InnerWorkings, Inc.
Nov 8, 2016
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InnerWorkings Announces Third Quarter 2016 Results

Record quarterly revenue with year-to-date gross profit up 10%

Over $100 million in new enterprise contracts signed year to date; raising full-year guidance

CHICAGO--(BUSINESS WIRE)-- InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three months ended September 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 have devoted considerable energy to developing our presence in the international markets and new service offerings over the last few years, and the benefits of these investments are becoming more apparent," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "With the strength of our global capabilities and rate of penetration with our existing accounts, I'm excited by our performance and the path I see ahead for InnerWorkings."

"Our third quarter financial results demonstrate continued organic growth and further operating efficiency, particularly in our International segment," said Jeffrey P. Pritchett, Chief Financial Officer of InnerWorkings. "We are raising our financial performance expectations for 2016 as we continue to execute ahead of plan."

Outlook

The Company is raising its guidance for 2016 annual revenue and non-GAAP diluted earnings per share. InnerWorkings now expects 2016 revenue to range between $1.075 billion and $1.082 billion, compared to previous guidance of $1.06 to $1.08 billion. Non-GAAP diluted earnings per share is now expected to be $0.31 to $0.34, versus prior guidance of $0.30 - $0.33. Guidance for non-GAAP adjusted EBITDA is unchanged at $58.0 million to $62.0 million.

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)
   
Three Months Ended Nine Months Ended
September 30,   September 30,
2016   2015   2016   2015
 
Revenue $ 279,993 $ 264,720 $ 820,286 $ 759,043
Cost of goods sold 212,212   201,109   625,465   581,387  
Gross profit 67,781 63,611 194,821 177,656
Operating expenses:
Selling, general and administrative expenses 52,601 48,787 155,511 144,836
Depreciation and amortization 5,066 4,485 14,382 12,842
Change in fair value of contingent consideration 788 701 9,975 1,691
Restructuring and other charges 466     4,433    
Income from operations 8,860 9,638 10,520 18,287
Other income (expense):
Interest income 26 6 63 55
Interest expense (1,191 ) (1,132 ) (3,252 ) (3,382 )
Other, net (114 ) (1,089 ) 16   (992 )
Total other expense (1,279 ) (2,215 ) (3,173 ) (4,319 )
Income before income taxes 7,581 7,423 7,347 13,968
Income tax expense 3,240   3,487   8,023   6,100  
Net income (loss) $ 4,341   $ 3,936   $ (676 ) $ 7,868  
 
Basic earnings (loss) per share $ 0.08 $ 0.07 $ (0.01 ) $ 0.15
Diluted earnings (loss) per share $ 0.08 $ 0.07 $ (0.01 ) $ 0.15
 
Weighted-average shares outstanding - basic 53,818 52,973 53,536 52,759
Weighted-average shares outstanding - diluted 54,772   53,349   53,536   53,457  

Condensed Consolidated Balance Sheets

 
(in thousands)

September 30,
2016

December 31,
2015

(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 20,787 $ 30,755
Accounts receivable, net 190,438 188,819
Unbilled revenue 40,505 30,758
Inventories 45,377 33,327
Prepaid expenses 11,984 14,353
Other current assets 30,528   31,825  
Total current assets 339,619 329,837
Property and equipment, net 32,279 32,681
Intangibles and other assets:
Goodwill 204,978 206,257
Intangible assets, net 33,476 37,715
Deferred income taxes 1,123 586
Other non-current assets 1,426   1,391  
Total intangibles and other assets 241,003   245,949  
Total assets $ 612,901   $ 608,467  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 129,980 $ 170,244
Current portion of contingent consideration 19,320 11,387
Due to seller 1,683 402
Accrued expenses 21,037 17,866
Other current liabilities 35,515   31,363  
Total current liabilities 207,535 231,262
Revolving credit facility 133,734 99,258
Deferred income taxes 11,594 10,526
Contingent consideration, net of current portion 10,775
Other non-current liabilities 2,235   2,510  
Total liabilities 355,098 354,331
Stockholders' equity:
Common stock 6 6
Additional paid-in capital 219,085 213,566
Treasury stock at cost (51,724 ) (52,207 )
Accumulated other comprehensive loss (15,518 ) (13,993 )
Retained earnings 105,954   106,764  
Total stockholders' equity 257,803   254,136  
Total liabilities and stockholders' equity $ 612,901   $ 608,467  
Condensed Consolidated Statement of Cash Flows
(Unaudited)
   
(in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2016   2015 2016   2015
 
Cash flows from operating activities
Net income (loss) $ 4,341 $ 3,936 $ (676 ) $ 7,868
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 5,066 4,485 14,382 12,842
Stock-based compensation expense 1,740 1,226 4,097 4,854
Deferred income taxes 227 (598 ) 677 768
Bad debt provision 644 165 1,433 1,214
Change in fair value of contingent consideration 788 701 9,975 1,691
Other operating activities 52 52 157 157
Change in assets:
Accounts receivable and unbilled revenue (10,432 ) (7,247 ) (12,798 ) (17,558 )
Inventories (9,477 ) (2,271 ) (12,050 ) (13,116 )
Prepaid expenses and other assets (12,681 ) (14,157 ) 3,574 (13,436 )
Change in liabilities:
Accounts payable (6,280 ) (1,502 ) (40,264 ) 4,471
Accrued expenses and other liabilities 3,229   6,964   7,861   2,989  
Net cash used in operating activities (22,783 ) (8,246 ) (23,632 ) (7,256 )
 
Cash flows from investing activities
Purchases of property and equipment (3,057 ) (3,470 ) (10,502 ) (12,126 )
Net cash used in investing activities (3,057 ) (3,470 ) (10,502 ) (12,126 )
 
Cash flows from financing activities
Net borrowings from revolving credit facility 22,169 16,093 34,722 23,489
Net short-term secured borrowings (924 ) (1,220 ) (820 ) (551 )
Repurchases of common stock (4,897 )
Payments of contingent consideration (6,865 ) (5,833 ) (11,008 ) (8,010 )
Proceeds from exercise of stock options 911 52 2,002 650
Other financing activities (206 ) (247 ) (680 ) (426 )
Net cash provided by financing activities 15,085 8,845 24,216 10,255
 
Effect of exchange rate changes on cash and cash equivalents (64 ) (57 ) (50 ) (813 )
Decrease in cash and cash equivalents (10,819 ) (2,928 ) (9,968 ) (9,940 )
Cash and cash equivalents, beginning of period 31,606   15,566   30,755   22,578  
Cash and cash equivalents, end of period $ 20,787   $ 12,638   $ 20,787   $ 12,638  

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

(Unaudited)

(in thousands)  

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2016   2015 2016   2015
 
Net income (loss) $ 4,341 $ 3,936 $ (676 ) $ 7,868
Income tax expense 3,240 3,487 8,023 6,100
Total other expense 1,279 2,215 3,173 4,319
Depreciation and amortization 5,066 4,485 14,382 12,842
Stock-based compensation expense 1,740 1,226 4,097 4,854
Change in fair value of contingent consideration 788 701 9,975 1,691
Restructuring and other charges 466     4,433  
Non-GAAP Adjusted EBITDA $ 16,920   $ 16,050   $ 43,407   $ 37,674
(in thousands, except per share amounts)  

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2016   2015 2016   2015
 
Net income (loss) $ 4,341 $ 3,936 $ (676 ) $ 7,868
Change in fair value of contingent consideration 788 700 9,975 1,680
Restructuring and other charges, net of tax 382 3,964
Realignment-related income tax charges 263     898  
Adjusted net income $ 5,774 $ 4,636 $ 14,161 $ 9,548
Weighted-average shares outstanding, diluted 54,772   53,349   54,359   53,457
Non-GAAP Diluted Earnings Per Share $ 0.11   $ 0.09   $ 0.26   $ 0.18

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

Source: InnerWorkings, Inc.

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