Earnings call transcript Q1 2023

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Operator

Good afternoon, everyone, and thank you for participating in today's Conference Call to discuss PFSweb's Q1 2023 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, Jackie Keshner with the Gateway Group.

Following their remarks, we'll open the call for your questions.

I would now like to turn the call over to Ms. Keshner, for some introductory comments.

Jackie Keshner

you. Thank

forward-looking further, statements. this to found used conference identify will, All than facts forward-looking go remarks the used call, guidance, to would anticipate, the historical well forward-looking as statements non-GAAP words and to and concerning statements of are expressions statements. confidence, I target, metrics we expect, relating other Investors be statement. make like are the under following as other our in presentation believe, project company's XX-K Before estimate, The similar in intend, PFSweb typically statements. in filings forward-looking in safe The full can certain section disclaimer this harbor website

the as at of press consent link provided replay is without webcast or redistribution, any A in way strictly well prohibited. company's expressed website available the via release on pfscommerce.com. the Any call in rebroadcast retransmission written will also this available PFSweb as today's of be

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

Michael Willoughby

everyone. Jackie, good afternoon, you, Thank and

quarter fulfillment performance fueled continued we growth drove in brands demand set the premier verticals. fee record all-time X% our in record, XXXX. Our first We momentum had a new a luxury and and activity service maintained company QX from year among by our core

implemented pricing put for we gross reflecting has the improvements, strong modifications footing service year. benefit this margin we productivity ahead. addition, the fee and the improvements sequential on In and year-over-year delivered We us of year progress last believe

within particularly our few for pipeline QX. evident the This sales and minutes, the fulfillment our pipeline, for will delivered in result with booking and along strong early Demand operating remained health a environment in and sales encouraging Our expand. just and which our our QX, within year. optimistic client comments our outlook resiliency core performance collectibles. on and strong Zach the as results beauty the booking with markets, stayed to already continues have and remains broader portfolio of for current sales sales have is and core verticals has of strong network more sales a sales our rest resiliency multinode largely resilient jewelry vertical evolves

we fulfillment with continue restructuring platform. growth operational This efficiency platform our stand-alone driving reminder, XXXX a our our as to a around largely further savings, has order greater aim complete. the As the supporting entered work with us business optimizing cost positioned of and improving

maintain more operating additional Our to ongoing toward transparent a work and a while performance us costs creating shareholder of pathways liquidity strategic traditional also our level to to provide picture open enables rightsize remaining corporate our more of financial value. clearer,

announced repurchase our end work, first we our and buyback The strong value. program up up to Board maximize to growth trajectory. growth believe opportunities has the our common to purchase an our With an X-year to our end, program this near of of of authorization To of shares of share the stock. X and million program our Directors' duration quarter. and us aggregate allows represents provides dividend start we complete, restructuring long-term payment share and our flexibility in given the confidence our XXXX, of the also and corporate our support additional to special It largely shareholder

demand this remain to targeted for the XX%. the of our range. at fee are PFS We With trends upper least revenue fee X% can the end fulfillment consumer call service disclosed and we in achieve service we at XXXX that based which growth revenue targets, reiterating the across strength optimistic range our annual growth confidence and verticals, of our current previously continued core on guidance service pipeline sales of

of within inclusive service the our we remaining be public to X% adjusted EBITDA expect to of to fee XXXX company of company In costs. revenue, consolidated continue total our X% addition, range

X% on as financial of fee to our revenue Excluding total EBITDA company service revenue, we of metric, business believe as range are adjusted company between company We fee percentage to targeting X% approximately total service a and XX% for of service fee the costs EBITDA public revenue primary in addition a focus in adjusted is restructured our XXXX. XXXX. in optimized appropriate to

X will public our are estimated costs a current past focus provide our of adjusted adjusted size pro an the total But stand-alone and still the We providing company margin EBITDA over have the service been percentage believe excluding also forma of PFS equivalent aligned business. metric company we appropriate with comparison as estimates EBITDA, more remaining years. they fee of the estimated to revenue

financial continue of we our to alternatives review with year. end before James, adviser, process strategic the target Finally, completing this Raymond current our

Our strongest we our for weigh for our pathways value currently priority M&A market. amid is shareholders business challenging potential surging maximizing a as

color additional provide the on our strategic we Before our objectives ahead, year progress and in

discuss greater to financials first Tom? call in our the turn I'll quarter detail. to Tom over

Tom Madden

Mike. Thanks,

our product we them with agreement altogether Ricoh in model reporting XXXX see the presentation, after was we service distributor terminated product going our will you'll have to service last equivalent than metric, fee QX fee forward. eventually we eliminated This with top be revenue revenue used. the discontinued revenue historically are principal our as P&L non-GAAP As revenue rather allow from year. financial our line Remember,

eliminating track operations revenue" by equivalent comparisons. progress this with streamlining minimal our business, the make and expected of the with presentation impact conjunction our "service presentation discontinuing LiveArea in adjusted towards the fee clarifying and divested EBITDA us additional Taken on allowed term financial has discontinued consolidated to

both fee our mind, ago compared period. With $XX.X driven year million, to across the service existing during The and primarily XXXX X% was sustained new by increase growth that in million to context revenue $XX.X clients. QX increased

service pricing of approximately year-over-year gross margin into the modifications basis and last to XXXX QX revenue of implementation year, of This Our XXXX sequential margin gross early compared improvement to ago late of period. in XXXX. increased profit QX a and effect fee several increased taking the XXX reflects points over profit XX% which XX% year productivity the began in QX benefit and by

such non-fulfillment-related activity. partially services, The typical technology-related was continue margin core by for range activities, gross and will the is With our these XX%. generally XX% to growth mix as services revenue, our service more offset reduced within project be our fee believe which comprising and fulfillment we of service between higher-margin

since is designed fulfillment-oriented smaller aligned activity that process and had have structure with and addition, more subsequent to restructuring to year-over-year expenses divestiture. as unit reduced and cost our in XXXX. we of decrease closely LiveArea and August other drove business underway the In we a cost align result related our our a professional This divestiture to SG&A reduction related business fees the prior

strategic As complete, corporate process expenses restructuring-related costs tax our XXXX have fees, certain restructuring severance our we enter with incremental with to work the comprised related and professional alternatives along costs. largely remaining

throughout We SG&A will were improvements, and cost continue possible further working productivity overhead to drive savings year. and corporate reduction additional the implement

Our and adjusted client consolidated the EBITDA year negative and improvements first XXXX, increase of to of margin ago reductions quarter significantly growth, in in ongoing period. compared benefits $X.X increased The the to our adjusted EBITDA initiatives. million reflects our an of restructuring our cost gross continued $X.X million the

were approximately $X.X QX in million. expenditures capital Our

of to growth expect XXXX As and $XX our we between the expenditures we million. $X further total range support fulfillment to continue our capital contracts new network, million to

more the towards newest share We our facilities activation and to ramp-up expansion quarters, of the coming allocated our expect our over Zach growth CapEx footprint will about and be shortly.

of primarily working as relative Our seasonally of XXXX, we million approximately XX, high liquidity to cash XXXX, increase This end at of $XXX,XXX of requirements than position end capital less some December had reflects March debt. the cash includes of to the cash. balance the sequential $XX.X in our and impact converting the in of

payments first a of LiveArea estimated special of equity quarter. payouts $X.X The our dividend dividend remaining gain as result payable received In previous various monies is balance million as on transaction. we to our The dividend refunds certain from was in sheet made to million increase $X.X addition, completion equivalent related declining awards. offset of balance tax the our related partially during a carried our by excess on the tax

facility. growth issuance dividend evaluating program of of the the of end repurchase purchased program a we share establishment XX,XXX with X-year reasonable focused approximately XX, place, repurchase put and by including an the maintaining we level continued authorization April. March the operating our by we completed significantly quarter, million the our million to a approximately of of Having finance in and remain the on we cash, supporting $X.X first purchased our on $X.X Pursuant shares business shares traditional in for for XXX,XXX approximately incremental

for operating we process a position this establish strategic on retain additional normalized opportunities cash, complete year growth execute and we this As and level review our our further PFS. optimizes to of believe

and progress call our I'll to over Zach? our objectives. review the operational Zach QX XXXX to now turn

Zach Thomann

fulfillment year has from Thanks, our XXXX. in momentum Tom. record booking PFS continued order sales its and

new record for during order With the we volumes first company fulfillment a the quarter fulfillment high we activity. experienced quarter, set

We strong in a also with comparable buildup support with QX continued or ACV $X.X recording record contract have X booking year. value and to million bookings a annual number pipeline, estimated during sales the ACV our an QX, a value XXXX to

for renewals and remained and investments remain to premium early As fulfillment our our clients in QX their indications and see services consumer converting equally renewed our in QX. We in continue both seeking the sales for demand clients and in conversions this launches increasing core multinode capabilities. verticals, client expansions e-commerce new prospects among from new brands client has demand persist sales strong launches, of in new opportunities with number underway current to making closely resulting year, pipeline an pipeline promising we to

clients' better product whole, success converting strategy following as dynamic one, networks. for the which growth achieve sales of a continue For and growth; our third, to fulfillment our for our and driving platform to pipeline strategy, strong more two, fulfillment continued Number serve expanding multinode our our flexible as Service comprises a offering three-pronged we Fulfillment our to initiatives: allow customers; on

multinode with our expansion fulfillment Starting initiatives.

capacity broadening existing southwestern agent We to as customer announced in track the Dallas DFW-based domestic types clients have is center our our our flexibility solid and on This in our progress and for the open U.S., the footprint. well international Area of we offer. of for In previously remain service on fulfillment QX. designed greater models facility region team the U.S. made fulfillment as to offer enhance for second members early we fulfillment

a Portsmouth. proximity miles existing square This agreement our XX,XXX Southampton Southampton into additional Airport England. entered strategic ports is Southampton located we fulfillment lease that announced for new we the and with fulfillment foot Fareham, facility the of new center a center to recently, in from Most XX and

allowing fulfillment training cross provide centers opportunities our Fareham our leadership clients. addition transportation convenient serve oversee allows to to employees well more for for team shipping multiple as location as facilities In and both options, easily, to

in resulted clients enhance European to original outgrew to disruption sought the as clients our We of a to second serve well U.K. facility supply capacity our mitigate from as chain some seeking that current facility has who open are flexibility the Brexit. European who serve their to prospective

We design to opportunity to in launch of new serve specifically in our new expect our to facility value first and expect second advancing We vertical beauty for this health brands expanded and product sustainability the sustainability out we while the initiatives. largest new quarter. also implementing facility this brands our while Fareham goals, client

Nearly XXXX. several QX point-of-sale Prestige are Circana year-over-year sales sales and year-over-year To past revealed earlier more beauty, data to increased collectibles, these and we growth that that XX% both sales our which new to opportunities Prestige the see health from growth many generated within of QX beauty channels. and in jewelry found and elaborate robust Prestige within grew March in and sales relative to mass And growth X/X and outpaced U.S. we years. Circana on beauty continue of health beauty came makeup, billion. Mike's even from report industry revenue and over comments, XXXX $XX the A unit recent XX% beauty sales

much these This macroeconomic gift continuing effect. Some lipstick demand current smallest cited outsized amid distillations brands These line in even these grow fragrances revealed we've Lauder's the rapidly. imply play. like beauty sets pattern to view widely their designer treats sales this that effect pressures welcome with on mini of Leonard luxury that seen on as customers spending have items and products is very budgets. in with impacts had remains and patterns demand The of lipstick, for trends of

opportunities, throughout these fulfillment towards Our skewed existing booking, the conjunction services, in the efforts BXB multinode, and This that we pipeline enduring fulfillment adding grow continue and pandemic. opportunities of this of at our sales and multinode our remaining demand reflecting from BXB supports double-digit Taking mix promise it facilitated have per direct-to-consumer transportation have and height higher pipeline rates. trends been shift the first year. expect will demand are and which sales the of underway ACV with the power since and services, half to direct-to-consumer our a to

For both our a with sales source opportunities for to in our we of engagements upsells existing center see fulfillment our these services, potential existing contact as offerings. continue bundles and in and value,

We expect growth in revenue see in for we these percentage higher services. transportation rates services smaller and as pipeline to of a see fulfillment sales our to overall our our represent continue conversion

and see lower-cost, our are and center subsequent continue both pipeline customers for and monitoring we our immediate efforts our existing largely the these programs. and fulfillment on continue AI optimize markets While opportunities, contact adoption towards deploy existing will opportunities services how and center contact trends to have nearshore sales client support towards we new services, geared to effects with we and

To and sales own our also enhance of our pop-up cycle. enhance continued multinode fulfillment client products. or and has solutions, to centers. to Service Fulfillment be the flexibility growth strength clients and new continued and client with we've agility fulfillment centers, scale which both rapidly further engagements platform, allowing agile in innovation retail and complement platform, support through our it services, fueling differentiate to agility as of open centers scaling existing These our multiple the and clients allows our new our the rapidly solutions within our fulfillment fulfillment us This our quickly a our offerings products

a strategic progress, foundation a forward our momentum into testament bring solid QX they are to -- and Our this results QX. us first give quarter to

our In pipeline full reiterating over believe our to outlook, our have to sustainable double-digit addition year longer we and refined term. XXXX growth operational we facilitate the foundation

consistent to XX% With our have margins the measures to our these stable gross within mix. cost-cutting service range, fulfillment-oriented expect implemented, prudent and with service we fee we ongoing remain XX%

demand, our are well for balance the multinode ongoing to beyond. base leaner address foundation, work through growth and of With ramp capabilities to executing our objectives from a and we client on operate XXXX robust fulfillment growing streamlined more believe fulfillment customer and our positioned our and I continue

With for the now up that, call open Q&A. we'll

Operator

of question first Our Sutton comes Instructions] [Operator line the from of George Craig-Hallum.

Adam Kelsey

could pipeline. why are a is George. on are for at was really it start hoping I from backdrop? is off good more on given This that. to of little Adam high QX like Mike, the you such a sounds terms hearing you rate the moment in And exactly converting you provide detail clients? What a at the economic

Michael Willoughby

give perspective, Zach the I a strong Well, in referenceability let I'll the particularly say my health of beauty most that in from would from industry, sector. and benefiting color. you we're

to the go have we for time to bat we think and right I every win beauty brand. health single

benefiting have on and to change, And health seeing from a not expect. from because them, competitors. We're opportunity the become benefiting we're being the also of It's most with we're we're think and us beauty name few think I their their And brands to consumers they higher going but appear experience struggling is to of clients. channel. of I serious giving really the be some that around that investment direct-to-consumer level focusing important channel. a raised their bar attention conversations

Zach Thomann

Mike, to further, the just I'd one relates focus. completely really direct-to-consumer step comment. that as I echo go it

seeing channel, a forward. of I lot brands, premium it to really in really continue positioned channel, be quite and seeing grow collectibles opportunity commentary, and the we're to lot it's the proving targeting of that a beauty that differentiate way source should such, Primarily during for we're us as be jewelry And customers, luxury well relates the we're to to in the want seeing ways channel, capture think have tried invest there. channel and the in and what to to lot health With forward. continue investment specifically, direct-to-consumer and from a that and to it that to that. want capture most to a we're resilient. of move that as are we to momentum all Also they positioned the the be and profitable for our grow pandemic And well because we're the back whole. then goes of They're channel, we're some it investment looking to this really comments time. to proving as and and seeing

Adam Kelsey

That's great. to much better way could capacity find you? And according going facilities you could the it I hoping how terms more of give may was us coming help that X have you time. in understand sounds is impact plan like a online. quantify you everything to over potential When with new revenue a revenue facility, the new

Zach Thomann

normally that revenue the terms don't start we facilities in how guidance online expect see we'll QX, demand to next that That head we really script. continue and is. QX look of we have X more rates we 'XX that's at in much being years year. provide And incremental with also as as outlined something to said, facilities. that direct opportunities a with We'll growth the as year. correlation So an for in full seeing in into expect double-digit the we in we're to see steers out we early need those towards do strive invest for the to that the we really We coming to in revenue elevation for continue pipeline,

Adam Kelsey

dynamics a going question love but how working to should I'd it free thinking cash cash you, million there's great be flow people one big the benefit, then otherwise. your a was forward? Obviously, get a on from And Tom. perspective. flow great. That's capital about just Granted, for perspective quarter $X.X still

Tom Madden

Yes.

be positive year. the or our the free do and capital around So to business slightly we breakeven provided, call. place, forecasted year in for the cash expect that CapEx And we talked guidance the that components we've look we with as about all is at considering growth after we that this flow the have expenditure including that take a on

as feel continue other like in can position we in business properly financing we support strong be a to this the we're to long cash the order the liquidity support types to for we able of utilize of business. ongoing financial or some the We'll those order of standpoint and of in both be So to or from place, put finance of whether opportunities how to CapEx term. not year foundation instruments growth look

Operator

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

Michael Willoughby

that And Thank everyone forward we you, future to our as Crystal. afternoon. to investors the forward this the the and can time tone, our business that Look I'd for attended thank from call well. about pleased at incredibly calls, we like you seeing you. to optimistic on with spend you can and conferences you. available bullish We're to we're future. in look some future the Thank as always, tell

Operator

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

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

Pfsweb (PFSW) 9 May 232023 Q1 Earnings call transcript