InnerWorkings, Inc.
Aug 7, 2017
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InnerWorkings Announces Second Quarter 2017 Results

Record second quarter gross profit (net revenue) increased 8%; Year-to-date new signings reach $75 million

CHICAGO--(BUSINESS WIRE)-- InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three months ended June 30, 2017. For all Non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

Financial and Business Highlights

"Our second quarter results reflect strong execution of our strategy," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "We continue to win more business with new and existing clients on the strength of our global capabilities and our technology. Our business is improving its mix of high value-add services leading to stronger bottom-line performance."

"We continue to see robust growth in net revenue, which we believe is the most important sales growth indicator for our business," said Jeffrey P. Pritchett, Chief Financial Officer of InnerWorkings. "Our net revenue and earnings outlook remain on track with additional profit improvement expected in the second half of the year, though we have moderated our gross revenue expectations for the second half of 2017."

Outlook

The Company is revising its guidance for 2017 gross revenue. InnerWorkings expects 2017 annual gross revenue to range between $1.115 billion and $1.145 billion, compared to previous guidance of a range of $1.155 and $1.185 billion. The reduction in expected gross revenue is offset by higher expected profitability, and therefore the Company is maintaining its guidance for non-GAAP adjusted EBITDA to be between $65.0 million and $68.0 million, and raising the low end of its non-GAAP diluted earnings per share guidance to be $0.46 to $0.49, compared to previous guidance of $0.45 to $0.49.

Conference Call

Eric D. Belcher, Chief Executive Officer, and Jeffrey P. Pritchett, Chief Financial Officer, will host a conference call to discuss the results today at 4:30 p.m. Central time (5:30 p.m. Eastern time).

The phone number to access the conference call is (877) 771-7024. A live audio webcast of the call will be available through InnerWorkings' website at http://investor.inwk.com/events.cfm. A replay of the webcast will be available later today at the same location.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission: non-GAAP adjusted EBITDA and non-GAAP diluted earnings per share. We believe these measures provide useful information to investors because they provide further insights into the Company's financial performance. These measures are also used by management in its financial and operational decision-making and evaluation of overall performance. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, please see the reconciliation of non-GAAP adjusted EBITDA and non-GAAP diluted earnings per share included in this release.

The Company has not quantitatively reconciled its guidance for non-GAAP adjusted EBITDA or non-GAAP diluted earnings per share to their most comparable GAAP measure because the Company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the Company's control, or cannot be reasonably predicted. Accordingly, a reconciliation to the nearest GAAP financial metric is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the Company's results.

Forward-Looking Statements

This release contains statements relating to future results. These statements are forward-looking statements under the federal securities laws. We can give no assurance that any future results discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. These statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this release. For a discussion of important factors that could affect our actual results, please refer to our SEC filings, including the "Risk Factors" section of our most recently filed Form 10-K.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) is the leading global marketing execution firm serving Fortune 1000 brands across a wide range of industries. As a comprehensive outsourced enterprise solution, the Company leverages proprietary technology, an extensive supplier network and deep domain expertise to streamline the production of branded materials and retail experiences across geographies and formats. InnerWorkings is headquartered in Chicago, IL and employs approximately 1,900 individuals to support global clients in the execution of multi-faceted brand campaigns in every major market around the world. InnerWorkings serves many industries, including: retail, financial services, hospitality, consumer packaged goods, nonprofit, healthcare, food & beverage, broadcasting & cable, automotive, and transportation. For more information visit: www.inwk.com.

     
 

Condensed Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)

(In thousands, except per share data)

 
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016
 
Revenue $ 279,530 $ 269,220 $ 546,920 $ 540,292
Cost of goods sold 209,303   204,126   412,416   413,253  
Gross profit 70,227 65,094 134,504 127,039
Operating expenses:
Selling, general and administrative expenses 55,086 51,418 108,513 102,910
Depreciation and amortization 3,182 4,721 6,086 9,316
Change in fair value of contingent consideration 1,884 7,276 844 9,187
Restructuring and other charges   623     3,967  
Income from operations 10,075 1,056 19,061 1,659
Other income (expense):
Interest income 12 24 46 38
Interest expense (1,038 ) (985 ) (2,041 ) (2,062 )
Other, net (1,165 ) 291   (1,388 ) 130  
Total other expense (2,191 ) (670 ) (3,383 ) (1,894 )
Income (loss) before income taxes 7,884 386 15,678 (235 )
Income tax expense 3,391   2,710   5,727   4,782  
Net income (loss) $ 4,493   $ (2,324 ) $ 9,951   $ (5,017 )
 
Basic earnings (loss) per share $ 0.08 $ (0.04 ) $ 0.19 $ (0.09 )
Diluted earnings (loss) per share $ 0.08 $ (0.04 ) $ 0.18 $ (0.09 )
 
Weighted-average shares outstanding - basic 53,278 53,411 53,665 53,278
Weighted-average shares outstanding - diluted 55,189 53,411 55,070 53,278
     
 

Condensed Consolidated Balance Sheet

(In thousands)

 
June 30, 2017 December 31, 2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 23,537 $ 30,924
Accounts receivable, net of allowance for doubtful accounts of $2,466 and $2,622, respectively 208,382 182,874
Unbilled revenue 36,515 32,723
Inventories 28,192 31,638
Prepaid expenses 23,588 18,772
Other current assets 20,949   24,769  
Total current assets 341,163 321,700
Property and equipment, net 36,030 32,656
Intangibles and other assets:
Goodwill 205,399 202,700
Intangible assets, net 29,699 31,538
Deferred income taxes 1,281 1,031
Other non-current assets 1,267   1,374  
Total intangibles and other assets 237,646   236,643  
Total assets $ 614,839   $ 590,999  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 125,593 $ 121,289
Current portion of contingent consideration 19,283
Due to seller 17,842
Accrued expenses 27,567 30,067
Other current liabilities 37,748   35,049  
Total current liabilities 208,750 205,688
Revolving credit facility 118,658 107,468
Deferred income taxes 9,852 11,291
Other non-current liabilities 1,988   1,926  
Total liabilities 339,248 326,373
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.0001 per share, 200,000 and 200,000 shares authorized, 63,808 and 63,391 shares issued, and 53,500 and 54,088 shares outstanding, respectively 6 6
Additional paid-in capital 230,030 224,480
Treasury stock at cost, 10,308 and 9,303 shares, respectively (59,224 ) (49,458 )
Accumulated other comprehensive loss (14,940 ) (20,799 )
Retained earnings 119,719   110,397  
Total stockholders' equity 275,591   264,626  
Total liabilities and stockholders' equity $ 614,839   $ 590,999  
   
 

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 
Six Months Ended June 30,
2017   2016
 
Cash flows from operating activities
Net income (loss) $ 9,951 $ (5,017 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 6,086 9,316
Stock-based compensation expense 2,921 2,358
Deferred income taxes 76 450
Bad debt provision 82 789
Change in fair value of contingent consideration 844 9,187
Other operating activities 104 105
Change in assets:
Accounts receivable and unbilled revenue (29,395 ) (2,366 )
Inventories 3,446 (2,573 )
Prepaid expenses and other assets (957 ) 16,255
Change in liabilities:
Accounts payable 4,304 (33,984 )
Accrued expenses and other liabilities 851   4,632  
Net cash used in operating activities (1,687 ) (848 )
 
Cash flows from investing activities
Purchases of property and equipment (7,024 ) (7,445 )
Net cash used in investing activities (7,024 ) (7,445 )
 
Cash flows from financing activities
Net borrowings from revolving credit facilities 11,491 12,553
Net short-term secured borrowings 37 104
Repurchases of common stock (10,041 )
Payments of contingent consideration (2,089 ) (4,144 )
Proceeds from exercise of stock options 1,319 1,090
Other financing activities (119 ) (474 )
Net cash provided by financing activities 598 9,129
 
Effect of exchange rate changes on cash and cash equivalents 726   15  
Increase (decrease) in cash and cash equivalents (7,387 ) 851
Cash and cash equivalents, beginning of period 30,924   30,755  
Cash and cash equivalents, end of period $ 23,537   $ 31,606  
             
 

Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Diluted Earnings Per Share

(Unaudited)

(In thousands)

 
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016
Net income (loss) $ 4,493 $ (2,324 ) $ 9,951 $ (5,017 )
Income tax expense 3,391 2,710 5,727 4,782
Interest income (12 ) (24 ) (46 ) (38 )
Interest expense 1,038 985 2,041 2,062
Other, net 1,165 (291 ) 1,388 (130 )
Depreciation and amortization 3,182 4,721 6,086 9,316
Stock-based compensation expense 1,503 1,117 2,921 2,358
Change in fair value of contingent consideration 1,884 7,276 844 9,187
Restructuring and other charges   623     3,967  
Non-GAAP Adjusted EBITDA $ 16,644   $ 14,793   $ 28,912   $ 26,487  
 

(In thousands, except per share data)

   
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016
Net income (loss) $ 4,493 $ (2,324 ) $ 9,951 $ (5,017 )
Change in fair value of contingent consideration 1,884 7,276 844 9,187
Czech exit from exchange rate commitment, net of tax 294 294
Restructuring and other charges, net of tax 618 3,582
Realignment-related income tax charges   238     635  
Adjusted net income $ 6,671 $ 5,808 $ 11,089 $ 8,387
Weighted-average shares outstanding, diluted 55,189   54,297   55,070   54,139  
Non-GAAP Diluted Earnings Per Share $ 0.12   $ 0.11   $ 0.20   $ 0.15  

InnerWorkings, Inc.
Bridget Freas, 312.589.5613
bfreas@inwk.com

Source: InnerWorkings, Inc.

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