Todd Fromer - Managing Partner Michael C. Willoughby - Chief Executive Officer, President, Chief Information Officer and Director Thomas J. Madden - Chief Financial & Accounting Officer and Executive Vice President

George F. Sutton - Craig-Hallum Capital Group LLC, Research Division Alex Silverman George Walsh

Ladies and gentlemen, thank you for standing by, and welcome to the PFSweb's First Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Todd Fromer of KCSA Strategic Communications. Please go ahead, sir.

Thank you, and thank you, everyone for your patience this morning. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call, other than historical facts, are forward-looking statements. The word anticipate, believe, estimate, expect, intend, will, guidance, confidence, target, project, and other similar expressions typically are used to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and involve and are subject to risks, uncertainties and other factors that may affect PFSweb's business, financial condition and operating results, which include, but are not limited to, the risk factors and other qualifications contained in PFSweb's annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by PFSweb with the Securities and Exchange Commission to which your attention is directed. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. PFSweb expressly disclaims any intent or obligation to update these forward-looking statements. During this call, we may also present certain non-GAAP financial measures, such as EBITDA, adjusted EBITDA, non-GAAP net income, Service Fee Equivalent revenue, merchandise sales and certain ratios that use these measures in our press release with the financial tables issued earlier today, which is located on our website at pfsweb.com. You'll find our definitions of these non-GAAP financial measures, a reconciliation of these non-GAAP financial measures with the closest GAAP measures and a discussion about why we think these non-GAAP measures are relevant. These financial measures are included for the benefit of investors and should not be considered -- and should be considered in addition to and not instead of GAAP measures. At this time, it is now my pleasure to turn the floor over to Mike Willoughby, CEO of PFSweb. Mike, the floor is now yours. Michael C. Willoughby: Thank you, Todd, and thank you, everyone, for joining us on today's call. I am here this morning with our CFO, Tom Madden, who will be discussing our financial performance for the quarter. But before turning the call over to Tom, I wanted to first discuss the exciting development we announced this morning and provide an update on the key operational highlights during the first quarter. As I said on last quarter's conference call, I am committed to creating shareholder value and transforming PFSweb into a sustainable growing profitable company. That's why I'm thrilled about the strategic relationships with transcosmos we announced earlier today. For those of you who aren't familiar with transcosmos, let me provide you with some background. transcosmos is a public company based in Tokyo that manages call centers and provides IT, data management and digital marketing services for a large portfolio of leading global brands, including some 700 clients. The company has an extensive footprint for its operations, with facilities across the globe. However, it has an especially strong presence in Asia Pacific countries, and has plans for emerging markets such as Brazil, Russia and India. One of my major goals as CEO is to position PFSweb as the global eCommerce services leader. The U.S. and Europe continued to see strong growth in eCommerce as more consumers buy goods online. But in many parts of the world, especially those where transcosmos has a presence, online shopping is just now emerging. We believe the best way to enter these markets is by partnering with best-in-class providers. By taking this approach, we can provide a competitive service offering without incurring significant capital cost required to build out facilities and infrastructure that we would need to serve our clients. That's why we think the transcosmos relationship makes so much sense. When we initially met with transcosmos' management, we were incredibly impressed not only by their pedigree and track record of success, but also by their business philosophy and entrepreneurial approach. When they work with a company, they don't just see it as a business arrangement, they're looking for a long-term partner that is going to grow and prosper with them. Because of their philosophy and approach, they feel it's incredibly important to have skin in the game, which is why in addition to forming this strategic relationship, we have a definitive agreement with them that will allow transcosmos to acquire 3,214,369 shares of PFSweb common stock, equivalent to 19.99% of shares outstanding post transaction, at a price of $4.50 per share. Pursuant to the terms of the transaction, transcosmos is permitted to acquire up to an additional 5% of the company's outstanding common stock on the open market, and is subject to a 2-year lockup and a customary standstill agreement. The company and transcosmos also entered into customary registration rights agreement. The $14.7 million in gross proceeds from the transaction will not only help PFSweb bolster our balance sheet, but also give the company the financial flexibility to implement several initiatives that we believe will drive growth in our services business. In particular, we will explore options including: acquisitions or investments in creative design firm, a system integrator or technology providers; acquiring a competitor in another geography; and funding international expansion in Asia-Pacific, South America, and ultimately, the Russian-speaking Eastern Europe countries. We will also be open to opportunities to use a portion of the proceeds to fund our share repurchase program previously authorized by our Board of Directors. On the operational side, we gain access to transcosmos more than 800 web developers and more than 2,500 digital marketing specialists in Asia. Over time, we'll be able to cross-train the web developers on Demandware integration, which will help us to on board more clients onto the Demandware platform in multiple geographies. In addition, we'll also be able to bolster our call center capabilities by leveraging transcosmos' footprint of world-class call centers and take advantage of their suite of digital marketing services in Asia Pacific. Most importantly, this arrangement will help us secure new client engagement. We will be able to offer our existing clients services in geographies where we previously did not have a practical presence. In addition, we will be able to offer transcosmos existing clients, which are seeking to expand into the U.S. and Europe with a suite of services they haven't been able to access before. Now with that color on the transcosmos acquisition, I'd like to turn to our first quarter and give you an overview of the events that helped shape our financial performance, as well as events that will directly impact the quarters to come. To start, while within our expectations and as previously disclosed, we acknowledge that our revenues for the first quarter are disappointing compared to the record levels we achieved during the year in 2012. First, to clarify why revenues declined compared to last year, we are now seeing the impact of certain client programs that are transitioning off of our solution, either partially or completely. While these events have been anticipated for a few quarters, we are now starting to see the larger impact in our financial results. Though we are disappointed by the loss of this revenue tied to this transitioning client programs, I want to make it clear that I believe the largest of these client transitions are tied directly to, or influenced heavily by, certain operational challenges we experienced in 2011. As discussed on the last call, we believe we have addressed the root causes for those operational challenges in 2011, and we have a new appreciation for our clients' expectations for us to scale to meet planned or unplanned volume spikes. And we're confident we have the ability now to scale our operation and infrastructure appropriately. We believe we proved this to our clients and to ourselves during the last 2012 holiday season when under similar volume characteristics, we performed at or above service levels. And I'm very pleased to report that we went into 2013 with 100% referenceability with our clients. While we expect and plan for a certain level of churn in our client portfolio, along with the associated revenue attrition from that churn, these levels of revenue attrition in 2013 should be an anomaly. And we target returning to our expected level of churn of approximately 5% of Service Fee Equivalent revenues in the coming years. Secondly, and this is related to the first point in various ways, we have been executing various internal changes in staff adjustments all the way from the top to the bottom. As I stated on our 2012 fourth quarter call on March, we have implemented a reduction in headcount and restructuring of our business to streamline our operations and increase efficiency. While there is some benefit from these changes reflected on our March quarter results, primarily from natural staff attrition we experienced in the quarter, most of the benefit from these changes will be felt in the last 3 quarters of 2013. While we have included the anticipated benefit from these changes and cost controls in our guidance for 2013, we remain committed to continuing a thorough review of our business to identify inefficiencies and cost reduction opportunities. With regard to our ongoing restructuring plan, let me provide you with an update from our call 6 weeks ago. We continue to be committed to executing plans that we believe will accelerate progress toward our objective to make PFSweb a consistently profitable company, while we simultaneously adjust to the transition of certain clients out of our solution, fully or partially, during the first half of 2013. Some of these completed or in-process actions are: a reduction in professional headcount and adjustments to operational headcount which will continue as client transitions are completed; a targeted reduction of 25% in aggregate top executive-based salaries as part of a more incentive-based compensation program. We believe the executive comp plan, to be disclosed in our annual proxy statement, is aligned with industry best practice based on assistance we've received from outside experts on executive compensation plans. A completed realignment of the leadership team and organizational structure based on our business model, consisting of our client service lifecycle, our technology ecosystem, our operational centers of excellence and our agency services. We believe these changes will have a measurable impact on our service levels, sales effort, overall client retention and will result in greater shareholder value through higher revenues, better aligned SG&A levels and improved gross margin. We have also made a commitment to increase our visibility with Wall Street and garner expanded research coverage and support through a reinvigorated Investor Relations effort. Over the past 6 weeks, Tom and I have conducted a series of Investor Road Shows in New York, Minneapolis, Milwaukee and San Francisco. We have enjoyed the opportunity to share the PFSweb story with existing investors, prospective investors new to our story and other interested parties. We expect to continue this commitment through greater transparency and engagement as we return to New York and travel to additional cities and venues throughout the rest of the year. On the last call, I made a commitment to all our shareholders to evaluate every opportunity to accelerate growth and unlock shareholder value through targeted acquisitions, partnerships or joint ventures, particularly in the areas of international expansion and agency. I hope you appreciate the announcement of our transcosmos alliance and the associated investment in our company as a clear indication of our commitment to accelerate growth and increase shareholder value. While I do not expect to announce a new deal with every conference call, we will continue to evaluate every opportunity in light of the resources we now have at our disposal. Tom and I also remain committed to exploring alternatives to the way in which we present the financial results of our Supplies Distributors business. We have been clearly reminded in our meetings with investors that the accounting treatment of this segment and our business -- of our business match the true value of our company and the tracks from the strong growth opportunities of our services business. We realized we must spend at least 5 minutes of every meeting explaining Service Fee Equivalent. And while we believe that is an effective tool for understanding the true nature of our revenue stream, we also realized there are many meetings that never happened because our seemingly static top line performance over the past several years immediately prevents us from getting a second look from an investor. So we will explore ways to modify how we present these results while continuing to provide value, to Ricoh and other partners within this business segment. On our last call, I also committed, on the behalf of the management team and the Board, to make an effort to increase of stock ownership of that management team and the board by establishing ownership targets and using purchases of PFSweb shares in the open market and/or exercising holding vesting option grants to further align our interest with our shareholders. We have begun this effort as evidenced by the option grants exercised in held by members of the management team in April. We also expect this commitment to be reflective in the long term incentive portion of the executive comp plan. With those updates from our ongoing restructuring plan, I'd like to move to our view of our new business developments. There are several new client programs that we have just launched or are in the process of implementing. We are very excited about these new solutions and the associated revenues they can potentially generate. However, these programs require a ramp up theory before we expect to achieve projected levels of activity. This post implementation ramping period can vary based on what the brand or retailers in eCommerce presence was prior to launching our program, though it averages between 3 to 9 months from launch date. For an update on our existing client business, we're pleased to announce the launching of 3 new eCommerce programs and the signing of 1 agreement to expand an existing program. This past quarter, we launched 2 new individual brand programs under the previously announced master services agreement with Armour Sports. This includes one for Wilson, a leading manufacturer of ball sports equipment; and the other was for a leading basketball and softball equipment brand that we went live with in April with a PFSweb order fulfillment solution. These 2 esteemed brands joined an already successful portfolio of Armour brands live with the PFSweb. And we look forward to more brands and international expansion later this year. On our last call, we announced the expansion of a new End2End program for an additional brand under the previously announced master agreement with Kraft Foods. Joining this successful Gevalia and Tassimo solutions, this new Kraft food and beverage brand went live in April. We're excited to help them grow this brand's first eCommerce site as we continue to visibly illustrate the value that our solution brings to enterprise companies with multiple brands. Also on our last call, we announced that we had recently started a scoping project for an existing client in our growing CPG category, for which we currently operate a loyalty fulfillment program. We're pleased to announce that we have completed that scoping project and we have since signed an agreement with this client to provide an End2End solution for a new product line launching in the third quarter. We are very excited to expand our relationship with this long-standing client and help them grow their first eCommerce business. Moving to our new business contracts. This past quarter, we launched 1 new U.S. Direct-to-Consumer program and signed 3 more. And as previously mentioned a few quarters ago, we signed a major footwear manufacturer for a U.S. Direct-to-Consumer solution. We're excited to announce that this brand's eCommerce program went live in April. For this solution, we are providing order management, payment processing, fraud management, customer care and order fulfillment services. Our solution is this brand's first eCommerce operation and they have plans to expand internationally with PFSweb later this year. This global program also represents the first time we have integrated our technology ecosystem with the Hybris eCommerce platform, and we are happy to add this platform to our growing list of certified platform integrations. Finally, we're excited to announce the signing of a master services agreement with a leading Fortune 500 apparel and home fashion retailer. Under this master services agreement, we will be providing order management, payment processing, fraud management, customer care and order fulfillment services for at least 3 of their U.S. brands beginning with the planned launch of the first brand late in the third quarter of this year. We are proud to add these sustained brands to our growing client portfolio and look forward to helping them grow their eCommerce businesses. We also hope to be able to share their names with you after the programs launch in the third quarter. In addition, all these new programs brings our total to 81 total eCommerce programs live around the world, with 32 of them being End2End programs. We currently have 13 programs in implementation and scheduled to go live periodically over the next 6 to 9 months. Our new business pipeline has rebounded nicely since just a little over 1 month ago to more than 50 million in average annual contract value based on our client projections. This resurgence in our pipeline reflects the March quarter seasonal fluctuation we often see coming out the busy holidays where we experience a decline in business development activities due to the retail industry's focus on capturing holiday demand. Over the past couple of years, on these calls, I've consistently stressed the importance of our current clients in generating new business opportunities for us. Whether on boarding new brands under a Master services agreement or launching new client programs in new geographies, this organic growth is key to our future success. I believe current client contribution is a very important indicator of the health of our pipeline, and I'm happy to note that 40% of the revenue and a number of deals in our new business pipeline come from current clients. One benefit of this is that typically, our sales cycle is significantly shorter and on boarding time reduced compared to the effort to close and on board a new client. As we look to the future with a growing client portfolio, we would target to continue to grow the number of new clients we can on board in each new geography, while we also increase the number of new deals we can support from current clients. Changing gears slightly, we are also excited to announce new developments in regard to PFSweb's iCommerce initiative. Later this year, we will deploy a comprehensive omni-channel commerce solution for an existing apparel brand client. This expanded solution will leverage the full range of our iCommerce technology ecosystem including: PFSweb's iCommerce product content management solution; the Demandware commerce platform to power web storefronts, optimized for both desktops and mobile devices; and in those Aisle application used by stores to sell products not available in store; the Shopatron distributed order management platform to power shipped from store and in-store pickup programs; and our iCommerce agent application deployed to stores to enable a seamless buy-online-return-to-store process. This expanded solution will empower this multi-channel brand retailer to further delight its customers by providing a consistent, high-quality brand experience across all their channels and by enabling the consumer to buy any product, anytime, anywhere. Now I'd like to turn the call over to Tom for a detailed review of our first quarter 2013 financial results. Tom? Thomas J. Madden: Thank you, Mike. Good morning, everyone. Before I start on my financial overview, I do want to clarify one comment from Mike's section earlier. I believe we heard that he indicated a share price of $4.50 per share on the transcosmos acquisition. The actual price was $4.57, so just to ensure the clarification on that. I want to spend some time going through the March quarter results reported earlier today, as well as our outlook for the remainder of calendar year 2013. On an overall basis, while we're pleased with our results from the first quarter of March 2013, we continue to expect 2013 to be a transition year for us as we wind down certain previously announced client programs, as well as incur several restructuring and other related costs related to our initiative to streamline and improve our operations. Our total consolidated revenue for PFSweb in the quarter ended March 31, 2013, decreased to $63.1 million compared to $72.8 million reported in the first quarter of last year. This decrease was primarily related to our anticipated drop in our product revenue segment activity, as well as a slight drop in our service fee business. As we have discussed several times in the past, our product revenue activity is expected to decline based on reorganizational changes by our primary client in that business segment of Ricoh. As in the past, we provide a key metrics in our business that we referred to as Service Fee Revenue -- Service Fee Equivalent revenue. And this metric is calculated by taking our service fee revenues, which is the primary business activity we perform, and adding the gross margin on our product revenue business so that both businesses can be measured on a similar service fee basis. During our first quarter, our Service Fee Equivalent revenue declined slightly to $30.0 million as compared to $31.2 million for the same period last year. While several new and expanded client programs generated increased revenue for us on a year-over-year basis, the reduction in revenue related to client transition activity more than offset these increases. Our consolidated gross profit for the March 2013 quarter increased to $10.7 million or 20% of net revenues, excluding past-due revenues, as compared to $9.6 million or 15.2% of net revenues, excluding past-due revenues for the same period in the prior year. This improvement in gross margin percentage was both due to business mix, as we experienced a higher percentage of our net revenues from the higher gross margin Service Fee business segment, and also due to an improvement in the overall gross margin for that Service Fee business. Our gross profit percentage for the services business grew to approximately 31% during the March 2013 quarter as compared to approximately 24% in the prior year. A portion of this increase is related to improved operating efficiencies, as well as an increasing percentage of our Service Fee revenue being generated from higher margin, professional services and technology activities. In addition, the Service Fee gross margin in the first quarter of 2013 included an incremental benefit of approximately $0.6 million applicable to certain client transition related agreements, which we expect to continue into the second quarter. On a going-forward basis, we continue to target an overall gross profit percentage of 25% to 30% on existing and new service fee contracts. We are focused on continuing to increase the level of higher-margin service fee activity, including our professional services model and technology-related services to help offset what can be often lower gross margin activity in certain more commodity like service areas of our business. Our gross margin percentage for the product revenue business stayed relatively stable on a year-over-year basis. Our SG&A for the first quarter of 2013 increased to $12.8 million as compared to $10.5 million in the same period of the prior year. Both periods included incremental charges. In 2013, we had approximately $2.3 million of restructuring and other related costs, while in prior year, we had a total of $1.0 million of cost related to lease termination and relocation expenses. Excluding the impact of these incremental charges in both periods, we had a year-over-year increase of approximately $1 million in SG&A, primarily related to increased depreciation and amortization expense, facility-related cost and personnel-related expenses. As I indicated, our first quarter included approximately $2.3 million in restructuring and other charges. The charges were related to the previously mentioned reduction in professional and operational headcount we implemented in March, including severance cost for our former Chairman and CEO. While the $2.3 million currently represents the bulk of our planned restructuring charges, we anticipate making certain additional cost reductions as client transitions are completed, which is expected to be reflected in our second quarter 2013 financial performance. We believe we are making the appropriate adjustments to our operations and staffing to address the expected short-term reduced revenue levels while still supporting our long-term growth initiatives. As many of our restructuring-related activities did not occur until very late in the March quarter, there was only minimal benefit in quarter 1. However, we are currently targeting that our restructuring activities will result in reduced ongoing SG&A levels as we look out the rest of the year to a level of approximately $10 million or less on a quarterly basis. Based on a combined factor of the items that I've previously mentioned, our adjusted EBITDA for the quarter was $2.9 million as compared to $2.6 million for the prior year. Our non-GAAP net income, which excludes restructuring charges among other items, was approximately breakeven, which is relatively consistent with our performance in the same period as the prior year. Turning to the balance sheet, our total cash and cash equivalent as of March 2001 -- March 31, 2013, was approximately $18.3 million, and our total debt was just under $24 million. As a result, our total debt versus cash net position of approximately $5.7 million as of March compares to approximately $2.2 million as of December 31, 2012, our year-end date. If you recall, however, we had previously indicated that the December cash and debt balances had been favorably impacted by the timing of various vendor and client reimbursement programs. Our March 2013 net balance is more in line with prior quarter ends. Obviously, with our new cash infusion from transcosmos today of over $14 million, we have strengthened our balance sheet considerably and we believe such capital will play an important role in allowing PFSweb to accelerate its ongoing growth initiatives. Again, while we're pleased with our financial results for the first quarter, 2013 is going to be a transition year for us. As we look ahead, we expect that we will experience reduced revenue and profits in the second, and even more so, in the third quarters of 2013 as compared to the first quarter, as these client programs continue to transition. We then expect an improvement in our fourth quarter as we realize increased benefits from new and expanded client programs, including potential new clients through our transcosmos relationship, as well as seasonal client volumes. Again, while we recognize this as a transition year, we are very excited about the positive momentum in our business, including the new business opportunities we anticipate from our transcosmos relationship. Given the ramp-up time required to contract and implement new client solutions, however, we expect the benefit of these opportunities will be primarily reflected in our calendar year 2014 and forward results. As such, at this time, we are reaffirming our guidance for calendar year 2013 with Service Fee Equivalent revenue expected to be in the range of $110 million to $115 million, and adjusted EBITDA in the range of $8 million to $10 million. Again, this excludes the impact of restructuring and other related cost that we expect to continue, but to a lesser extent, in the second quarter. One last area I'd like to discuss turn -- I'd like to discuss before I turn this back to Mike, related to our shareholders relations activity. As Mike indicated, he and I have been very active over the past 6 weeks communicating our story to current and prospective investors. Our goal here is to present our PFSweb investment thesis loudly and clearly to the investor community. We continue to believe we have strong opportunities for growth as we look to the future. And with our new relationship with transcosmos, we now have an even more exciting PFSweb story to share. Now I'd like to turn the call back over to Mike for some closing remarks. Mike? Michael C. Willoughby: Thanks, Tom. As I stated earlier, we are very excited about the progress we've made over the past few months. We believe our future offers tremendous growth opportunities, and we believe the steps that we're taking will help us unlock that potential. Our relationship with transcosmos is just one new part of this exciting new path the company is taking to aggressively grow the business. I look forward to beginning to start leveraging this new relationship over the summer, and I'm excited to bring you news of our plans to accelerate growth through this important alliance in the quarters to come. I'd like to invite you to stay involved with our story and track our progress as we work to transform PFSweb into a global commerce powerhouse. I'd like to thank everyone that attended the call today, and I hope to be speaking with many of you over the next few days and weeks. I am fully committed to delivering the best possible returns for our shareholders and the highest levels of service and value for our world-class customers. This concludes our prepared remarks, and I'd now like to open the call up for questions. Operator?

[Operator Instructions] Your first question comes from the line of George Sutton of Craig-Hallum. George F. Sutton - Craig-Hallum Capital Group LLC, Research Division: Mike, I'm intrigued by the transcosmos opportunities as you listed in your press release. I wondered if you could talk about some tangible examples. For example, a PFSweb client moving to Japan or a transcosmos client moving to the U.S. How would that work structurally? How might that look different than it if it was just simply a deal done through your system? Michael C. Willoughby: Well, first off, I think operationally, a transcosmos client coming to the U.S. requires very little additional work for us to facilitate that, which is one of the reasons that we have focused that particular benefit upfront early in this process. So Phase 1, if you like, the process would be to engage with current transcosmos clients that have an eye towards entering the market in North America or Europe, and on boarding those clients as rapidly as we can, including the potential to have some client programs live in the last quarter of this year. Everything is in place to create that opportunity for those clients. With regard to our clients going to Japan, for instance, there is some work to be done to localize our solution appropriately for that audience. We believe we have resources available within transcosmos to help with that work. Their large pool of interactive marketing services specialist, as well as the large pool of web developers that we might have access to will be helpful in that process. There is some level of capital investments required for us to do that, and so therefore, we are clearly targeting an impact from being able to take PFSweb clients and launch programs in Japan as being an impact more in 2014 timeframe. That being said, we do have, I think, pent-up demand within our current clients, looking to expand their programs into Asia-Pacific, particularly Japan and China. And so we will be, over the next several months, engaging with our current clients to talk to them about this program and start to build the pipeline of potential program expansion deals targeting Japan and China. With regard to -- you're asking also about sort of the financial structure, we haven't mentioned the details of the commercial arrangement. We'll probably have a bit more color on that in August as we start to flesh out the operational and financial details. We would not expect the arrangement to affect our gross profit, gross margin expectations for deals that we operate in either geography. George F. Sutton - Craig-Hallum Capital Group LLC, Research Division: Interesting. Okay, good. Now I wondered if you could address the selling process you're going through this year, where you do have 100% referenceability versus last year, where you're coming off a tough 2011. My assumption would be that the deal cycles might be shorter, might be a little bit easier for you to work through, is that a fair assumption? Michael C. Willoughby: It's certainly a fair assumption with our current clients. You might imagine that is a tougher sale with the current client to convince them that they ought to expand their program with us into a new geography or add new brands if you're dealing with a hangover from 2011 holiday struggle. So coming off of a superior holiday performance in 2012 certainly strengthens our position to engage with our current clients. And that is a huge benefit us because the sales cycle is naturally shorter with the current clients anyway, where you're not having to re-contract and a lot of the infrastructures have already been deployed in order to lie it on board new programs. So the benefits are accentuated with current clients. I also do think that there's a benefit with net new clients because we are blessed to have great referenceability within our industry when our clients are 100% referenceable. It's an important part of our sales process to new clients, and so our ability to, once again, present our prospective clients with the entire list of our current clients and say, call whoever you would like, they'll tell you that we're a great service provider to do business with, even to the extent that we've done full disclosure on the challenges in 2011 and point it to the rebound with a great performance in '12, I think helps us in that sales sale cycle, although I wouldn't say that necessarily shortens the sales cycle materially with a new client. George F. Sutton - Craig-Hallum Capital Group LLC, Research Division: Got you. Last question for me. Relative to the capital that you now have and relative to some of the objectives you listed, it doesn't sound alike you're going to slow down in terms of the transformation, so I just want to confirm that; and b, I wondered if you could give us some sense of priority relative to that list that you provided. Michael C. Willoughby: So clearly, the priority would be almost in reverse order of what I listed, where we would begin to immediately work through the operational implications of expanding our solution into Asia Pacific. And as I said, we'll probably have more comments on that in August once we've started to put those plans into action with our partner, transcosmos. But we'll also start to get serious about the first point and identify potential acquisitions or investments that we believe would be accretive to us, and also add important services and revenue streams to our solution. So we have -- obviously, we know a lot of the players in our industry with regard to creative design firms and system integrators and technology providers. We'll now start to get serious about making a list of potential strategic partners where an acquisition or investment would make sense, and as I said, be accretive to us both in financial results, as well as in improving our services offering.

[Operator Instructions] Your next question comes from the line of Alex Silverman of Special Situations Fund.

Just to clarify, the capital that you've raised, is the plan to actually build warehouses in pick and pack operations in Asia Pacific? Michael C. Willoughby: It is absolutely not targeted for that purpose. The infrastructure that we will need to leverage to take clients into Asia Pacific is already there as a part of the transcosmos organization and their relationships. So our use of this capital, as we've identified, is primarily to accelerate growth in the higher margin areas of our business as we indicated through investments or acquisitions and some of these high-end services, as well as in doing the primarily technology work required to localize our ecosystem for deployment in China or Japan, where some of the technical requirement, such as supporting a double byte language with their characters that you see on the web pages required to localize the solution. So primarily, technology investments with regard to international expansion.

So when you say your first priority for the capital is to fund the expansion into Asia Pacific, you're talking about technology investments? Michael C. Willoughby: Primarily so.

Okay. Second question. The plans that you guys laid out back in March in terms of declassifying the board, bringing on additional board members and such, are those plans still in place?

Yes. All those plans are still in place. We will be able to convey more in our proxy that we expect to put out here within the next week or 2. All the corporate governance items that we discussed previously are still planned to meet moving forward.

Okay. And is the representative from transcosmos going to take a -- succeed or replace an existing board member? Michael C. Willoughby: We'll provide more information on that as that is finalized.

Will the declassification of the board be for those brought on the board this year or for future boards? Michael C. Willoughby: I think, once again, the details of that process will be to wait for the proxy. I think the mechanics of exactly how that works and which classes are affected is still being worked out. But we expect to release that very soon, within the next week or so.

When will we see the 8-K regarding this transaction? Michael C. Willoughby: It should be later this afternoon, by the end of the day.

And the 10-Q? Michael C. Willoughby: That should be later today as well.

[Operator Instructions] The next question comes from the line of George Walsh of Gilford Securities.

I was just wondering, with the additional capital now, just a couple of questions relative to that. So the total numbers of shares outstanding now is about $16 million, is that correct? Thomas J. Madden: That's correct.

Okay. And I think you have about $30-some odd million in cash now, is that what it would be, about $32 million? Thomas J. Madden: That's correct.

Okay. Is there -- does this help you kind of restructure the balance sheet a little bit in terms of relations with the bank that you've had previously, doing some consolidation or anything? Thomas J. Madden: It may -- we will begin to have those discussions with the banks. We've got great working relationships today with both Wells Fargo and Comerica relationships here in the U.S. So both are partners in different components of the business, one is in the product revenue side and one is in the services side, so they have kind of different dynamics to the structure that we work under for both of them. But we'll continue to evaluate whether it makes sense to consolidate that or to continue to use 2 providers. But again, those relationships are very strong and we see what they've done for us and we've been able to meet their requirements as well.

Okay. And you mentioned -- I just want to be, clear on the TCI, transcosmos, that was about 20% now, and they have an additional 5%, would you say that that's the purchases they can do in the open market? Michael C. Willoughby: That's correct.

Okay. And is there a standstill after that, and there was a line that was mentioned in the news release? Thomas J. Madden: Yes, the agreement has a standstill as part of it.

Okay. All right. And I'm just curious, what's the -- just a little bit on the history of how this arrangement came about, maybe a little timeline. Michael C. Willoughby: Sure. Well we've been engaged with them for quite some time, just as a potential partner. Although it's been over the last couple of months that, that process really accelerated as we came to know them. They're a very entrepreneurial company, and we've been very impressed with the speed at which they respond to opportunity. And as we got to know their client portfolio and see some of the great retail brands that are involved, got a feel for the infrastructure that they have and some of the specials that they have on their staff became more and more obvious to us that this was the logical partner we've been searching for, for now 2 years to enable us to go into the Asia Pacific area. And so over the past 30 days or so, we rapidly came to the conclusion that this was a great strategic partnerships for both companies, and the terms that you will see represented in the 8-K later today really reflect that mutual exploration and that work that was put in over the past 30 to 45 days. It's pretty unusual for a Japanese company to respond to that entrepreneurially, which once again gives us a lot of comfort knowing that they're going to be able to pace with us and be as agile as we would like to be.

Yes, and what was most attractive for them? Was it some of the call centers you had, like in the Philippines and stuff, or was it really, they really wanted the U.S. presence? Thomas J. Madden: They prized our mature presence in North America and Europe, particularly the technology, ecosystem and the professional services. They understand the space that we're in because they do some of the things that we do in Japan, although not on an End2End basis. And as they got to know our ecosystem and the complete solution we provide for clients, they came to realize it was a best-in-class solution, and they have pent-up demand within their client portfolio with many of the retail clients wanting to expand their presence into the U.S. for the first time. And so this gives them the ability to go to those clients and showcase this solution, which is deployed, mature, certified and proven, which should enable them and us to on board those clients rapidly into the U.S. and Europe.

Okay, so that's the ramp up you see. This would be, I think we had alluded to earlier, faster than your usual. And you really look to maybe getting some of these people on board for your fourth quarter this year and put a lot more impact in 2014? Thomas J. Madden: Right. We would expect to see some impact in Q4. Probably helps us to fully realize our new business objectives for the year. But we certainly expect to see the impact show up in 2014 with accelerated growth opportunity.

Will this opportunity be reflected as you report your -- as you do your business pipeline? Will there be some sense of the -- will there be change in that number relative to this? Thomas J. Madden: Actually, we hadn't really considered whether or not we would break out that component separately, so that's something that we'll think about, George, and let you know in August if that makes sense.

Okay. And just, what's the pace of -- that you think you would be utilizing this additional capital? Thomas J. Madden: I think we'll probably let the check clear before we necessarily start to think about the details of it. We have certainly been thinking about this, as you know, for the past 30 days or so. Tom and I have been spending times with investors and thinking about this transformation. I think now we can get serious about making our list of potential investments or acquisitions. I would say, let us come back to you in August with a little bit more detail on what we're seeing. But we'll get serious over the summer about making those plans and seeing what opportunities are out of there.

Okay. And I was looking a little bit at the company's website, they have a lot of different divisions. Are you working with the company as a whole or is it a certain divisions that you're really going to be working with relative, to their various product offerings? Michael C. Willoughby: No. Our relationship is with transcosmos, the enterprise. Although I think our working relationship will be managed out of their U.S. office, they have a staff of Japanese-Americans that are able to bridge the gap language-wise and cultural-wise, and help make sure we're able to engage effectively and quickly with them corporately. Tom and I, along with some other members of our executive team, will be making a trip over Tokyo, probably in June, to begin our top to bottom plans of doing this integration. So we're going to move quickly.

Okay. And do you have any quantification numbers of just their revenue stream and... Thomas J. Madden: Yes, well, in 2012, they reported total revenues of a little bit more than $1.5 billion. So as Mike indicated, they've got over 700 or 800 client relationships, a number of different geographies, and I think, in excess of 20,000 employees.

Okay. And is this something just historically? Is this a first for them doing this with a company in the United States? Michael C. Willoughby: No. They've actually done this quite a bit, especially in the late '90s and early 2000 time period. They had a number of strategic investments with a lot of partners that they were working with here in the U.S. and they've been a little bit quieter on this activity over the last few years, but it's definitely an instrument that they've use in the past in order to establish a stronger presence and relationship with the companies that they want to work with. So it's something that's been very recurring for them on an overall basis over that period of time.

Okay. And will they be -- will there be a liaison or representative or management or whatever representative from them, besides on the Board which you mentioned, but as part of management with you guys in the U.S.? Michael C. Willoughby: Well, clearly, we're going to have a very close working relationship in order to execute on our plans. We have not formalized those plans yet, but I'd certainly would expect that there'd a change program of sorts that we have in place in order to engage quickly. So once again, I think we'll come back in August with some details on where we're at. But I certainly would expect to have some of their folks with us as we start to on board their clients into our U.S. and European solutions.

Our next question is a follow-up from Alex Silverman of Special Situations Fund.

Just a follow-up on one of George's question or on a couple of George's question. What process did you guys go through to determine dilution, what was acceptable, what kind of hurdle rate or return you expect to make on the capital you're bringing in? Michael C. Willoughby: Okay. So we explored other transactions like these in the space to ensure that the value that we're being paid for the shares was appropriate, and utilize outside firms to assist us in that evaluation process.

But they basically bought it -- basically, you're issuing it at 4, 4.5x EBITDA? What's your hurdle rates for what you expect to -- for your investments? Michael C. Willoughby: Obviously, it depends on the individual investment -- many of them are long term in nature, so we did feel like this was an appropriate price in our discussions with them in order to take advantage of the opportunity that we saw with working with them on a long-term basis, us being able to enable our clients to experience a presence in the Japanese -- in Japan, in China and for us, it's very unexpected, significant improvement in some of their clients in revenue for [ph] their clients coming over here.

Will we get to see that analysis? Will that be part of the filing? Michael C. Willoughby: No, I don't believe so.

Okay. And many, many U.S. companies have all kinds of joint ventures in Asia Pac. Very rarely does it result in selling 20% of the shares in the company. Help us with how that came about, and how frankly it came about in just 30 days? Michael C. Willoughby: Well, as I said, George, we've been in discussions with them for longer than that but really got serious in the past 30 days and as Tom mentioned, this has been a mechanism that they have used historically with great success to partner with a company where they were going to have skin in the game and contribute to...

I understand the benefit to them. I'm trying to understand the benefit to PFS? Michael C. Willoughby: Well, the benefit to us is that it siemens [ph] the opportunity we have to grow into this Asia Pacific area. It helps fund that process, which we thought was important to be using our cash effectively and have it tied to the initiative appropriately. And there are these auxiliary benefits that we believe will accelerate growth through our ability to use the funding for these other investments and acquisitions that we've been mentioning. Thomas J. Madden: And a key part of this is just access to their existing client base for -- that are very interested in expansion in the U.S.-European markets. And that activity now has a high likelihood of being able to go through us instead of another solution. Michael C. Willoughby: I think another critical element as we're discussing the financial and operational relationship between the 2 companies is that the way that they treat this investments allows us to provide value to them as they consolidate results into their financial statements, so we don't have to have alternatives ways of returning value to them. So they bring a client to us, we're able to on board the client and operate the client within our normal expectation on gross margin and gross profit rather than having to have some sort of commission, plan or something else in effect to return value to them.

Wouldn't the commission be less expensive than selling 20% of the shares? Thomas J. Madden: Again, the agreement allows us to have the opportunity to service their client base that has exhibited significant excitement about expanding into the U.S. and European marketplace. We would not have been able to obtain that potential sales pipeline without structuring this in this manner.

At this time, there are no further questions. I will now turn the call to management for any additional or closing remarks. Michael C. Willoughby: Thank you, operator. As I've said before, we appreciate all of you for participating and for being part of our story. So I'm going to I look forward to seeing you -- many of you face-to-face over the next few months. And we look forward to being back with you in August to give you an update on these exciting results that we have in the announcements we made today. Thank you, and have a great day.

Thank you. That does conclude today's PFSweb first quarter 2013 Earnings Conference Call. You may now disconnect.