InnerWorkings Announces Second Quarter 2020 Results
“As we had anticipated, a reduction in global economic activity impacted marketing spend by our clients and therefore resulted in a significant decline in our second-quarter revenue. We took swift action to dramatically reduce our costs while still meeting the high standard by which we serve our clients,” said Chief Executive Officer
Financial and Business Highlights
-
Gross revenue was
$203.3 million in the second quarter of 2020, a decrease of 28.4% compared to$283.9 million in the second quarter of 2019. -
Gross profit was
$48.4 million , or 23.8% of gross revenue in the second quarter of 2020, compared to$68.4 million , or 24.1% of gross revenue, in the same period of last year. -
Selling, general and administrative expenses were
$45.1 million in the second quarter, down 21.4% compared to$57.4 million in the second quarter of 2019. -
Net loss for the second quarter of 2020 was
$(7.9) million , or$(0.15) per diluted share, compared to net loss of$(0.5) million , or$(0.01) per diluted share in the second quarter of 2019. Year-to-date net loss was$(10.8) million , compared to$(2.6) million in the same period of 2019. -
Adjusted diluted (loss) earnings per share for the second quarter of 2020 was
$(0.07) , compared to$0.05 in the second quarter of 2019. -
Adjusted EBITDA was
$6.1 million in the second quarter of 2020, compared to$13.0 million in the second quarter of 2019. Year-to-date adjusted EBITDA was$19.0 million , compared to$20.4 million in the same period of 2019. -
Additional work from new and existing clients awarded so far in 2020 amounts to approximately
$56 million of annual revenue at full run-rate.
Conference Call
Due to the previously announced proposed acquisition of
Non-GAAP Financial Measures
This press release includes the following financial measures defined as “non-GAAP financial measures” by the
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
About
|
Condensed Consolidated Statements of Operations (In thousands, except per share data) (unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Revenue |
$ |
203,311 |
|
|
$ |
283,861 |
|
|
$ |
464,671 |
|
|
$ |
551,072 |
|
|
Cost of goods sold |
154,890 |
|
|
215,463 |
|
|
352,808 |
|
|
420,664 |
|
||||
|
Gross profit |
48,421 |
|
|
68,398 |
|
|
111,863 |
|
|
130,408 |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
45,117 |
|
|
57,404 |
|
|
96,756 |
|
|
113,235 |
|
||||
|
Depreciation and amortization |
3,310 |
|
|
3,233 |
|
|
6,437 |
|
|
5,849 |
|
||||
|
|
— |
|
|
— |
|
|
7,191 |
|
|
— |
|
||||
|
Intangible and other asset impairments |
609 |
|
|
— |
|
|
883 |
|
|
— |
|
||||
|
Restructuring charges |
3,644 |
|
|
3,698 |
|
|
7,281 |
|
|
7,632 |
|
||||
|
(Loss) income from operations |
(4,259 |
) |
|
4,063 |
|
|
(6,685 |
) |
|
3,692 |
|
||||
|
Other income (expense): |
|
|
|
|
|
|
|
||||||||
|
Interest income |
53 |
|
|
104 |
|
|
109 |
|
|
202 |
|
||||
|
Interest expense |
(3,201 |
) |
|
(2,486 |
) |
|
(7,587 |
) |
|
(5,232 |
) |
||||
|
(Loss) gain from change in fair value of warrant |
(120 |
) |
|
— |
|
|
5,085 |
|
|
— |
|
||||
|
Foreign exchange income (loss) |
862 |
|
|
237 |
|
|
(1,929 |
) |
|
(239 |
) |
||||
|
Other income |
221 |
|
|
42 |
|
|
1,117 |
|
|
78 |
|
||||
|
Total other expense |
(2,185 |
) |
|
(2,103 |
) |
|
(3,205 |
) |
|
(5,191 |
) |
||||
|
(Loss) income before income taxes |
(6,444 |
) |
|
1,960 |
|
|
(9,890 |
) |
|
(1,499 |
) |
||||
|
Income tax expense |
1,468 |
|
|
2,468 |
|
|
862 |
|
|
1,053 |
|
||||
|
Net loss |
$ |
(7,912 |
) |
|
$ |
(508 |
) |
|
$ |
(10,752 |
) |
|
$ |
(2,552 |
) |
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Numerator: |
|
|
|
|
|
|
|
|
||||||||
|
Net loss - basic |
|
$ |
(7,912 |
) |
|
$ |
(508 |
) |
|
$ |
(10,752 |
) |
|
$ |
(2,552 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||||
|
Change in fair value of Initial Warrant liability |
|
— |
|
|
— |
|
|
(5,085 |
) |
|
— |
|
||||
|
Net loss - diluted |
|
$ |
(7,912 |
) |
|
$ |
(508 |
) |
|
$ |
(15,837 |
) |
|
$ |
(2,552 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Denominator: |
|
|
|
|
|
|
|
|
||||||||
|
Weighted average shares outstanding |
|
52,327 |
|
|
51,773 |
|
|
52,233 |
|
|
51,830 |
|
||||
|
Issuance of Initial Warrant |
|
1,335 |
|
|
— |
|
|
1,335 |
|
|
— |
|
||||
|
Weighted average shares outstanding - basic and diluted |
|
53,662 |
|
|
51,773 |
|
|
53,568 |
|
|
51,830 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic loss per share |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.05 |
) |
|
Diluted loss per share |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.30 |
) |
|
$ |
(0.05 |
) |
|
Condensed Consolidated Balance Sheets (In thousands) (Unaudited) |
|||||||
|
|
|
|
|
||||
|
Assets |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
35,311 |
|
|
$ |
42,711 |
|
|
Accounts receivable, net of allowance for doubtful accounts of |
158,636 |
|
|
202,406 |
|
||
|
Unbilled revenue |
23,900 |
|
|
48,396 |
|
||
|
Other receivables |
9,858 |
|
|
28,194 |
|
||
|
Inventories |
37,303 |
|
|
34,977 |
|
||
|
Prepaid expenses |
13,021 |
|
|
10,680 |
|
||
|
Other current assets |
6,981 |
|
|
7,301 |
|
||
|
Total current assets |
285,010 |
|
|
374,665 |
|
||
|
Property and equipment, net |
36,357 |
|
|
37,224 |
|
||
|
Intangibles and other assets: |
|
|
|
||||
|
|
144,967 |
|
|
152,210 |
|
||
|
Intangible assets, net |
6,693 |
|
|
7,714 |
|
||
|
Right of use assets, net |
46,805 |
|
|
51,159 |
|
||
|
Deferred income taxes |
2,183 |
|
|
2,182 |
|
||
|
Other non-current assets |
3,018 |
|
|
4,129 |
|
||
|
Total intangibles and other assets |
203,666 |
|
|
217,394 |
|
||
|
Total assets |
$ |
525,033 |
|
|
$ |
629,283 |
|
|
Liabilities and stockholders' equity |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
96,866 |
|
|
$ |
142,136 |
|
|
Accrued expenses |
43,350 |
|
|
50,975 |
|
||
|
Deferred revenue |
10,572 |
|
|
9,568 |
|
||
|
Revolving credit facility - current |
76 |
|
|
593 |
|
||
|
Term loan - current |
10,000 |
|
|
7,500 |
|
||
|
Other current liabilities |
25,969 |
|
|
35,665 |
|
||
|
Total current liabilities |
186,833 |
|
|
246,437 |
|
||
|
Lease liabilities |
42,487 |
|
|
46,075 |
|
||
|
Revolving credit facility - non-current |
40,476 |
|
|
60,086 |
|
||
|
Term loan - non-current |
79,800 |
|
|
89,242 |
|
||
|
Deferred income taxes |
8,053 |
|
|
8,053 |
|
||
|
Other long-term liabilities |
1,762 |
|
|
1,138 |
|
||
|
Total liabilities |
359,411 |
|
|
451,031 |
|
||
|
Commitments and contingencies |
|
|
|
||||
|
Stockholders' equity: |
|
|
|
||||
|
Common stock |
6 |
|
|
6 |
|
||
|
Additional paid-in capital |
248,215 |
|
|
245,311 |
|
||
|
|
(78,418 |
) |
|
(81,471 |
) |
||
|
Accumulated other comprehensive loss |
(27,348 |
) |
|
(22,449 |
) |
||
|
Retained earnings |
23,167 |
|
|
36,855 |
|
||
|
Total stockholders' equity |
165,622 |
|
|
178,252 |
|
||
|
Total liabilities and stockholders' equity |
$ |
525,033 |
|
|
$ |
629,283 |
|
|
Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited) |
|||||||
|
|
Six Months Ended |
||||||
|
|
2020 |
|
2019 |
||||
|
Cash flows from operating activities |
|
|
|
||||
|
Net loss |
$ |
(10,752 |
) |
|
$ |
(2,552 |
) |
|
Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
||||
|
Depreciation and amortization |
6,437 |
|
|
5,849 |
|
||
|
Stock-based compensation expense |
2,521 |
|
|
2,141 |
|
||
|
Bad debt provision |
426 |
|
|
689 |
|
||
|
Contract implementation cost amortization |
135 |
|
|
213 |
|
||
|
|
7,191 |
|
|
— |
|
||
|
Long-lived asset impairment |
883 |
|
|
— |
|
||
|
Change in fair value of warrant |
(5,085 |
) |
|
— |
|
||
|
Change in fair value of embedded derivatives |
(519 |
) |
|
— |
|
||
|
Unrealized foreign exchange loss |
1,184 |
|
|
— |
|
||
|
Other operating activities, net |
1,085 |
|
|
224 |
|
||
|
Change in assets and liabilities: |
|
|
|
||||
|
Accounts receivable and unbilled revenue |
61,059 |
|
|
(10,099 |
) |
||
|
Inventories |
(3,134 |
) |
|
4,582 |
|
||
|
Prepaid expenses and other assets |
17,147 |
|
|
(4,163 |
) |
||
|
Accounts payable |
(41,351 |
) |
|
(18,146 |
) |
||
|
Accrued expenses and other liabilities |
(19,190 |
) |
|
22,551 |
|
||
|
Net cash provided by operating activities |
18,037 |
|
|
1,289 |
|
||
|
|
|
|
|
||||
|
Cash flows from investing activities |
|
|
|
||||
|
Purchases of property and equipment |
(5,127 |
) |
|
(6,881 |
) |
||
|
Net cash used in investing activities |
(5,127 |
) |
|
(6,881 |
) |
||
|
|
|
|
|
||||
|
Cash flows from financing activities |
|
|
|
||||
|
Net borrowings from old revolving credit facility |
— |
|
|
14,908 |
|
||
|
Net repayments on new revolving credit facility |
(19,830 |
) |
|
— |
|
||
|
Net short-term secured borrowings |
— |
|
|
(833 |
) |
||
|
Payments on term loan |
(2,500 |
) |
|
— |
|
||
|
Proceeds from exercise of stock options |
— |
|
|
63 |
|
||
|
Payment of debt issuance costs |
— |
|
|
(935 |
) |
||
|
Other financing activities, net |
(130 |
) |
|
(156 |
) |
||
|
Net cash (used in) provided by financing activities |
(22,460 |
) |
|
13,047 |
|
||
|
|
|
|
|
||||
|
Effect of exchange rate changes on cash and cash equivalents |
2,150 |
|
|
(226 |
) |
||
|
Decrease in cash and cash equivalents |
(7,400 |
) |
|
7,229 |
|
||
|
Cash and cash equivalents, beginning of period |
42,711 |
|
|
26,770 |
|
||
|
Cash and cash equivalents, end of period |
$ |
35,311 |
|
|
$ |
33,999 |
|
|
Reconciliation of Adjusted EBITDA and Adjusted Diluted Earnings Per Share (In thousands, except per share amounts) (Unaudited) |
|||||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Net loss |
$ |
(7,912 |
) |
|
$ |
(508 |
) |
|
$ |
(10,752 |
) |
|
$ |
(2,552 |
) |
|
Benefit for income tax |
1,468 |
|
|
2,468 |
|
|
862 |
|
|
1,053 |
|
||||
|
Interest income |
(53 |
) |
|
(104 |
) |
|
(109 |
) |
|
(202 |
) |
||||
|
Interest expense |
3,201 |
|
|
2,486 |
|
|
7,587 |
|
|
5,232 |
|
||||
|
Change in fair value of warrant |
120 |
|
|
— |
|
|
(5,085 |
) |
|
— |
|
||||
|
Foreign exchange loss |
(862 |
) |
|
(237 |
) |
|
1,929 |
|
|
239 |
|
||||
|
Depreciation and amortization |
3,310 |
|
|
3,233 |
|
|
6,437 |
|
|
5,849 |
|
||||
|
Stock-based compensation - equity classified awards |
1,554 |
|
|
1,402 |
|
|
3,034 |
|
|
2,141 |
|
||||
|
Stock-based compensation - liability classified awards (SARs) |
127 |
|
|
46 |
|
|
(513 |
) |
|
46 |
|
||||
|
|
— |
|
|
— |
|
|
7,191 |
|
|
— |
|
||||
|
Intangible and other asset impairments |
609 |
|
|
— |
|
|
883 |
|
|
— |
|
||||
|
Restructuring charges |
3,644 |
|
|
3,698 |
|
|
7,281 |
|
|
7,632 |
|
||||
|
Merger-related transaction costs |
790 |
|
|
— |
|
|
790 |
|
|
— |
|
||||
|
Professional fees related to control remediation |
356 |
|
|
550 |
|
|
620 |
|
|
916 |
|
||||
|
Executive search fees |
— |
|
|
— |
|
|
— |
|
|
80 |
|
||||
|
Sales and use tax audit |
— |
|
|
— |
|
|
— |
|
|
25 |
|
||||
|
Other income |
(221 |
) |
|
(42 |
) |
|
(1,117 |
) |
|
(78 |
) |
||||
|
Adjusted EBITDA |
$ |
6,131 |
|
|
$ |
12,992 |
|
|
$ |
19,038 |
|
|
$ |
20,381 |
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
Net loss |
$ |
(7,912 |
) |
|
$ |
(508 |
) |
|
$ |
(10,752 |
) |
|
$ |
(2,552 |
) |
|
Restructuring charges |
3,644 |
|
|
3,698 |
|
|
7,281 |
|
|
7,632 |
|
||||
|
Executive search fees |
— |
|
|
— |
|
|
— |
|
|
80 |
|
||||
|
Merger-related transaction costs |
790 |
|
|
— |
|
|
790 |
|
|
— |
|
||||
|
Professional fees related to control remediation |
356 |
|
|
550 |
|
|
620 |
|
|
916 |
|
||||
|
Sales and use tax audit |
— |
|
|
— |
|
|
— |
|
|
25 |
|
||||
|
Change in fair value of warrant and derivatives |
36 |
|
|
— |
|
|
(5,604 |
) |
|
— |
|
||||
|
|
— |
|
|
— |
|
|
7,191 |
|
|
— |
|
||||
|
Intangible and other asset impairments |
609 |
|
|
— |
|
|
883 |
|
|
— |
|
||||
|
Income tax effects of adjustments |
(1,115 |
) |
|
(961 |
) |
|
(2,071 |
) |
|
(1,994 |
) |
||||
|
Adjusted net (loss) income |
$ |
(3,592 |
) |
|
$ |
2,779 |
|
|
$ |
(1,662 |
) |
|
$ |
4,107 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP weighted-average shares outstanding – diluted |
53,662 |
|
|
51,773 |
|
|
53,568 |
|
|
51,830 |
|
||||
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
||||||||
|
Employee stock options and restricted common shares |
— |
|
|
156 |
|
|
— |
|
|
104 |
|
||||
|
Adjusted weighted-average shares outstanding – diluted |
53,662 |
|
|
51,929 |
|
|
53,568 |
|
|
51,934 |
|
||||
|
Adjusted diluted earnings per share |
$ |
(0.07 |
) |
|
$ |
0.05 |
|
|
$ |
(0.03 |
) |
|
$ |
0.08 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200806006101/en/
312.589.5613
bfreas@inwk.com
Source: