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PFSWeb Inc. Financial Market Roadshow Presentation
1. September 2012
PFSweb
Mark Layton, CEO Financial Market Roadshow Presentation
Tom Madden, CFO
® 2012 PFSweb, Inc. │ www.pfsweb.com
2. 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 Company's 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
3. 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
5. 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
11. Universe
of
Secondary
Markets Commerce
Publisher
Deals
Daily Deal
Sites
Flash Sale
Sites
SCE &
Affiliate
12. 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 WORLD
Our goal is to provide best-in-class capabilities across the entire technology stack. We achieve this by building and
constantly reshaping a pre-integrated ecosystem that combines PFSweb proprietary systems with leading technology
providers to deliver a comprehensive fully working commerce solution unmatched by our competitors.
12
13. 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
16. 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
17. 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
18. 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
19. 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
20. 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
22. 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
23. 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
24. 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 Large
Source: Craig-Hallum Capital Group LLC 2010 – For Illustrative Purposes Only 24
26. 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
30. RECENT DEVELOPMENTS
Strong Service Fee Revenue Growth
• CY 11 Service Fee Revenue up 35%
• YTD June 12 Service Fee Revenue up 42%
• Targeting Growth of 20% for CY12
Improving 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 $11M
Exciting new business pipeline
• Over $50M pipeline
• CPG and Fashion Direct to Consumer (DTC) trend strong
30
31. 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 $12M(A)(B)
PFSweb Inc.
Infrastructure Services Professional Services Direct to Consumer Business to Business
(TARGET OF 25-30% GP) (TARGET OF 40-50% GP) (TARGET OF 15-30% GP) (TARGET OF 6-8% GP)
eCOMMERCE TECHNOLOGY TECHNOLOGY eSTORE RETAIL SERVICES RICOH INFOPRINT SOLUTIONS
INTEGRATION/DEVELOPMENT (Supplies Distributors)
ORDER / WAREHOUSE PROCUREMENT
MANAGEMENT WEB SITE EXPERENTIAL DESIGN MERCHANDISING
PRICING
HIGH TOUCH CUSTOMER WEB MARKETING PROGRAM MGT.
CARE
WEB ANALYTICS
GLOBAL FULFILLMENT &
LOGISTICS USER EXPERIENCE RESEARCH
FINANCIAL SERVICES CONSUMER ANALYTICS
(A) 2011 Actual Results
(B) Represents gross profit earned on product revenue 31
33. STRONG RESULTS FOR FIRST 6 MONTHS OF 2012 ($ 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
34. MULTIPLE DRIVERS FOR GROWTH
CY 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
35. 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 $26,802
35
36. ILLUSTRATIVE FINANCIAL MODEL ($ 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
37. AN EXPERIENCED TEAM OF WEB COMMERCE PIONEERS LEAD OUR COMPANY
World 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
38. PFSweb PRESENTS A COMPELLING INVESTMENT OPPORTUNITY
Global Commerce Leader
• One of two full-service eCommerce solution providers offering an end-to-end solution
Significant Barriers to Entry
• Millions of hours to develop
• $100M+ to replace
• Global reach
Strong Growth Potential
• Online DTC sales of manufacturers consumer products will drive next wave of growth
• Significant growth potential from large, newly adopting industries
Iconic Brands validate the value of our services offering
• Long-term contracts with recurring revenue streams
• Relationship developed over years of service
Sound financial position
• Approximately $18 million in cash and restricted cash as of June 2012
Highly Attractive Overall Financial model
• Significant growth opportunities + improving margin mix + operating leverage = dramatically improving EBITDA potential 38
41. 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
42. 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
43. 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
