InnerWorkings, Inc.
Aug 15, 2016
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InnerWorkings Announces Second Quarter 2016 Results

Record second quarter gross profit increased 10%; expanded scope with several existing clients

CHICAGO--(BUSINESS WIRE)-- InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three months ended June 30, 2016. For all Non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

Financial Highlights

Business Highlights

"We continue to win more business with new and existing clients on the strength of our global capabilities and our technology," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "The expansion of our work with the large food and beverage company demonstrates our commitment to serve as an extension of our clients' brands, executing comprehensive marketing campaigns all around the world."

"Our second quarter financial results reflect continued strong execution of our strategy," said Jeffrey P. Pritchett, Chief Financial Officer of InnerWorkings. "We are on track to achieve our financial targets for 2016 with additional profit improvement in the second half of the year, particularly in our International segment where the combination of a more efficient hub structure and strong organic growth is starting to create meaningful operating leverage."

Outlook

The Company's guidance for 2016 remains unchanged. InnerWorkings expects 2016 annual revenue to range between $1.06 billion and $1.08 billion, non-GAAP adjusted EBITDA to be between $58.0 million and $62.0 million, and non-GAAP diluted earnings per share to be $0.30 to $0.33.

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 information about the estimated financial performance of the Company's ongoing business. These measures are used by management in its financial and operational decision-making and evaluation of overall operating 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 financial 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 based in Chicago, IL and employs more than 1,500 individuals to support global clients in the execution of multi-faceted brand campaigns in every major market around the world. Among the many industries InnerWorkings serves are: retail, financial services, hospitality, consumer packaged goods, not-for-profits, healthcare, food & beverage, broadcasting & cable, and transportation. For more information visit: www.inwk.com.

Condensed Consolidated Statements of Income
(Unaudited)
   
(in thousands) Three Months Ended June 30, Six Months Ended June 30,
2016   2015 2016   2015
(as revised) (as revised)
Revenue $ 269,220 $ 252,227 $ 540,292 $ 494,323
Cost of goods sold 204,126   193,248   413,253   380,278  
Gross profit 65,094 58,979 127,039 114,045
Operating expenses:
Selling, general and administrative expenses 51,418 47,134 102,910 96,049
Depreciation and amortization 4,721 4,266 9,316 8,357
Change in fair value of contingent consideration 7,276 676 9,187 990
Restructuring and other charges 623     3,967    
Income (loss) from operations 1,056 6,903 1,659 8,649
Other income (expense):
Interest income 24 27 38 48
Interest expense (985 ) (1,105 ) (2,062 ) (2,251 )
Other, net 291   13   130   97  
Total other expense (670 ) (1,065 ) (1,894 ) (2,106 )
Income (loss) before income taxes 386 5,838 (235 ) 6,543
Income tax expense 2,710   2,183   4,782   2,613  
Net income (loss) $ (2,324 ) $ 3,655   $ (5,017 ) $ 3,930  
 
Basic earnings (loss) per share $ (0.04 ) $ 0.07 $ (0.09 ) $ 0.07
Diluted earnings (loss) per share $ (0.04 ) $ 0.07 $ (0.09 ) $ 0.07
 
Weighted-average shares outstanding - basic 53,411 52,588 53,278 52,651
Weighted-average shares outstanding - diluted 53,411 54,212 53,278 53,915

Condensed Consolidated Balance Sheets

   
June 30, December 31,
(in thousands) 2016 2015
(unaudited) (as revised)
Assets
Current assets:
Cash and cash equivalents $ 31,606 $ 30,755
Accounts receivable, net 193,297 188,819
Unbilled revenue 27,857 30,758
Inventories 35,901 33,327
Prepaid expenses 12,145 14,353
Other current assets 17,647   31,825  
Total current assets 318,453 329,837
Property and equipment, net 33,089 32,681
Intangibles and other assets:
Goodwill 204,897 206,257
Intangible assets, net 34,831 37,715
Deferred income taxes 882 586
Other non-current assets 1,415   1,391  
Total intangibles and other assets 242,025   245,949  
Total assets $ 593,567   $ 608,467  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 136,260 $ 170,244
Current portion of contingent consideration 3,862 11,387
Due to seller 8,527 402
Accrued expenses 17,818 17,866
Other current liabilities 35,993   31,363  
Total current liabilities 202,460 231,262
Revolving credit facility 111,566 99,258
Deferred income taxes 11,620 10,526
Contingent consideration, net of current portion 14,699 10,775
Other non-current liabilities 2,639   2,510  
Total liabilities 342,984 354,331
Stockholders' equity:
Common stock 6 6
Additional paid-in capital 216,540 213,566
Treasury stock at cost (51,724 ) (52,207 )
Accumulated other comprehensive loss (15,853 ) (13,993 )
Retained earnings 101,614   106,764  
Total stockholders' equity 250,583   254,136  
Total liabilities and stockholders' equity $ 593,567   $ 608,467  
Condensed Consolidated Statement of Cash Flows
(Unaudited)
   
Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
2016   2015 2016   2015
(as revised) (as revised)
Cash flows from operating activities
Net income (loss) $ (2,324 ) $ 3,655 $ (5,017 ) $ 3,930
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 4,721 4,266 9,316 8,357
Stock-based compensation expense 1,117 1,567 2,358 3,628
Deferred income taxes 839 1,778 450 1,366
Bad debt provision 133 174 789 1,049
Change in fair value of contingent consideration 7,276 676 9,187 990
Other operating activities 52 52 105 104
Change in assets:
Accounts receivable and unbilled revenue 13,890 (6,360 ) (2,366 ) (10,311 )
Inventories (1,185 ) (4,356 ) (2,573 ) (10,845 )
Prepaid expenses and other assets (127 ) (2,379 ) 16,255 720
Change in liabilities:
Accounts payable 6,212 9,823 (33,984 ) 5,973
Accrued expenses and other liabilities (6,885 ) (1,634 ) 4,632   (3,974 )
Net cash provided by (used in) operating activities 23,719 7,262 (848 ) 987
 
Cash flows from investing activities
Purchases of property and equipment (3,458 ) (4,937 ) (7,445 ) (8,656 )
Net cash used in investing activities (3,458 ) (4,937 ) (7,445 ) (8,656 )
 
Cash flows from financing activities
Net borrowings from revolving credit facility (6,805 ) 1,816 12,553 7,396
Net short-term secured borrowings 1,906 580 104 669
Repurchases of common stock (1,397 ) (4,897 )
Payments of contingent consideration (3,619 ) (1,739 ) (4,144 ) (2,177 )
Proceeds from exercise of stock options 106 560 1,090 599
Other financing activities (854 ) (80 ) (474 ) (179 )
Net cash provided by (used in) financing activities (9,266 ) (260 ) 9,129 1,411
 
Effect of exchange rate changes on cash and cash equivalents (318 ) 95   15   (754 )
Increase (decrease) in cash and cash equivalents 10,677 2,160 851 (7,012 )
Cash and cash equivalents, beginning of period 20,929   13,406   30,755   22,578  
Cash and cash equivalents, end of period $ 31,606   $ 15,566   $ 31,606   $ 15,566  
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,
2016   2015 2016   2015
(as revised) (as revised)
Net income (loss) $ (2,324 ) $ 3,655 $ (5,017 ) $ 3,930
Income tax expense 2,710 2,183 4,782 2,613
Total other expense 670 1,065 1,894 2,106
Depreciation and amortization 4,721 4,266 9,316 8,357
Stock-based compensation expense 1,117 1,567 2,358 3,628
Change in fair value of contingent consideration 7,276 676 9,187 990
Restructuring and other charges 623     3,967  
Non-GAAP Adjusted EBITDA $ 14,793   $ 13,412   $ 26,487   $ 21,624
(in thousands, except per share amounts)   Three Months Ended June 30,   Six Months Ended June 30,
2016   2015 2016   2015
(as revised) (as revised)
Net income (loss) $ (2,324 ) $ 3,655 $ (5,017 ) $ 3,930
Change in fair value of contingent consideration, net of tax 7,276 669 9,187 979
Restructuring and other charges, net of tax 618 3,582
Realignment-related income tax charges 238     635  
Adjusted net income $ 5,808 $ 4,324 $ 8,387 $ 4,909
Weighted-average shares outstanding - diluted 54,297   54,212   54,139   53,915
Non-GAAP Diluted Earnings Per Share $ 0.11   $ 0.08   $ 0.15   $ 0.09

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

Source: InnerWorkings, Inc.

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