InnerWorkings Announces Fourth Quarter and Full Year 2019 Results
Record
Multi-year transformation on track
“The tremendous progress we made in 2019 is a demonstration of our ability to successfully execute our plans to significantly improve the business,” said Chief Executive Officer
Financial and Business Highlights
-
Gross revenue was
$319.1 million in the fourth quarter of 2019, an increase of 9% compared to$294.0 million in the fourth quarter of 2018. Fourth quarter 2019 gross revenue included$15 million of incremental revenue on bill and hold arrangements, as discussed below. Gross revenue of$1,157.8 million for the full year 2019 increased 3% over 2018, or 5% excluding currency impact.
-
Gross profit was
$62.1 million , or 19.5% of gross revenue in the fourth quarter of 2019, compared to$59.1 million , or 20.1% of gross revenue, in the same period of last year. Gross profit for the full year 2019 was$262.0 million , or 22.6% of gross revenue, compared to$253.8 million , or 22.6% of gross revenue, for the full year 2018. Fourth quarter and full year 2019 gross profit includes$3.1 million of incremental gross profit on bill and hold arrangements, as discussed below. Also see below for discussion of warehousing and other service costs and the impact on fourth quarter gross profit.
-
Net loss for the fourth quarter of 2019 was
$(6.5) million , or$(0.12) per diluted share, an improvement compared to net loss of$(29.4) million , or$(0.57) per diluted share in the fourth quarter of 2018. Net loss for the full year 2019 was$(10.1) million , or$(0.19) per share, an improvement compared to net loss of$(76.7) million or$(1.47) per diluted share for the full year 2018. The Company's net loss in the fourth quarter contained higher than expected foreign exchange losses, restructuring charges, and income tax expense, including the impact of valuation allowances recorded on state tax loss carryforwards.
-
Adjusted diluted earnings (loss) per share for the fourth quarter of 2019 was
$(0.01) , compared to$(0.14) in the fourth quarter of 2018. Full-year adjusted diluted earnings (loss) per share was$0.14 , compared to$(0.11) in the full-year 2018. The impacts of foreign exchange losses and income taxes discussed above are not adjusted out of adjusted diluted earnings (loss) per share and are more pronounced as the Company is operating near break even on an adjusted basis.
-
Adjusted EBITDA was
$15.5 million in the fourth quarter of 2019, compared to$(0.2) million in the fourth quarter of 2018. Fourth quarter 2019 adjusted EBITDA includes$2.8 million of incremental adjusted EBITDA on bill and hold arrangements, as discussed below. Full year adjusted EBITDA was$49.0 million , an increase of 80% compared to the full year 2018.
-
Additional work from new and existing clients awarded in 2019 amounts to approximately
$159 million of annual revenue at full run-rate, a new annual record.
“As a result of the material weaknesses previously disclosed, insufficient evidence existed to support the recognition of revenue in arrangements containing bill and hold provisions. Therefore, we deferred the related revenue until product shipped from our warehouse. In connection with the remediation of those material weaknesses, we are now able to support earlier revenue recognition for bill and hold arrangements. Disregarding this benefit, adjusted EBITDA increased 70% in 2019 and our plan reflects at least 15% growth in 2020, excluding the impact from COVID-19,” said
Outlook
The Company's 2020 outlook excludes the impact from COVID-19, as it is a rapidly evolving situation that is difficult to predict at this time. Gross revenue is expected to be in a range of
Warehousing and Other Service Costs
During 2019,
Conference Call
The phone number to access the conference call is (877) 771-7024. A live audio webcast of the call will be available through
Non-GAAP Financial Measures
This press release includes the following financial measures defined as “non-GAAP financial measures” by the
The Company has not quantitatively reconciled its guidance for adjusted EBITDA to its most comparable GAAP measure, net income, because certain of the reconciling items that impact this measure, including restructuring charges and stock-based compensation expense affecting the period, have not occurred, are outside the Company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the nearest GAAP financial measure 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
Revision of Prior Period Financial Statements
In connection with the preparation of the consolidated financial statements, the Company identified errors within our
About
|
Consolidated Statements of Operations (In thousands, except per share data) (unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Revenue |
$ |
319,074 |
|
|
$ |
293,977 |
|
|
$ |
1,157,834 |
|
|
$ |
1,121,106 |
|
|
Cost of goods sold |
256,968 |
|
|
234,911 |
|
|
895,825 |
|
|
867,293 |
|
||||
|
Gross profit |
62,106 |
|
|
59,066 |
|
|
262,009 |
|
|
253,813 |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
49,735 |
|
|
62,124 |
|
|
222,721 |
|
|
238,537 |
|
||||
|
Depreciation and amortization |
3,389 |
|
|
2,550 |
|
|
12,328 |
|
|
12,988 |
|
||||
|
|
— |
|
|
18,432 |
|
|
— |
|
|
46,319 |
|
||||
|
Intangible and other asset impairments |
— |
|
|
1,303 |
|
|
— |
|
|
18,121 |
|
||||
|
Restructuring charges |
5,394 |
|
|
2,889 |
|
|
15,918 |
|
|
6,031 |
|
||||
|
Income (loss) from operations |
3,588 |
|
|
(28,232 |
) |
|
11,042 |
|
|
(68,183 |
) |
||||
|
Other income (expense): |
|
|
|
|
|
|
|
||||||||
|
Interest income |
127 |
|
|
83 |
|
|
366 |
|
|
218 |
|
||||
|
Interest expense |
(4,489 |
) |
|
(2,895 |
) |
|
(14,097 |
) |
|
(7,749 |
) |
||||
|
Other, net |
(1,790 |
) |
|
118 |
|
|
(3,686 |
) |
|
(1,616 |
) |
||||
|
Total other expense |
(6,152 |
) |
|
(2,694 |
) |
|
(17,417 |
) |
|
(9,147 |
) |
||||
|
Loss before income taxes |
(2,564 |
) |
|
(30,926 |
) |
|
(6,375 |
) |
|
(77,330 |
) |
||||
|
Provision (benefit) for income tax |
3,897 |
|
|
(1,536 |
) |
|
3,700 |
|
|
(647 |
) |
||||
|
Net loss |
$ |
(6,461 |
) |
|
$ |
(29,390 |
) |
|
$ |
(10,075 |
) |
|
$ |
(76,683 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
Basic loss per share |
$ |
(0.12 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.19 |
) |
|
$ |
(1.47 |
) |
|
Diluted loss per share |
$ |
(0.12 |
) |
|
$ |
(0.57 |
) |
|
$ |
(0.19 |
) |
|
$ |
(1.47 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average shares outstanding - basic |
53,467 |
|
|
51,773 |
|
|
53,293 |
|
|
52,230 |
|
||||
|
Weighted-average shares outstanding - diluted |
53,467 |
|
|
51,773 |
|
|
53,293 |
|
|
52,230 |
|
||||
|
Consolidated Balance Sheets (In thousands) |
|||||||
|
|
|
|
|
||||
|
|
(unaudited) |
|
|
||||
|
Assets |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
42,711 |
|
|
$ |
26,770 |
|
|
Accounts receivable, net of allowance for doubtful accounts of |
202,406 |
|
|
193,186 |
|
||
|
Unbilled revenue |
48,396 |
|
|
46,252 |
|
||
|
Other receivables |
28,194 |
|
|
23,727 |
|
||
|
Inventories |
34,977 |
|
|
55,715 |
|
||
|
Prepaid expenses |
10,680 |
|
|
16,256 |
|
||
|
Other current assets |
7,301 |
|
|
10,733 |
|
||
|
Total current assets |
374,665 |
|
|
372,639 |
|
||
|
Property and equipment, net |
37,224 |
|
|
82,933 |
|
||
|
Intangibles and other assets: |
|
|
|
||||
|
|
152,210 |
|
|
152,158 |
|
||
|
Intangible assets, net |
7,714 |
|
|
9,828 |
|
||
|
Right of use assets, net |
51,159 |
|
|
— |
|
||
|
Deferred income taxes |
2,182 |
|
|
1,195 |
|
||
|
Other non-current assets |
4,129 |
|
|
2,976 |
|
||
|
Total intangibles and other assets |
217,394 |
|
|
166,157 |
|
||
|
Total assets |
$ |
629,283 |
|
|
$ |
621,729 |
|
|
Liabilities and stockholders' equity |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
142,136 |
|
|
158,028 |
|
||
|
Accrued expenses |
50,975 |
|
|
35,698 |
|
||
|
Deferred revenue |
9,568 |
|
|
17,614 |
|
||
|
Revolving credit facility - current |
593 |
|
|
142,736 |
|
||
|
Term loan - current |
7,500 |
|
|
— |
|
||
|
Other current liabilities |
35,665 |
|
|
28,190 |
|
||
|
Total current liabilities |
246,437 |
|
|
382,266 |
|
||
|
Lease liabilities |
46,075 |
|
|
— |
|
||
|
Revolving credit facility - non-current |
60,086 |
|
|
— |
|
||
|
Term loan - non-current |
89,242 |
|
|
— |
|
||
|
Deferred income taxes |
8,053 |
|
|
7,605 |
|
||
|
Other long-term liabilities |
1,138 |
|
|
50,903 |
|
||
|
Total liabilities |
451,031 |
|
|
440,774 |
|
||
|
Commitments and contingencies |
|
|
|
||||
|
Stockholders' equity: |
|
|
|
||||
|
Common stock |
6 |
|
|
6 |
|
||
|
Additional paid-in capital |
245,311 |
|
|
239,960 |
|
||
|
|
(81,471 |
) |
|
(81,471 |
) |
||
|
Accumulated other comprehensive loss |
(22,449 |
) |
|
(24,311 |
) |
||
|
Retained earnings |
36,855 |
|
|
46,771 |
|
||
|
Total stockholders' equity |
178,252 |
|
|
180,955 |
|
||
|
Total liabilities and stockholders' equity |
$ |
629,283 |
|
|
$ |
621,729 |
|
|
Consolidated Statement of Cash Flows (In thousands) (Unaudited) |
|||||||
|
|
Year Ended |
||||||
|
|
2019 |
|
2018 |
||||
|
Cash flows from operating activities: |
|
|
|
||||
|
Net loss |
$ |
(10,075 |
) |
|
$ |
(76,683 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
||||
|
Depreciation and amortization |
12,328 |
|
|
12,988 |
|
||
|
Stock-based compensation expense |
6,281 |
|
|
5,302 |
|
||
|
Deferred income taxes |
(879 |
) |
|
(4,604 |
) |
||
|
|
— |
|
|
46,319 |
|
||
|
Intangible and other asset impairments |
— |
|
|
18,121 |
|
||
|
Bad debt provision |
1,068 |
|
|
3,601 |
|
||
|
Contract implementation cost amortization |
300 |
|
|
433 |
|
||
|
Change in fair value of warrant |
2,233 |
|
|
— |
|
||
|
Change in fair value of embedded derivative |
(176 |
) |
|
— |
|
||
|
Unrealized foreign exchange loss |
834 |
|
|
— |
|
||
|
Other operating activities, net |
1,150 |
|
|
255 |
|
||
|
Changes in assets and liabilities: |
|
|
|
||||
|
Accounts receivable and unbilled revenue |
(12,254 |
) |
|
4,470 |
|
||
|
Inventories |
20,980 |
|
|
(16,039 |
) |
||
|
Prepaid expenses and other assets |
(6,529 |
) |
|
2,120 |
|
||
|
Accounts payable |
(15,634 |
) |
|
21,585 |
|
||
|
Accrued expenses and other liabilities |
22,843 |
|
|
5,190 |
|
||
|
Net cash provided by operating activities |
22,470 |
|
|
23,058 |
|
||
|
Cash flows from investing activities: |
|
|
|
||||
|
Purchases of property and equipment |
(13,378 |
) |
|
(11,263 |
) |
||
|
Payments for acquisitions, net of cash acquired |
(721 |
) |
|
— |
|
||
|
Proceeds from sale of property and equipment |
— |
|
|
122 |
|
||
|
Net cash used in investing activities |
(14,099 |
) |
|
(11,141 |
) |
||
|
Cash flows from financing activities: |
|
|
|
||||
|
Net borrowings (repayments) from prior revolving credit facility |
(142,583 |
) |
|
14,539 |
|
||
|
Net borrowings from new revolving credit facility |
60,563 |
|
|
— |
|
||
|
Net short-term secured repayments |
(833 |
) |
|
(1,525 |
) |
||
|
Proceeds from term loan |
100,000 |
|
|
— |
|
||
|
Payments on term loan |
(2,500 |
) |
|
— |
|
||
|
Repurchases of common stock |
— |
|
|
(25,689 |
) |
||
|
Payment of debt issuance costs |
(5,488 |
) |
|
(545 |
) |
||
|
Proceeds from exercise of stock options |
63 |
|
|
545 |
|
||
|
Other financing activities, net |
(245 |
) |
|
(1,061 |
) |
||
|
Net cash provided by (used in) financing activities |
8,977 |
|
|
(13,736 |
) |
||
|
Effect of exchange rate changes on cash and cash equivalents |
(1,407 |
) |
|
(1,973 |
) |
||
|
Increase (decrease) in cash and cash equivalents |
15,941 |
|
|
(3,792 |
) |
||
|
Cash and cash equivalents, beginning of period |
26,770 |
|
|
30,562 |
|
||
|
Cash and cash equivalents, end of period |
$ |
42,711 |
|
|
$ |
26,770 |
|
|
Reconciliation of Adjusted EBITDA and Adjusted Diluted (Loss) Earnings Per Share (In thousands, except per share amounts) (Unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss |
$ |
(6,461 |
) |
|
$ |
(29,390 |
) |
|
$ |
(10,075 |
) |
|
$ |
(76,683 |
) |
|
Provision (benefit) for income tax |
3,897 |
|
|
(1,536 |
) |
|
3,700 |
|
|
(647 |
) |
||||
|
Interest income |
(127 |
) |
|
(83 |
) |
|
(366 |
) |
|
(218 |
) |
||||
|
Interest expense |
4,489 |
|
|
2,895 |
|
|
14,097 |
|
|
7,749 |
|
||||
|
Depreciation and amortization |
3,389 |
|
|
2,550 |
|
|
12,328 |
|
|
12,988 |
|
||||
|
Stock-based compensation - equity classified awards |
1,608 |
|
|
1,678 |
|
|
5,533 |
|
|
5,302 |
|
||||
|
Stock-based compensation - SARs market-to-market |
454 |
|
|
— |
|
|
748 |
|
|
— |
|
||||
|
Restructuring charges |
5,394 |
|
|
2,889 |
|
|
15,918 |
|
|
6,031 |
|
||||
|
Executive search fees |
— |
|
|
— |
|
|
80 |
|
|
235 |
|
||||
|
Professional fees related to control remediation |
212 |
|
|
535 |
|
|
1,130 |
|
|
2,430 |
|
||||
|
Sales and use tax audit |
— |
|
|
12 |
|
|
25 |
|
|
113 |
|
||||
|
Other professional fees |
898 |
|
|
345 |
|
|
2,241 |
|
|
507 |
|
||||
|
|
— |
|
|
18,432 |
|
|
— |
|
|
46,319 |
|
||||
|
Intangible and long-lived asset impairment |
— |
|
|
1,303 |
|
|
— |
|
|
18,121 |
|
||||
|
Senior leadership transition and other employee-related costs |
— |
|
|
257 |
|
|
— |
|
|
1,410 |
|
||||
|
Obsolete retail inventory |
— |
|
|
— |
|
|
— |
|
|
950 |
|
||||
|
Professional fees related to ASC 606 implementation |
— |
|
|
— |
|
|
— |
|
|
1,092 |
|
||||
|
Other, net |
1,790 |
|
|
(118 |
) |
|
3,686 |
|
|
1,616 |
|
||||
|
Adjusted EBITDA |
$ |
15,543 |
|
|
$ |
(231 |
) |
|
$ |
49,045 |
|
|
$ |
27,315 |
|
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss |
$ |
(6,461 |
) |
|
$ |
(29,390 |
) |
|
$ |
(10,075 |
) |
|
$ |
(76,683 |
) |
|
Restructuring charges |
5,394 |
|
|
2,889 |
|
|
15,918 |
|
|
6,031 |
|
||||
|
Executive search fees |
— |
|
|
— |
|
|
80 |
|
|
235 |
|
||||
|
Professional fees related to control remediation |
213 |
|
|
535 |
|
|
1,130 |
|
|
2,430 |
|
||||
|
Sales and use tax audit |
— |
|
|
12 |
|
|
25 |
|
|
113 |
|
||||
|
Other professional fees |
898 |
|
|
345 |
|
|
2,241 |
|
|
507 |
|
||||
|
Fair value of warrants and derivatives |
1,204 |
|
|
— |
|
|
2,057 |
|
|
— |
|
||||
|
Foreign exchange loss |
— |
|
|
— |
|
|
773 |
|
|
— |
|
||||
|
|
— |
|
|
18,432 |
|
|
— |
|
|
46,319 |
|
||||
|
Intangible and other asset impairments |
— |
|
|
1,303 |
|
|
— |
|
|
18,121 |
|
||||
|
Senior leadership transition and other employee-related costs |
— |
|
|
257 |
|
|
— |
|
|
1,410 |
|
||||
|
Obsolete retail inventory |
— |
|
|
— |
|
|
— |
|
|
950 |
|
||||
|
Professional fees related to ASC 606 implementation |
— |
|
|
— |
|
|
— |
|
|
1,092 |
|
||||
|
Income tax effects of adjustments |
(1,627 |
) |
|
(1,542 |
) |
|
(4,852 |
) |
|
(6,280 |
) |
||||
|
Adjusted net (loss) income |
$ |
(379 |
) |
|
$ |
(7,159 |
) |
|
$ |
7,297 |
|
|
$ |
(5,755 |
) |
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP Weighted-average shares outstanding – diluted |
53,467 |
|
|
51,773 |
|
|
53,293 |
|
|
52,230 |
|
||||
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
||||||||
|
Employee stock options and restricted common shares |
— |
|
|
— |
|
|
486 |
|
|
— |
|
||||
|
Adjusted weighted-average shares outstanding – diluted |
53,467 |
|
|
51,773 |
|
|
53,779 |
|
|
52,230 |
|
||||
|
Adjusted diluted (loss) earnings per share |
$ |
(0.01 |
) |
|
$ |
(0.14 |
) |
|
$ |
0.14 |
|
|
$ |
(0.11 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200316005812/en/
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bfreas@inwk.com
Source: