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InnerWorkings Announces Fourth Quarter and Full-Year 2015 Results

February 18, 2016

 

Fourth quarter revenue grew 15% in constant currency; full year operating cash flow was a record $43.4 million

CHICAGO--(BUSINESS WIRE)-- InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the year ended December 31, 2015. For all Non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

"2015 marked the best year in our company's history in terms of both profitability and new client wins," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "Our technology, reputation, and global platform distinguish us as the premier provider to execute marketing campaigns for the world's most successful companies."

Fourth Quarter 2015 Highlights

  • Four new enterprise contracts signed, including a large comprehensive agreement with global premium spirits company Beam Suntory.
  • Revenue was $270.3 million as reported and $283.8 million in constant currency, reflecting 15.1% growth in constant currency compared with $246.6 million in the fourth quarter of 2014.
  • Net cash provided by operating activities was $50.7 million, compared to $3.5 million in the fourth quarter of 2014.
  • Non-GAAP diluted earnings per share were $0.08 as reported and $0.09 in constant currency. GAAP net loss per share was $0.75 and GAAP net loss was $39.9 million, mainly due to a noncash goodwill impairment charge and other realignment-related items totaling $46.0 million.
  • Non-GAAP adjusted EBITDA was $14.7 million as reported and $15.4 million in constant currency, reflecting 22.8% growth in constant currency as compared to $12.5 million in the fourth quarter of 2014.

Full-Year 2015 Highlights

  • Record new enterprise contracts signed totaling $135 million in annual revenue at full run-rate.
  • Revenue was $1.03 billion as reported and $1.09 billion in constant currency, reflecting 9.3% growth in constant currency compared with $1.00 billion in 2014.
  • Net cash provided by operating activities was $43.4 million, compared to net cash used for operating activities of $12.5 million in 2014.
  • Non-GAAP diluted earnings per share were $0.25 as reported and $0.31 in constant currency. GAAP net loss per share was $0.61 and GAAP net loss was $32.3 million, mainly due to a noncash goodwill impairment charge and other realignment-related items totaling $46.0 million.
  • Non-GAAP adjusted EBITDA was $51.9 million as reported and $55.7 million in constant currency, reflecting 30.0% growth in constant currency as compared to $42.8 million in 2014.
  • The Company's innovative technology became even more integral to the suite of services, with an average of 50,000 marketing professionals and suppliers logging in daily during 2015.

"We exceeded our adjusted EBITDA guidance for 2015 and ended the year on a very strong note," said Jeffrey P. Pritchett, Chief Financial Officer of InnerWorkings. "I am confident we can continue to improve our returns on invested capital through cost discipline and operating leverage as we onboard a growing list of enterprise clients in 2016 and beyond."

Financial Results

Fourth quarter non-GAAP diluted earnings per share were $0.08 and GAAP net loss per share was $0.75. The largest component of the difference between the GAAP and non-GAAP earnings per share was a noncash goodwill impairment charge in the amount of $37.5 million, or $0.70 per share, related to the historical performance and future expectations for a portion of the Company's international operations. The global realignment strategy announced in December 2015 will drive stronger integration of the Company's global platform to more efficiently meet client needs while improving financial results, with at least $3.0 million in profit improvement expected to be realized during 2016.

Outlook

The Company expects 2016 annual revenue to range between $1.06 billion and $1.08 billion, representing growth of 3% to 5% compared to 2015 (6% to 8% compared to 2015 on a constant currency basis and excluding two operations we are exiting, one in Venezuela and another in a small European market). Non-GAAP adjusted EBITDA is expected to be between $58.0 million and $62.0 million in 2016, representing growth of 12% to 19% compared to 2015 on a reported basis and 16% to 24% growth on a constant currency basis. The Company forecasts non-GAAP diluted earnings per share to be $0.30 to $0.33, representing growth of 20% to 32% compared to 2015 on a reported basis and 30% to 43% on a constant currency basis.

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, Non-GAAP Adjusted Operating Cash Flow, Non-GAAP diluted earnings per share and constant currency. 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. With respect to constant currency, we believe such presentation allows investors to measure our financial performance exclusive of foreign currency exchange fluctuations more clearly. Constant currency for revenue, gross profit and Non-GAAP Adjusted EBITDA is calculated by retranslating current period results at a consistent rate with the prior period results. This approach is based on the pricing currency for each country, which is typically the functional currency. All of these non-GAAP financial measures may be different from similar measures used by other companies. 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 "GAAP to Non-GAAP Reconciliation" 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

($ in thousands)   Three Months Ended December 31,   Year Ended December 31,
    2015   2014   2015   2014
    (unaudited)   (unaudited)   (unaudited)    
Revenue   $ 270,311     $ 246,642     $ 1,029,353     $ 1,000,133  
Cost of goods sold   207,772     187,792    

789,158

    770,673  
Gross profit   62,539     58,850     240,195     229,459  
Operating expenses:                
Selling, general and administrative expenses   50,890     48,613     196,194     195,006  
Depreciation and amortization   4,629     4,792     17,472     17,723  
Change in fair value of contingent consideration   (1,961 )   (36,130 )   (270 )   (37,874 )
Goodwill impairment charge   37,539         37,539      
Intangible asset impairment charges   202     2,710     202     2,710  
Restructuring and other charges   1,053         1,053      
Income (loss) from operations   (29,813 )   38,865     (11,995 )   51,893  
Other income (expense):                
Interest income   14     22     69     57  
Interest expense   (1,230 )   (1,346 )   (4,612 )   (4,428 )
Other, net   (2,143 )   (440 )   (3,135 )   (747 )
Total other expense   (3,359 )   (1,763 )   (7,678 )   (5,118 )
Income (loss) before income taxes   (33,172 )   37,102     (19,673 )   46,775  
Income tax expense (benefit)   6,719     (352 )   12,665     2,313  
Net income (loss)   $ (39,891 )   $ 37,453     $ (32,338 )   $ 44,462  
                 
Basic earnings (loss) per share   $ (0.75 )   $ 0.71     $ (0.61 )   $ 0.85  
Diluted earnings (loss) per share   $ (0.75 )   $ 0.69     $ (0.61 )   $ 0.84  
                 
Weighted average shares outstanding, basic   53,093     52,805     52,791     52,095  
Weighted average shares outstanding, diluted   53,093     53,976     52,791     53,104  
                         

Condensed Consolidated Balance Sheets

($ in thousands)   December 31,   December 31,
    2015   2014
    (unaudited)    
Assets        
Current assets:        
Cash and cash equivalents   $ 30,755     $ 22,578  
Accounts receivable, net of allowance for doubtful accounts   188,819     179,466  
Unbilled revenue   30,758     31,699  
Inventories   33,327     27,163  
Prepaid expenses   14,353     12,684  
Deferred income taxes       1,819  
Other current assets   31,825     28,819  
Total current assets   329,837     304,228  
Property and equipment, net   32,681     29,764  
Intangibles and other assets:        
Goodwill   206,257     246,948  
Intangible assets, net   37,715     44,920  
Deferred income taxes   586     3,904  
Other assets   1,391     1,487  
Total intangibles and other assets   245,949     297,259  
Total assets   $ 608,467     $ 631,251  
Liabilities and stockholders' equity        
Current liabilities:        
Accounts payable   $ 170,244     $ 144,045  
Current portion of contingent consideration   11,387     9,078  
Due to seller   402     402  
Other liabilities   31,363     30,637  
Accrued expenses   11,603     9,990  
Total current liabilities   224,999     194,152  
Revolving credit facility   99,258     104,539  
Deferred income taxes   12,898     9,967  
Contingent consideration, net of current portion   10,775     23,504  
Other long-term liabilities   2,510     2,942  
Total liabilities   350,440     335,104  
Stockholders' equity:        
Common stock   6     6  
Additional paid-in capital   213,566     207,429  
Treasury stock at cost   (52,207 )   (49,996 )
Accumulated other comprehensive income (loss)   (13,993 )   (5,401 )
Retained earnings   110,655     144,109  
Total stockholders' equity   258,027     296,147  
Total liabilities and stockholders' equity   $ 608,467     $ 631,251  
                 

Cash Flow Data

($ in thousands)   Year Ended December 31,
    2015   2014
    (unaudited)    
Cash flows from operating activities        
Net income (loss)   $ (32,338 )   $ 44,462  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
Deferred income taxes   7,320     (2,192 )
Stock-based compensation expense   5,873     5,352  
Excess tax benefit from exercise of stock awards       (185 )
Depreciation and amortization   17,472     17,723  
Change in fair value of contingent consideration liability   (270 )   (37,873 )
Bad debt provision   1,949     1,984  
Goodwill impairment charges   37,539      
Intangible asset impairment charges   202     2,710  
Venezuela remeasurement charges   890      

Secured asset reserve

  2,022     940  
Other operating activities   210     364  
Change in assets, net of acquisitions:        
Accounts receivable and unbilled revenue   (10,361 )   (14,793 )
Inventories   (8,188 )   (635 )
Prepaid expenses and other assets   (6,138 )   (7,335 )
Change in liabilities, net of acquisitions:        
Accounts payable   26,199     (25,199 )
Accrued expenses and other liabilities   1,021     2,162  
Net cash provided by (used in) operating activities   43,402     (12,515 )
         
Cash flows from investing activities        
Purchases of property and equipment   (15,034 )   (14,116 )
Other investing activities       (594 )
Net cash used in investing activities   (15,034 )   (14,710 )
         
Cash flows from financing activities        
Net short-term secured borrowings (repayments)   (799 )   2,618  
Payments of contingent consideration   (8,010 )   (5,769 )
Net repayments of revolving credit facility   (5,281 )   35,539  
Excess tax benefit from exercise of stock awards       185  
Proceeds from exercise of stock options   1,195     778  
Repurchasea of common stock   (4,897 )    
Payment of debt issuance costs       (696 )
Other financing activities   (594 )   (399 )
Net cash provided by (used in) financing activities   (18,386 )   32,256  
         
Effect of exchange rate changes on cash and cash equivalents   (1,805 )   (1,059 )
Increase in cash and cash equivalents   8,177     3,972  
Cash and cash equivalents, beginning of period   22,578     18,606  
Cash and cash equivalents, end of period   $ 30,755     $ 22,578  
                 

Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP Diluted Earnings Per Share
(Unaudited)

($ in thousands)  

Three Months Ended
December 31,

  Year Ended December 31,
    2015   2014   2015   2014
Net income (loss)   $ (39,891 )   $ 37,453     $ (32,338 )   $ 44,462  
Income tax expense (benefit)   6,719     (352 )   12,665     2,313  
Total other expense   3,359     1,763     7,678     5,118  
Depreciation and amortization   4,629     4,792     17,472     17,723  
Stock-based compensation expense   1,019     1,328     5,873     5,352  
Change in fair value of contingent consideration   (1,961 )   (36,130 )   (270 )   (37,874 )
Goodwill impairment charge   37,539         37,539      
Intangible asset impairment charges   202     2,710     202     2,710  
Restructuring and other charges   1,053         1,053      
Restatement-related professional fees               2,093  
Secured asset reserve   2,022     940     2,022     940  
Non-GAAP Adjusted EBITDA   $ 14,691     $ 12,505     $ 51,896     $ 42,838  
                                 
($ in thousands)  

Three Months Ended
December 31,

  Year Ended December 31,
    2015   2014   2015   2014
Net cash provided by (used in) operating activities   $ 50,659     $

3,523

    $ 43,402     $ (12,515 )
Excess tax benefit from exercise of stock awards *       (185 )       (185 )
Net short-term advances on International receivables **   (248 )  

(99

)   (799 )  

2,618

 
Non-GAAP Adjusted Operating Cash Flow   $ 50,411     $

3,240

    $ 42,603     $

(10,081

)

 

* Represents a U.S. tax deduction in an amount equal to the excess of the market price of the stock on the date of exercise over exercise price.
** US GAAP requires classification in financing activities despite inclusion in working capital on the balance sheet.

         
($ and shares in thousands, except EPS)  

Three Months Ended
December 31,

  Year Ended December 31,
    2015   2014   2015   2014
Net income (loss)   $ (39,891 )   $ 37,453     $ (32,338 )   $ 44,462  
Change in fair value of contingent consideration, net of tax   (1,962 )   (36,122 )   (282 )   (37,571 )
Goodwill impairment charge   37,539         37,539      
Intangible asset impairment charges, net of tax   153     1,657     153     1,657  
Restructuring and other charges, net of tax   873         873      
Venezuela remeasurement charges   1,521         1,521      
Secured asset reserve, net of tax   1,239     568     1,239     568  
Restatement-related professional fees, net of tax               1,266  
Realignment-related income tax charges   4,685         4,685      
Adjusted net income   $ 4,156     $ 3,556     $ 13,389     $ 10,382  
Weighted average shares outstanding, diluted   53,756     53,976     53,515     53,104  
Non-GAAP Diluted Earnings Per Share   $ 0.08     $ 0.07     $ 0.25     $ 0.20  
                                 

 

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

Source: InnerWorkings, Inc.

 

 

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