Final Transcript
May. 16. 2007 / 11:00AM ET, PFSW — Q1 2007 PFSweb, Inc. Earnings Conference Call
Our cash and working capital capacity remain solid overall. This past quarter we completed
extensions and selected expansions on all of our corporate lending agreements. We believe this is a
positive indicator of the confidence in our business plan by our lending partners. And also as you
will hear, we continue to hold our financial targets for 2007 for revenue at between $420 million
and $435 million and EBITDA of between $8 million and $10 million for the year.
So with that summary as a backdrop, let me turn the call over to Mike Willoughby, the President of
our Services Division who will discuss activity for our Service Fee business and SD. Mike?
Mike Willoughby - Priority Fulfillment Services — President
Thank you, Mark. As with previous calls, I’m going to refer to our services business segment
which includes both our Supplies Distributors and our PFS Service Fee business collectively. I do
this because both of these businesses have essentially the same operating business model although
different financial models.
The first quarter represents a solid start to 2007. PFSweb’s Services Business segment is a
recognized leader in the BPO market. And we established a strong repetition as a global services
provider with broad capacity to handle diverse customer needs. Our operating platform handled
approximately $650 million in merchandise sales during the first quarter. By operating our business
platform with such high volumes, we are able to deploy and offer our clients a wide range of
resources that would be totally cost prohibitive for them to maintain on their own.
We’re excited by the new contracts and expanded agreements that we signed in 2006. Most of these
2006 contracts became operational even in the second half of calendar year 2006 or in the first
quarter of ‘07. And they are now contributing to our 2007 run rate fee revenues. However, bear in
mind as Mark said, the first quarter of the year is traditionally our seasonal low fee revenue
quarter and many of the new contracts also have a fourth-quarter seasonal peak. We will not realize
the full financial benefit of some of these newly implemented contracts until the 2007 holiday
season.
I’m very pleased to announce the successful implementation in the first quarter of our contract
with Riverbed Technologies signed last November. As we previously announced, we’re providing
product management, configuration, final assembly for their wide area beta services product line as
well as inventory management, order fulfillment and international logistics services. Although we
provide this type of final assembly service for other high-tech clients, our relationship with
Riverbed has given us the opportunity to take this part of our service offering to a whole new
level.
We are confident that we have a best-of-breed offering in this area and we’re excited at the
prospect of expanding our excellent high-tech client portfolio to include new clients needing this
type of postpone manufacturing or final assembly services. We’re also very pleased to be such an
integral part of supporting a high-growth company such as Riverbed and we look forward to the
opportunity to grow with Riverbed as they continue to expand their product offerings and their
global presence.
Toward the end of the first quarter, we also completed the successful implementation of our North
American contract with LEGO Brand Retail. As announced last December, we signed a five-year
agreement with LEGO to support order fulfillment for the shopLEGO.com online store and their shop
at home catalog in North America. We’re hosting LEGO in one of our Memphis-based facilities using a
new advanced material handling system provided by our strategic partner, [Dematic].
The complex implementation including the installation of the conveyor and integration with the LEGO
systems was handled smoothly and on schedule due to the hard work and tight coordination of the
excellent PFS and LEGO project teams. We’re looking forward to supporting this world-renowned brand
and their successful construction toy product line. We designed the LEGO solution to effectively
support their steady-state operation nine months of the year while scaling aggressively and cost
effectively for each holiday season. And we’re very excited to be able to deliver the benefits of
this custom solution to this valued new client.
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