InnerWorkings Announces Third Quarter 2013 Results
Core Enterprise Business Remains Strong; Third Quarter Results and Full Year Guidance Impacted by Performance of the Productions Graphics Business Acquired in 2011
Quarterly Highlights:
-
Revenue increased 16% to
$232.6 million , compared to$199.8 million in the third quarter of 2012. New enterprise account growth was$20 million , representing 10% growth over the prior year period. -
Non-GAAP Adjusted EBITDA was
$8.5 million , compared to$11.3 million in the third quarter of 2012, due primarily to lower profitability from Productions Graphics and the spending reduction by a large retail customer announced in the first quarter of 2013. Please refer to the Non-GAAP reconciliation table below for more information. -
Non-GAAP Adjusted Operating Cash Flow was
$1.6 million , compared to Non-GAAP Adjusted Operating Cash Flow of$1.4 million in the third quarter of 2012. Please refer to the non-GAAP reconciliation table below for more information. -
A restructuring and write down charge of
$4.3 million , or a$0.05 impact to GAAP diluted earnings per share, was incurred to transition the Inside Sales division to a new customer acquisition strategy. -
Non-GAAP diluted earnings per share were
$0.05 , compared to$0.10 in the third quarter of 2012. Approximately$0.05 of the Non-GAAP diluted earnings per share underperformance is attributable to the Productions Graphics business versus the same period in 2012. GAAP diluted earnings per share were$0.14 compared to$0.10 in the third quarter of 2012, due primarily to a$0.87 impact from a contingent liability release related to the performance of Productions Graphics, partially offset by a related European goodwill impairment charge of$0.73 .
"While our core enterprise business continues to drive our growth
globally, the performance of Productions Graphics in
Additional third quarter 2013 financial and recent operational highlights include the following:
- 78% of the Company's revenues were generated from the enterprise channel, with the remaining 22% derived from the middle market channel.
-
An enterprise agreement was signed with a new global consumer package
goods company to manage their permanent in-store display program, in
addition to providing traditional print management services. The
Company estimates this new agreement will generate approximately
$15 million of annual revenue once it is fully implemented. -
New agreements have been signed with several existing clients to
expand into new geographies around the world. Most recently, the
Company became the global provider of print and promotional materials
for
Intercontinental Hotel Group by expanding its relationship intoEurope and theMiddle East . - New client agreements were signed with two large charitable organizations to manage direct mail campaigns and other fundraising materials. These agreements further establish the Company's growing presence in the non-profit sector.
"While we are disappointed by the results of Productions Graphics, we remain confident in our long-term growth in Europe," said Joseph M. Busky, Chief Financial Officer. "Our year-over-year organic growth in the region was 10% in the third quarter and the European-based businesses we have acquired this year have exceeded our expectations."
|
Revenue Growth - Comparing 2013 to 2012 |
|||||||||
| Q3 | YTD | ||||||||
| $(MM) | Q3 % | $(MM) | YTD % | ||||||
| Change | Change | Change | Change | ||||||
| New Enterprise Account Growth |
|
10% |
|
10% | |||||
| New Middle Market Growth |
|
0% |
|
0% | |||||
| Same Customer Spend |
( |
-2% |
( |
-3% | |||||
| Lost Customer Spending (1) |
( |
-6% |
( |
-3% | |||||
| Acquisitive Growth |
|
14% |
|
6% | |||||
| Total Revenue Growth |
|
16% |
|
10% | |||||
| Total Organic Revenue Growth (2) |
|
8% |
|
7% | |||||
|
(1) Related to spending reduction from large retail customer
announced in |
|
(2) Excludes lost customer spending and acquisitive growth. |
Outlook
The Company is lowering its 2013 revenue guidance from a range of
Conference Call
A conference call to discuss the Company's third quarter 2013 results
will be broadcast live on
To access the conference call by telephone, interested parties may dial
(877) 771-7024. Interested parties are also invited to listen to the
live webcast by visiting the Investor "Events & Presentations" section
of
About
For more information visit: www.inwk.com.
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
| Consolidated Statements of Income (Unaudited) | |||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||||||||
| 2012 | 2013 | 2012 | 2013 | ||||||||||||||
| Revenue | $ | 199,768,676 | $ | 232,629,788 | $ | 589,712,549 | $ | 647,821,539 | |||||||||
| Cost of goods sold | 152,887,337 | 179,511,134 | 453,591,764 | 500,533,788 | |||||||||||||
| Gross profit | 46,881,339 | 53,118,654 | 136,120,785 | 147,287,751 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling, general and administrative expenses | 36,253,631 | 45,832,645 | 106,514,313 | 130,866,672 | |||||||||||||
| Depreciation and amortization | 2,696,255 | 3,880,431 | 8,077,332 | 8,994,494 | |||||||||||||
| Change in fair value of contingent consideration | 330,791 | (46,793,951 | ) | 797,476 | (47,834,508 | ) | |||||||||||
| Goodwill impairment charge | - | 37,908,000 | - | 37,908,000 | |||||||||||||
| Restructuring and asset write down charges | - | 4,321,862 | - | 4,321,862 | |||||||||||||
| Income from operations | 7,600,662 | 7,969,667 | 20,731,664 | 13,031,231 | |||||||||||||
| Total other expense | (166,915 | ) | (728,047 | ) | (921,202 | ) | (2,140,743 | ) | |||||||||
| Income before income taxes | 7,433,747 | 7,241,620 | 19,810,462 | 10,890,488 | |||||||||||||
| Income tax expense | 2,457,403 | (50,301 | ) | 6,672,030 | 800,092 | ||||||||||||
| Net income | $ | 4,976,344 | $ | 7,291,921 | $ | 13,138,432 | $ | 10,090,396 | |||||||||
| Basic earnings per share | $ | 0.10 | $ | 0.14 | $ | 0.27 | $ | 0.20 | |||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.14 | $ | 0.26 | $ | 0.19 | |||||||||
| Weighted average shares outstanding, basic | 49,406,180 | 51,157,933 | 48,408,532 | 50,743,576 | |||||||||||||
| Weighted average shares outstanding, diluted | 51,244,909 | 52,217,066 | 51,038,573 | 52,122,553 | |||||||||||||
| Consolidated Balance Sheets | ||||||
|
|
|
|||||
| 2012 | 2013 | |||||
| (unaudited) | ||||||
| Cash and cash equivalents | $ | 17,218,899 | $ | 19,224,801 | ||
| Accounts receivable, net of allowance for doubtful accounts | 149,246,568 | 167,059,275 | ||||
| Unbilled revenue | 30,798,230 | 28,920,833 | ||||
| Inventories | 17,406,863 | 29,423,436 | ||||
| Prepaid expenses | 16,210,053 | 10,689,569 | ||||
| Other current assets | 22,565,321 | 26,806,150 | ||||
| Total long-term assets | 268,797,648 | 331,054,159 | ||||
| Total assets | $ | 522,243,582 | $ | 613,178,223 | ||
| Accounts payable-trade | $ | 121,132,051 | $ | 143,507,594 | ||
| Other current liabilities | 44,262,065 | 54,614,732 | ||||
| Revolving credit facility | 65,000,000 | 91,500,000 | ||||
| Other long-term liabilities | 68,870,021 | 81,401,452 | ||||
| Total stockholders' equity | 222,979,445 | 242,154,445 | ||||
| Total liabilities and stockholders' equity | $ | 522,243,582 | $ | 613,178,223 | ||
|
|
||||||||
|
Nine Months Ended |
||||||||
| 2012 | 2013 | |||||||
| Net cash provided by (used in) operating activities | $ | (13,100,484 | ) | $ | 14,858,869 | |||
| Net cash used in investing activities | (10,793,609 | ) | (28,486,508 | ) | ||||
| Net cash provided by financing activities | 20,163,365 | 15,512,553 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (332,194 | ) | 120,988 | |||||
| Increase (decrease) in cash and cash equivalents | (4,062,922 | ) | 2,005,902 | |||||
| Cash and cash equivalents, beginning of period | 13,219,385 | 17,218,899 | ||||||
| Cash and cash equivalents, end of period | $ | 9,156,463 | $ | 19,224,801 | ||||
| Reconciliation of Adjusted EBITDA, Adjusted Operating Cash Flows and Adjusted Diluted EPS (Unaudited) | ||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 2012 | 2013 | 2012 | 2013 | |||||||||||||
| Operating income | $ | 7,600,662 | $ | 7,969,667 | $ | 20,731,664 | $ | 13,031,231 | ||||||||
| Depreciation and amortization | 2,696,255 | 3,880,431 | 8,077,332 | 8,994,494 | ||||||||||||
| Stock-based compensation expense | 719,699 | 982,082 | 3,171,073 | 3,036,188 | ||||||||||||
| Change in fair value of contingent consideration | 330,791 | (46,793,951 | ) | 797,476 | (47,834,508 | ) | ||||||||||
| Goodwill impairment charge | - | 37,908,000 | - | 37,908,000 | ||||||||||||
| Restructuring and asset write down charges | - | 4,321,862 | - | 4,321,862 | ||||||||||||
| Legal fees in connection with patent infringement defense | - | 209,075 | - | 961,295 | ||||||||||||
| Adjusted EBITDA | $ | 11,347,407 | $ | 8,477,166 | $ | 32,777,545 | $ | 20,418,562 | ||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 2012 | 2013 |
2012 |
2013 |
|||||||||||||
| Net cash provided by (used in) operating activities | $ | (3,103,935 | ) | $ | 6,553,846 | $ | (13,100,484 | ) | $ | 14,858,869 | ||||||
| Excess tax benefit from exercise of stock awards * | 905,122 | (2,834,634 | ) | 8,352,190 | (1,768,277 | ) | ||||||||||
| Cash paid for settlement of preference claim | - | - | - | 900,000 | ||||||||||||
|
Prepayment (refund) of VAT assessment in |
3,604,866 | (2,166,664 | ) | 3,604,866 | (2,166,664 | ) | ||||||||||
| Adjusted net cash provided by (used in) operating activities | $ | 1,406,053 | $ | 1,552,548 | $ | (1,143,428 | ) | $ | 11,823,928 | |||||||
| * 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. | ||||||||||||||||
|
** Represents a payment made to Her Majesty's Revenue and Customers
for VAT assessments in the |
||||||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 2012 | 2013 |
2012 |
2013 |
|||||||||||||
| Net income | $ | 4,976,344 | $ | 7,291,921 | $ | 13,138,432 | $ | 10,090,396 | ||||||||
| Change in fair value of contingent consideration, net of tax | 203,767 | (45,457,561 | ) | 491,245 | (46,498,118 | ) | ||||||||||
| Goodwill impairment charge | - | 37,908,000 | - | 37,908,000 | ||||||||||||
| Restructuring and asset write down charges, net of tax | - | 2,627,692 | - | 2,627,692 | ||||||||||||
| Legal fees in connection with patent infringement defense, net of tax | - | 127,118 | - | 584,467 | ||||||||||||
| Adjusted net income | $ | 5,180,111 | $ | 2,497,170 | $ | 13,629,677 | $ | 4,712,437 | ||||||||
| Weighted average shares outstanding, diluted | 51,244,909 | 52,217,066 | 51,038,573 | 52,122,553 | ||||||||||||
| Adjusted Diluted EPS | $ | 0.10 | $ | 0.05 | $ | 0.27 | $ | 0.09 | ||||||||
(312) 277-1510
bmoore@inwk.com
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