InnerWorkings Announces Third Quarter 2009 Results

Press Release


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Nov 5, 2009
InnerWorkings Announces Third Quarter 2009 Results

CHICAGO, Nov 5, 2009 (GlobeNewswire via COMTEX News Network) -- InnerWorkings, Inc. (Nasdaq:INWK), a leading global provider of managed print and promotional solutions to corporate clients, today reported results for the three months ended September 30, 2009.

Quarterly Highlights:



  * Revenue generated during the third quarter was $98.2 million,
    including a $5.7 million one-time correction of a 2008 revenue
    accrual related to one customer.  Adjusted revenue excluding this
    one-time correction is $103.9 million.  Please refer to the non-
    GAAP reconciliation table below for more information.

  * Reported net income and earnings per share for the third quarter
    was $1.7 million and $0.04 per diluted share.  Excluding the
    one-time correction, adjusted net income and earnings per share
    are $2.3 million and $0.05 per diluted share. Please refer to the
    non-GAAP reconciliation table below for more information.

  * Seven new enterprise contracts were signed during the quarter,
    including agreements with InterContinental Hotels Group,
    The Scotts Company and Bayer.

  * Revenue from new accounts was $14.6 million in the quarter and
    $35.3 million year-to-date.

  * Cash flow generated from operations was $2.0 million in the
    third quarter.

"In terms of the size and quality of our new enterprise wins, the third quarter was among the best we've had," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "We believe we have seen the bottom with respect to marketing budgets and print spends and continue to gain confidence that our markets are improving."

Additional third quarter 2009 financial and operational highlights include the following:



  * For the third quarter of 2009, 65 percent of the Company's
    revenue was generated from sales to enterprise clients, with the
    remaining 35 percent derived from transactional clients.

  * Customer concentration from the Company's top 10 accounts
    decreased to 33 percent of total revenue compared to 35 percent
    in the year-earlier period.

  * The Company conducted business with 24 of its top 25 customers
    from the year-earlier period.

  * As of the end of the third quarter the Company has an outstanding
    balance of $42.3 million on its bank credit facility and retains
    cash and short-term investments of $25.8 million.

"We are continuing to manage expenses prudently and reduce costs as we seek an optimization of our resources," said Joseph M. Busky, Chief Financial Officer of InnerWorkings. "We believe that further productivity initiatives, along with sustained financial discipline and our healthy balance sheet and cash flow generation will position us well to benefit as market conditions continue to improve. As sales begin to recover in earnest, we expect to strengthen our operating leverage and improve our financial performance."

2008 Revenue Accrual Correction

As noted above, InnerWorkings recorded a one time, non-cash correction of a 2008 revenue accrual for one customer account in the quarter. The adjustment relates primarily to the second and third quarters of 2008. The out-of-period adjustment in the third quarter of 2009 was for $5.7 million in revenue, $0.9 million of gross profit and $0.6 million of net income. This adjustment is confined to one customer. InnerWorkings identified and addressed the issue and additional safeguards and controls have been implemented in an effort to prevent anything similar from reoccurring. We have concluded that no prior periods are materially misstated and that no restatement is required for any prior period as a result of this correction.

Conference Call

A conference call will be broadcast live on Thursday, November 5, 2009, at 4:30 p.m. Central Time (5:30 p.m. Eastern Time). The live webcast discussion, which will include a Q&A session, will be hosted by Eric D. Belcher, Chief Executive Officer, and Joseph M. Busky, Chief Financial Officer. Interested parties are invited to listen to the live webcast by visiting the Investor "Events & Presentations" section of InnerWorkings' website at www.inwk.com. A replay of the webcast will be available later that day in the same section of the website.

About InnerWorkings, Inc.

InnerWorkings, Inc. (Nasdaq:INWK) is a leading global provider of managed print and promotional solutions to corporate clients across a wide range of industries. With proprietary technology, an extensive supplier network and domain expertise, the Company procures, manages and delivers printed materials and promotional products as part of a comprehensive outsourced enterprise solution. The Company is based in Chicago with other offices in the United States and in the United Kingdom. For more information on InnerWorkings, visit: www.inwk.com.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission: adjusted revenue, adjusted net income and adjusted earnings per share. These measures may be different from non-GAAP financial 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, see "Reconciliation of Adjusted Revenue, Net Income and Earnings Per Share" included in this press release.

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.

(inwk-e)



 Consolidated Statements of Income (unaudited)

                                              Three months ended
                                                 September 30,
                                          ---------------------------
                                              2008            2009
                                          ------------   ------------
 Revenue                                  $122,016,248   $ 98,206,204
 Cost of goods sold                         92,540,770     73,304,494
                                          ------------   ------------
 Gross profit                               29,475,478     24,901,710
 Operating expenses:
  Selling, general, and administrative
   expenses                                 20,305,114     20,034,045
  Depreciation and amortization              1,337,901      2,041,801
                                          ------------   ------------
 Income from operations                      7,832,463      2,825,864
 Total other income (expense)                1,387,327       (119,108)
                                          ------------   ------------
 Income before taxes                         9,219,790      2,706,756
 Income tax expense                          3,540,699        977,181
                                          ------------   ------------
 Net income                               $  5,679,091   $  1,729,575
                                          ============   ============

 Basic earnings per share                 $       0.12   $       0.04
 Diluted earnings per share               $       0.12   $       0.04

 Weighted average shares outstanding,
  basic                                     47,097,230     45,580,606
 Weighted average shares outstanding,
  diluted                                   49,136,416     47,175,594


                                                Nine months ended
                                                  September 30,
                                          ---------------------------
                                              2008           2009
                                          ------------   ------------
 Revenue                                  $314,554,263   $292,581,147
 Cost of goods sold                        237,732,172    219,929,771
                                          ------------   ------------
 Gross profit                               76,822,091     72,651,376
 Operating expenses:
  Selling, general, and administrative
   expenses                                 54,854,905     60,678,251
  Depreciation and amortization              3,207,904      5,756,247
                                          ------------   ------------
 Income from operations                     18,759,282      6,216,878
 Total other income (expense)                6,879,302        (88,714)
                                          ------------   ------------
 Income before taxes                        25,638,584      6,128,164
 Income tax expense                          9,996,182      2,002,902
                                          ------------   ------------
 Net income                               $ 15,642,402   $  4,125,262
                                          ============   ============

 Basic earnings per share                 $       0.33   $       0.09
 Diluted earnings per share               $       0.31   $       0.09

 Weighted average shares outstanding,
  basic                                     47,723,840     45,504,137
 Weighted average shares outstanding,
  diluted                                   49,862,159     47,122,499


Consolidated Balance Sheets

                                          December 31,   September 30,
                                              2008            2009
                                          ------------   ------------
                                                          (unaudited)

 Balance Sheet Data
 Cash and cash equivalents                $  4,011,855   $  1,348,745
 Short-term investments                             --     24,451,256
 Accounts receivable, net of allowance
  for doubtful accounts                     73,628,112     76,086,409
 Unbilled revenue                           27,802,667     21,074,416
 Inventories                                 7,539,870     13,132,841
 Prepaid expenses                            9,257,086     10,742,623
 Other current assets                        8,081,553      7,783,172
 Total long-term assets                    123,501,173    111,656,030
                                          ------------   ------------
 Total assets                             $253,822,316   $266,275,492
                                          ============   ============

 Accounts payable-trade                   $ 54,084,430   $ 64,683,388
 Other current liabilities                  65,854,864     52,982,772
 Capital lease obligations, less current
  maturities                                   144,993         46,422
 Other long-term liabilities                        --      2,924,917
 Total stockholders' equity                133,738,029    145,637,993
                                          ------------   ------------
 Total liabilities and stockholders'
  equity                                  $253,822,316   $266,275,492
                                          ============   ============



 Cash Flow Data (unaudited)

                                                Nine Months Ended
                                                  September 30,
                                          ---------------------------
                                              2008           2009
                                          ------------   ------------
 Net cash provided by operating
  activities                              $ 14,279,298   $ 10,082,930
 Net cash used in investing activities     (33,728,170)   (12,601,332)
 Net cash provided by (used) in financing
  activities                                10,574,457        (61,832)
                                          ------------   ------------
 Effect of exchange rate changes on cash
  and cash equivalents                         144,130        (82,876)
                                          ------------   ------------
 Decrease in cash and cash equivalents      (8,730,285)    (2,663,110)
 Cash and cash equivalents, beginning of
  period                                    26,716,239      4,011,855
                                          ------------   ------------
 Cash and cash equivalents, end of period $ 17,985,954   $  1,348,745
                                          ============   ============


 Reconciliation of Adjusted Revenue, Net Income and Earnings Per Share
 (unaudited) (in millions, except per share amounts)

                                  Three months ended September 30,
                             -----------------------------------------
                                      Reported    One-time    Adjusted
                               2008     2009     Adjustment     2009
                             -------  --------   ----------   --------
 Revenue                     $122.0     $98.2        $5.7      $103.9

 Cost of goods sold            92.5      73.3         4.8        78.1
                             -------  --------   ----------   --------
 Gross profit                  29.5      24.9         0.9        25.8
 Selling, general, and
  administrative expenses      20.4      20.1          --        20.1
 Depreciation and
  amortization                  1.3       2.0          --         2.0
                             -------  --------   ----------   --------
 Income from operations         7.8       2.8         0.9         3.7
 Total other income (expense)   1.4      (0.1)         --        (0.1)
                             -------  --------   ----------   --------
 Income before taxes            9.2       2.7         0.9         3.6
 Income tax expense             3.5       1.0         0.3         1.3
                             -------  --------   ----------   --------
 Net income                    $5.7     $ 1.7      $  0.6      $  2.3
                             =======  ========   ==========   ========

 Basic earnings per share     $0.12     $0.04      $ 0.01      $ 0.05
 Diluted earnings per share   $0.12     $0.04      $ 0.01      $ 0.05


                                   Nine months ended September 30,
                              ----------------------------------------
                                      Reported    One-time    Adjusted
                               2008     2009     Adjustment     2009
                              ------  --------   ----------   --------
 Revenue                      $314.6   $292.6       $ 5.7      $298.3


 Cost of goods sold            237.8    219.9         4.8       224.7
                              ------  --------   ----------   --------
 Gross profit                   76.8     72.7         0.9        73.6
 Selling, general, and
  administrative expenses       54.8     60.7          --        60.7
 Depreciation and amortization   3.2      5.8          --         5.8
                              ------  --------   ----------   --------
 Income from operations         18.8      6.2         0.9         7.1
 Total other income (expense)    6.8     (0.1)         --        (0.1)
                              ------  --------   ----------   --------
 Income before taxes            25.6      6.1         0.9         7.0
 Income tax expense             10.0      2.0         0.3         2.3
                              ------  --------   ----------   --------
 Net income                   $ 15.6   $  4.1       $ 0.6      $  4.7
                              ======  ========   ==========   ========

 Basic earnings per share     $ 0.33   $ 0.09       $0.01      $ 0.10
 Diluted earnings per share   $ 0.31   $ 0.09       $0.01      $ 0.10

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: InnerWorkings, Inc.

CONTACT:  InnerWorkings, Inc.
Joe Busky
(312) 784-2603
jbusky@inwk.com

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