Mike Willoughby - CEO Tom Madden - CFO

Mike Graham - Canaccord Mark Argento - Lake Street Capital Markets Jason Kreyer - Craig-Hallum Robert Breza - Wunderlich Securities Kevin Kopelman - Cowen and Company

Good afternoon everyone and thank you for participating in today's conference call to discuss PFSweb's Financial Results for the First Quarter Ended March 31, 2016. Joining us today are PFSweb's CEO, Mr. Mike Willoughby; and the Company's CFO, Mr. Tom Madden. Following their remarks, we'll open the call for your questions. Before we go further, 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 words anticipate, believe, estimate, expect, intend, will, guidance, confidence, target, project and other similar expressions typically are used to identify forward-looking statement. These forward-looking statements are not guarantees of future performance and may 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 the call, we may also present certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, non-GAAP net income, service fee equivalent revenue, merchandized sales and certain ratios that use these measures in our press release with the financial tables issued earlier today, to which your attention is directed on our website at pfsweb.com. You can find our definition 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 be considered in addition to and not instead of GAAP measures. I would like to remind everyone, this call will be available for replay through May 23, 2016, starting at 8.00 P.M. ET this evening. A webcast replay will also be available via the link provided in today's press release as well as available on the Company's website at www.pfsweb.com. Any redistribution, retransmission or rebroadcast of this call in anyway without the expressed written consent of PFSweb, Inc. is strictly prohibited. Now, I would like to turn the conference call over to Chief Executive Officer of PFSweb, Mr. Mike Willoughby. Sir, please go ahead.

Thank you, Shannon, and good afternoon, everyone. As you might have seen earlier this afternoon, we issued a press release announcing our results for the first quarter ended March 31, 2016. The momentum from our record 2015 has carried into the first quarter of 2016. And our Q1 record revenue was driven by growth across all of our core service offerings as well as the continued benefit from last year's acquisitions of CrossView and Moda. We also continued to leverage our newly launched consulting practice during the quarter, which enhances our positioning earlier in the sales cycle. In fact we booked 10 new recurring revenue engagements in Q1 and 52 new agency and technology project engagements, a project bookings record for our company. I'll have more to say about our first quarter bookings later in the call. Within these project engagements we're particularly excited about several new projects involving the SAP/hybris platform. We're also excited to have won our first end-to-end engagement on the recently refreshed and reinvigorated Magneto platform. These project and recurring revenue engagements illustrate the value of our recent acquisitions in increasing our addressable market. Before commenting further I'd like to turn the call over to Tom to discuss our financial results. And then following Tom's remarks I'll return to discuss some additional highlights, provide a business development overview and open the call for your questions. Tom?

Thank you, Mike and good afternoon everyone. As Mike indicated, I’ll spend some time providing additional color on the first quarter 2016 results reported earlier today as well as our outlook for the remainder of 2016. Before doing so, as I do on every call, I'd like to remind everyone that when we provide discussions about our financial results, we often discuss our service fee equivalent revenue performance. This non-GAAP metric is calculated by taking our service fee revenues, which is a primary business activity we perform and adding the gross profit on our product revenue business, so that both businesses can be measured on a similar service fee basis. With that as a backdrop, let’s quickly review the numbers. Our fourth quarter service fee equivalent revenue increased to a Q1 record $15.0 million, an increase of 33% compared to the year ago quarter. This increase was driven by both new and expanded client relationships as well as approximately 8.2 million of service fee revenues generated by our CrossView and Moda businesses which were acquired mid-year, calendar year 2015. Also note that this March quarter results include a somewhat higher level of client fee activity than what was previously anticipated, some of which moved from a quarter two expected timeline up to quarter one. Our service fee gross margin in the first quarter increased 310 basis points to 34.6% compared to last year. The increase was due to a higher proportion of agency and technology services in the 2016 quarter in part due to benefit from the Moda and CrossView acquisitions. As expected, our product revenue declined by approximately 20% over the prior year due to ongoing restructuring activities by our last remaining client in this segment and they're discontinuance of certain product lines. Product related gross margins were in the 5% range as expected. SG&A expenses during the first quarter were 17.6 million compared to 13.6 million in the year ago quarter. SG&A in Q1 2016 includes the incremental SG&A levels of our newly acquired entities which accounts for approximately 3.5 million of the year-over-year increase. And that included 0.6 million of amortization of acquisition related intangibles. SG&A has also increased as a result of incremental sales and marketing expenditures as well as other infrastructure expenditures to capitalize on our expanded service capabilities and support our targeted future growth. These increases were partially offset by a 0.6 million reduction in acquisition and restructuring related cost in the Q1 2016 quarter as compared to Q1 2015. And a $1 million benefit recorded in the March 2016 quarter resulting from revised estimates of certain performance based continued payments based on our 2016 and 2017 projected financial results for Moda and CrossView. This contingent payment liability will continue to be reevaluated on a quarterly basis. With all this taken into account our adjusted EBITDA in the first quarter increased slightly to 3.8 million compared to 3.7 million in the same year ago quarter. As a percentage of service fee equivalent revenue, adjusted EBITDA was 7.5% compared to 9.9% in the year ago quarter. As expected the reduction in adjusted EBITDA margin is a result of our increased investments in sales marketing and infrastructure resources which we continue to benefits we will see the benefits of in the back half of 2016 end into 2017. Net loss in the first quarter improved to 0.8 million or negative of $0.04 per diluted share compared to a net loss of 1.7 million or $0.10 per diluted share in the same period of 2015. From a non-GAAP net income stand point, excluding the impact of amortization of intangibles, acquisition related cost and non-cash stock based compensation, our non-GAAP net income was $41,000 for the first quarter of 2016 compared to a $130,000 in the year ago quarter. Now turning to the balance sheet at March 31, 2016 cash and cash equivalent totaled 15.6 million compared to 21.8 million at December 31, 2015. Total debt was 37.0 million a slight increase from 35.4 million at the end of 2015. As such our net debt position was approximately 21.4 million as of March compared to 13.6 million at December. As we’ve stated in our prior calls, our cash balance includes the benefit from the timing of certain cash collections received by PFSweb from our clients customers that are then later remitted [ph] to our clients. This benefit was higher as of December 31, 2015 as a result of higher holiday season activity then it was at March 31, 2016. Now let’s review our 2016 outlook. We continue to expect strong growth in service fees equivalent revenue and adjusted EBITDA as we’ve realized a full year benefit from recent acquisitions as well as incremental revenue from new and expanded client relationships. Consistent with our previous guidance, we’re reiterating our target for calendar year 2016 service fee equivalent revenue to range between 220 million to 230 million, reflecting growth of 19% to 24% from 2015. We continue to target annual service fee gross margins of 27% to 32% dependent on revenue mix then we have been performing it and will continue to stray to our performing at the middle to high end of this range. We’re also reiterating our target for adjusted EBITDA to range between 23 million to 25 million up 11% to 21% from 2015 results. The adjusted EBITDA target includes the expected impact of incremental sales and marketing expenditures as well as other infrastructure resources to capitalize on our newly acquired capabilities and support our future growth. Consistent with our prior communications, we expect that our sales and marketing spend will increase between 2 million to 3 million in calendar year 2016 as compared to 2015 and as a result from a quarterly prospective, we expected increase in SG&A and so we’re seeing a temporary decrease in adjusted EBITDA margins in the first half of 2016, as a result of our incremental investments as well as timing of other expenditures. As we look ahead to toward [indiscernible] specifically, if you recall I stated earlier there are Q1 service fees included the benefit of certain client activity that was previously anticipated in Q2. In total Q1 and Q2 of calendar year 2016 together are relatively on plan, with some what of timing differences to win the revenue and related adjusted EBITDA contribution is expected to be reflected in our results. From an adjusted EBITDA stand point, as we go through the year, we expect to have an improving adjusted EBITDA percentage as a percentage of service fee equivalent revenue. We current expect most of this improvement to be reflected in the second half of the year and into 2017 as we generate incremental revenue and further leverage the investments we’ve made. Please note that our 2016 guidance does not include the impact of potential future acquisitions. This includes my prepared remarks, now I’ll turn the call back over to Mike for some further comments on the recently completed quarter as well as an overview of business development highlight and closing remarks. Mike?

Thank you, Tom. We’re excited about the record saving project bookings performance this quarter and I’m also pleased with the strength of our sales pipeline, particularly for project on the Demandware and Hybris platforms and recurring revenue engagement involving our operation segment. As I’ve indicated before, the first two quarters of the year are the heights of the selling season for B2C projects and operations engagement with most of the recurring revenues deals that would be expected to contributive revenue in the current fiscal year booked by the end of the second quarter. The selling season for B2C project that would be expected to contributive revenue in the current fiscal year typically extends into the third quarter, as we are working to sign and then complete many client projects prior to the all-important holiday period. We continue to expect the last quarter of the year to be our strongest overall revenue quarter of the year, void by the revenue from holiday operation. Beginning with our last quarterly call we are now only reporting bookings for the district quarter for which we are reporting. In this case I’ll report bookings from Q1 which is January 1 through March 31. Previously we provided updates on new bookings that occurred leading up to the date of the conference call, which in some cases can be significantly longer or shorter period depending on the timing of the call. We believe this will result in a more accurate view of the sales activities during a given quarter. And a better basis for year-over-year comparison and a clearer view of the selling trends including seasonality. As a reminder regarding bookings for both project work as well as engagements with recurring revenue streams, a booking is a contractual engagement to begin work for client within any or all of our services segments. The engagement may be formalized by any one of a number of contractual mechanisms, but in order to be considered a booking the engagement must require us to deliver service to a clients and the client to compensate us for those services. The engagement should also be for incremental services and not normal course of business service projects such as postponed manufacturing work, value added service project and one of our DCs or call center support for a special flash [indiscernible]. In addition to disclosing the number of booking each quarter we will estimate the expected revenue from project engagement and the lifetime contract value for recurring revenue engagement based on client provided information and the expected length of the contract. We used the lifetime contract value term as a reference to cumulative growth service fee revenue we expect to earn over the expected life of the contract. Project engagement will generally be less than a year in duration while recurring revenue engagements will always be a year or more in duration. As we disclosed this information please understand that the project revenues and estimated lifetime contract values are based on client projection which often change and in any case may not benefit achieved, we provide this information so that you can have a better understanding of our business. But we don’t assume any obligation to update any information and there may be circumstances in which we are unable to disclose bookings or lifetime contract value. With that said a quarter one 2016 we booked 52 new agency and technology projects worth approximately $13 million. In addition to the new projects book in quarter one, we booked 10 new recurring revenue service engagements where the total is about $24 million in lifetime contract value. With regard to the 10 recurring revenue engagements we discussed on the last call the signing of a managed services contract to provide ongoing e-commerce development services for a footwear retailer on SAP/hybris. The contract with the footwear retailer is a three year agreement for an estimated lifetime contract value of approximately $1.9 million and is included in the recurring revenue bookings number for Q1. Also disclosed is the Q1 signing of a new agreement with an internet retailer of seasonal apparel to provide a U.S. order fulfillment solution. This engagement is a three year operational contract for an estimated lifetime contract value of approximately $11.7 million and is also included in a recurring revenue bookings number for Q1. This new client is being hosted in a newly leased facility in Southaven, Mississippi adjacent to our other Southaven operations to facilitate labor sharing and management across building. This client engagement is now partially operational with full operations expected later in Q2. Not previously disclosed we signed a new contract late in Q1 with global travel plug [ph] to provide a U.S. end-to-end solutions. This particular deal is unique and that it will be our first end-to-end solution built on the Magento platform. This demonstrates our value proposition in end-to-end perspective regardless of what platform is chosen by the client. This engagement is a three year operational contract for an estimated lifetime contract value of approximately $8.9 million and is also included in the recurring revenue booking number for Q1. We also signed project for a creative services and a hybris upgrade along with a recurring revenue managed services agreement with a west coast base retailer of home improvement and gardening products. This particularly was a great example of the benefit of our cross-key subsidiary and is gaining with the ability added on agency services work to their existing technology and services deals. The project component of this agreement is included in the Q1 project bookings number and [technical difficulty] engagement is than the Q1 recurring revenue bookings number as a one year services contract, for an estimated life time contract value of approximately $900,000. The remainder of the Q1 recurring revenue booking are from a series of smaller engagements including agency marketing services retainers and a one year managed services contract. With regard to the 52 project bookings for the quarter we had a strong quarter of booking new deals from our technology services business to provide a wide array of web development services for our new client. These bookings included new site builds, defined and design consulting services, managed services and even some add-on agency components. These bookings also include the two Demandware builds and the consulting engagements we discussed on our last call. Included in the Q1 bookings are a $3.8 million contract for expanded technology services on the IBM WebSphere platform or a special event apparel retailer, a $1.1 million contract to provide managed services on the Demandware platform for a leading gift and greeting card brand. A $1.2 million contract to provide managed services with a widely distributed casual apparel brand and a $1.1 million contract to redeploy a Canadian general merchandize retail chain on the Demandware platform. Also included in the Q1 bookings -- project bookings is an engagement with a UK based home decorations brand to provide a Demandware site implementation. On that note we continue to see strong interest in the UK and remain committed to expanding our presence in this fast growing market. As we look ahead to quarter two, let me give you a couple of recent highlights from deals that we've signed early in Q2 and that will be included in our Q2 bookings number. These highlights will not include the expected project or lifetime contract value since these yields were closed after Q1. We recently signed a project agreement with a Canadian-based natural loan response manufacturer to build their new ecommerce site on Demandware. The site will serve both the Canadian and U.S. market when it goes live later this year and we hope to share the name of this brand with you at that time. We also recently signed an agreement expanding our previously disclosed project engagement with a large membership warehouse club in Central America to include a three year managed services agreement and access to our order management solution and customer service solution for use in the call centers. With regard to the back half of the year I'm also excited about a couple of segments of our sales pipeline. As you probably noticed we continued to experience good traction with opportunities on the Demandware platform. I believe this strength is due to a combination of our technical maturity on the pipeline, our very strong client base on the platform, the strength of our end-to-end offering including the Demandware platform and the strength of Demandware in the market ecommerce platforms. I'm also pleased with the strength of European pipeline particularly in the UK, our Moda acquisition and the investments we're making in agency capability and sales and marketing efforts are bearing fruit in the UK and in Western Europe. I'm also excited about the number and size of end-to-end and operations deals in the pipeline including a couple of nice operations deals currently in contracting. We have significant new business sales objectives in the back half of the year and a robust new business pipeline is critical to our efforts to capture and invoice the required new revenue. At this point I am comfortable that we have the pipeline to support our revenue and adjusted EBITDA objectives for the year, as reflected in our affirmation of our 2016 guidance. Also critical to our efforts to win new business is our ability to expand existing client account, to include new geographies and new service categories. To that end we've introduced a revised account planning process that includes every client relationship in a thorough evaluation of incremental sales opportunities. Over the past 18 months we have repeatedly referred to the value of cross-selling our expanding capabilities to our current client including those clients we have as a result of the four acquisitions we have done. I believe we've done a good job making the most of our current client relationships in our search for new business opportunities, but I expect the deployment of this revised account planning process to take us to the next level. Growing our current client engagements as we seek to maintain a strong base of recurring revenue is a key factor in maintaining double-digit growth rates in the future. Without a strong portfolio of clients contributing to that growing base of recurring revenue, it would otherwise become increasingly difficult to sustain our annual organic growth rates of 10% to 15%. As a reminder we refer to our global portfolio as engagement, which can be defined as a single e-commerce operation or a single brand with a recurring revenue stream from any of our service segment. We currently maintain approximately a 160 active client engagements to provide recurring services from our agency, technology or operation business segments. Now moving on to our strategic commerce consulting practice as we discussed on the last call, given the platform agnostic capabilities we've gained through our acquisitions we're now positioned to serve as a true strategic partner for clients and provide high-value strategic digital transformation services and platform selection consulting to both B2B and B2C companies. We remained in the early innings of capitalizing omni-channel [ph] value proposition and vast market opportunity, however early results are encouraging and an addition to the stand alone engagement, I discussed on last call, we’re already seeing a positive impact on our sales cycle from billable define and design project, general sales support activity and platform evaluation project. That said despite the platform agnostic value preposition, we can now go to market with, we remain committed to our long standing partnership with Demandware. Just last month at the 2016 Demandware same conference we received the 2016 global delivering partner of the year award. This follows our sales partner of the year award received. We’re extremely honored to have received this award and feel that is a true testament to the value of our partnership with Demandware and the services we deliver to our clients around the world. We look forward to building out new clients and growing existing one as two continue our joint success with Demandware. Moving on to our integration of CrossView, which we acquired last year. For new listeners on the call, CrossView is an eCommerce system integrator that solidified our technology service offering with IBM WebSphere Commerce and SAP/hybris Integration Capabilities. CrossView also provides us with a robust business-to-business front-end eCommerce development solution that when combined with our agency and operation services has created a very compelling end-to-end B2B offering for us to take to market. We continue to make progress as planned integrating CrossView more fully into our technology services business, with most of the support function, fully integrated we’ll begin to look to leverage the technical talent in our technology business, across all five supported platforms. In the near term this will likely take the forum a Cross training members of the CrossView technological team on the Demandware and Oracle platforms. Our long term vision is to have a large group of universal technologists, who are able to easily move between the platforms as we see it take full advantage of secular tailwinds created by increases in market demand with certain platforms while militating headwinds, created by decreases in market demand for other platforms. I believe this universal technologists approach will be very unique in the system integrated market and will serve to further differentiate PSFweb as a world class global commerce service provider. This approach should also enable us to maximize our total addressable market in both the U.S. and Western Europe. With regard to the longer term integration of CrossView, we’ll continue to evaluate opportunities to drive additional synergies while operates CrossView as a wholly-owned subsidiary using the CrossView branding in the near term. With regard to our acquisition strategy we plan to continue our strong track record of integrating accretive acquisition and remain opportunistic with geographic expansion of our digital agency and technology services platform practices in Europe. For the remainder of 2016 we will continue to drive growth through our higher margin service offering to capitalize on our large and growing addressable market. We also remain in the early innings of leveraging B2B capabilities and we continue to believe this underserved portion of the market is the sizable opportunity for our Company. We also remained excited about the opportunities in our operation segment as I indicated earlier, but most importantly we plan to continue executing for our clients and enabling them to maximize online sales which we believe the most enhance value for our stock holders. Shannon we will now open the call for question and answer session.

Thank you, sir. [Operator Instructions] And we’ll take our first question from Mike Graham, Canaccord.

Thanks you and guys congrats on a really strong quarter. I have two question, to start off, one is just on the gross margin, it was really strong. I know you said that you’re still expected to be 27% to 32% going forward but, you also commented that you expect some of these high margin service areas to grow most quickly, so I’m just wondering how to square those two comments. And then, you know Mike, you gave some really helpful color on the business development pipeline, I didn’t hear a ton of color about, how much of that was B2B and I know that’s been a real important point of emphasis could you also, I’m just wondering if you give us update on, how your B2B efforts are progressing and how important that figures into some of the business that you’re winning right now? Thanks

So Michael this is Tom, I’ll start off with the efforts question on gross margins, so as you pointed out, our gross margin was very strong during the March quarter, up quite a bit over last year. we did have some benefit this quarter -- incremental benefit this quarter from higher project activity and technology and agency work that we’re performing on behalf our clients, so that was all very favorable. The overall guidance that I provide of 27% to 32%, I put some added word in front of that this times to indicate the best kind of our annual guidance range. I realize that we’ve been at kind of the high end or slightly above that range, as we look at some of the quarterly performance and but are they annual performance standpoint because of some of the growth in the operational activity as we look into Q4 performance period that often attentive for the overall annual number down to somewhat back in to -- that’s somewhere within that range hopefully again as I indicated in my comments somewhere at the high end of the range. So and I think what you’ll see is, while it may not be as strong as it was in this first quarter, an expectation that we’re beyond the high end of that guidance range in the first few quarters of the year and then somewhere middle of that range can we if we look at our Q4 performance, so that we get to an annual targets or annual performance somewhere within that range.

That makes sense. Thank you.

Thanks Michael, and on the B2B question so couple of things there I think we have indicated we were launching this end-to-end version or B2B version of our end-to-end offering, late in the year, last year we indicated it was early innings and there will be a relatively long sell cycle for an end-to-end deal. That being said we have one late stage opportunity in our pipeline right now that has both B2C and B2B component, where the B2B part was very critical or is critical to their selection. So I feel like the B2B aspect of our offering is really important in that particular opportunity. So I’d [technical difficulty] to the extent that we win that deal at least chopped that up partially to having the B2B offering. We still also have several hybris platform deals in our pipeline that are either primarily or completely B2B and are taking advantage of the opportunity to up sale the client during the sale cycle on our broader capabilities, we’ll have to see whether or not that successful in the sales cycle or whether we would wait till after the engagement begins in order to expand the relationship and obviously we have to win the deal first. So that’s I think the color that I would be able to provide on the B2B at this point, we had originally indicated that we didn’t know how much contribution we would expect from B2B incremental B2B opportunities this year, but just from the couple of deals I mentioned it’s possible we could see that this year.

And we will take our next question from Mark Argento with Lake Street Capital Markets.

Couple of things, first half, I know on the Demandware call they were talking about that old GSI-eBay business now, I think it’s called Radial [ph], but they’re not going to be doing anymore front ends or anymore websites, is that an opportunity for you guys to throw in some incremental business there? What partially think about that development?

That’s our understanding as well based on booking announcement from Radial and also form Demandware and that’s not a surprise we expected that because eBay had announced even before the spinout that they were affectively sun setting the legacy GSI platform. And the fact that the Magento IP was spun off separately, that the clients that are on the legacy GSI platform would be needing to re-platform over a relatively short period of time. So each one of those client that on that platform will be evaluating the other enterprise/platforms in the market including Demandware and obviously the relationship between Radial and Demandware creates somewhat of path of least resistance to go onto the network platform as one of the largest Demandwere SIs in the worlds that does create an opportunity for us. We have a lot of experience migrating clients from the legacy GSI platforms, so that should play to our strength. We would expect to see some of those opportunities certainly coming it our pipeline and we will market aggressively to the client base for re-platforming deals. So I would agree with you it should create opportunities, some of those clients will likely re-platform to other platforms besides Demandware. In which case our platform agnostic capabilities really do provided an additional strength that we can't consult with them on not only how to move from GSI platform to Demandware of they had moved from GSIs platform taking [ph] up the other four platforms has a choice, so I think that really is a very strong position for us in the market with regard to helping those clients move.

Got you, so of the 52 new projects that you took on in the quarter, which we assume this opportunity would be incremental to what we saw in the quarter?

That’s probably a safe assumption, obviously these clients have a certain one way with which to make a decision, we would expect those to largely coming to the pipeline, over the course of the rest of the year maybe even early into next.

Then Tom, I think in your prepared remark you talked about that you saw maybe, I think you might have quantified it maybe couple of million dollars worth of revenue, they got pull to harder [ph]. Maybe it was a couple of clients that got pulled ahead. Can you just better help me understand this from a modeling perspective, what do you see going on?

It was primarily project oriented, so it wasn’t significant amount but there was probably a couple of million dollars or so of revenue that we generated in the last quarter that from a timing standpoint was somewhat accelerated versus our previous anticipated amounts.

And then again thinking about gross merchandise volume growth for the year and kind of some of your Demandware and other full end-to-end solution customers out there. You still -- when you're looking at setting your budget and your guidance for this year, what kind of input do you have in terms of expectations around gross merchandize volume? I know there somewhat chart of kind of 17% to 19% GMV growth where I believe on the Demandware -- Demandware is looking at, obviously your mix of some Demandware and other platforms, how do we think about GMV growth as kind of a component to your full year guide?

It's interesting as our client mix continues to grow, it's hard to take an overall percentage because there are so many unique client situations in the mix. So when we look at most of our clients what we and especially our specialty retailer B2C that type clients, what we're usually seen from them is growth in terms of gross merchandise value on an annual basis at some more around the midpoint or somewhere above the midpoint of the overall e-commerce growth within that marketplace. So many of them would be experiencing mid-teen during case higher [ph] than mid-teen type of growth on a year-over-year basis and those are the projections that are often used as we work with the client to formalize our operational plans for them and also assess our fee expectations for the rest of the year. Again it's just kind of all over the board, there's a lot of unique client situations where, in certain cases they'll have a decrease year-over-year, others will be so much higher than that, a lot of it depends on whether they're at in their e-commerce evolution, but on an overall basis I would say the majority of our clients would be targeting for gross merchandise value increases that are either at or ahead of the kind of midpoint of the rates -- growth rates out there.

Then last question, in terms of Reco you guys still working on trying to renegotiate that or where does that stand?

Look, it’s our intentions to continue to work with them and hopefully work towards transitioning that as we look out towards the end of 2016.

And we'll take our next question from George Sutton with Craig-Hallum.

Gentlemen, good afternoon this is Jason on for George Sutton. I wanted to ask about omni-channel that seems to be a prevailing theme within the industry and you can maybe just talk about your pipeline and what kind of impact do omni-channel opportunities is have in?

I think for most of our clients and client prospects omni-channel is in some form or passions becoming table stakes, and rather than it viewing as some sort of incremental opportunity it's largely bundled in with expectations, kind of like mobile development would be bundled into the base expectations. So we're typically taking clients that have an aspirations to involve their store footprint one way or the other. Lot of times it's with the ship to store transaction is being maybe the place to start. Obviously our order management solution having those omni-channel capabilities build in gives us a nice advantage when responding to those. I would say that it’s unusual for a client to launch a new website or even a re-platformed site with those store integration capabilities day one, unless the already have or are already supporting them with their current initiative. It should be for us a significant set of incremental opportunities with our current client and we're seeing that in our pipeline where we have several new business opportunities with current clients to implement omni-channel capabilities. So, that would show up in the projects bookings as we continue to go throughout the year. But I think given the nature of the technology maturity cycle I would expect that to continue to viewed as table stakes and then for us the one really exciting aspect is in addition to being able to provide the technical solution I really do think it gives us a nice opportunity to leverage our strategic and commerce consulting practice because many times when you're looking at an omni-channel deployment the real issues are not as much technical issues as they are business process, the revenue models as far as allocation of revenue to a store versus to the online store, in-store compensation model things like that and our consulting our ability to operate consulting services around those very real issues I think is the, a real opportunity for us.

And then just second, you've mentioned a couple of times the strength that you're seeing in the UK, give us some idea of what current capabilities you have their relative to the opportunities. Maybe this is an area that you're looking to pursue some M&A and kind of help me with what additional capabilities you'd be looking for in that area?

We have our complete end-to-end solution available in the UK, although we are primarily right now supporting the Demandware and Magento platforms in the UK, so we don't have a robust support for hybris or IBM or Oracle. With that being said we don’t see a lot of demand right now for IBM or Oracle in the UK that could change as both of those platform providers continue to roll out there cloud products which have a lower initial price tag and a faster entry to market. At this time the one obvious opportunity as for the support of SAP/hybris platform, our ability right now is to support the client would be through our CrossView subsidiary. That might not be optimal for supporting a UK client and so as you pointed out that might create an opportunity for us to look at acquisitions as a way plugging that particular gap. Beyond that we have a full set of service including all of the marketing services in creative design capabilities for the market we will overtime be keeping our finger on the pulse of the our clients need for having logistics in the country, it might not be out of question for us to be opening a new distribution center of some kind in the next 12 to 18 months in the UK, just to meet client demand as it continues to grow as we continue to see more and more shipments being delivered into the UK but other than those things I think we've got a full service offering available in that market.

And will take our next question from Robert Breza with Wunderlich Securities.

Just quickly Mike as you talked about the revised complying process and talked about the 10 million and the 52 agency contracts that you were working with. Can you just tell us how you thought about that as you entered the quarter is that on plans for you or did you, with this new process you have accelerated and how do you think we should expect those trend to continue through the Q2 in the second half?

Yes, this is a great question. So, I'll give you a maybe a bit of a subjective answer to that, I do think that we continue to see a strong new business performance from our current clients and I think that the number of new business opportunities that we have from our current clients this quarter is potentially little bit higher than we might have expected going in which is I think partially due to this account playing process, but it’s also due just to the strong level of performance that we've provided to our clients recently specially through the holiday, it's just easy for our clients to come to us with new opportunities and allows us to expand that client relationship. We've often talked in the past about important it is to keep our clients happy and referenceable in order to keep that pipeline open and I think we are in that position right now with our current clients. [Multiple Speakers] So I was going to say I think in addition as we look at the pipeline overall, we would expect as much as 50% of our new business to come from our current clients this year which is I would say maybe a little up from prior years we think about the contribution from current clients I think that what we’re look at the current Q1 pipeline and what was delivered that was representative, I would say that if you look at the number of bookings particularly on the project side and just kind of these some of the examples that I threw out you would probably come to the conclusion that there is a lot of small projects included in that bookings pipeline and a lot of those smaller projects are in fact from current clients, where we are picking up additional retainers or additional smaller projects that really just form a of steady pipeline of opportunities from our current clients. I think that's a positive thing and we would hope and we expect that to continue.

Maybe as a quick follow up for one housekeeping item for Tom and just quickly as I don’t know if I caught, just the number of employees at the end of the year and maybe how you think that will trends of the yearend and that dovetails into my question I guess Mike for you as you think about the acquisitions next few, et cetera. Do you feel like you are fully integrated here at this point? I mean I know it's been not quite a year yet, but still how do you think about the integration and where you were [indiscernible] 6 to 9 months ago in terms if we were entering into these agreements, do you think you are on track or is this pretty much done at this point?

This is Tom, I'll answer the first question regarding employee count. We finish the year about 2, 100 employees and since that point in time it's increased somewhat we've continued to build out our capabilities in our Bangalore, India operations. So it's up somewhat form that level but somewhere between say 2,100 to 2,200 or 2,300.

Perfect.

And with Rob to your question about the integrations and maybe pace of integration compared to our expectations. At this point the first two acquisitions that we did the acquisition of REV Solutions and the acquisition of LiveAreaLabs are fully integrated into PFSweb to the extent that REV Solutions is really no longer a brand that is present in the market at all and all of the operational components, all of the service delivery capabilities are really fully integrated. So there is really no distinction between PFSweb and what was formally known as REV Solutions and that's also true with LiveAreaLabs, although you might noticed if you go to our website that we’ve carried the LiveArea branding into our agency and our entire agency is really branded LiveArea which is pretty common for commerce service providers and have both digital agency and technology services capabilities where the agency portion is branded separately. You certainly saw that with the safety at nitro-organization, where the nitro part was the agency part prior to the acquisition by [indiscernible]. Moda our third acquisition is fully integrate as well although we have earned out provisions in place for 2016 so that we’ll continue to maintain a view of the activities that would contribute to that earn out, but from an operational perspective and business support perspective it’s fully integrated. And that view with CrossView, the last acquisition we did last August as I indicated my comments. Most of the business support functions are fully integrated at this point probably have a little bit work left to do in the finance area to fully integrate that and we are now moving into looking at the technology services delivery part of the company and part of our plans to have all of our technologist be trained as much as possible across all five platforms will become the next focus for us as we look to begin to cross train technologist on the CrossView side in the useful Demandware and workload and even potentially Magento, and then over the longer term would look to continue to train resources that are on the PFSs website of the main Magento demand were of Oracle [ph] today, train them on the SEP/hybris and IBM platform as appropriate. So the long term view is to have a complete universal resource pool where we can assign them to whichever platform has got the most demanded at that particular point in time and be able to take advantage of both tailwind -- or headwind and tailwinds in the market.

We will take our next question from Tim [indiscernible].

Couple of quick questions, one just getting back to the CrossView CrossTraining, sounds sort of weird I guess, but how far along are you and how long does it take to maybe work through that employee based to get them up to speed on all your important platforms?

It’s a great question and it's really quite early in that process. The process actually started with the project managers and business analyst where you are talking about the sort of least technical differentiation between the platforms and I would say that probably of the kind of training we need to do, the easiest work to be done. And then we actually talked about the developers themselves CrossTraining a person who already knows how to work on the WebSphere platform and the Hybris platform which, virtually all of the CrossView resources are trained in both of those platforms simultaneously. Training them to work on Oracle is a relatively straightforward task, the platform is similar, the language is the same and the concepts are similar enough that you can relatively quickly in the space of, I would say, a couple of months, get somebody up to speed both through the training that you do and the on-the-job training that you do with a coach working alongside a developers who is picking up that platform. Get them up to speed. CrossTraining somebody who knows Magento, Oracle, IBM or hybris on Demandware is little more challenging because the way that the platform operates the coding mechanism is a little bit different. The way that you program against the platform, but on the other hand it’s a little bit of a simpler model. So I would anticipate the similar 60 days, 90 days timeframe would be appropriate for initially getting somebody up to speed and working on a first project along with the coach and coming up fully to speed. So underneath those circumstances you’re probably talking about a 90 day time to get somebody from start to full productivity between any of the platforms.

And then a follow-up is as customers migrate, obviously, you probably have existing customers who maybe migrate from one platform to another platform you support. How does that affect you? Just consider project revenue to do that migration or is there any other things that we should be aware of that affect the model?

It was tally depend on the nature of the engagement, if all we are doing is project to move them from one platform to the next that would show up as a project revenue booking. But if it’s a current client and we are extending a relationship whether that’s amending [ph] services agreement or an end-to-end relationship and we’re retaining the end-to-end relationship, we’re just moving them from one platform to the next, then it's possible but that could show up as a -- both a project and even extension to an existing or current revenue contract. Obviously if we were to be blessed with an opportunity to have a deal coming out of one of our competitors that is both a re-platforming deal and brings with it a recurring revenue stream in the form of May services agreement or the operations component that would be a best case scenario for us because you get acknowledged as a high merchant project, but also those stronger recurring revenue streams with them and that’s what we’re selling in the market place.

And then one final question, now it sounds like your business from existing customers is picking up, is that a nice margin tailwind for you given probably your better understanding of their operations and lower sales costs or I'm mistaking on that?

Well, I think that the gross margins and probably even the flow through margins on the actual work would be consistent with what we've seen with the new client. What would be different is the selling cost. So, our ability to expand client relationships is largely done with this account planning process and with our client partners that are engaged to support clients every day. And therefore we're not necessarily having to deploy the same kind of sales and marketing investments against our new -- our current clients as we do with a net new client. So, that's probably where you would see an improvement in overall contribution from that piece of new business coming from the current client.

[Operator Instructions] And we'll take our next question from Kevin Kopelman with Cowen and Company.

Just, I wanted to ask a follow-up on the consulting practice that you talked about, can you give us more color, first on the opportunity, we didn't talk about how having that kind of that consulting practice on an offer has change the tenure of your conversations with prospective new customers if it has?

It is relatively new practice we just launched it last November I believe, by hiring a practice leader from one of our competitors, since then we've added a couple of new -- net new consultants and we've sort of rolled in some work that we were doing before into that group. So, I think our headcount right now is about four, so it's relatively small. That being said we have deployed them pretty aggressively especially in the sales cycle. And as I indicated in my comments, I've been actually been really pleased with the amount of opportunity that's being generated within the sales cycle with regard to define and design projects which is where we engage with the client to actually get paid to define requirements and do the high level design. That opportunity is really new for us, in the past we would have either come in behind a consultant bid [indiscernible] done that work or we would have ended up doing some of that work on a non-billable basis during the sales process. So, that's been a significant change for us. We also have really been able to leverage or platform agnostic capabilities to allow our consultants to go in early in the decision cycle with our client. And talk about platform evaluation. And the one place that this shows that I think is very unique for us as a -- if you want to look at it as a system integrator is our ability to go in and talk to a client not only about the platforms that they're evaluating, but also compare that against the platform that they're currently operating. So, if a client prospect invites say a Oracle pure play system integrator to come in and talk to them about Oracle, it's unlikely that that Oracle SI knows Demandware very well for instance if they happen to be on that platform or hybris if they happen to be on that platform. So, our ability to come in and do a compare and contrast or real world comparing and contrast between the two platforms and really point out the overlaps and where the gaps might be going either way, I think it's really unique and differentiated. Now we've seen that show up in a couple of our deals over the past three or four months, where I believe that we have been in a position to win that business because of the credibility that we have going in and understanding all these platforms and being able to really give good practical advice. Looking to the future as I indicated before I don't expect a lot of contribution to 2016 to come from standalone consulting engagements, but as we scale this practice up I would expect it to start to contribute more materially in 2017, in the mean time we would expect to have significant contribution in our sales cycles both from these billable activities as well as just general after sales support activities. But it has made a pretty significant difference in a short period of time in our sales cycle.

If I could ask one other question, just quickly, any updated thoughts on how you're evaluating potential acquisitions, now that we're a little bit further into the year?

Our near evaluation is based almost entirely on where we perceive we might have gaps in our offering, the one obvious area is in the support for platforms in the Western European theater. I mentioned earlier and I guess in response to your question, that we support Demandware and Magento effectively in the UK, but we're not supporting hybris very effectively right now, it's a very popular platform there that is a potential opportunity. Until then we'll have to support those opportunities with our U.S. based CrossView subsidiary. If you look at Western Europe, we have a strong Demandware offering, I think we could probably make a case for strengthening it in selected geography and hybris point is valid in Western Europe as well. In Western Europe are seeing some incremental Magneto opportunities which I think has to do with the strengthening of that platform after the separation from eBay Enterprise. And we're sort of have a renewed interest in that platform more broadly in Western Europe as well as here in the U.S. and to the extent that we wanted to say accelerate the development of Magento practice and increase our capability that might also be a potential acquisition opportunity. And then beyond that I think we're remaining opportunistic with regard to plugin agency capabilities that might come along, such as the search into marketing firms that maybe available in the market and we continue to have a long term view about how we can partner affectively with our technology partners in support of, say, the in-store experience. While that’s not something I'd expect to do or be looking to do in 2016, over the longer term we still are looking at that, in-store experience as potential opportunity for some acquisition.

At this time there are no more questions. I would now like to turn the call back over to Mr. Willoughby for closing remarks.

Okay Shannon and I'd like to thank everyone that attended the call today. As you hopefully could tell from our tone we're very excited about the developments in our business and performance in Q1. We look forward to speaking with our investors and analysts when we report our second quarter results in August. Until then thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.