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PFSweb Reports Record Fourth Quarter and Full Year 2014 Results

Q4 Adjusted EBITDA up 76% to Record $6.8 Million, Full Year up 28% to Record $13.7 Million

ALLEN, TX--(Marketwired - Mar 5, 2015) - PFSweb, Inc. (NASDAQ: PFSW), a global provider of end-to-end eCommerce solutions, reported results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter 2014 Highlights

  • Service fee equivalent revenue (a non-GAAP measure defined below) increased 38% to a record $49.0 million compared to $35.6 million in the same period of 2013

  • Adjusted EBITDA (a non-GAAP measure defined below) increased 76% to a record $6.8 million compared to $3.9 million in the same period of 2013

  • Successfully concluded the 2014 holiday season with a high level of client satisfaction. Comparable direct-to-consumer clients experienced more than 20% year-over-year growth in their gross merchandise revenue during the quarter.

  • Expanded global sales operations with two additional European sales offices in London and Munich

Fourth Quarter 2014 Financial Results

Total revenues in the fourth quarter of 2014 increased 18% to $78.7 million compared to $66.7 million in the same period of 2013. Service fee revenue in the fourth quarter of 2014 increased 40% to $48.0 million compared to $34.3 million last year. Product revenue decreased to $18.1 million compared to $21.3 million in the same period of 2013, primarily due to ongoing restructuring activities by the company's largest client in this segment.

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Service fee equivalent revenue in the fourth quarter of 2014 increased 38% to a record $49.0 million compared to $35.6 million in the same period of 2013. The increase was primarily due to new and expanded client relationships, higher seasonal volumes, and the benefit from the acquisitions of REV Solutions and LiveAreaLabs, both of which occurred in September 2014.

Service fee gross margin in the fourth quarter was 28.2% compared to 30.3% in the same period in 2013. While each period includes the benefit of higher margin project activity, the 2014 period included an increased level of expenses to prepare for and support certain client operations for the holiday volumes.

Adjusted EBITDA increased 76% to a record $6.8 million in the fourth quarter of 2014 compared to $3.9 million in the same period of 2013.

Net income in the fourth quarter of 2014 was $2.1 million or $0.12 per diluted share, compared to a net loss of $0.4 million or $(0.03) per diluted share in the same period of 2013. Net income in the fourth quarter of 2014 included $0.6 million in stock-based compensation expense, $0.2 million in acquisition costs, and $0.9 million in restructuring and other charges. The restructuring and other charges include costs associated with closing the company's Manila operation and integration of its recent acquisitions. This compares to $1.4 million in stock-based compensation expense and no acquisition or restructuring related costs in the same period of 2013.

Non-GAAP net income (a non-GAAP measure defined below) in the fourth quarter of 2014 was $3.7 million or $0.21 per diluted share, compared to non-GAAP net income of $1.0 million or $0.06 per diluted share in the fourth quarter of 2013.

Cash and cash equivalents decreased to $18.1 million compared to $22.4 million at December 31, 2013, primarily due to cash paid for the acquisitions of REV Solutions and LiveAreaLabs. Total debt decreased to $10.9 million at December 31, 2014 compared to $11.1 million at December 31, 2013.

Full Year 2014 Financial Results

Total revenues in 2014 increased 2% to $247.0 million compared to $241.6 million in 2013. Service fee revenue in 2014 increased 19% to $134.4 million compared to $113.0 million last year, while product revenue was $75.3 million compared to $91.0 million in the prior year. Service fee equivalent revenue increased 17% to a record $138.7 million compared to $118.7 million in 2013.

Service fee gross margin in 2014 was 29.4% compared to 31.7% last year.

Adjusted EBITDA increased 28% to a record $13.7 million in 2014 compared to $10.7 million in 2013.

Net loss in 2014 was $4.6 million or $(0.28) per diluted share compared to net loss of $5.9 million or $(0.39) per diluted share in 2013. Net loss in 2014 included $3.1 million in stock-based compensation expense, $1.7 million in acquisition costs, and $1.0 million in restructuring and other charges. This compares to $2.6 million in stock-based compensation expense and $2.5 million in restructuring and other charges in 2013.

Non-GAAP net income in 2014 was $1.2 million or $0.07 per diluted share, compared to non-GAAP net loss of $0.8 million or $(0.05) per diluted share in 2013.

Management Commentary

"2014 was highlighted by a number of financial and operational accomplishments," said Michael Willoughby, CEO of PFSweb. "We generated increases in nearly every metric of our business, most notably a 17% increase in service fee equivalent revenue and a 28% increase in adjusted EBITDA. In addition to new client wins and the highly-anticipated rollout of the United States Mint eCommerce solution, we strengthened our agency and technology service offerings with the acquisitions of REV Solutions and LiveAreaLabs.

"As an eCommerce system integrator, REV Solutions enhances our Demandware practice and adds Oracle Commerce support capabilities. LiveAreaLabs, a digital creative agency and system integrator, strengthens our agency service offering and further supplements our Demandware related technology services. LiveAreaLabs also broadens our integration capabilities with the additional strategy, creative and user experience design support for hybris, Magento, WebSphere and Drupal, among other leading platforms."

"Following these acquisitions," Willoughby continued, "the year culminated in a very strong holiday season, with clients who have been with us for more than a year realizing, on average, more than 20% year-over-year growth in gross merchandise revenue in Q4. Overall, our strong digital agency, technology and infrastructure performance for our clients during this peak-volume period positions us well for expanded opportunities in the future.

"For 2015, we remain focused on providing an exceptional omni-channel experience for both new and existing clients. With our expanded digital agency and technology service capabilities, we believe we are well-positioned to capitalize on the evolving eCommerce marketplace, both in the U.S. and abroad. We will continue to invest in our sales and marketing efforts, as reflected by our new European sales offices and recently appointed Executive VP of Sales, Travis Hess. We will also continue to target acquisitions that support our geographic growth initiatives and enhance our end-to-end solution offering, especially within professional services. Our goal is to deliver another year of record performance in 2015."

2015 Outlook

While the company's business activity in 2015 is expected to remain at previously communicated levels, the impact of foreign currency exchange related to the weak Canadian dollar and Euro is expected to partially offset the company's financial results. Accordingly, PFSweb has adjusted its 2015 service fee equivalent revenue guidance to range between $160 million and $170 million, which reflects targeted growth of 15% to 23% from 2014. The previously issued 2015 service fee equivalent revenue guidance was $165 million to $175 million. The company is targeting adjusted EBITDA to range between $16 million and $18 million, which reflects targeted growth of 17% to 32% from 2014. The 2015 guidance excludes the impact of potential future acquisitions.

Conference Call

PFSweb will conduct a conference call today at 11:00 a.m. Eastern time to discuss its results for the fourth quarter and full year ended December 31, 2014.

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

Date: Thursday, March 5, 2015
Time: 11:00 a.m. Eastern time (10:00 a.m. Central time)
Toll-free dial-in number: 1-888-417-8533
International dial-in number: 1-719-325-2329
Conference ID: 9205523

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=113361 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 2:00 p.m. Eastern time on the same day through March 19, 2015.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 9205523

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, 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.

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, 2013 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.

PFSweb, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (A)

(In Thousands, Except Share Data)

December 31,

December 31,

2014

2013

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

18,128

$

22,418

Restricted cash

521

130

Accounts receivable, net of allowance for doubtful accounts of $447 and $382 at December 31, 2014 and December 31, 2013, respectively


59,126


55,292

Inventories, net of reserves of $768 and $962 at December 31, 2014 and December 31, 2013, respectively


10,534


14,169

Other receivables

5,638

5,241

Prepaid expenses and other current assets

7,103

4,713

Total current assets

101,050

101,963

PROPERTY AND EQUIPMENT, net

26,604

27,190

INTANGIBLE ASSETS, net

2,170

-

GOODWILL

8,366

-

OTHER ASSETS

2,556

2,883

Total assets

140,746

132,036

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$

6,850

$

8,231

Trade accounts payable

38,842

34,096

Deferred revenue

9,098

8,181

Accrued expenses

28,473

25,045

Total current liabilities

83,263

75,553

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

4,062

2,876

DEFERRED REVENUE

5,355

7,491

DEFERRED RENT

4,870

5,191

OTHER LONG-TERM LIABILITIES

3,091

-

Total liabilities

100,641

91,111

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; 17,047,093 and 16,540,904 shares issued at December 31, 2014 and December 31, 2013, respectively; and 17,013,626 and 16,507,437 shares outstanding as of December 31, 2014 and December 31, 2013, respectively




17




17

Additional paid-in capital

129,457

124,522

Accumulated deficit

(89,926

)

(85,300

)

Accumulated other comprehensive income

682

1,811

Treasury stock at cost, 33,467 shares

(125

)

(125

)

Total shareholders' equity

40,105

40,925

Total liabilities and shareholders' equity

$

140,746

$

132,036

(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, 2013.

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations (A)

(In Thousands, Except Per Share Data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

REVENUES:

Product revenue, net

$

18,102

$

21,322

$

75,284

$

90,982

Service fee revenue

47,992

34,269

134,385

112,977

Pass-thru revenue

12,587

11,133

37,379

37,644

Total revenues

78,681

66,724

247,048

241,603

COSTS OF REVENUES:

Cost of product revenue

17,067

20,022

71,019

85,237

Cost of service fee revenue

34,471

23,895

94,858

77,160

Cost of pass-thru revenue

12,587

11,133

37,379

37,644

Total costs of revenues

64,125

55,050

203,256

200,041

Gross profit

14,556

11,674

43,792

41,562

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

12,387

11,840

47,658

46,235

Income (loss) from operations

2,169

(166

)

(3,866

)

(4,673

)

INTEREST EXPENSE (INCOME), NET

323

115

813

679

Income (loss) before income taxes

1,846

(281

)

(4,679

)

(5,352

)

INCOME TAX PROVISION (BENEFIT)

(258

)

128

(53

)

539

NET INCOME (LOSS)

$

2,104

$

(409

)

$

(4,626

)

$

(5,891

)

NON-GAAP NET INCOME (LOSS)

$

3,744

$

970

$

1,216

$

(772

)

NET INCOME (LOSS) PER SHARE:

Basic

$

0.12

$

(0.03

)

$

(0.28

)

$

(0.39

)

Diluted

$

0.12

$

(0.03

)

$

(0.28

)

$

(0.39

)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:

Basic

16,905

16,345

16,737

14,957

Diluted

18,258

16,345

16,737

14,957

EBITDA

$

5,195

$

2,511

$

7,809

$

5,537

ADJUSTED EBITDA

$

6,835

$

3,890

$

13,651

$

10,656

(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, 2013.

PFSweb, Inc. and Subsidiaries

Reconciliation of certain Non-GAAP Items to GAAP

(In Thousands, Except Per Share Data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

NET INCOME (LOSS)

$

2,104

$

(409

)

$

(4,626

)

$

(5,891

)

Income tax expense (benefit)

(258

)

128

(53

)

539

Interest expense, net

323

115

813

679

Depreciation and amortization

3,026

2,677

11,675

10,210

EBITDA

$

5,195

$

2,511

$

7,809

$

5,537

Stock-based compensation

550

1,379

3,059

2,574

Acquisition related costs

229

-

1,749

-

Restructuring and other charges

861

-

1,034

2,545

ADJUSTED EBITDA

$

6,835

$

3,890

$

13,651

$

10,656

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

NET INCOME (LOSS)

$

2,104

$

(409

)

$

(4,626

)

$

(5,891

)

Stock-based compensation

550

1,379

3,059

2,574

Acquisition related costs

229

-

1,749

-

Restructuring and other charges

861

-

1,034

2,545

NON-GAAP NET INCOME (LOSS)

$

3,744

$

970

$

1,216

$

(772

)

NET INCOME (LOSS) PER SHARE:

Basic

$

0.12

$

(0.03

)

$

(0.28

)

$

(0.39

)

Diluted

$

0.12

$

(0.03

)

$

(0.28

)

$

(0.39

)

NON-GAAP NET INCOME (LOSS) Per Share:

Basic

$

0.22

$

0.06

$

0.07

$

(0.05

)

Diluted

$

0.21

$

0.06

$

0.07

$

(0.05

)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

TOTAL REVENUES

$

78,681

$

66,724

$

247,048

$

241,603

Pass-thru revenue

(12,587

)

(11,133

)

(37,379

)

(37,644

)

Cost of product revenue

(17,067

)

(20,022

)

(71,019

)

(85,237

)

SERVICE FEE EQUIVALENT REVENUE

$

49,027

$

35,569

$

138,650

$

118,722

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended December 31, 2014

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$

-

$

18,102

$

-

$

18,102

Service fee revenue

42,634

5,358

-

47,992

Service fee revenue - affiliate

4,642

292

(4,934

)

-

Pass-thru revenue

12,587

-

-

12,587

Total revenues

59,863

23,752

(4,934

)

78,681

COSTS OF REVENUES:

Cost of product revenue

-

17,067

-

17,067

Cost of service fee revenue

33,855

5,328

(4,712

)

34,471

Cost of pass-thru revenue

12,587

-

-

12,587

Total costs of revenues

46,442

22,395

(4,712

)

64,125

Gross profit

13,421

1,357

(222

)

14,556

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

12,025

584

(222

)

12,387

Income (loss) from operations

1,396

773

-

2,169

INTEREST EXPENSE (INCOME), NET

196

127

-

323

Income (loss) before income taxes

1,200

646

-

1,846

INCOME TAX PROVISION (BENEFIT)

(497

)

239

-

(258

)

NET INCOME (LOSS)

$

1,697

$

407

$

-

$

2,104

NON-GAAP NET INCOME (LOSS)

$

3,337

$

407

$

-

$

3,744

EBITDA

$

4,409

$

786

$

-

$

5,195

ADJUSTED EBITDA

$

6,049

$

786

$

-

$

6,835

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

NET INCOME (LOSS)

$

1,697

$

407

$

-

2,104

Income tax expense (benefit)

(497

)

239

-

(258

)

Interest expense (income), net

196

127

-

323

Depreciation and amortization

3,013

13

-

3,026

EBITDA

$

4,409

$

786

$

-

$

5,195

Stock-based compensation

550

-

-

550

Acquisition related costs

229

-

-

229

Restructuring and other charges

861

-

-

861

ADJUSTED EBITDA

$

6,049

$

786

$

-

$

6,835

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

NET INCOME (LOSS)

$

1,697

$

407

$

-

$

2,104

Stock-based compensation

550

-

-

550

Acquisition related costs

229

-

-

229

Restructuring and other charges

861

-

-

861

NON-GAAP NET INCOME (LOSS)

$

3,337

$

407

$

-

$

3,744

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.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Three Months Ended December 31, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$

-

$

21,322

$

-

$

21,322

Service fee revenue

30,580

3,689

-

34,269

Service fee revenue - affiliate

3,779

338

(4,117

)

-

Pass-thru revenue

11,133

-

-

11,133

Total revenues

45,492

25,349

(4,117

)

66,724

COSTS OF REVENUES:

Cost of product revenue

-

20,022

-

20,022

Cost of service fee revenue

24,028

3,547

(3,680

)

23,895

Cost of pass-thru revenue

11,133

-

-

11,133

Total costs of revenues

35,161

23,569

(3,680

)

55,050

Gross profit

10,331

1,780

(437

)

11,674

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

11,036

1,241

(437

)

11,840

Income (loss) from operations

(705

)

539

-

(166

)

INTEREST EXPENSE (INCOME), NET

(29

)

144

-

115

Income (loss) before income taxes

(676

)

395

-

(281

)

INCOME TAX PROVISION (BENEFIT)

(15

)

143

-

128

NET INCOME (LOSS)

$

(661

)

$

252

$

-

$

(409

)

NON-GAAP NET INCOME (LOSS)

$

718

$

252

$

-

$

970

EBITDA

$

1,929

$

582

$

-

$

2,511

ADJUSTED EBITDA

$

3,308

$

582

$

-

$

3,890

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

NET INCOME (LOSS)

$

(661

)

$

252

$

-

(409

)

Income tax expense (benefit)

(15

)

143

-

128

Interest expense (income), net

(29

)

144

-

115

Depreciation and amortization

2,634

43

-

2,677

EBITDA

$

1,929

$

582

$

-

$

2,511

Stock-based compensation

1,379

-

-

1,379

ADJUSTED EBITDA

$

3,308

$

582

$

-

$

3,890

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

NET INCOME (LOSS)

$

(661

)

$

252

$

-

$

(409

)

Stock-based compensation

1,379

-

-

1,379

NON-GAAP NET INCOME (LOSS)

$

718

$

252

$

-

$

970

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.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Twelve Months Ended December 31, 2014

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$

-

$

75,284

$

-

$

75,284

Service fee revenue

119,573

14,812

-

134,385

Service fee revenue - affiliate

14,556

1,138

(15,694

)

-

Pass-thru revenue

37,379

-

37,379

Total revenues

171,508

91,234

(15,694

)

247,048

COSTS OF REVENUES:

Cost of product revenue

-

71,019

-

71,019

Cost of service fee revenue

94,301

15,182

(14,625

)

94,858

Cost of pass-thru revenue

37,379

-

-

37,379

Total costs of revenues

131,680

86,201

(14,625

)

203,256

Gross profit

39,828

5,033

(1,069

)

43,792

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

45,779

2,948

(1,069

)

47,658

Income (loss) from operations

(5,951

)

2,085

-

(3,866

)

INTEREST EXPENSE (INCOME), NET

264

549

-

813

Income (loss) before income taxes

(6,215

)

1,536

-

(4,679

)

INCOME TAX PROVISION (BENEFIT)

(625

)

572

-

(53

)

NET INCOME (LOSS)

$

(5,590

)

$

964

$

-

$

(4,626

)

NON-GAAP NET INCOME (LOSS)

$

252

$

964

$

-

$

1,216

EBITDA

$

5,669

$

2,140

$

-

$

7,809

ADJUSTED EBITDA

$

11,511

$

2,140

$

-

$

13,651

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

NET INCOME (LOSS)

$

(5,590

)

$

964

$

-

(4,626

)

Income tax expense (benefit)

(625

)

572

-

(53

)

Interest expense (income), net

264

549

-

813

Depreciation and amortization

11,620

55

-

11,675

EBITDA

$

5,669

$

2,140

$

-

$

7,809

Stock-based compensation

3,059

-

-

3,059

Acquisition related costs

1,749

-

-

1,749

Restructuring and other charges

1,034

-

-

1,034

ADJUSTED EBITDA

$

11,511

$

2,140

$

-

$

13,651

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

NET INCOME (LOSS)

$

(5,590

)

$

964

$

-

$

(4,626

)

Stock-based compensation

3,059

-

-

3,059

Acquisition related costs

1,749

-

-

1,749

Restructuring and other charges

1,034

-

-

1,034

NON-GAAP NET INCOME (LOSS)

$

252

$

964

$

-

$

1,216

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.

PFSweb, Inc. and Subsidiaries

Unaudited Consolidating Statements of Operations

For the Twelve Months Ended December 31, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

REVENUES:

Product revenue, net

$

-

$

90,982

$

-

$

90,982

Service fee revenue

104,448

8,529

-

112,977

Service fee revenue - affiliate

10,246

1,448

(11,694

)

-

Pass-thru revenue

37,644

-

-

37,644

Total revenues

152,338

100,959

(11,694

)

241,603

COSTS OF REVENUES:

Cost of product revenue

-

85,237

-

85,237

Cost of service fee revenue

78,843

8,708

(10,391

)

77,160

Cost of pass-thru revenue

37,644

-

-

37,644

Total costs of revenues

116,487

93,945

(10,391

)

200,041

Gross profit

35,851

7,014

(1,303

)

41,562

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

41,709

5,829

(1,303

)

46,235

Income (loss) from operations

(5,858

)

1,185

-

(4,673

)

INTEREST EXPENSE (INCOME), NET

84

595

-

679

Income (loss) before income taxes

(5,942

)

590

-

(5,352

)

INCOME TAX PROVISION (BENEFIT)

185

354

-

539

NET INCOME (LOSS)

$

(6,127

)

$

236

$

-

$

(5,891

)

NON-GAAP NET INCOME (LOSS)

$

(1,008

)

$

236

$

-

$

(772

)

EBITDA

$

4,193

$

1,344

$

-

$

5,537

ADJUSTED EBITDA

$

9,312

$

1,344

$

-

$

10,656

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

NET INCOME (LOSS)

$

(6,127

)

$

236

$

-

(5,891

)

Income tax expense (benefit)

185

354

-

539

Interest expense (income), net

84

595

-

679

Depreciation and amortization

10,051

159

-

10,210

EBITDA

$

4,193

$

1,344

$

-

$

5,537

Stock-based compensation

2,574

-

-

2,574

Restructuring and other charges

2,545

-

-

2,545

ADJUSTED EBITDA

$

9,312

$

1,344

$

-

$

10,656

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

NET INCOME (LOSS)

$

(6,127

)

$

236

$

-

$

(5,891

)

Stock-based compensation

2,574

-

-

2,574

Restructuring and other charges

2,545

-

-

2,545

NON-GAAP NET INCOME (LOSS)

$

(1,008

)

$

236

$

-

$

(772

)

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.

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2014

(In Thousands)

Business &

PFSweb

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

PFSweb, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheets

as of December 31, 2013

(In Thousands)

Business &

PFSweb

Retail Connect

Eliminations

Consolidated

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

15,028

$

7,390

$

-

$

22,418

Restricted cash

-

130

-

130

Accounts receivable, net

37,857

18,697

(1,262

)

55,292

Inventories, net

-

14,169

-

14,169

Other receivables

-

5,241

-

5,241

Prepaid expenses and other current assets

3,552

1,161

-

4,713

Total current assets

56,437

46,788

(1,262

)

101,963

PROPERTY AND EQUIPMENT, net

26,945

245

-

27,190

RECEIVABLE/INVESTMENT IN AFFILIATES

12,563

-

(12,563

)

-

OTHER ASSETS

2,800

83

-

2,883

Total assets

98,745

47,116

(13,825

)

132,036

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$

4,419

$

3,812

$

-

$

8,231

Trade accounts payable

11,602

23,756

(1,262

)

34,096

Deferred revenue

8,181

-

-

8,181

Accrued expenses

18,114

6,931

-

25,045

Total current liabilities

42,316

34,499

(1,262

)

75,553

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion

2,876

-

-

2,876

PAYABLE TO AFFILIATES

-

23,045

(23,045

)

-

DEFERRED REVENUE

7,491

-

-

7,491

DEFERRED RENT

5,191

-

-

5,191

Total liabilities

57,874

57,544

(24,307

)

91,111

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:

Common stock

17

19

(19

)

17

Capital contributions

-

1,000

(1,000

)

-

Additional paid-in capital

124,522

28,060

(28,060

)

124,522

Retained earnings (accumulated deficit)

(85,360

)

(41,850

)

41,910

(85,300

)

Accumulated other comprehensive income

1,817

2,343

(2,349

)

1,811

Treasury stock

(125

)

-

-

(125

)

Total shareholders' equity

40,871

(10,428

)

10,482

40,925

Total liabilities and shareholders' equity

$

98,745

$

47,116

$

(13,825

)

$

132,036