PFSweb Reports Positive Second Quarter Results; Record Revenues, Income, and New Client Additions Highlight Quarter

Business Wire, August 16, 2004

PLANO, Texas -- PFSweb, Inc. (NASDAQ: PFSW), a global provider of integrated business process outsourcing (BPO) solutions, today reported its results for the quarter ended June 30, 2004. "The results for the quarter are the best results from ongoing operations we have reported since PFSweb went public," said Mark C. Layton, Senior Partner and Chief Executive Officer of PFSweb.

PFSweb's consolidated results for the June 2004 quarter include total net revenues of $76.2 million, net income before interest, taxes and depreciation and amortization of $2.2 million, and net income of $479,000, or $0.02 per share. The consolidated balance sheet as of June 30, 2004, reflects $114.8 million in total assets, including $16.8 million in cash, of which $1.3 million is restricted, and shareholders' equity of $26.9 million, or $1.27 per share.

"We are highly energized about the progress we continue to make in developing our business," continued Layton. "It is truly gratifying to see so many aspects of our business beginning to blossom.

"The June quarter is traditionally our strongest quarter due primarily to the seasonality of our largest service fee client relationship. In addition to seasonality, we also benefited this quarter from several incremental projects with both existing and new clients," he said.

"In additional to the record financial results, PFSweb also experienced outstanding success in new client additions. During the past three months, we gained many new client relationships, including Raytheon Aircraft Company, FLAVIA(R) Beverage Systems and Brillian Corporation, further broadening the industries we serve. We are currently actively involved in the implementation efforts applicable to many of our recent client wins. Due to the time period estimated to fully implement these contracts, we expect to realize the majority of the financial benefit of these new contracts beginning in calendar year 2005.

"Our sales proposal pipeline, which currently includes more than $25 million in annual service fees with both new and existing clients, continues to be robust. We are in the contracting stage for certain of these proposals, and we continue to work hard to close additional new business opportunities to further fuel our growth," Layton emphasized.

"PFSweb's financial foundation continues to be solid," stated Tom Madden, Senior Partner and Chief Financial Officer of PFSweb. "The gross margin percentage for our service fee business during the June 2004 quarter was higher as a result of the seasonality of our largest service fee client and certain incremental client projects. Cash generated from operating activities during the quarter offset cash used to fund this quarter's capital expenditures and lease and debt payments, enabling us to maintain our strong cash position at $16.8 million as of June 30, 2004. We are keenly aware of the impact that monitoring and controlling our costs has on our cash balance, and we constantly review our operating expenses to ensure they align with our targeted growth levels.

"As for our near-term outlook," Madden continued, "we reiterate that the June quarter is traditionally our strongest quarter and the March quarter is traditionally our lowest due to the seasonality of our largest service fee client relationship. With recent wins from certain clients that are already operational and the current projections for our existing clients, we expect that our results for the September 2004 quarter will be moderately better than the September 2003 quarter."

CONFERENCE CALL INFO:

PFSweb will hold a conference call Monday, August 16, 2004 at 10:00 a.m. Central Time. To ensure attendance on the call, plan to dial in by 9:50 a.m. to 973-582-2741. Ask to be placed on the PFSweb Earnings Release Conference Call. Two hours after the conference, a recorded playback can be heard for 14 days at 973-341-3080, using the confirmation number 5035610. Check www.pfsweb.com and our August 3, 2004 investor conference call press release for more details on the call.

About PFSweb, Inc.

When the world's brand names need proven, fast and secure business infrastructure to enable traditional and e-commerce strategies, they choose PFSweb for comprehensive outsourcing solutions. The PFSweb team of experts designs diverse solutions for clients around a flexible core business infrastructure. PFSweb provides solutions that include: professional consulting services, order management, web-enabled customer contact centers, customer relationship management, international distribution services, kitting and assembly services, managed web hosting and site design, billing and collection services and ERP information interfacing utilizing the Entente Suite(SM).

Our services are provided to a multitude of industries and company types, including such clients as Adaptec (NASDAQ: ADPT), Brillian (NASDAQ: BRLC), Dupont Fluoroproducts, FLAVIA(R) Beverage Systems, Hewlett-Packard (NYSE: HPQ), iGo/Mobility Electronics (NASDAQ: MOBE), International Business Machines (NYSE: IBM), Lancome, a cosmetics division of L'Oreal International (ADR: LORLY), Nokia (NYSE: NOK), Pfizer, Inc. (NYSE: PFE), Raytheon Aircraft Company, Roots, Inc., Shell Energy Services Company, Smithsonian Institution and Xerox (NYSE: XRX).