PFSWEB (PFSW) 8 Nov 172017 Q3 Earnings call transcript

Good afternoon, everyone, and thank you for participating in today's conference call to discuss PFSweb's financial results for the third quarter ended September 30, 2017.

Joining us today are PFSweb's CEO, Mr. Mike Willoughby; the company's CFO, Mr. Tom Madden; and the company's outside Investor Relations Adviser, Sean Mansouri with Liolios group.

Following their remarks, we will open the call for your questions. to call like to now would turn over the Mr. I some introductory for comments. Mansouri

Thank you, Matt.

release further, like guidance, this I following go estimate, forward-looking we Before XXXX, would anticipate, words of webcast statement. be call starting I'd without today's retransmission Any p.m. forward-looking as than facts, provided our the believe, all statements. prohibited. Eastern other way The any that statements replay of and remarks press intend, to filings on Harbor link available rebroadcast for this statements, statements of consent Investors target, call, corporate.pfsweb.com. or via as the in Safe metrics full will, disclaimer at company's redistribution, The will everyone conference website PFSweb is other expect, like be will historical are confidence, forward-looking concerning the PFS to the identify XX, statements. replay non-GAAP the written can also presentation, similar project at well tonight. strictly this section certain to and under expressed expressions, as X:XX forward-looking be in A to used remind the as website available November typically in call are used in through in well available make relating found this

to Executive Officer Chief call of the would Mike I over turn Mr. Willoughby. to Now Mike? the like PFS,

everyone. afternoon, good and Sean, you, Thank

offerings, additional these to an and financial activity. yet distinct insight business. will and components X X our effort namely as of the into business you This incremental service financial our hear the of getting Before providing today, to our areas is listen being start our into about activity update, you done operations to professional us our call integrated the distinct, community in information provide services

recognize we As full the many are services provide. breadth companies that of we landscape, the not there competitive that evaluate that we other offer

private or challenge. to companies can be other So public comparing us a

preliminary and further businesses is provide internal today enhance in data processes. more into plan here own with these providing we to X begin then our Our reporting financial as insight some areas, first XXXX,

let's business areas. two So about again talk the

periods fulfillment, The group, generally and mid-XXs, years. been activities. first on started business the and performing that technology performed level includes $XXX that initial now X services payment business This area clients so our business is fee often than revenue. contract PFS generate between with, this management a service under management $XXX million, generally XX beginning product XX%. approximately revenue activities is this which gross have years is we and million This order margins more expected for activity to primarily and renewed, arrangements Operations the in our these with is behalf target our of PFS we to X be XX% to with equivalent get of This of long-term to in high clients to of year recurring business

which unit Digital Services Consulting activities. second Services, The includes and Agency group, our our business is Professional Technology

the real XXXX, of X over through we to past While the growth organic acquisitions. X and through in a both greenfield business through this this activity growth approach started occurred years,

our this referring LiveArea. of now to Services business sector as are We Professional

reoccurring driven does by Those a projects recurring While of this it's revenue, have business often existing high with primarily some level areas project activity. clients.

to to service XX%. gross fee expected million target $XX revenue between generate $XX XX% to business this approximately XXXX. margins in of Our LiveArea We area million be equivalent activity to generally is in

our to results. turning Now back

the our execute we high business. During the third continued quarter, a our initiatives for clients performed for key on XXXX we at to as across level

margin sales our of opportunities. cycle by in certain by being higher more costs, engagements and lower-margin improve the Operations Operations selective gross controlling to activity profitability continued our We PFS by transitioning targeting

business, to our XX% to a at Operations contributed margin the to point the faster the Operations in XXX This professional professional basis than mix, profitability increase continued $X.X and rate EBITDA business, services increase gross service in of business emphasize million. favoring with We change in fee higher-margin LiveArea in PFS growing business. combined a our adjusted improvement services the a

We've long-tenured our us of we and confirm forward and one particularly an Salesforce mutually receive industry in the Cloud to to referred you also to in This Professional revolving within success executing this Cloud. during QX, did ecosystem. the client, relaunch earnings our the release the very decided our the launches, focusing and Lauren direct-to-consumer site referred win several Ralph to discontinue which the very digital began Lauren stores. Lauren timeframe their this that around We their elevates with to services. as Salesforce longer and Ralph recent onto excited replatform had our with I'm disappointed Services organization. brand. a our well. for with to partner Commerce use have release transition a look for signing They site today, short a engagements further instead to engagement, unexpected notification client rewarding Starbucks, Commerce today long ambitious I'm e-commerce LiveArea Ralph relationship on high-profile of a project we believe customers, their on partnership, experience including with I for this recent press from provide and a in about new no stores I iconic

clients in with maintained the it's our have QX, worth and assist than success even in our that even to level We might and such with U.S. noting expect L'Oréal see activity greater engagement. first of to we through we as clients very experienced and good have referenceability former Mint a reengaged transitioning former Starbucks have

That unexpected Starbucks traditionally strategy good unfolds. during the and the taking strong, holiday and another QX EBITDA. look we to adjusted the customers. see impact current of and the will we'll for the remainder of we of the to peak ahead period plan care remains and their QX unplanned in forecast perhaps, this activities their loss to upcoming again We Starbucks our revenue this said, strong client QX season, unexpected and and on successful are them in execute deliver the during holiday future client sales has of as driven and rest Unfortunately, our have year, compared holiday as transition, an them negative

QX, million. During with worth Professional good $XX.X bookings we had quarter Service of approximately project another XX projects

lifetime value. We million also worth booked contract engagements $X.X XX new approximately recurring revenue in

in the As delay value, close sales several win XXXX. opportunities reflected we good in in quarter. remain we've QX pipeline low and last expected lifetime experienced the could deals that in of These our or Operations operational to contract

Operations of our revenue fee fall new short in QX. -- new clients We to clients from service expectations expect

are We a Though we bookings and the delay and performance, pleased for impact we Operation the our sales and experienced the Services we we encouraged Professional are U.K. as into lesser of head While delays. in QX. by are to service our with XXXX, a it disengagement to XXXX Services Professional from unexpected appropriate our adjusted our carrying fee pipelines, is reduce extent strong for based equivalent into of sales primarily overall believe our EBITDA geography. expectations a the market some Starbucks on pipeline had strength the in Professional and we services our business, project QX Services very revenue

quarter. Now call before results the discuss the to that over our I to like financial further Tom than with longer turn on typical comment I'd Tom? to introduction

Mike, you, Thank afternoon, good and everyone.

right jump in results. Let's third XXXX of were the financial $XX.X million into of $XX.X in revenues Total million XXXX. quarter the to the period compared same

churn million, from revenue fee service to equivalent quarter relationships, $XX.X we as to client expanded and million by resources increased third expected higher-margin driven offset $XX.X reallocated both new Our by engagements. partially

having large with supplies which gross of of targeted to middle XX%, Though gross loss gross our to range our year, in margins XX.X% the in coming clients, due above activities year-over-year compared the basis QX of range to third encompasses due under year, higher driven last expect of period. increase related XXX increase by product revenue prior-year period a quarter margin is services. activity. in again of this our of our gross seasonally as margins expected, by margin our earlier our ongoing to proportion proportion the restructuring business product This a Service and points higher to same lines. discontinuation from $X.X business, revenue to million million period is around of XX% contract LiveArea As the also a technology at last of we remaining holiday $XX.X during with to same declined legacy which costumes to come model party this and and the fulfillment the increased period professional certain their a XXXX, at came agency operated the QX. a The the the in result XX.X% compared client fee lower-margin-operations termination the during in once

For XX% the $X.X to XXXX, million $X.X million third quarter last year. to increased EBITDA of adjusted compared

As a to increased improvements discussed of basis our XX.X% were fee adjusted The fee percentage gross revenue, margin. compared XXX the service X.X%. previously equivalent driven to points to primarily by EBITDA increases service

balance September of to a in total and December XX, of cash million Turning debt position at At equivalents $XX.X a cash compares approximately million to position sheet. resulting XXXX. which net net and $XX.X $XX.X was the XXXX, debt totaled million XX, approximately million $XX.X debt

PFS under balance was timing benefit has of cash have then stated the our received this we by in quarter, customers remitted September As certain the this of Beginning one with arrangement. to from our our the clients. contract clients reduced clients' our due calls, a cash to collections modification on are that later prior typically from included benefit

quarter. have some the these and here now cash may we a timing customer from December the we see impact to as look collections, we So reduced benefit further of

season, holiday quarter by As we we the peak the expect towards to fourth holiday [indiscernible] volumes. look strong continue upcoming a

are volumes anticipated. by new-client offset previously being than expectation lower strong these revenues However, for our partially

new million client million have with to which XXXX to impact revenue our revenue of QX. range an expect heavy with Mike we million $XXX $XXX Starbucks focus for streams service fee a previous X% growth been now guidance revised guidance the million to year. annual $XXX basis the transition, earlier, As to $X to the $XXX guidance historically and reflecting $XX a on million This equivalent has mentioned in on million, from the includes the of range compares between to up and prior XXXX, our

$XX our adjusted to expect million and $XX EBITDA million. range previous This is XX% growth between down somewhat million guidance XX% now from $XX to XXXX. reflecting to also $XX million, We of of to

expect we are As more ahead we look our into to specific area. working XXXX, business, report as this to metrics transparency for LiveArea to we provide more

scale, margin forward well. to look our similar we business profitability years, business so reporting business and served expansion LiveArea landscape, Professional for and a Services over the and as on in centerpiece unique that positioning detailing we has understand our Our investors market to conducting the competitive will growth a Operations as they last can its its several and characteristics be

result a the required and analysis LiveArea for new the reporting of and planning Operations As business.

not XXXX. This for in outlook have will calendar back the analysis, providing call concludes turn my to and fully until completed We I'll early Mike. the the we be remarks, over year Mike? hopefully financial XXXX prepared

Tom. you, Thank

additional from First pick exciting up introductory and some iconic and our detail on partnership I'd new to comments, family of my of the Ralph Lauren brands. like give support you

site and that providing to holiday, Monaco in XXXX, flagship engaged Ralph brand the brand Commerce site large-scale win to our the coming launch over we to in also at Commerce to engagement with We're new expect appreciate the their solution I Club significance Cloud a a on from our In they to represents Commerce hope and years. can ability this client so our build of future. complex, and this prior Salesforce the for execute for can requirements. addition early more high their multiple enterprise rapidly e-commerce clients are geographies e-commerce level most new the services Cloud Cloud the class, it affirmation in managed launches investment we Lauren very of get listeners our have

statements next we PFS in to detail earlier, on our presenting our plan mentioned year. Tom financial more and LiveArea begin As businesses

transparency as the investors, an felt end-to-end our XXXX. Services we brand, new our recently have for business addition and launched under in for Agency as with strategy to along providing to we our units often of as Previously, In marketed Tech solution. appropriate we go-to-market were PFS Operation services, both this a was additional move also

a marketing the few the carte and regard consume of the well. our we leverage days launched PFS our the a forces' taking recall just may recognizing often Dreamforce refreshed site agency technology our brand, into under the clients as integration of the commerce for conference services our called successfully services. sales efficiently we and and anticipation digital PFS LiveArea new that brand, other LiveArea we integrated way With since incorporate a LiveArea sites that are la Operation we However, XXXX, practices fashion, ago acquisitions We you brand continue now while agency to to to acquired brand consulting Labs LiveArea and September this strong we LiveArea week we in have are market. have in

unit, launched launch. completed, both redesigns, Woolen the a LiveArea this e-commerce or directly upgrades and is replatform woolen access and www.pfsweb.com. projects. addition all From known LiveArea and new and sites e-commerce and site for Many We Pendleton XX apparel using completed e-commerce for Professional other PFS site design three the may were family-owned projects LiveArea we their XX also new www. in through from products. corporate.pfsweb.com American Services Mills, to using brand, navigate livearealabs.com functionality or You business Lauren to our a Ralph sites, PFS sites creative

While system, this earnings This Salesforce developed previously Commerce anonymously previously in-house on project well. on on quarter new were mentioned along second Lauren an with was Ralph project as our the e-commerce call. site Cloud built

issued You premium press back YETI. may recall, a release and brand, our a with drinkware announcing April in we also relationship cooler

fulfillment design utilizing new our to pleased recently Operations live notably, the creative brands. to systems variety fulfillment, we Most in our to launched X our quarter order engagement are unit, integration that our range a order scope second health for this services to X payment an portfolio calls order projects fraud featured. and that earnings management, new brands from we new referenced and beauty we services. site new perform with brands We completed of new major individual their announce of From PFS business This management. care total existing client including on that the XX client customer same brings is went

quarter. call similar were quarter trend a for third second Now I the mentioned a previous coming moving on we and our strong bookings, anticipating project into bookings off that in we of quarter. third were

have new XX% X-X been representing $XX.X for estimated XX%, the worth third XX with Agency quarter, from Technology expectations Our projects increase. million, percent bookings increase an validated a and year-ago quarter that's

case. We the large in determining project have that to a commented following that BXB year, provided QX several deals launch date, for this whereas and quality we BXB are bookings earlier. quarter, late which It's the in signed noting is this were continues the expected seasonality times launch some projects BXC to in be factor not during year worth the included the I booking typically results,

for signed Specifically, projects, ongoing or engaged we signing In we two these SAP X companies the implementation bookings on larger development for Hybris. these previously services, of large cases, discovery services, development with services project. before agency project

more include project an projects demonstrate lucrative continues We've $X.X engagement strategy opportunities several Our that expand to smaller to had All land-and-expand worth sales land-and-expand see the these our cross-sell contracts, million. our our as for begin professional Operations revenue and larger, retainers. worth LiveArea business the services of relationship, prove many X noting to about success it's questions the our were then land strategy, recurring and to estimated recently successful within we services to of within and a continue ability and we projects business. PFS combined to

the between overlap see much don't X we However, as business units.

may as integration. we sign a that that project web platform and with new additional services, out then e-commerce a development as engagement example, contract For upsell design such we starts system

we cross sell to a We operational our often our operation less ability full similar distribution we from services. clients that successfully of see and -- set expand sell cross that from engagements single-offering on Operations PFS successfully However, client it's as business. services would

such, our two As to demand opposed going land-and-expand end-to-end the as expect continue we with to units for offerings, resulting la opportunities the across most strong taking a segment, engagements carte within service in forward. business place

an $XXX,XXX, million engagements services on all engagements, $XXX,XXX. We value. services combined including a in these agreement existing approximately LiveArea also worth worth Salesforce existing revenue XX managed service WebSphere for estimated were apparel Commerce clients and recurring Cloud client $X.X lifetime agreements contract worth an new estimated for estimated on IBM of X apparel booked managed an Almost

the a in will to XXXX. on the significantly past smaller been primarily compared that few slot You on This focus center result of contract smaller, fulfillment of has notice amount quarters deals our infrastructure call previous booked is lifetime into well value years. our and existing higher-margin

many in pipeline in bookings and project QX quarter, expecting bookings. of BXC to verticals Looking see have maintain we us number how our through number come a as evaluate increasing and we margin contractual nature a the note U.S, we we continue of recurring business the to QX, pipeline to LiveArea that expectations. or Professional this portfolio fourth bound are expect our the we stream aren't Starbucks provide PFS from projects and Professional the and the that approximately into XXX segments. I'm the we also number somewhat commitment. an encouraged planned and deals provide the prior Services necessarily currently as our multi-year plan LiveArea I visibility Agency, Technology our revenues client head clients We part Based client gross business, and with active to strong in to from engagements increase quarters that the to for base transition XXXX. as the as recent loss for will to to not lower-margin similar by of contracted include QX launches a engagements is of the of size, we target in Services with this improving we a project-related as opportunities project down have to This client both result XXXX. begin Europe. our Operations is well our of on move Canada This Operations segment to does again this BXB as to is certain It's of future, due services of supported steady brands provide revenue important clients that

Q&A investments Before pace for The evolve recent some a double-digit to season with moving growth. expectations continues clients into trends. holiday continues grow alike. and e-commerce to to growth on industry drive I'd session, at another rapid like with services This and by industry touch sales online the investors

I offerings, LiveArea communicate growth offer an interesting objectives engaging provide evaluate many service there way involving two some of in Group, especially the primary our financial look to have look directly our Consulting the industry our LiveArea transparency acquisitions also of of of including and Radial, months, in business businesses story. were our to investors seen, Tom competes and reflect and PFS exciting unit. may last questions our the and forward of we strength to of into to of transactions We XXXX. believe with PFS additional Operations strategic multiple answer Newgistics our and As as couple performance which with you competitors, Lyons these all each continue our or and

available we'll We will to have many X the ourselves next as call always, happy conferences the and with over to various up and make opportunities open answers. X by for to phone. at we're questions and Matt, roadshows now meet you months, nondeal

Canaccord. Instructions]. Graham this At hear we Michael now with from [Operator time, will

on appreciate be if some I in previously. the I for that roughly going of there or just kind still challenging is push other, was with bit And the the you've QX than that's client a and lower time to the followup not? sure wanted of then trying guess after $XX rest it generating revenue or of and XX% not, is Starbucks to I I million the it other XX% the of of all is million revenue understand, transparency that. to have just outs about I detail. Starbucks, a SFE for $XX make I'm guidance implied, clarify just guidance, the Thanks and QX then

Yes.

activities that so again, QX limited September we really point providing behalf. during So dark actually activities we and site we're it's activity Starbucks indicated, and the have and on will, sales minimal. in XX, The as certain number a Mike transition but time at ceased went of still on just their

component performance, the individual they that client we are numbers appropriate year-over-year. side, we shortfall shortfalls a here as would a the to then then most of are of not our and original expectations. strong Professional quite where not -- And your -- experiencing in Operation Services that it's the pieces, alluded So U.K. good some this revenue about have related with quarter fourth talked other environment significant historically been we the year, to an the a relatively meeting are from so and

positive ticket And brand, that wondering, you it got, that And if and that, a of seems organization? then for for got I lot roll of more a you've of you of interested rest really that the of, just Thanks to guess, you Lauren Tom. properties. Okay. the note, to I their on into sort you in on out what for was like I'm going and Ralph think greenlight now early part across different minute could sort a right it one the got engagement keep went a spend was that

Thanks, Michael, for question. thanks the

partner we this Salesforce own that partners were to and made press can, Commerce effectively indicated it Cloud of in strategic actually we that this strategic of release. earlier Cloud, their year had a a Commerce And with on really a study case our particular nice effort. Salesforce big and sales So standardize Ralph I part Lauren is how in think, decision case.

Mint where to being platform also their the incredible relationship to volume their release handle record they when decision the to based just able the enterprise care platform, was we events. including, have large the of in take obviously, needs think on I choose on demonstrated platform we U.S. successful coin track the

as standardize And part the and decide of have they record various think, use track once success that currently or may sites Lauren's to there similar we It sure in intention strategy, that they I way making. decision the that to make story, geographies other to I always supporting it. was their was where Ralph multiple key our But decision that was to was, on such future. again, supporting other part a by cautious brands And think, clients has ones clients some wanted their brand of operate as multiple acquire the big we're we that validated I a buyer, launch a think of the the platform a work which that platform actual of so a as did. PANDORA, they support or that

tight that, reference And before so while we after which part originally on able future. confidence, the managed-services the the in by site them very, site, way engaged in was contract, launched was in the such to a replatforming this we for we successfully effort be hit sites are Club launch for working engaged were And under that their preholiday-launch Ralph Monaco also we holiday, shortly they that were to and which timeframe the with flagship on in for specifications primary that once as a site, Club time, very had a for I basis application the contract Ralph Lauren of Lauren we the actually order a the that'll at site, that Monaco window, engaging their developing site. think, replatforming same the

launches be and we're can case a engage in and them of our by it long-term present clearly then client's us, the is a case with many So how study performing the during flagship hopefully, to participate cycle, the to add to great be partner, very a it's in confidence site future position client study, sales we and successfully and in capabilities, Salesforce client proud a great really portfolio. our a it's for gain

to Sutton go with We will now Craig-Hallum. George

the Mike, George. QX, and in about that's that as drive unrelated, QX. Jason do and that just that booking and some quarter to opportunities if you wondering start I'm talked that ability opportunity if of from had for results weren't some wondering anything in It's projects far to lengthening bookings as much slipped on clients with that the projects starting if into time QX has -- the recognize to completely how projects historically, into revenue QX, projects? did quarter you last for whereas

Thanks, Jason.

that be our normally have the are deals, I'm signing early So up we a that and what had and the based prior in seen same launch signed for first I the following and At and for started site they continues in that that of described And is working and that today may and sales we X on in BXC could QX, think, projects to as like come are really entered picks in longer. today, of we we has last launch the that this the strong continues, BXC pipeline we in see about we where say early talked that I to that, dry of through mentioned and have we the the time, Obviously, the tend bookings And to an unprecedented large kind certainly with see on the tend entered through be and where number a seasonality little year. get part typical smooth leads -- XXXX. we'll that the cliff we opportunities do love see of a am was a QX part to of number -- slow, deals. we've volatile BXC felt see you year we into launches that the on, excited I opportunities next QX, in site year. of and last comment they I and part QX. BXB to where like of BXB more stop presented late fact seen kind bit extent next QX in pattern a the planned move they of part That continue we've in pipeline may -- the QX moving if quarter pattern new BXB comforted quarter-over-quarter is than we kind deals, early We planned that that you felt for little to as the or started And new was by those could deals BXC projects, of we the close that indicative in continue to larger BXC selling deals website to different less of launches year. pipeline pattern somewhat the just up. opportunities that sales year second

had may QX I what in about you finally, So having And to was ask some you launch once reference QX really chance good hoped. projects in would while those may we'd them in projects be from talking you not in our that, thought to least get number website we engaged, such, there. project that they did multiyear up And about specifically meaningful up that of in QX. then have we then refer was end as contributed and even bookings revenue include a as XXXX, and to signing sign a able slipped to Operations not end them a they you at as

close right final just They deals holiday of and we're those actually the timing past go in XXXX. Operations pipeline peak the see here. of couple But XXXX and So and some over in in in may could the push given some contribute land I those is of stages some the than Operations we seen we've and encouraged now QX. the cases, may actually into that quarters, deals stronger am with early ahead now

growth we last actually, some Tom, numbers what -- this numbers give revenue a of contribution kind Mike, sorry, year. I'm for and contribution thank far segments as you. you around PFS you feel any rate those as details revenue -- looking color, year what get Great around fee you're at? service can the so Can you gave just contributed LiveArea gave

we're really I and more things Tom can't, it's mentioned. I Actually, those -- think,

not process through operating segment able and provide clarity I a X working are contribution of provide to also first don't all and at detail to think the will want sides. We year-over-year reporting to, that right revenue revenue XXXX that XXXX. on difficult to I around now from kind to both point, talk be go back and some we and next It's transparency these you about objectives. year, way give revenue it's through but do the same the to compared to that all that at diving XXXX part a the of guidance 'XX, We also necessarily like think then what give I 'XX details P&L point and wanted format. be of the information our on out from of we'll through we'll all that the of know looked with to split statistics, giving segments

would what we that plus anticipate those a look So comps. give side, you in back in to the have on order XXXX revenue X-year

we're So do do now, that hopefully, in XXXX, working that's process early through that as to we'll categorization. something right that

for Understood. me. Last one

can would relationships earlier You've cycle talked how Like consulting through that work you're Is form that logos? that? past new should that the see customer's establishing see your indication in an through in whatnot. more and in project comes metrics. business you're get we some life we Where work we seeing of the that of in that the

It's a great question.

But projects which engagement and from or nevertheless, is anywhere that opportunities then use can one to the can may XX if I within this be win is, be might the you lion's design of point we those strategy think, color that number. $XX,XXX the that. we the some the just to recurring-revenue we of find quarter, have, don't we shows where to engagement understand are clients could that, like coming of larger we the of where you we might thousand, or at reasons into see such that contributions those a in large project It's at are question projects to number the So ones that, up so session on that going a revenue number look design the a that lot said a don't statistical be the project that, is That's against and large currently share we many contracted it It's it's $XX,XXX larger smaller I that the provide the projects this number, had kind a that discovery since smaller about logo deals. information of booked. revenue made is, relatively typical couple really smaller we about you to size, way engagements, you're up going land-and-expand obvious be have discovery the that bookings of and have we to that engagements. a engagement from of, hundred that than engagement big is, The last it is tried where more a the engagement, provide stream. built answer

So design clients lot we providing engagement next from our contract stretching with benefit Well, strategy could. in we much stream, recurring-revenue recurring-revenue into, the we clients where that detail, as including to logo of may a a contracted a year not expect definition actually where aren't is length, a of that year. stream say, there's there start project is where we would showing where a is or necessarily and least be we these

And from but little a relationships. to of we're we're those That's we're could more implement project where logo so website, be thing the think year go turn transparency project. may as a that engagement, so, to maybe now some these to client and that go not it working benefit everything XXXX, recurring as things we into how design as looking doing client we the engaged a just is committed we be into months another logos that. is client nice to you engagements, to transparency really to necessarily on we'll and in might in it a probably there, or we we of then all with to looking one bit next and provide a isn't There's that that give we're X year in for

with Street Lake from We'll now Markets. Capital hear Argento Mark

questions. Two

collections a down that that had has of up drill cash for mentioned about you've that favorable you us? customer changed. on some a relationship Tom, bit little with you Could First, type

Sure. card of In then get we'll processing merchant we've X our cash we credit of transaction that. operate a of anywhere we structure years, forwarded for those from, our result, those In received some credit And of works, to client. certain little monies benefit record as books a of that when again, onto we to cash one what's the as that on operating number flow the engagements, but a modified for previously, for client cases, been sales the when way that bit that have flow could to our remit just of client, we've and it receipt contracts so from timing days. it's the called we we put a card will flow lessened. in certain has we received been And to the as X a collect takes place, and get some cash positive activity,

That's Starbucks helpful. or been that And then historically. the contract? just remind end-to-end Was me, just on operational contract an an

as works. to frequently No, fact, it Starbucks was how good the an end-to-end. account case a end-to-end study of referred And pretty in we

I the -- in that we around number It multiple and that and is brands mentioned U.S, the some well. dialogue Starbucks, and thing of supported they that was in just sold we So X Starbucks brands. Europe, the engagements Canada other it of supported the in wasn't as geographies, that

what to and but might doing So they're was expected it's grocery-store the read certainly all. And try and not relationships, to doing, that we commentary be why you on unexpected at loss. they on obviously stores Starbucks focusing the understand it something can disappointing from

were the understand the Professional platform one in mentioned Understood. slow U.K. pivoting you maybe Sure. help I can or Services Is business, specific any think you'd things to that. that Or practice? particular bit to little Then that better us

Sure.

acquisitions was that recall U.K. started the through may we you business that X did. So

fairly larger One Commerce Magento. Cloud And around SAP Hybris of acquisition practice an in practice. did of somewhat small them we Salesforce was was then a

on in pipeline going going going strength expected the SAP the as including expectations be drive, That's that platform. of year the the we we of most around to into the was revenue was were to Hybris we incremental experienced and revenue, Our Interestingly, just that lack where saw although we typically, this delayed. They frustrating closure leave a we year. and the And our year, platform. of delayed SAP particularly did. within didn't some opportunities, certainly saw Hybris pipeline, deals the those that just delayed

can there think that. we working reversing They and We And clearly way Hybris well. both is very we terminology even Salesforce week partner SAP are actually with Commerce very with what sales interested interested partners some to this as deals the these that right trend so closing understand our as in that to clearly over to have close well the are do I Cloud delaying in these folks of deals. characterize to them as are

either trend. that a it's of think or SAP, frustrating Salesforce So delay, kind it but with indicates don't I long-term

evidence Brexit just true, dynamic market. be interesting some don't year. that the I say think both may if lot have implications to the possible. It's platforms are necessarily an would this delay. with There of it's We still be a valued but in

we hopefully U.K. coming much of out evolve, see as that So see a how to continues business. we'll trend that better

we pretty gather in here strategy a And And trading spaces cited a These little then M&A in remarks, looking, kind events, different higher at of, as from in level, the tell, more you then of obviously your well. seen are can different what prepared today, big changing these and at bit. the businesses some multiples. we your we had is -- the these parts go-to-market around are

strategic at a could we maybe brands. Could And, these guys sit situation the separate Sounds us the is From table? and businesses, walk to through where thinking unlock perspective, about you're the businesses businesses they a like different contemplate it you're today? value? a how the level on the pieces separating high you as

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is provide step that first to the so clarity. And

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Instructions]. B. Anderson with Riley [Operator we'll At this time to move Kara FBR.

expect kind a what rate churn going seeing you'd Can you you what of are normalized us update rate on basis year? kind this And on of forward?

Sure.

of target our our stream. what we've to recurring churn So standpoint, model X% between -- is somewhere generally churn revenue below. never from We usually you X%

talked at about, equivalent revenue XX% on recurring or the the that of in normal X% our would past in as service So fee so we nature, what's rate and expect is basis. about we've to called, X% churn

couple a experiencing that of reasons. are higher this level a year for of We

purpose. of Some it on is

low-margin this As reallocate our Gateway, type negative margin engagements about to in margin desire several away client and X move from we higher gross to to it in engagements. a year, is talked earlier case, and/or resources order profitable in

completely higher-than-normal that Starbucks something being alluded up some if to, Mike were ended there unexpected. you So The as activity planned was churn, was, will.

piece a of of that has look terms rate from recurring-basis as stuff. at in churn that higher -- that the we So created business

would regards lay past. a somewhat out churn in and than experienced -- have but it's in how model have next for I it level. wall in is yet So higher higher we -- all specifics it don't the to is year where the our

all to Have And purposeful out you that. quick the follow-up sought this year? just that you completed a churn

fulfillment evaluate safety look client improve real even months last getting go are really going gross the say to extent focus dynamics, continue for margin, we we margins would churn call part margins the -- may in we to some want to think are as to services purposely in into through and or improvement, changes an the on to doing transitioning out. where closing refine there that. say terms continue some that in do identified either to turning year have into thinking renewing We, out alluded client client we've areas but could and do everything that felt work conference into to X order improve And aren't the opportunity engagements better-pricing our client that necessarily X, and that the selling XXXX, our management in have portfolio, went in XXXX or on next as we I to and Service place getting potentially will our we present don't couple always I relationship the EBITDA we high-value to X got area that where Operation that done, particularly we like the side financial as higher a don't something a to of engagements on them a have portfolio. of ones would with that client. We price we a successful that where that in where that now to that that accomplished we're we're clients. we're contract maybe the opportunities in the personalization. obviously, on competent where offering technology-enablement There such be a right

we At Securities. will take from time Klasell this Northland a with Tim question

seen that a got behavior called, the this bit the Sorry in little of past? far sort Operations of night should that of busy the sort late. bit a seasonal side, was so on the a guys, you've a buyer But push deviation that outs the, the as I from as we expect? on Or call is pattern

that QX an from from time quarter you've Operations next to you we think because knowing it's deviation live Well, certainly X before deals, client seen got decent past size that to do window I we've the a some where in the holiday. X-month the what a is book getting a contract typically

contracted And so, that were are of our actually pipeline stage X I would've or X, still get some in hoped and expected X the X. see deals to now pipeline in that in in

Unfortunately, side, I verticals, and different currently would historically in those higher-quality is margin XX few months the are in size, started it's trend pipeline mentioned, a get the that looking that signed So think, XXXX of than is opportunities our them I than new we're get those XX slide aren't we think and The that there a last open here our we and would've deviation. aligned the the is have gross many past on ahead particularly on years. pipeline hope QX seen early had as the or that. in for, to we've I we target to our target a very so facility. well deals. with infrastructure It in go our And Operation necessarily profile into over the us requiring certainly

they So a in fit extent deals mentioned leveraging high-quality signed, and high-profitability I the better to them doable infrastructure criteria, our way. earlier Tom that we are resources that of the more think get

Or apologies The was expect? there. it us a that going this. Give worst? and what bit color Okay, along or quick on margins Starbucks, customer good. would just was to typically And my then one question we again of over on little better

specifically, discuss -- client activities. guidance usually we margin Though or individual gross on give don't

As end-to-end in client about we the engagement. talked was

Services So Operations Professional and both area. our activity included our it

operate market Operations basis our in in side. an we Services with So our on a to XX% overall XX% XX% usually XX% Professional and to side

a that So the that work can't insight give we client, but specific with. you general into parameters of, those again, are, kind I particular

this back I now to like concludes closing Willoughby for remarks. our over would the And call turn question-and-answer session. Mr. to

you, our I'd our through that everyone the excited thank attended in developments call comments Thank the like and today. incredibly Hopefully to right, we're came that business. our with Matt. All it in Q&A

or March next results quarter around to various fourth look we're to conferences, in we and and that then as before, LiveArea said, to the this specifically we're going the I and about much. available phone. with always then talking look As have speaking we to and very forward analysts between and our and opportunities via report when the business we our now we're Thanks, PFS, investors forward at 'XX, change looking

gentlemen, today's concludes Ladies and this teleconference.

You may time. your participation. this Thank disconnect lines you your for at