PFSweb Reports December Quarter Adjusted EBITDA of $3.5 Million and Third Consecutive Quarter of Net Income

Business Wire, March 26, 2008

eCOST.com Business Increases Revenue 35% in the Fourth Quarter

PLANO, Texas -- PFSweb, Inc. (Nasdaq: PFSW), an international business process outsourcing provider of end-to-end web commerce solutions and an online discount retailer, today announced its financial results for the fourth quarter and year ended December 31, 2007, which included 2007 Adjusted EBITDA results in excess of previously provided guidance.

Summary of consolidated results for the fourth quarter ended December 31, 2007:

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Summary of consolidated results for the year ended December 31, 2007:

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Please note that the prior year's consolidated results only include the financial results for eCOST.com from the date the merger closed on February 1, 2006 through December 31, 2006.

Mark Layton, Chairman and Chief Executive Officer of PFSweb, stated, "2007 was a significant year for PFSweb, as we reported a substantial improvement in our bottom line performance, including our third consecutive quarter of profitability, and achieved $10.9 million in Adjusted EBITDA, exceeding our previously provided guidance for the year. In addition, we have won several new client agreements for the Service Fee business and expanded eCOST.com into new, higher margin product markets, including home, sports and leisure merchandise. We believe these activities have great potential to be significant factors in boosting our growth in 2008."

Summary of results by business:

Service Fee Business:

For the fourth quarter of 2007, Service Fee revenue increased 11% to $21.5 million, compared with $19.4 million for the same period in 2006. The Service Fee business reported Adjusted EBITDA of $2.2 million for the fourth quarter of 2007, compared to $1.2 million for the same period in the prior year.

For the year ended December 31, 2007, Service Fee revenue increased 11% to $74.5 million, from $67.1 million in 2006. The Service Fee business reported Adjusted EBITDA of $6.5 million for the year ended December 31, 2007, compared to $4.6 million in the prior year.

Mike Willoughby, President of PFSweb's Services Division, commented, "In the fourth quarter, the Service Fee business continued to demonstrate consistent top line growth that was in-line with the performance we exhibited earlier in the year. This growth is attributable to several new clients that were added in 2007 and late 2006 and increased project activity recorded in the fourth quarter of 2007. Looking to 2008, we are excited by a robust pipeline of pending proposals, currently valued based on client projections at approximately $35 million. Further, we believe our recently announced collaboration with Demandware can provide a significant competitive advantage in delivering to clients a complete end-to-end solution, while maintaining and stringently adhering to the established brand standards of each client."

Supplies Distributors Business:

For the fourth quarter of 2007, Supplies Distributors revenue was $60.6 million, compared to $59.8 million for the same period in the prior year. Adjusted EBITDA was $1.6 million for the fourth quarter of 2007, compared to $1.3 million for the same period in the prior year.

For the year ended December 31, 2007, Supplies Distributors revenue was $235.4 million, compared to $245.0 million during the prior year. Adjusted EBITDA was $6.6 million for the year ended December 31, 2007, as compared to $7.6 million in 2006.

Mr. Willoughby continued, "In the fourth quarter, Supplies Distributors' revenue remained relatively constant compared to the prior year period. On a calendar year basis, the decline in revenue in 2007 from 2006 reflects a decline year-over-year due to reduced vendor promotional activity, the impact of foreign currency fluctuations and lower unit volumes as compared to the prior year."

eCOST.com Business:

For the fourth quarter of 2007, eCOST.com revenue increased 35% to $28.5 million, compared to $21.1 million in the fourth quarter of 2006. Adjusted EBITDA for eCOST.com in the quarter was a loss of $0.3 million, a significant improvement as compared to a loss of $1.6 million in the same quarter of 2006, and a continued improvement as compared to a loss of $0.4 million in the third quarter of 2007, a loss of $0.6 million in the second quarter of 2007 and a loss of $0.9 million for the first quarter of 2007.

For the year ended December 31, 2007, eCOST.com revenues increased 18% to $104.1 million, compared to $88.3 million in 2006. Adjusted EBITDA for eCOST.com in 2007 was a loss of $2.2 million, compared to a loss of $9.7 million in 2006. The prior year results for eCOST.com reflect only 11 months of activity from the date of acquisition of February 1, 2006 through December 31, 2006.

Mr. Layton continued, "In the fourth quarter of 2007, eCOST.com increased revenue by 35% from the prior year period, and improved gross margins to 9%, compared to 8% in the third quarter of 2007. Specifically, the improving fundamentals in the eCOST.com business continue to be driven by a broader mix of products, improved pricing and freight controls and a greater number of Virtual Warehouse agreements.