InnerWorkings Announces Third Quarter 2018 Results
“While we are experiencing greater revenue declines than expected in
transactional and small accounts, we are encouraged by the momentum we
continue to build in new enterprise wins,” said Chief Executive Officer
Financial and Business Highlights
-
Gross revenue was
$270.9 million in the third quarter of 2018, a decrease of 6% compared to$288.5 million in the third quarter of 2017. Excluding currency impacts, third quarter gross revenue decreased 5% compared to the same period of last year. Year-to-date gross revenue was$827.4 million , a decrease of 1% compared to$833.0 million in the same period of 2017. -
Gross profit (net revenue) was
$64.0 million , or 23.6% of gross revenue in the third quarter of 2018, compared to$71.9 million , or 24.9% of revenue, in the same period of last year. Excluding the impact of an inventory writeoff related to our retail environments business, our gross margin was 24.0% in the third quarter of 2018. -
Net loss for the third quarter of 2018 was
$(44.9) million , or$(0.87) per diluted share, compared to net income of$7.1 million , or$0.13 per diluted share in the third quarter of 2017. Third quarter net loss includes goodwill and intangible asset impairment charges of$41.9 million . -
Non-GAAP diluted earnings per share for the third quarter of 2018 was
$0.04 , compared to$0.15 in the third quarter of 2017. -
Non-GAAP adjusted EBITDA was
$12.2 million in the third quarter of 2018, compared to$18.1 million in the third quarter of 2017. -
Additional work from new and existing clients awarded so far during
2018 is expected to drive approximately
$134 million of annual revenue at full run-rate. This includes a major client expansion announced today, a global partnership with a Fortune 100 food and beverage company.
“As planned, we have actioned
Outlook
The Company is lowering its 2018 guidance for gross revenue to a range
of
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
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) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(as restated) | (as restated) | |||||||||||||||
Revenue | $ | 270,850 | $ | 288,523 | $ | 827,356 | $ | 832,994 | ||||||||
Cost of goods sold | 206,808 | 216,602 | 632,376 | 626,323 | ||||||||||||
Gross profit | 64,042 | 71,921 | 194,980 | 206,671 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 56,142 | 57,186 | 176,312 | 165,855 | ||||||||||||
Depreciation and amortization | 3,265 | 3,317 | 10,438 | 9,403 | ||||||||||||
Change in fair value of contingent consideration | — | (167 | ) | — | 677 | |||||||||||
Goodwill Impairment | 27,887 | — | 27,887 | — | ||||||||||||
Intangible and long-lived asset impairment charge | 16,818 | — | 16,818 | — | ||||||||||||
Restructuring and other charges | 3,142 | — | 3,142 | — | ||||||||||||
(Loss) income from operations | (43,212 | ) | 11,585 | (39,617 | ) | 30,736 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 19 | 31 | 135 | 77 | ||||||||||||
Interest expense | (1,769 | ) | (1,198 | ) | (4,854 | ) | (3,239 | ) | ||||||||
Other, net | (301 | ) | 426 | (1,734 | ) | (962 | ) | |||||||||
Total other expense | (2,051 | ) | (741 | ) | (6,453 | ) | (4,124 | ) | ||||||||
(Loss) income before income taxes | (45,263 | ) | 10,844 | (46,070 | ) | 26,612 | ||||||||||
Income tax (benefit) expense | (326 | ) | 3,728 | 851 | 9,444 | |||||||||||
Net (loss) income | $ | (44,937 | ) | $ | 7,116 | $ | (46,921 | ) | $ | 17,168 | ||||||
Basic (loss) earnings per share | $ | (0.87 | ) | $ | 0.13 | $ | (0.90 | ) | $ | 0.32 | ||||||
Diluted (loss) earnings per share | $ | (0.87 | ) | $ | 0.13 | $ | (0.90 | ) | $ | 0.31 | ||||||
Weighted-average shares outstanding – basic | 51,688 | 53,964 | 52,384 | 53,962 | ||||||||||||
Weighted-average shares outstanding – diluted | 51,688 | 55,189 | 52,384 | 55,127 |
Condensed Consolidated Balance Sheets |
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(in thousands) |
September 30, 2018 |
December 31, 2017 |
|||||
(unaudited) | (as restated) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 27,595 | $ | 30,562 | |||
Accounts receivable, net | 188,744 | 205,386 | |||||
Unbilled revenue | 59,961 | 50,016 | |||||
Inventories | 57,164 | 40,694 | |||||
Prepaid expenses | 21,494 | 18,565 | |||||
Other current assets | 43,005 | 37,865 | |||||
Total current assets | 397,963 | 383,088 | |||||
Property and equipment, net | 79,320 | 36,714 | |||||
Intangibles and other assets: | |||||||
Goodwill | 170,652 | 199,946 | |||||
Intangible assets, net | 10,405 | 27,563 | |||||
Deferred income taxes | 931 | 691 | |||||
Other non-current assets | 2,512 | 1,636 | |||||
Total intangibles and other assets | 184,500 | 229,836 | |||||
Total assets | $ | 661,783 | $ | 649,638 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 161,389 | $ | 141,164 | |||
Accrued expenses | 35,539 | 34,391 | |||||
Deferred revenue | 17,725 | 17,620 | |||||
Revolving credit facility - current | 12,979 | — | |||||
Other current liabilities | 21,535 | 24,078 | |||||
Total current liabilities | 249,167 | 217,253 | |||||
Revolving credit facility - non-current | 138,447 | 128,398 | |||||
Financing obligation - build-to-suit | 42,900 | — | |||||
Deferred income taxes | 12,143 | 12,043 | |||||
Other non-current liabilities | 7,230 | 7,399 | |||||
Total liabilities | 449,887 | 365,093 | |||||
Stockholders' equity: | |||||||
Common stock | 6 | 6 | |||||
Additional paid-in capital | 238,385 | 235,199 | |||||
Treasury stock at cost | (81,471 | ) | (55,873 | ) | |||
Accumulated other comprehensive loss | (23,180 | ) | (19,229 | ) | |||
Retained earnings | 78,156 | 124,442 | |||||
Total stockholders' equity | 211,896 | 284,545 | |||||
Total liabilities and stockholders' equity | $ | 661,783 | $ | 649,638 |
Condensed Consolidated Statement of Cash Flows (Unaudited) |
||||||||
(in thousands) |
Nine Months Ended September 30, |
|||||||
2018 | 2017 | |||||||
(as restated) | ||||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | (46,921 | ) | $ | 17,168 | |||
Adjustments to reconcile net (loss) income to net cash from operating activities: | ||||||||
Depreciation and amortization | 10,438 | 9,403 | ||||||
Stock-based compensation expense | 3,624 | 5,296 | ||||||
Deferred income taxes | — | 448 | ||||||
Bad debt provision | 888 | 268 | ||||||
Implementation cost amortization | 344 | — | ||||||
Change in fair value of contingent consideration | — | 677 | ||||||
Goodwill impairment | 27,887 | — | ||||||
Intangible and long-lived asset impairment | 16,818 | — | ||||||
Other operating activities | (189 | ) | 157 | |||||
Change in assets: | ||||||||
Accounts receivable and unbilled revenue | 5,810 | (35,732 | ) | |||||
Inventories | (16,469 | ) | (17,726 | ) | ||||
Prepaid expenses and other assets | (7,903 | ) | (10,567 | ) | ||||
Change in liabilities: | ||||||||
Accounts payable | 20,350 | 7,395 | ||||||
Accrued expenses and other liabilities | (4,572 | ) | 6,474 | |||||
Net cash provided by (used in) operating activities | 10,105 | (16,739 | ) | |||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (7,835 | ) | (10,274 | ) | ||||
Net cash used in investing activities | (7,835 | ) | (10,274 | ) | ||||
Cash flows from financing activities | ||||||||
Net borrowings from revolving credit facility | 23,230 | 42,258 | ||||||
Net short-term secured borrowings | 55 | 633 | ||||||
Repurchases of common stock | (25,689 | ) | (10,041 | ) | ||||
Payments of contingent consideration | — | (10,989 | ) | |||||
Proceeds from exercise of stock options | 416 | 1,824 | ||||||
Payment of debt issuance costs | (545 | ) | — | |||||
Other financing activities | (746 | ) | (850 | ) | ||||
Net cash (used in) provided by financing activities | (3,279 | ) | 22,835 | |||||
Effect of exchange rate changes on cash and cash equivalents | (1,958 | ) | 936 | |||||
Decrease in cash and cash equivalents | (2,967 | ) | (3,242 | ) | ||||
Cash and cash equivalents, beginning of period | 30,562 | 30,924 | ||||||
Cash and cash equivalents, end of period | $ | 27,595 | $ | 27,682 |
Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Diluted Earnings Per Share (Unaudited) |
||||||||||||||||
(in thousands) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(as restated) | (as restated) | |||||||||||||||
Net (loss) income | $ | (44,937 | ) | $ | 7,116 | $ | (46,921 | ) | $ | 17,168 | ||||||
Income tax (benefit) expense | (326 | ) | 3,728 | 851 | 9,444 | |||||||||||
Interest income | (19 | ) | (31 | ) | (135 | ) | (77 | ) | ||||||||
Interest expense | 1,769 | 1,198 | 4,854 | 3,239 | ||||||||||||
Other, net | 301 | (426 | ) | 1,734 | 962 | |||||||||||
Depreciation and amortization | 3,265 | 3,317 | 10,438 | 9,403 | ||||||||||||
Stock-based compensation expense | 801 | 2,375 | 3,624 | 5,296 | ||||||||||||
Goodwill impairment | 27,887 | — | 27,887 | — | ||||||||||||
Intangible and long-lived asset impairment | 16,818 | — | 16,818 | — | ||||||||||||
Restructuring charges | 3,142 | — | 3,142 | — | ||||||||||||
Senior leadership transition and other employee-related costs | 1,153 | — | 1,153 | — | ||||||||||||
Business development realignment | 715 |
— |
|
715 | ||||||||||||
Obsolete retail inventory | 950 | — | 950 | — | ||||||||||||
Change in fair value of contingent consideration | — | (167 | ) | — | 677 | |||||||||||
Professional fees related to ASC 606 implementation | — | 300 | 1,092 | 300 | ||||||||||||
Executive search fees | — | — | 235 | — | ||||||||||||
Restatement-related professional fees | 1,358 | — | 1,895 | — | ||||||||||||
Other professional fees | 81 | — | 162 | — | ||||||||||||
Non-GAAP Adjusted EBITDA | $ | 12,243 | $ | 18,125 | $ | 27,779 | $ | 47,127 |
(in thousands, except per share amounts) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(as restated) | (as restated) | ||||||||||||||
Net (loss) income | $ | (44,937 | ) | $ | 7,116 | $ | (46,921 | ) | $ | 17,168 | |||||
Czech exit from exchange rate commitment, net of tax | — | — | — | 294 | |||||||||||
Goodwill impairment | 27,887 | — | 27,887 | — | |||||||||||
Intangible and long-lived asset impairment, net of tax | 14,037 | — | 14,037 | — | |||||||||||
Restructuring charges, net of tax | 2,584 | — | 2,584 | — | |||||||||||
Senior leadership transition and other employee-related costs, net of tax | 844 | — | 844 | — | |||||||||||
Business development realignment, net of tax | — | 875 | — | 875 | |||||||||||
Change in fair value of contingent consideration | — | (167 | ) | — | 677 | ||||||||||
Obsolete inventory, net of tax | 769 | — | 769 | — | |||||||||||
Professional fees related to ASC 606 implementation, net of tax | — | 204 | 819 | 204 | |||||||||||
Executive search fees, net of tax | — | — | 176 | — | |||||||||||
Restatement-related professional fees, net of tax | 984 | — | 1,387 | — | |||||||||||
Other professional fees, net of tax | 59 | — | 119 | — | |||||||||||
Adjusted net income | $ | 2,227 | $ | 8,028 | $ | 1,701 | $ | 19,218 | |||||||
Weighted-average shares outstanding, diluted | 51,992 | 55,189 | 53,017 | 55,127 | |||||||||||
Non-GAAP diluted earnings per share | $ | 0.04 | $ | 0.15 | $ | 0.03 | $ | 0.35 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181108005985/en/
Source:
InnerWorkings, Inc.
Bridget Freas
312.589.5613
bfreas@inwk.com