|MARCH 22, 2012 / 03:00PM GMT, PFSW - Q4 2011 PFSweb, Inc. Earnings Conference
In the last conference call, we announced the launch of End2End eCommerce solutions for two major
beverage brands under a master agreement with a major CPG company in the pre-packaged food and beverage space that went live in November of 2011. We are now in program expansion mode with this client as we work with them to grow both programs. This
agreement also brings the possibility to expand our relationship to additional brands and new geographies for this major global CPG company.
We believe the agreement also further validates our leadership position in the very exciting and we believe very high growth potential eCommerce CPG
space. Once the client permits, we will publicly announce this new agreement and the launch of their End2End eCommerce solutions.
ahead, we have many new client programs, the majority of which are End2End program set to launch over the next six months. These programs are for companies that span multiple industries as we have continued to benefit from the emergence of several
large product categories that are continuing to accelerate growth in the web commerce space. And as weve discussed on previous calls, these include fashion, health and beauty, and consumer packaged goods or CPG.
When combined with the programs currently set to launch or just launched and taking into account the organic growth that were experiencing from
existing clients, I believe that we can sustain a strong growth rate for 2012.
Now I will turn the call over to Tom for a review of our
financial results for the fourth quarter.
Tom Madden PFSweb, Inc.CFO & Chief Accounting Officer
Thank you, Mike, and good morning, everyone. While Mark and Mike have both discussed some high-level financial data with you, let me spend
a few minutes providing you with further insight into our financial results for the December quarter reported earlier today, as well as further details on our 2012 outlook.
As expected, our fourth-quarter results reflect a significant spike in activity compared to the rest of the year as a result of our clients strong holiday season activity. The seasonality is
representative of how our business has shifted over the past several years to a higher concentration of Direct to Consumer clients.
consolidated revenue for PFSweb in the quarter ended December 31, 2011 increased 15% to $87.5 million compared to $76.3 million reported in the fourth quarter of 2010. This included an increase of 50% in our service fee revenue business, up to
$32.5 million compared to $21.7 million for the 2010 fourth quarter.
Of this $10.8 million year-over-year increase in service fees, $7.6
million was derived from new client activity, applicable to programs implemented over the past 12 months, and the remaining increase of approximately $3.2 million came from growth of existing client programs.
Also note that this $32.5 million of service fee revenue generated during this fourth quarter was a record performance for us and exceeded our prior
record quarter service fee revenue by nearly $10 million.
The overall increase in our service fee revenue helped to offset a decrease in our
Business and Retail Connect business segment, which includes our supply distributors operations. Revenue for Business and Retail Connect was $40.4 million for the fourth quarter of 2011 as compared to $46 million for the 2010 fourth quarter. This
decrease in the Business and Retail Connect business segment was primarily attributable to a decrease in revenue from our Supplies Distributors business activity.
As we indicated in prior quarterly calls, our largest client relationship in this segment proactively communicated to us last summer of certain realignment and restructuring activities that they are
implementing in order to streamline their business. This has resulted in reduced sales volumes during 2011, and we expect that this trend will continue as we look to the future, and I will share a little bit more with you about that in a minute.
Our consolidated gross profit for the fourth quarter of 2011 increased to $10.9 million or 14.9% of net revenues, excluding pass-thru
revenues as compared to $8.9 million or 13.1% of net revenue excluding pass-thru revenue in the fourth quarter of 2010. The gross profit percentage for our service fee business was 24.6% in the December quarter of 2011 as compared to 27.5% in the
same period of the prior year. The gross profit percentage performance for the fourth quarter of 2011 was slightly lower than our target of 25% to 30%. This is because the fourth quarter of 2011 was impacted by lower gross margins, uncertain new
and/or high-growth clients, including the impact of incremental costs incurred during the fourth quarter from implementing processes targeted to drive future long-term operating efficiencies, as well as higher than anticipated costs associated with
our clients promotional activity.
Our gross profit percentage for the Business and Retail Connect product revenue business was 7.1% in
the fourth quarter of 2011, an improvement from the prior year performance of 6.3%. Both periods included the benefit of certain incremental gross margin earned from the impact on certain incremental inventory cost reductions.
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