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PFSWeb Inc. Financial Market Roadshow Presentation PFSWeb Inc. Financial Market Roadshow Presentation Presentation Transcript

  • September 2012 PFSweb Mark Layton, CEO Financial Market Roadshow Presentation Tom Madden, CFO® 2012 PFSweb, Inc. │ www.pfsweb.com
  • SAFE HARBOR The matters discussed in this presentation, particularly information regarding future revenue, earnings, business plans and goals, consist of forward-looking information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor created by these sections and involve risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. Such statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management’s assumptions and the Companys future performance are both subject to a wide range of business risks and uncertainties, and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially. The Company undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking information contained herein is subject to the risk factors and uncertainties described in the Company’s filings with the Securities and Exchange Commission, which risk factors and uncertainties are incorporated by reference as though fully set forth herein. This presentation contains certain non-GAAP measures including Service Fee Equivalent Revenue, Non-GAAP Net Income (Loss), EBITDA, Adjusted EBITDA and Free Cash Flow. Service Fee Equivalent Revenue represents service fee revenue plus the gross profit earned on product revenue. Non-GAAP Net Income (Loss) represents net income (loss) calculated in accordance with U.S. GAAP as adjusted for income (loss) from discontinued operations, the impact of non-cash stock-based compensation expense, executive disability benefits, move related expenses and lease termination costs. EBITDA represents net income (loss) before income (loss) from discontinued operations, interest, taxes, depreciation and amortization. Adjusted EBITDA further eliminates the effect of stock-based compensation expense, executive disability benefits, move related expenses and lease termination costs. Free Cash Flow is defined as net cash provided by (used in) continuing operating activities less capital expenditures. Service Fee Equivalent Revenue, Non-GAAP Net Income (Loss), EBITDA, Adjusted EBITDA and Free Cash Flow 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 income (loss) from discontinued operations, the effect of stock-based compensation, executive disability benefits, move related expenses and lease termination costs and EBITDA and Adjusted EBITDA further eliminates the effect of financing, income taxes and the accounting effects of capital spending and Free Cash Flow which accounts for operating cash flow less cash paid for fixed assets, including capitalized software development, 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. The non-GAAP measures are not intended to be considered in isolation of, as a substitute for or superior to our GAAP financial information. We have included reconciliations later in this presentation of the non-GAAP measures to the nearest GAAP measure. 2
  • OVERVIEW Company: PFSweb, Inc. Symbol / Exchange: PFSW / NASDAQ Share Price: $2.56* Shares Outstanding: 12.8 million* Market Cap: $33 million * *As of August 28, 2012 3 View slide
  • PFSweb, Inc. About View slide
  • ABOUT PFSweb WEB COMMERCE TECHNOLOGY & SERVICES PROVIDER TO THE WORLD’S LEADING BRANDS Founded 1994 Headquartered in Texas Servicing > 65 Iconic Brand Client Programs 1,600 Global Staff 2011 Service Fee Equiv. Revenue - $107M @ 27% GP 5
  • PFSweb’s EVOLVING TECHNOLOGY & SERVICES OFFERING eCommerce Technology Robust Platform. Powerful Tools. Fully Integrated Interactive Marketing Attract Shoppers. Convert Buyers. Nurture Loyalty Order Management Oracle JD Edwards. Secure. Multi-Channel Integrations Analytics Financial Services PCI Compliant. Fraud Prevention. International Global Logistics & Fulfillment Scalable. Premium Packaging. Highly Customized Customer Care Brand Centric. Web Enabled. Multi-Lingual Content Management (TBA) PIM. Product Photography. Data Synchronization 6
  • KEY BUILDING BLOCKS OF OUR TECHNOLOGY & SERVICES SOLUTION PROFESSIONALS TECHNOLOGY CUSTOMER CARE LOGISTICS 1600 Global Personnel Oracle/JDE ERP 5 Global Customer Care Centers 6 Global Distribution Centers > 250 Client Facing Professionals IBM Power 7 Series Servers 900 Global Call Center Seats >1M ft2 of fulfillment capacity  >130 eCommerce PFSweb Technology ECO System Voice, Chat, email Highly Automated Developers High Availability & Scalable 2.5M+ Annual Customer Contacts 8M Annual Customer Shipments  >75 Client Mgmt. SSAE-16 SOC 1 , PCI Level 1 v1.2 7
  • PFSweb, Inc. Why do Iconic Brands Choose PFSweb?
  • The Massive & Evolving Universe of Commerce??
  • Universe ofSecondary Markets CommercePublisher DealsDaily Deal SitesFlash Sale Sites SCE & Affiliate
  • PFSweb PROVIDES A FULLY INTEGRATED TECHNOLOGY ECOSYSTEM OF >100 “BEST IN CLASS” PROVIDERS INCLUDING: eCommerce Technology Order Management JD EDWARDS WORLD Interactive Marketing Financial Services Customer Care Logistics & Fulfillment JD EDWARDS WORLDOur goal is to provide best-in-class capabilities across the entire technology stack. We achieve this by building andconstantly reshaping a pre-integrated ecosystem that combines PFSweb proprietary systems with leading technologyproviders to deliver a comprehensive fully working commerce solution unmatched by our competitors. 12
  • DEMANDWARE STRATEGIC PARTNERSHIP Partnership formed in 2007 – First client launched in 2008 Industry’s only enterprise class Software-as-a-Service platform Tightly integrated with PFSweb Oracle JD Edwards ERP system Brand customized customer service suite application (CSS) PFSweb is the Largest Integrator of Demandware technology in the world, providing a wealth of highly experienced technology development and support professionals 13
  • PFSweb, Inc. Who are your clients?
  • CLIENT PORTFOLIO – CURRENTLY SERVING >65 ICONIC BRAND PROGRAMS 15
  • CLIENT SPOTLIGHT: L’Oréal USA As a previous client, L’Oréal USA came back to PFSweb looking for a solution that could leverage shared infrastructure and technology. Under a master agreement signed in 2010 L’Oréal USA chose PFSweb to service several of their brands with a full range of back-end solutions. These include customer care, financial services, product merchandising and order fulfillment. 16
  • CLIENT SPOTLIGHT: Fifth & Pacific Companies In 2008, PFSweb was awarded an enterprise-wide contract with Fifth & Pacific Companies to support their online brands. PFSweb provides all brands in their portfolio with an End2End solution. These brands include Lucky Brand Jeans, Juicy Couture, Kate Spade and Jack Spade. 17
  • CLIENT SPOTLIGHT: P&G eStore The P&G eStore solution is a unique model which was custom-built for P&G’s unique business needs. Launched in 2010, PFSweb purchases product directly from P&G via a subsidiary and then resells the product on the eStore website. Within the solution, PFSweb provides an End2End eCommerce solution to handles all facets of the operation. P&G initiated the eStore concept and collaborates with PFSweb for test concepts and programs. These valuable ideas and insights are passed back to P&G for future use. 18
  • CLIENT SPOTLIGHT: LEGO Brand Retail Since 2007, PFSweb has provided order fulfillment, advanced material handling systems and flexible warehouse management systems for LEGO’s online store. PFSweb also supports inventory replenishment for the 58 LEGO-brand retail stores all over the country. PFSweb’s story with LEGO is one of rapid growth as they reached their 5 year growth projection within the first peak season with PFSweb. The solution responds to dramatic seasonal spikes while maintaining above average industry standard order fulfillment performance. This helped LEGO achieve the 2012 Internet Retailer Hot 100 list. 19
  • STRONG NEW BUSINESS PIPELINE OF OVER $50M IN ANNUAL SERVICE FEES Sept. 2011 July 2012 Aug. 2011 Sept. 2011 Mar. 2012 Sept. 2011 Feb. 2012 20
  • PFSweb, Inc. What is driving growth?
  • FOUR YEAR STRATEGIC GROWTH We see growth opportunity through several strategic initiatives • Strong web commerce macro-Industry growth in both domestic and international markets, particularly in YOY Growth Rates of Web Retailers (2010-2011) 40% manufacturer direct to consumer initiatives 28% 29% • Organic growth from existing clients as well as new client 20% additions particularly in our targeted industry segments 7% of CPG & Fashion Web retailers Manufacturer Multichannel Pure play Multichannel • Bringing to market new Omni Channel commerce overall D2C (stores) eCommerce (catalog) technology initiatives (iCommerce™) Source: Forrester Research - The State of Retailing Online 2011: Key Metrics • Broadening our range of services to drive higher margins and longer client life cycles • Global expansion 22
  • THE WEB COMMERCE MARKET IS CONTINUING TO RAPIDLY EXPAND U.S. Online Retail Forecast European Online Retail Forecast $350.0 $327.1 € 200.0 $303.9 € 172.0 $300.0 $278.2 € 155.9 $252.5 $250.0 € 150.0 € 140.4 $226.3 € 125.5 U.S. billions ($) $201.9 € 110.8 Billions (€) $200.0 $177.2 € 96.7 € 100.0 € 83.4 $150.0 $100.0 € 50.0 $50.0 $0.0 € 0.0 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016% change 14% 14% 12% 12% 10% 9% 8% % of total 12% Growth 6% 7% 7% 8% 8% 8% 9%retail sales Source: Forrester Research Online Retail Forecast, 2011 To 2016 (Western Europe) Source: Forrester Online Retail Forecast, 2012 to 2016 (US) 23
  • SIGNIFICANT GROWTH POTENTIAL FROM LARGE, NEWLY ADOPTING INDUSTRIES High Music Technology eCommerce Market Penetration Books Sporting Goods Travel & Entertainment 20%or more Mature eCommerce Markets Fashion & Consumer Apparel Products (CPG)10% or less Fashion & Consumer Apparel Products (CPG) Growth eCommerce Markets Low Small eCommerce Market Size LargeSource: Craig-Hallum Capital Group LLC 2010 – For Illustrative Purposes Only 24
  • PFSweb, Inc. How will PFSweb evolve?
  • PFSweb’s STRATEGY FOR THE FUTURE PFSweb aspires to be the premier global facilitator of digital and physical commerce transactions for the World’s Leading Brands by providing strategic technology solutions that enable synergy and growth across all commerce channels. iCommerce™ Hub iCommerce™ Agency iCommerce™ Operations Network Digital Commerce & Order Mgmt. Omni Channel Strategy PFSweb Centers of Excellence Affiliate/Partner connections Digital Marketing Services Client Operations Payment/Commission Engine Custom Development Network Providers Network Dashboard Operational Stewardship 26
  • PFSweb, Inc. Who is PFSweb’s competition?
  • Competitive Market Overview• Compete & Cooperate• Integrate & Innovate• Develop & Deliver Delivering Best of Class Complete Commerce Solutions is our goal
  • PFSweb, Inc. Financial Overview
  • RECENT DEVELOPMENTSStrong Service Fee Revenue Growth• CY 11 Service Fee Revenue up 35%• YTD June 12 Service Fee Revenue up 42%• Targeting Growth of 20% for CY12Improving Adjusted EBITDA results• CY 11 $6.1M  Q4 11 $3.9M (Record Quarter)• YTD June 12 Adjusted EBITDA $5.4M, up 253%• CY 12 Target of $9M to $11MExciting new business pipeline• Over $50M pipeline• CPG and Fashion Direct to Consumer (DTC) trend strong 30
  • PFSweb CORPORATE SEGMENT OVERVIEW Enterprise Sales & Marketing & Client Services PFSweb Services PFSweb Business & Retail Connect Merchandise Sales $1,580M(A) Merchandise Sales $162M(A) GAAP Revenue $95M(A) GAAP Revenue $162M(A) Service Fee Equivalent Revenue $95M(A) Service Fee Equivalent Revenue $12M(A)(B) PFSweb Inc. Infrastructure Services Professional Services Direct to Consumer Business to Business (TARGET OF 25-30% GP) (TARGET OF 40-50% GP) (TARGET OF 15-30% GP) (TARGET OF 6-8% GP) eCOMMERCE TECHNOLOGY TECHNOLOGY eSTORE RETAIL SERVICES RICOH INFOPRINT SOLUTIONS INTEGRATION/DEVELOPMENT (Supplies Distributors) ORDER / WAREHOUSE  PROCUREMENT MANAGEMENT WEB SITE EXPERENTIAL DESIGN  MERCHANDISING  PRICING HIGH TOUCH CUSTOMER WEB MARKETING  PROGRAM MGT. CARE WEB ANALYTICS GLOBAL FULFILLMENT & LOGISTICS USER EXPERIENCE RESEARCH FINANCIAL SERVICES CONSUMER ANALYTICS(A) 2011 Actual Results(B) Represents gross profit earned on product revenue 31
  • HISTORIC FINANCIAL OVERVIEW ($ IN MILLIONS) Revenue (A) Service Fee Equivalent Adjusted EBITDA Service Fee Revenue Product Revenue Revenue (A) $7.0 $6.1$300.0 $120.0 $6.0 $107.1 $5.5 $245.2 $257.8$250.0 $241.6 $100.0 $5.0 $82.8 $72.8 $200.0 $80.0 $4.0 $3.5 $162.4 $150.0 $183.0 $174.6 $60.0 $3.0 $100.0 $40.0 $2.0 $50.0 $20.0 $1.0 $58.6 $70.6 $95.4 $- $- $- CY09 CY09 CY09 CY10 CY10 CY10 CY11 CY11 CY11(A) Excludes Pass-through revenue 32
  • STRONG RESULTS FOR FIRST 6 MONTHS OF 2012 ($ IN MILLIONS) Revenue (A) Service Fee Equivalent Adjusted EBITDA Service Fee Revenue Product Revenue Revenue (A) $6.0 $5.4$140.0 $124.0 $121.1 $70.0 $61.8 $5.0$120.0 $60.0 $46.1$100.0 $84.1 $4.0 $50.0 $64.3 $80.0 $40.0 $3.0 $60.0 $30.0 $1.5 $2.0 $40.0 $20.0 $39.9 $56.8 $20.0 $1.0 $10.0 $- $- $- YTD June 11 YTD June YTD June 11 YTD June 11 12 YTD June 12 YTD June 12(A) Excludes Pass-through revenue 33
  • MULTIPLE DRIVERS FOR GROWTHCY 2012 Overview • Signed contracts recently implemented and contracts signed but not yet implemented targeted to contribute incremental service fee revenue. • Certain incremental SG&A investments in personnel, facilities, sales & marketing and technology being made to support projected current and long-term growth. • Substantial leverage ability allows for expanding Adjusted EBITDA margins as we grow.CY 2012 Targets • Service Fee Equivalent Revenue Growth  20% • Adjusted EBITDA $9M to $11M 34
  • SELECTED CONSOLIDATED BALANCE SHEET DATA (IN THOUSANDS) December 31, June 30, Assets: 2011 2012 Cash & Restricted Cash $18,522 $17,835 Accounts Receivable 52,679 39,172 Inventories 30,487 27,060 Property & Equipment, Net 14,945 25,574 Other 19,739 15,370 Total Assets $136,372 $125,011 Liabilities: Accounts Payable $48,544 $35,658 Accrued Expenses/L-T Liabilities 32,232 37,071 Debt 27,522 25,480 Total Liabilities $108,298 $98,209 Shareholders’ Equity: $28,074 $26,802 35
  • ILLUSTRATIVE FINANCIAL MODEL ($ IN 000’S) Run-Rate(1) Potential Financial Model Service Fee Revenue (Consumer Direct & Digital Connect) (2) $95,345 $175,000 $250,000 Product Revenue (Retail & Business Connect) 162,447 120,000 110,000 Total Revenue (GAAP) (2) $257,792 $295,000 $360,000 Service Fee Revenue $95,345 $175,000 $250,000 Gross Margin on Product Revenue 11,709 (3) 7,000 6,000 Service Fee Equivalent (“SFE”) Revenue (Non-GAAP) $107,054 $182,000 $256,000 Client Direct Operating Costs (Excluding D & A) (4) $72,810 $127,000 $179,000 Client Contribution $34,244 $55,000 $77,000 SG&A, excluding D & A, as adjusted (4) 28,159 $35,000 44,000 Adjusted EBITDA $6,085 $20,000 $33,000 Adjusted EBITDA Margin % of Service Fee Equivalent Revenue 6% 11% 13% 1. Based on CY 2011 financial results 2. Excludes Pass-through revenue 3. Product revenue of $162,447 less cost of product revenues of $150,738 results in gross profit of $11,709, or 7.2% of product revenue 4. Excluding depreciation and amortization, stock compensation and relocation related costs 36
  • AN EXPERIENCED TEAM OF WEB COMMERCE PIONEERS LEAD OUR COMPANYWorld Class Experience, Expertise, Passion Mark Layton CEO 23 years of service Tom Madden CFO 19 years of service Liz Johnson VP 12 years of service Mike Willoughby Dave Reese VP President Mark Fuentes VP 13 years of service 13 years of service 7 years of service Gib Dawson VP 13 years of service Martijn Duynstee VP Europe Lawrence Lubrano VP 12 years of service Scott Talley VP 12 years of service 20 years of service Cindy Almond VP 21 years of service Michael Wright VP 12 years of service 37
  • PFSweb PRESENTS A COMPELLING INVESTMENT OPPORTUNITYGlobal Commerce Leader • One of two full-service eCommerce solution providers offering an end-to-end solutionSignificant Barriers to Entry • Millions of hours to develop • $100M+ to replace • Global reachStrong Growth Potential • Online DTC sales of manufacturers consumer products will drive next wave of growth • Significant growth potential from large, newly adopting industriesIconic Brands validate the value of our services offering • Long-term contracts with recurring revenue streams • Relationship developed over years of serviceSound financial position • Approximately $18 million in cash and restricted cash as of June 2012Highly Attractive Overall Financial model • Significant growth opportunities + improving margin mix + operating leverage = dramatically improving EBITDA potential 38
  • Thank you for your time!
  • PFSweb, Inc. Financial Exhibits
  • ANNUAL EBITDA AND NON-GAAP NET INCOME (LOSS) RECONCILIATION FROM GAAP RESULTS A reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Non-GAAP Net Income (Loss) follows: 2011 2012 2009 2010 March June Sept Dec 2011 March June YTD Cons Cons Cons Cons Cons Cons Cons Cons Cons Cons Net Incom e (Loss) $ (4.6) $ (7.4) $ (2.3) $ (1.2) $ (1.8) $ 0.8 $ (4.6) $ (1.3) $ (0.5) $ (1.8) (Income) loss from discontinued operations, net of tax (0.3) 4.0 0.6 - - 0.3 0.9 - - - Income tax expense 0.3 0.5 0.1 0.1 0.1 0.1 0.4 0.1 0.2 0.3 Interest expense 1.2 0.9 0.2 0.3 0.3 0.3 1.1 0.3 0.2 0.5 Depreciation and amortization 6.5 6.1 1.5 1.5 1.5 1.8 6.3 2.1 2.2 4.3 EBITDA $ 3.1 $ 4.1 $ 0.1 $ 0.7 $ 0.1 $ 3.3 $ 4.1 $ 1.2 $ 2.1 $ 3.3 Stock-based compensation 0.4 0.8 0.3 0.4 0.3 0.3 1.4 0.3 0.4 0.7 Executive disability benefits - 0.7 - - - - - - - - Move related expenses - - - - 0.3 0.2 0.5 0.6 0.3 0.9 Lease termination costs - - - - - - - 0.5 - 0.5 Adjusted EBITDA $ 3.5 $ 5.6 $ 0.5 $ 1.1 $ 0.7 $ 3.9 $ 6.1 $ 2.6 $ 2.8 $ 5.4 Net Incom e (Loss) $ (4.6) $ (7.4) $ (2.3) $ (1.2) $ (1.8) $ 0.8 $ (4.6) $ (1.3) $ (0.5) $ (1.8) (Income) loss from discontinued operations, net of tax (0.3) 4.0 0.6 - - 0.3 0.9 - - - Stock-based compensation 0.4 0.8 0.3 0.4 0.3 0.3 1.4 0.3 0.4 0.7 Executive disability benefits - 0.7 - - - - - - - - Move related expenses - - - - 0.3 0.2 0.5 0.6 0.3 0.9 Lease termination costs - - - - - - - 0.5 - 0.5 Non-GAAP Net Incom e (Loss) $ (4.5) $ (1.9) $ (1.4) $ (0.8) $ (1.2) $ 1.6 $ (1.8) $ 0.1 $ 0.2 $ 0.3 41
  • CLIENT DIRECT OPERATING COSTS AND SELLING, GENERAL & ADMINISTRATIVE EXPENSES Reconciliation of (1) Cost of Service Fee Revenue to Client Direct Operating Costs, excluding Depreciation and Amortization, and (2) Selling, General and Administrative Expenses (“SG&A”) to SG&A, excluding Depreciation and Amortization, as Adjusted. 2011 Cost of Service Fee Revenue SG&A December 31, As Reported $ 71,751 $ 37,512 Les s : Depreciation & Amortization (3,561) (2,783) Stock-bas ed Compens ation Stock-bas ed Compens ation - (1,402) Relocation related cos ts - (548) SGA Related to Direct Client Cos ts 4,620 (4,620) As Adjusted $ 72,810 $ 28,159 42
  • RECONCILIATION OF SERVICE FEE EQUIVALENT REVENUE Twelve Months Ended Six Months Ended December 31, June 30, 2010 2011 2011 2012 Total Revenues $ 274,516 $ 298,766 $ 140,397 $ 143,272 Pass-through revenue (29,267) (40,974) (16,445) (22,228) Stock-based Compensation Cost of product revenue (162,485) (150,738) (77,877) (59,253) Service Fee Equivalent Revenue $ 82,764 $ 107,054 $ 46,075 $ 61,791 43