net loss was $2.8 million or $(0.14) per share, compared to a net loss of $1.6 million or $(0.08) . Adjusted EBITDA (a non-GAAP measure defined and reconciled below) increased 10% to $3.4 million compared to $3.1 million . “We have been making both operational and strategic investments across both business segments. Strategically, we recently announced the opening of two new PFS fulfillment centers, added key LiveaArea leadership personnel and expanded our service offerings to new geographies, all in preparation for what we anticipate will be durable eCommerce tailwinds as we head into 2021.
“Operationally, we are ramping our front-line work force across our fulfillment centers and expanding our at-home call center teams ahead of what we anticipate will be a record holiday season. While this has increased our PFS operating costs during the quarter, as expected, I believe we are well-positioned for the holiday peak fulfillment period as well as sustained long-term growth for both PFS and LiveArea as the eCommerce landscape continues to evolve.
“As a result of continued heightened PFS fulfillment volumes and strong momentum in LiveArea, we are increasing our 2020 outlook and now expect consolidated SFE revenue growth to be in the mid-teens and continue to expect adjusted EBITDA margin expansion compared to 2019.”
Third Quarter 20 20 Financial Results Total revenues in the third quarter of 2020 increased 13% to $77.1 million compared to $68.0 million in the same period of 2019. Service fee revenue in the third quarter increased 21% to $60.2 million compared to $49.6 million in the third quarter of last year. Product revenue from the company’s last remaining client under this legacy business model was $4.2 million compared to $6.6 million in the same period of 2019.
SFE revenue in the third quarter of 2020 increased 21% to $60.4 million compared to $49.9 million in the year-ago quarter. The increase was primarily driven by ongoing elevated fulfillment activity in PFS, as well as double-digit growth in LiveArea.
Service fee gross margin in the third quarter of 2020 was 32.1% compared to 34.9% in the same period of 2019. The decrease was primarily attributable to changes in revenue mix and increased fulfillment labor costs during the quarter. Gross margins for both segments continued to be within the guidance range of 25% to 30% for the PFS segment and 40% to 50% for the LiveArea segment.
Net loss in the third quarter of 2020 was $2.8 million or $(0.14) per share compared to a net loss of $1.6 million or $(0.08) in the same period of 2019. Net loss included the impact of $3.2 million of stock-based compensation expense in the third quarter of 2020 as compared to $0.9 million in the same period in the prior year.
Adjusted EBITDA in the third quarter increased 10% to $3.4 million compared to $3.1 million in the year-ago quarter. The increase was primarily due to sustained strength in SFE revenue growth, partially offset by expected increased costs in the PFS segment applicable to fulfillment-related labor costs and preparations for the holiday season. As a percentage of SFE revenue, adjusted EBITDA margin was 5.7% compared to 6.3% in the same period of 2019.
Non-GAAP net income (a non-GAAP measure defined and reconciled below) increased to $0.7 million in the third quarter of 2020 compared to $0.4 million in the third quarter of 2019.
At September 30, 2020, net debt (a non-GAAP measure defined and reconciled below as total debt, excluding operating lease liabilities, less cash and cash equivalents) was $29.1 million compared to $25.4 million at December 31, 2019.
Cash and cash equivalents at September 30, 2020 totaled $10.4 million compared to $12.4 million at December 31, 2019, and total debt was $39.5 million compared to $37.8 million at the end of last year.
2020 Outlook In light of ongoing high demand in the company’s PFS segment, as well as LiveArea’s continued strong performance and record pipeline, PFSweb has increased its expectations for consolidated SFE revenue growth to be in the mid-teens compared to 2019 (previously expected between 9% and 12% growth), while continuing to expect growth for each of its business units in 2020. Coupled with a sustained focus on prudent cost management, PFSweb also expects adjusted EBITDA margin improvement in 2020 when compared to the prior year.
COVID-19 Response PFSweb maintains information related to its ongoing response to the COVID-19 crisis on its corporate website at www.pfsweb.com/covid-19-response/ .
Conference Call PFSweb will conduct a conference call today at 8:30 a.m. Eastern time to discuss its results for the third quarter ended September 30, 2020.
PFSweb management will host the conference call, followed by a question and answer period.
Date: Friday, November 6, 2020 Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time) Toll-free dial-in number: (866) 220-4153 International dial-in number: (864) 663-5228 Conference ID: 1176494
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 11:30 a.m. Eastern time on the same day through November 20, 2020.
Toll-free replay number: (855) 859-2056 International replay number: (404) 537-3406 Replay ID: 1176494
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 data-driven marketing and omnichannel experience design through technology selection, platform implementation and orchestrated 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, ASICS, Pandora, Ralph Lauren, Shiseido Americas, 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, visit www.pfsweb.com .
Non-GAAP Financial Measures This news release contains certain non-GAAP measures, including non-GAAP net income (loss), net debt, 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.
Net debt represents total debt, excluding operating lease liabilities, less cash and cash equivalents.
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 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. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “intend,” “plan,” “potential,” “project,” “seek,” “strive,” “predict,” “continue,” “target,” and “estimate” and other similar expressions. These forward-looking statements involve risks and uncertainties and may include assumptions as to how we may perform in the future, including the impact of the COVID-19 pandemic on our business, results of operations and global economic conditions. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee these expectations will actually be achieved. PFS' Annual Report on Form 10-K, as amended, for the year ended December 31, 2019 and any subsequent amendments or quarterly reports on Form 10-Q identify 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 periodic reports 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. Willoughby Chief Executive Officer Or Thomas J. Madden Chief Financial Officer 1-972-881-2900
Investor Relations: Sean Mansouri, CFA Gateway Investor Relations 1-949-574-3860PFSW@gatewayir.com
PFSweb, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In Thousands, Except Share Data) (Unaudited) September 30, December 31, 2020 2019 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,397 $ 12,434 Restricted cash 214 214 Accounts receivable, net of allowance for doubtful accounts of $1,437 and $1,071 at September 30, 2020 and December 31, 2019, respectively 56,156 72,262 Inventories, net of reserves of $128 and $291 at September 30, 2020 and December 31, 2019, respectively 5,086 3,281 Other receivables 3,199 3,324 Prepaid expenses and other current assets 7,213 6,954 Total current assets 82,265 98,469 PROPERTY AND EQUIPMENT, net 19,546 18,436 OPERATING LEASE RIGHT-OF-USE ASSETS, net 36,529 36,403 IDENTIFIABLE INTANGIBLES, net 772 1,135 GOODWILL 45,192 45,393 OTHER ASSETS 3,919 3,772 Total assets $ 188,223 $ 203,608 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable $ 22,907 $ 44,640 Accrued expenses 23,431 21,625 Current portion of operating lease liabilities 9,491 8,904 Current portion of long-term debt and capital lease obligations 3,155 2,971 Deferred revenues 3,031 6,058 Total current liabilities 62,015 84,198 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion 36,334 34,829 DEFERRED REVENUES, less current portion 1,528 1,398 OPERATING LEASE LIABILITIES 31,777 33,295 OTHER LIABILITIES 5,828 3,046 Total liabilities 137,482 156,766 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value; 1,000,000 shares authorized; none issued or outstanding - - Common stock, $0.00 1 par value; 35,000,000 shares authorized; 20,281,638 and 19,465,877 issued at September 30, 2020 and December 31, 2019, respectively; and 20,248,171 and 19,432,410 outstanding at September 30, 2020 and December 31, 2019, respectively 20 19 Additional paid-in capital 166,204 158,192 Accumulated deficit (113,980 ) (109,943 ) Accumulated other comprehensive income (1,378 ) (1,301 ) Treasury stock at cost, 33,467 shares (125 ) (125 ) Total shareholders' equity 50,741 46,842 Total liabilities and shareholders' equity $ 188,223 $ 203,608
PFSweb, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 REVENUES: Service fee revenue $ 60,194 $ 49,602 $ 176,488 $ 151,371 Product revenue, net 4,229 6,579 17,677 20,216 Pass-through revenue 12,661 11,810 42,053 37,063 Total revenues 77,084 67,991 236,218 208,650 COSTS OF REVENUES: Cost of service fee revenue 40,877 32,296 116,358 99,062 Cost of product revenue 4,019 6,250 16,732 19,117 Cost of pass-through revenue 12,661 11,810 42,053 37,063 Total costs of revenues 57,557 50,356 175,143 155,242 Gross profit 19,527 17,635 61,075 53,408 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 21,389 18,886 62,301 55,329 Loss from operations (1,862 ) (1,251 ) (1,226 ) (1,921 ) INTEREST EXPENSE, net 365 458 1,154 1,418 Loss before income taxes (2,227 ) (1,709 ) (2,380 ) (3,339 ) INCOME TAX EXPENSE (BENEFIT), net 592 (71 ) 1,657 438 NET LOSS (2,819 ) (1,638 ) (4,037 ) (3,777 ) NON-GAAP NET INCOME $ 687 $ 357 $ 6,295 $ 976 NET LOSS PER SHARE: Basic $ (0.14 ) $ (0.08 ) $ (0.20 ) $ (0.19 ) Diluted $ (0.14 ) $ (0.08 ) $ (0.20 ) $ (0.19 ) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 20,211 19,432 19,899 19,454 Diluted 20,211 19,432 19,899 19,454 EBITDA $ 167 $ 1,423 $ 5,052 $ 6,021 ADJUSTED EBITDA $ 3,427 $ 3,121 $ 14,629 $ 9,884
PFSweb, Inc. and Subsidiaries Unaudited Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 NET LOSS $ (2,819 ) $ (1,638 ) $ (4,037 ) $ (3,777 ) Income tax expense (benefit), net 592 (71 ) 1,657 438 Interest expense, net 365 458 1,154 1,418 Depreciation and amortization 2,029 2,674 6,278 7,942 EBITDA 167 1,423 5,052 6,021 Stock-based compensation 3,235 852 8,934 2,181 Acquisition-related, restructuring and other costs 25 846 643 1,682 ADJUSTED EBITDA $ 3,427 $ 3,121 $ 14,629 $ 9,884 Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 NET LOSS $ (2,819 ) $ (1,638 ) $ (4,037 ) $ (3,777 ) Stock-based compensation 3,235 852 8,934 2,181 Amortization of acquisition-related intangible assets 116 167 361 501 Acquisition-related, restructuring and other costs 25 846 643 1,682 Deferred tax expense - goodwill amortization 130 130 394 389 NON-GAAP NET INCOME $ 687 $ 357 $ 6,295 $ 976 Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 TOTAL REVENUES $ 77,084 $ 67,991 $ 236,218 $ 208,650 Pass-through revenue (12,661 ) (11,810 ) (42,053 ) (37,063 ) Cost of product revenue (4,019 ) (6,250 ) (16,732 ) (19,117 ) SERVICE FEE EQUIVALENT REVENUE $ 60,404 $ 49,931 $ 177,433 $ 152,470
PFSweb, Inc. and Subsidiaries Unaudited Consolidated Segment Information and Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) The segment financial data for the three and nine months ended September 30, 2020 and 2019, 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 PFS Operations Revenues: Service fee revenue $ 39,339 $ 31,176 $ 114,184 $ 95,930 Product revenue, net 4,229 6,579 17,677 20,216 Pass-through revenue 11,836 10,760 39,708 35,049 Total revenues 55,404 48,515 171,569 151,195 Costs of revenues: Cost of service fee revenue 29,658 22,349 82,397 69,023 Cost of product revenue 4,019 6,250 16,732 19,117 Cost of pass-through revenue 11,836 10,760 39,708 35,049 Total costs of revenues 45,513 39,359 138,837 123,189 Gross profit 9,891 9,156 32,732 28,006 Direct operating expenses 7,353 7,454 22,702 21,649 Direct contribution 2,538 1,702 10,030 6,357 Depreciation and amortization 1,616 2,120 4,811 6,153 Stock-based compensation 817 144 1,757 379 Acquisition-related, restructuring and other costs 25 914 762 1,401 ADJUSTED EBITDA $ 4,996 $ 4,880 $ 17,360 $ 14,290 TOTAL REVENUES $ 55,404 $ 48,515 $ 171,569 $ 151,195 Pass-through revenue (11,836 ) (10,760 ) (39,708 ) (35,049 ) Cost of product revenue (4,019 ) (6,250 ) (16,732 ) (19,117 ) SERVICE FEE EQUIVALENT REVENUE $ 39,549 $ 31,505 $ 115,129 $ 97,029
PFSweb, Inc. and Subsidiaries Unaudited Consolidated Segment Information and Reconciliation of Certain Non-GAAP Items to GAAP (In Thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 LiveArea Professional Services Revenues: Service fee revenue $ 20,855 $ 18,426 $ 62,304 $ 55,441 Pass-through revenue 825 1,050 2,345 2,014 Total revenues 21,680 19,476 64,649 57,455 Costs of revenues: Cost of service fee revenue 11,219 9,947 33,961 30,039 Cost of pass-through revenue 825 1,050 2,345 2,014 Total costs of revenues 12,044 10,997 36,306 32,053 Gross profit 9,636 8,479 28,343 25,402 Direct operating expenses 7,095 5,885 22,171 18,634 Direct contribution 2,541 2,594 6,172 6,768 Depreciation and amortization 204 276 633 891 Stock-based compensation 892 261 3,283 558 Acquisition-related, restructuring and other costs - 53 6 111 ADJUSTED EBITDA $ 3,637 $ 3,184 $ 10,094 $ 8,328 Corporate Selling, general and administrative expenses $ (6,941 ) $ (5,547 ) $ (17,428 ) $ (15,046 ) Depreciation and amortization 209 278 834 898 EBITDA (6,732 ) (5,269 ) (16,594 ) (14,148 ) Stock-based compensation 1,526 447 3,894 1,244 Acquisition-related, restructuring and other costs - (121 ) (125 ) 170 ADJUSTED EBITDA $ (5,206 ) $ (4,943 ) $ (12,825 ) $ (12,734 )