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

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PFSweb, a global provider of integrated business process outsourcing solutions (e-commerce fulfillment, third party logistics, supply chain management)reports positive earnings for the second time since going public in December 1999. It also reports record revenues and income, new clients, with a robust sales pipeline and the projected "results for the September 2004 quarter will be moderately better than the September 2003 quarter.Â? A conference call is set for Monday, 8/16 at 10 a.m. Eastern time.

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® 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.”


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 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® Beverage Systems, Hewlett-Packard (NYSE: HPQ), iGo/Mobility Electronics (NASDAQ: MOBE), International Business Machines (NYSE: IBM), Lancôme, 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).

The matters discussed in this news release (except for historical information) and, in particular, information regarding estimates, future revenue, earnings and business plans and goals, consist of forward-looking information under the Private Securities Litigation Reform Act of 1995 and are subject to and involve risks and uncertainties, which could cause actual results to differ materially from the forward-looking information. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, our ability to retain and expand relationships with existing clients and attract new clients; our dependence upon our agreements with IBM; our reliance on the fees generated by the transaction volume or product sales of our clients; our reliance on our clients’ projections or transaction volume or product sales; our client mix and the seasonality of their business; our ability to finalize pending contracts; the impact of strategic alliances and acquisitions; trends in the market for our services; trends in e-commerce; whether we can continue and manage growth; changes in the trend toward outsourcing; increased competition; our ability to generate more revenue and achieve sustainable profitability; effects of changes in profit margins; the customer concentration of our business; the unknown effects of possible system failures and rapid changes in technology; trends in government regulation both foreign and domestic; foreign currency risks and other risks of operating in foreign countries; potential litigation involving our e-commerce intellectual property rights; our dependency on key personnel; our ability to raise additional capital or obtain additional financing; our relationship with and our guarantees of the working capital indebtedness of our subsidiary, Supplies Distributors; and our ability or the ability of our subsidiaries to borrow under current financing arrangements and maintain compliance with debt covenants; and whether warrants sold in the private placement will be exercised in the future. A description of these factors, as well as other factors, which could affect the Company’s business, is set forth in the Company’s Form 10-K for the year ended December 31, 2003.

In addition, some forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. We undertake no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. There may be additional risks that we do not currently view as material or that are not presently known.

It is useful in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA eliminates the effect of financing, income taxes and the accounting effects of capital spending, which items may vary from different companies for reasons unrelated to overall operating performance. EBITDA (LBITDA) is not a financial measure determined by generally accepted accounting principles and should not be considered as an alternative to net loss as a measure of operating results or to cash flows as a measure of funds available for discretionary or other liquidity purposes. EBITDA (LBITDA) may not be comparably calculated from one company to another.

To find out more about PFSweb, Inc. (NASDAQ: PFSW), visit our Web site at The PFSweb web site is not part of this release. PFSweb and GlobalMerchant CommerceWareTM are registered trademarks of PFSweb, Inc. IBM is a registered trademark of International Business Machines Corp. All rights reserved.

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Preston F. Kirk, APR
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