- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss PFSweb's Q3 2022 results.

Joining us today are PFSweb's CEO, Mike Willoughby; the COO and President of PFS, Zach Thomann; the company's CFO, Tom Madden; and the company's outside Investor Relations Adviser, Cody Slach with Gateway Group.

Following their remarks, we'll open the call for your questions. I would now like to turn the call over to Mr. Slach for some introductory comments.

Cody Slach

you. Thank

in statements. the further, All make call The guidance, statements well historical Investors of filings are go is project other the webcast the everyone harbor retransmission that concerning in and will following other as Any via pfscommerce.com. available replay confidence, release like believe, facts statements. any X, for anticipate, way website forward-looking express remind press in be statement. website will metrics forward-looking in target, I'd we call as under our November statements. without certain this be intend, in the this to as available redistribution, also remarks than estimate, Before expect, company's be words will, XX-K The typically the safe relating presentation section to found of available call this to this identify are non-GAAP replay PFSweb and to disclaimer used forward-looking today's and A I'd the . can link strictly expressions like forward-looking consent provided similar full through prohibited. PFSweb company's XXXX statements on as used at or of conference rebroadcast well written

Mike? I'd to Willoughby. of call turn Mr. over the PFSweb, to Now Mike like Officer the Chief Executive

Michael Willoughby

financial that some to in in areas, LiveArea QX year-to-date. processes highlighting afternoon, our and before the following restructuring alternatives Cody, color update business planned and good a the process our strategic last Earlier status press I an everyone. quarter and results over to press for strong release dividend successful details third provide our these of for review this issued results, release of call our you, on Thank distribution, divestiture we commentary handing our special afternoon, review will Tom a our year. and a Please of refer

and operational continue third momentum encouraged business. I'm experience significant very the our financial in to we performance First, quarter by as

These booking the consumer equivalent as of range verticals, core service service PFS consumer productivity achieve Our year-to-date benefit headwinds revenue XXXX goods. and QX jewelry fee margin impacting our strong generally performance and has remaining adjustments targets to fashion year. and outlook, been annual demonstrated the we of stated e-commerce health resilience optimistic buoyed our Based this sustained which the maintaining collectibles fee apparel, and and verticals growth and equivalent are increased I'm X% an gross sales verticals XXXX big revenue box from to to growth luxury of on upper financial and rate and pricing brands record, core the the XX%. by on previously benefits have demand across of proud add packaged range. that macroeconomic X% fulfillment we this intentional we into in We beauty, SFE end focus and client growth went at year-to-date and premier record targeted contract can despite effect the year, remain in major with revenue our retailers. service over sequential continued PFS improvement our within of a that of that

of forma range also to the within revenue EBITDA mitigate fee to are we wage target percentage we on to margin, adjusted As X% service to continuing PFS continue working XX%. equivalent stand-alone fee pressures our pro service gross inflation of estimated be

and are peak our and we to growth and upcoming have headed of the have year to and restructuring is to the From holiday so cost Tom support expected stand-alone corporate current and well accomplishments maximize on more As by align to the Zach we realize we which objective future, we where size are look focus. today, our our continuing significant savings platform, believe plan for structure next far a with next optimize more our our as further value season, foundation to will cost already operations, into shareholder details generated we positioned year. generate client growth this year. built sit savings cost solid additional to a closely

company revenue we expect As with total size and and financial a be into level EBITDA expect high revenue to EBITDA our adjusted transparency to EBITDA in public We with appropriate business company primary we service on to is more as to remaining total a adjusted a look provide optimized XXXX. business, our adjusted focus fee for addition XXXX, our guidance costs aligned restructured our we focus substantially metric and company believe current in returning of to and of for XXXX. for consolidated the service fee consolidated

adjusted expect also of still forma EBITDA, the years. EBITDA been we will past metric costs, company appropriate total provide to the providing We remaining public that company stand-alone estimated pro adjusted the margin net X over the have comparison PFS an

Before discuss quarter Tom contained third commenting over financials press significant release, to our the to turn further in in on further call our the news Tom? I'll detail.

Thomas Madden

Mike. you, Thank

$XX.X was PFS declines and in growth increase terminations As increased and by clients, QX service million SFE XXXX non-GAAP or in equivalent by fee foreign offset see new presentation, during existing period. to client million across primarily the you revenue, $XX.X PFS driven The our partially compared X% Europe. by revenue, year-ago will our both to currency

we the order increased applicable approximately during major the is QX to experience business Excluding for by holidays seasonally would SFE period related revenue softer a not to quarter. the typically business this currency relative PFS foreign volumes to X% impacts, year-ago high period. have as do our

newer delays. of primarily QX the to early during in due onboarding these that shifted revenue client October non-PFS and several implementations and to expect these our were corresponding launch begin were to final QX, case-by-case starting addition, That engagements completed expected we In related said, to in seeing of QX. contributions transition

year. the following third quarter Ricoh agreement during the product termination earlier distributor revenue our minimal recorded also of We this with

discontinued we've revenue them program a product with after this subsequently model this reduced our past As significantly size the termination few of the over reminder, years.

the from revenue. revenue to P&L term expect we discontinue equivalent ultimately our and product fee forward, eliminate service Going

transition may short-term change longer financial it EBITDA this lead minimally our benefit that the clarify will consolidated our term. in While results some impact and and confusion analysis, presentations adjusted the will our believe we comparative comparative in financial to

as Consistent gross of the XXXX QX fee quarters, continues pressures year-ago a service non-fulfillment reduced gross prior impacts in profit year-over-year activity. wage decrease XX% compared such services with the project and related approximately to Our profit and inflation margin higher-margin of to PFS approximately reflect was period. industry-wide the margin of revenue technology-related XX% revenue,

have QX QX they second productivity both due increases effect in of several sequentially and the to largely improved adjustments. margin incremental this our relative pricing of QX. either However, and year of or price programs. These later surcharges took beginning adjustments implementation quarter contract permanent And on and reinstituted client to included client the certain increased

As XX% closely these gross and believe saw we impact with such, to we of a expect range between the With margin going to XX%. incremental contact continue see level benefit our margins our more revenue and QX and to center our is more forward. for higher of generally fulfillment core align will services which services, gross typical comprising during mix

cost inflationary with pressures to greater continue productivity and price broader controls will profitability. adjustments, mitigate our and ultimately ongoing believe us operate We enhancements help

to milestones cost disposition reductions corporate services costs. certain XXXX. The ongoing our we prepared, to peak recently, structure primarily closely cash but we additional personnel and conditions completion LiveArea to already aligning necessary, successful agreement buyout company a a building. operating completed, additional These SG&A the and savings, corporate and these key entailed lease restructuring make impact organization the with $X.X as XXXX, driving through economic throughout in targeting of transaction peak more Since our progress its third including net monitor we post well and costs overhead $X.X of measures in progress assets in committed reductions XXXX, into this the cost have in been approximately quarter, the pricing the million, million as include are if the and business August to incremental is We reductions cost liability in resulting and made September model August also headquarters season, several buyout remain smaller professional we've year-end signed in pricing the our October improvements, other on which facility. implemented right-of-use was during Most periods. holiday structure further of plan paid our of corporate impact by the the and net As productivity XXXX for XXXX. restructuring adjustments substantial similar of completed implementing included disposition we XXXX of elimination have the the

year of in Work per a approximately However, production co-located performed corporate of with is operate expected generate savings. the or corporate basis also to to our functions initiative, $X office hybrid most our million centers already operations going divestiture on With as office expect part functions we remotely annual forward. our Anywhere our

second additional detail shortly. center, currently which greater into area activity our describe are Dallas to We will planning in co-locate fulfillment Zach corporate

Additionally, estimated our the executive costs we compensation are reflect team normalized basis. leadership program undergoing a leadership EBITDA restructuring stand-alone and of continuing more adjusted on of the an operations closely to the CEO

together, have initiatives savings estimated cost Taken annual of since to approximately million. the total various in resulted XXXX, August are $X

to of an partially the XXXX restructuring gross I the improved margin EBITDA EBITDA initiatives, adjusted client loss period. from million reflects adjusted the of ongoing reductions and the actual compared benefits our impacts significantly cost third to in consolidated Our of by year in million primarily This continuing ago discussed offset growth earlier. $X.X $X.X and quarter operations

capital approximately QX for expenditures million, year-to-date of $X.X giving capital us Our total approximately million. were PFS in $X expenditures

$XX between expect to contracts. further . to expenditures continue our we million XXXX million total as $X capital to new support range We

debt. was decrease Our our fluctuations. relative of balance position rate over as September the and by driven sequential expenditures, $XXX funding of changes capital only capital cash includes million XXXX, of primarily certain to million QX cash This approximately of working exchange XX, liquidity $X.X and in

are upper year be to rates driven strength. As XX% our revenue growth sustained fee X% targeting to growth end the of strong, fulfillment the XXXX calendar service our by targeted equivalent demand Mike we mentioned, at

of reaffirming revenue, PFS is adjusted EBITDA targeted range are stated X% financial previously to estimated XXXX our which We also service target forma pro percentage fee for between XX%. to stand-alone

PFS in EBITDA business the process. our over metric this an adjusted certain a I'll Mike now back were if review nonpublic update alternatives estimated for the operating on for As reminder, environment a as strategic costs. to corporate call overhead our without profitability we turn measures Mike?

Michael Willoughby

Tom. Thanks,

continue work of need cash excess and full by on the opportunities a Raymond with completion business. a and the range been review has balance restructuring. macroeconomic our strategic our of Though for headwinds complete strategic slowed to evaluation our James of to We the combination internal to sheet

made -- best have our cash LiveArea organization are believe a Consistent the continued after our approved to balance shareholders position is transaction and to strides dividend, viable December a we This XXXX. view, and record now shareholders per We from excess to call, our the XXXX, and successful the $XXX operating the XXXX. dividend in XX, the in the completion we in balance to traditional address from capital paid timely our be December position sheet maintaining cash significant can of macroeconomic pathway by us thorough available establishing reasonable a evaluation of transaction strategic dividend of of in optimal any special an our we facility. this options, a XXXX earlier to our our of headwinds cash indicated on in on SG&A, capital return X, in As a shareholders with results special in all our through to level approximately strategy, optimal shareholders. which and fashion. rightsizing In streamlining to Board the on our million LiveArea review our to returning return will special respond of finance share process of $X.XX

our to strategic for alternatives these improving this towards maximizing much a year, also initiatives, process in with in seeing through continue view any complete will the and our completion. strategic results, a my of will be review and XXXX completing return remain With most time of next currently footing. our We to on energy I devoting to review shareholders on We process financial alternatives along our believe expect expectation XXXX. focused stronger process us process to potential allow

all career to I close take impressive served we I on success our as CEO order time my leadership year Zach's are have help currently to CEO stability role to and on I next stability, you the phase process. our even year Zach Zach's a been Executive take as Zach's consecutive at I the next leadership In all orderly manage for I confident to driving planned facilitate of my Zach. you performance, and years over with my played and an will for and that leadership. of a Congratulations, is and time come. of almost of to next review strongly am the Board it's our and in and strategic have a role Zach. of expect addition of enjoying, the rooting following for critical proud company great have he behind our enhancing I continue through love believe conclusion Zach, to late to responsibilities in I your years ability been role Director several of to so to a I evolution PFS on has of and of business. lead I'm be role that PFS, strength during accomplished look PFS. you strength mid of leadership to CEO, a and will this in to expected and fulfillment for the transition growth this record of transition its think Zach X preparing completion the take you of time is staying process the our force under years, and and intentional that has in transition of time forward greater far best career. expected

Zach Thomann

Mike. it support. really Indeed your continued Thank you appreciate I is, for it.

XXXX, with sales the our existing fact record remaining. we the the continued quarter third throughout evidenced momentum we bookings have fourth quarter build have and achieved During to on by still that a year, already

ACV for our contract business this the agility previous This an and estimated recorded new annual of making recorded our the units before a the of which we bookings we reporting or combined equates testament in bookings serve. in full Year-to-date ACV, XXXX. with bookings quarter XX began Within $XX quarter as we an estimated even XXXX quality bookings fourth quarter, of third in third quarter platform for clients new we worth million total X specifically, the success our began. through value, strongest the a record that momentum and to million $XX year separately is of bookings the our fulfillment

we've new had engagements new As these with higher ACVs. we've with of client discussed throughout growth, XXXX, coming robust many

this these Importantly, XXX Eyewear chain total e-commerce we've the over the supply Co., provided and existing to strength in and year for sales and demonstrating in e-commerce to both support growth as flexibility had new growing also of The evolving Bath renewals play, brands brands trends as fulfillment partnerships. XXXX, as their of our conditions. of serves compared we've channels a offer engagements client amid strong scalable, client with flexibility announced expand operations in additional now Blenders level have to such across our we've Tubby clients. established capabilities With our value Todd ability brands high-quality well spanned base both rapid enduring of brands, XX PFS and

selected Wimbledon. by direct-to-consumer season operate operations its announced including U.S. England Our with shop. the new also strong announced Club performance fulfillment both capabilities, were August, fulfillment our and in order Lawn the for the U.K. we and we helped during growth, Tennis online engagement presence the that facilitate In to client Wimbledon peak recently All global have

growing and official Grand and the for brand cherished Slam especially event, merchandise, tournaments. history carries Wimbledon demand sports iconic a has generated a global As rich during

on while within with This by Lipstick incomes, also us look Leonard begun on such not have valued packaged among become Shoppers apparel, during a times of Index. for spending prices we brands we and and health they luxury but pressuring evolving have spending have Others headwinds operating of for fashion partner high-quality the make brand's With and e-commerce shoppers and some serve. remained have discretionary operations cosmetics this items beauty, legacy as have to more and swiftly brands, and to smaller supporting standards sustainable where to broadly ability big long-lasting have consumer about essentials. spending including them, maintaining growth periods household made jewelry high-quality, of their Lauder's luxury investments pieces by consumers core many risen and these scale many and retailers. focused maintaining changing the seeking habits macroeconomic consumers' resilient clients further Across luxury fulfillment has line is box premier buoyed and collectibles to that selective high inflation challenged the partnership. backdrop. luxury habits only a indulgences goods, buy, from Our generally forward high-demand in our our verticals

of offering and season, the brands Community will half significantly brand premium over to expected impacts. behaviors never remain favorite Gartner this broader anticipate crucial. that into are to their the remain loyalty, These strong fuels been loyal carry quality which a that revealing has Survey, despite we peak With experience Consumer recent holiday inflation customer more the consumers consumer despite brand will inflation year

Just announced XX% increase sales are an year, non-store and the $XXX.X XX% representing that billion Retail online expected predicted between total last compared to to National week, of $XXX.X and and last billion. between Federation holiday

HarrisX Many past discounts toward they years' their in addition, inflation holiday to of on discretionary are spending did advantage still or more for have of Cyber as expect concerns a holiday have Black study purchases. product dollars. availability longer said, indicating and Friday consumers and season and and and Monday, at the spend spend to to XX% October Samba sellers year, level holiday most to that U.S. In conducted last TV in this consistent plan on more a taken much allocate particular, firms early alike. make That the global expected holiday as by consumers gifts research of already adults found a discretionary their than about shoppers into of translated year

address our to to the Our patterns with engagements scalable existing clients and the as customers' core peak keep well have quickly within our consumer verticals, brand new and we the ramp as multi-node clients strong and ahead of can remaining our trends swiftly had adapt to needs. that us approaching ensure fulfillment help allows approach buying consumption to new ability these season. With customers' demand pace

our a provide the we focused the third sales client pipeline to to quarter. This build opened as us network, Nevada, network. expect in X on for Las enhance fulfillment more growth expanding strategy and we additional fulfillment of West launches of remain detail our Coast continued offering serve Coast fulfillment clients out during Vegas first our product already North some our West on driving fulfillment our second Vegas, to To dynamic grants future network pipeline we comprising XXXX, Las newest the which following to for first as convert area, X-pronged three, and a prospects service are in center demand and facility approach deliver we the We fulfillment officially flexible capacity number speed brand-centric customers. two, is additional with fulfillment better service offering. the to to have multi-node strong our which in facility clients' our our it customers; launched can our our in out continued continue and one, We multi-node sales early multi-node to to and initiatives: our fulfillment converting our allow committed growth;

facility area our reach the expand end we by several our fulfillment signed year. Dallas network, to client ramping utilization further recently the continue we we fulfillment XX% engagements, the As of lease center. over for second expect this newer To

built Southwest this of the disposition Irving, hybrid of and additional to our to support We the as and and expect open beyond quickly expanding our expands growth. uphold staff it our our location. an for our This DFW-based the strong following established corporate track team XXXX, productivity our Allen, pandemic and work in provides second facilitate with through Texas a continue we for and optimal ramping client of culture to record provides in facility work-anywhere capability fulfillment and team additional existing much seating facility environment for fulfillment in members quarter We've flexibility. new the Texas the to networks we've new

centers capacity a season solutions we this roll to and we've fulfillment In consistent in peak additional expect as leverage select addition, also flexible to out holiday our past provide pop-up done service with distribution what seasons.

our recent client us our to additional of look continue This grant dynamic holidays. a USA over the L'Oreal to pop-up the base foundation the coming brand, Following experience current for within forward solutions deployment solid and opportunities pipeline on executing supporting and we throughout growth robust our success SkinCeuticals years.

believe of Looking chapter entering a ahead, business. for we we're new growth our

client needs. to of remain and client back further to new from remarks. contributions and new our as made our closing early centers the XXXX, that proven additional create. We've throughout will maximizing framework year continue and client address that this to activity, into engagements our I for to pipeline substantial progress we operational optimizing we scale Mike the to we've now call expect that and and to our and launches we increase his I over am ramp the work in we turn value fulfillment committed QX We prospects XXXX. proud to can next through quickly open convert we sales

Michael Willoughby

tangible answers. believe our we've of value today. it's the I time I'm we we'll call open and for With and the forward business, an that progress for momentum Zach. shareholder the XXXX, created dividend far Shannon? questions so and now Thanks, that with that, going exciting special proud the our in declared

Operator

[Operator Instructions].

Our from first James from question comes Rush Craig-Hallum.

James Rush

the Sutton. George the results for and dividend. on on James Congrats solid special

types what's momentum or verticals in better there on customer the doing Are pipeline? you're sort touch seeing in others? of of sort the bookings driving that and strength than you could first, So any

Zach Thomann

This is Zach. Sure.

they're We've a into seen forward, last e-commerce illustrate as their verticals, as manufacturers we're the That's drive well continuing seen booking we've premier helping I to e-commerce growth continuing that to really experience, the what and specifically see, driving our tried and pandemic channel. core from luxury for think the investment their seeing that it's really channel. call we offer within in a that see also to or on branded is We're engagements quarters and we've direct-to-consumer really we're seeing is really the us service a ACV our momentum. that platform for much couple trend per catered over drive that And engagement a of both highlighted, more that's BXB towards the and for end helping together. brands. that those is which really, providing full higher

James Rush

then you're Got sense sort sounds of very sort it changes new you of revenue customers, growth or initiatives? Could you. strategic get And us of pipeline. in in in like strong of ramping expect margins a growth of or to some sort potential help XXXX a terms what

Michael Willoughby

Yes.

those trends the any margins the lower. we're that that that any think, while expect couple around we're quarters we the as perform past our any experience I of of to done would the in growth, as have the and kind should guidance currently James, for And we've the do continue into 'XX I see targeted providing we do move we're business and I gross not to the provided, margin seeing we've think XX% be of current that QX, So don't expectation range, pressures trends looking for mitigate at yet, into EBITDA X% continue to those next reason year. ability over that within that we to cost

a I as the then comfortable into holiday at we're we during 'XX typically along we'll probably And that but necessarily, think the the move like of this a with bar give not set point. part with guidance how to that's kind you So did year, we do. we of first bar specific

James Rush

sort an in at been or then changes the a high couple have hearing last in how any on Or like strategic you're mean market? just of since going? private process level, update seeing you update us happen. transactions I And is terms the of a what of can give Great. your there just

have process in how hearing? think about your sort so you're may would be to of And helpful thought hear changes changed I or just it what

Michael Willoughby

Sure.

us. headwinds to M&A have transactions So I with the Street Wall last don't think we unique experienced a the friction, in reported markets, in we said or in of to consistent significantly what these decrease year-over-year. year M&A U.S. the this are I Journal which XX% that pretty noticed points The last. think down compared are call, in transactions We've

not a friendly overly So to done. deals getting we certainly that's condition see macro market

some which also specific of may I think looking or it's came pointed complication significant pristine neither or turnaround the where really a some we comments, think market. our that's release, either friction that prepared something story got are fact in the a in we out market press points be for buyers looking experienced that including a nor bargain, it were a a they're we to we situation, for bargain pristine to and we're as I

complete provide in all clean year, opinion, my be us to So a order story. needs the corporate been for really, restructuring activities have to doing in that we good,

the of completing and point of try going special to I end only part our is sheet understand a to require the current point that sponsors a are as being to our tell. got transaction. intrinsic on we'll complication story that is to we the better that we friction position also a that have as they that year, had pristine of balance more excess cash so not towards in this And investors of have those ends friction be as of they're how for buy It for excess the value excess financial dividend of up do or you've a especially cash cash to figure prospective to buyers, us there. company the that amount out a also significant believe

you want just conversations talking are complicated have those to prospects. that when don't to of All things you're

doing, over. as much have are that I job. to tell, at the what's really our But a positions the be story completing be next question eliminating the those aimed including of that So free us to I really answer market year, like? go restructuring control going my to things just And into and us that's points the And to that we question. better of we have of conversations. having are friction is special these None the in that to dividend have market we complications the difficult, a good think even continues is, mentioned,

comments, that indicated a with asked the XXXX. has in the an me I another on part prepared that my As in that we close way one bring first or to Board in of to the concentrate expectation can year

Operator

I this that for call to the concludes like remarks. At session. time, over Mr. question-and-answer back to closing turn our now Willoughby would

Michael Willoughby

very hearing this to afternoon. everyone you, thank Thank like investors. Tom Shannon. to from who the call attended and all of Zach open really and remain our I'd I

follow-up If you work holiday look to this those, questions, for a you're please to to stats for great today. holiday us in happy some conversations. we season thank good and looking holidays, with you Gateway you We're bring rooting Hope with have those and . having season. forward And us January. being schedule hope I for and early all of really wish you

Operator

and Ladies conclude teleconference. does gentlemen, this today's

this lines your participation. Thank may You time. your disconnect at you for

Pfsweb (PFSW) 13 Nov 222022 Q3 Earnings call transcript