Final Transcript
May. 16. 2007 / 11:00AM ET, PFSW — Q1 2007 PFSweb, Inc. Earnings Conference Call
generate more revenue and achieve sustainable profitability; the effects of changes in profit
margins; the customer and supplier concentration of our business; the unknown effects of possible
system failures and rapid changes in technology; foreign currency risks and other risks of
operating in foreign countries; potential litigation; potential delisting; our dependency on key
personnel and the impact of new accounting standards and changes in existing accounting rules or
the interpretation of those rules; our ability to raise additional capital or obtain additional
financing; our ability and the ability of our subsidiaries to borrow under current financing
arrangements and maintain compliance with a debt covenants; relationships with and our guarantees
of certain liabilities and indebtedness of our subsidiaries whether outstanding warrants issued in
a prior private placement will be exercised in the future; our ability to successfully implement
the anticipated benefits of the merger; eCOST’s potential indemnification obligations to its former
parent; eCOST’s ability to maintain existing and build new relationships and manufactures and
vendors and the success of its advertising and marketing efforts; eCOST’s ability to increase its
sales revenue and sales margin and approve operating efficiencies; and eCOST’s ability to generate
a profit and cash flow sufficient to cover the value of its intangible assets.
PFSweb undertakes no obligation to update publicly any forward-looking statement for any reason
even if new information becomes available or other events occur in the future. There may be
additional risks that we do not currently view as material or that are not presently known.
With nothing further, I would now like to turn the floor over to Mark Layton, Chairman and CEO of
PFSweb. Mark, the floor is yours.
Mark Layton - PFSweb, Inc. — CEO
Thanks, Todd. Go catch your breath. And let me add my welcome to everybody this morning to our
2007 first-quarter conference call. With me today is Tom Madden, our CFO and Mike Willoughby, our
President of our services business. Both will have some prepared comments and be available for
questions after the prepared remarks.
Briefly this morning let me just start with a backdrop reiterating a few key points regarding the
results for the three months ended March 31 which we released yesterday afternoon. As you review
the results, please keep in mind that quarter one is typically our seasonally low quarter in the
Service Fee business segment. Secondly as you evaluate our results, the PFSweb Service Fee segment
reflected good and continued growth on the top line as a result of the new clients we signed during
the end of 2006.
Our bottom-line results were a little softer in the first quarter than our previous year. This is
related to reduced project work, increased facility costs, higher expenses related to the startup
of our Manila office which I will discuss in a little bit, and new clients start up expenses as
will be discussed in a few minutes.
Also in summary for the quarter, our Supplies Distributors results were softer than the prior year
primarily due to the impact of incremental vendor promotional activity in the March quarter last
year that was at a much lower level this year.
As you review the eCOST results, we believe those continue to show a positive trend. Revenue in
quarter one was actually up slightly versus quarter four and Q4 is typically our seasonal high
quarter. Operating losses have been sharply reduced in Q1 versus Q4 2006 as well as against the
same quarter last year. We believe Q1 represents eCOST’s best quarterly performance in terms of the
bottom line since 2004.
We continue our strategic expansion activities to help us prepare and handle our growth in our
services business. This includes the addition of a new operation in Manila that we discussed last
quarter and will give you a little bit more information on here in a few minutes. This provides us
a really cost effective solution for our future expansion activity. We also added a new larger
facility in the Toronto area to support our growth in the Canadian market this past quarter.
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