SEC Filings Section 16 Filings Only
 
PFSWEB INC filed this 8-K on 03/28/2011.
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<A — Mark C. Layton>: Yeah.
<Q — George Walsh>: Yeah, Retail Connect, that is going to be Supplies Distributors plus clients like P&G?
<A — Mark C. Layton>: That’s correct. Yeah, so basically we’re using a buy/sell model or a product ownership model, we’ll combine that together in that piece of the segment going forward to the extent that right now the retail component of it or the consumer piece of it is relatively small in contrast to the size of the business-to-business piece. As that retail component grows, we may break it out again and just report business-to-business and retail separately. Right now, it didn’t make any sense to do that. So, you’ll see basically two key segments going forward; the PFSweb Services segment, which we’ll target 25 to 30 points gross margin on and then the what we call Business and Retail Connect segment, which is the buy/sell or product ownership model. So you’ll see product revenue in that segment and you’ll see margins in the low single digits for now. So...
<Q — George Walsh>: Okay. But it’s the same business right?
<A — Mark C. Layton>: Yeah, it is. Yeah, we’re just repackaging the thing and then what’s left of the eCOST subsidiary that we renamed PFS Retail Connect is not that large at this point. So, it just makes sense given the similarity of the buy/sell model to segment report those together.
<Q — George Walsh>: Okay. Very good.
<A — Michael Willoughby>: And George just to add a little bit to that, remember that with these relationships such as the P&G relationship, certain activities that we do for them are billable under our normal fee basis, such as delivering platform and marketing services. So if you’re trying to sort of size the P&G deal, you have to put the two things together and that we believe will be consistent with the CPG engagements where certain activities including possibly some of the product sales would be on a consignment basis and would be under the traditional Service Fee revenue column and certain activities in that buy/sell. So don’t try to back into the P&G deal just by looking at that one aspect.
<A — Mark C. Layton>: Yeah, I mean...
<Q — George Walsh>: Okay, that’s good. So there are service elements and the inventory buy/sell elements, Mark?
<A — Mark C. Layton>: Yeah, if you want us to confuse you more, the other thing that I’ll add is things as well as that a lot of these CPG clients like the concept of launching using the buy/sell model, but over time may transition into the services model in change. So the product revenue would go away. We’re pretty agnostic in terms of how that happens. We should be able to earn a similar gross margin, or similar operating income regardless of which model that they use out of that. So, I think you will see lifecycles of clients change and move between those things as they go forward, sometimes clients that are all services come with a project that the easiest way for us to implement it’s in a buy/sell model. So, it’s just the flexibility of what we’re doing and it will be reported in both places. So, product revenue can be a bit misleading in terms of looking at that component of it. I’d focus on Service Fee revenue growth and then on operating income or EBITDA, Adjusted EBITDA performance. So...
<Q — George Walsh>: Okay. And last quarter I think you mentioned a little bit the — there might be some acquisitions you could be looking at in terms of adding to your capabilities on the services side, is there anything on that front to report are you thinking there?
<A — Mark C. Layton>: Nothing in the hopper at this point. I think I’ve talked a little bit about the interactive marketing services area, or a piece of business that we began to call digital connect now, but it’s our digital agency piece. I think there if we found the right opportunity in there, that’s an

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