InnerWorkings, Inc. Announces Third Quarter 2006 Results

Press Release


<< Back
Nov 7, 2006
InnerWorkings, Inc. Announces Third Quarter 2006 Results

CHICAGO, Nov 07, 2006 (BUSINESS WIRE) -- InnerWorkings, Inc. (Nasdaq:INWK), a leading provider of print procurement solutions to corporate clients in the United States, today reported record third quarter fiscal year 2006, ended September 30, 2006.

Highlights:

-- Revenue grew to a record of $41.8 million, an increase of over 78 percent versus the fiscal 2005 third quarter.

-- Income from operations increased 128 percent year over year.

-- Growth strategy execution through the addition of 23 account executives and five new enterprise clients during the three months ended September 30, 2006.

-- Full year 2006 revenue and net income guidance to the ranges of $145 million to $147 million and $7.6 million to $7.8 million, respectively.

Revenue for the quarter was $41.8 million, an increase of 78 percent compared to revenue of $23.5 million in the prior year quarter. For the 2006 third quarter, income from operations was $3.6 million, an increase of 128 percent from $1.6 million during the same quarter of 2005. Income from operations was 8.7 percent of revenue during the current year quarter, up from 6.8 percent during the same quarter of the prior year.

"We are pleased to deliver record results in our first quarter as a public company," commented Steve Zuccarini, Chief Executive Officer of InnerWorkings. "Our strong performance reaffirms the value we deliver to our customers, our innovative business model and opportunities to drive continued revenue growth."

For the three months ended September 30, 2006, net income was $2.4 million, an increase of 48 percent from $1.6 million during the third quarter of 2005. Year over year comparisons were impacted by the effect of corporate income taxes, which were not part of the Company's 2005 results due to its structure as a limited liability company. During the three months ended September 30, 2006, income before taxes increased by 144 percent from the same quarter of the prior year. For the third quarter, fully diluted EPS was $.05.

"Our performance during the quarter shows our commitment to profitable growth and highlights the operational and financial efficiency of our business model," stated Nick Galassi, Chief Financial Officer of InnerWorkings. "We were able to increase revenues without ratably increasing our operating costs, which produced record earnings for the quarter."

Additional third quarter fiscal year 2006 financial and operational highlights include the following:

-- 75 percent of the Company's revenue was generated from sales to enterprise, or contract, clients, with the remaining 25 percent coming from transactional clients.

-- The Company completed an initial public offering in August 2006, raising $46.8 million net of underwriter fees and preferred dividend payments.

-- The Company had $44.3 million of cash, cash equivalents and marketable securities as of September 30, 2006.

-- The Company's balance sheet contains no debt as of the period ended September 30, 2006.

-- The Company added 23 sales executives during the fiscal 2006 third quarter, bringing the quarter-end total to 114.

-- The Company signed five new enterprise clients during the three months ended September 30, 2006, resulting in a quarter-end total of 86 enterprise accounts.

-- The Company acquired CoreVision Group, a provider of print management services, in September 2006. CoreVision added 15 sales executives during the quarter in Michigan, Missouri and Illinois.

Outlook

The Company anticipates revenue for fiscal year 2006 in the range of $145 million to $147 million with resulting net income and fully-diluted earnings per share in the ranges of $7.6 million to $7.8 million and $0.17 to $0.18, respectively. The Company's diluted earnings per share reflect the new capital structure as of its IPO.

"We continue to see the strength of our business model as we expand our base of enterprise and transactional clients and make selective acquisitions," Zuccarini concluded. "Our proprietary technology and database, deep domain knowledge, and long standing supplier relationships create a differentiated solution that positions us as a long-term value-added partner for our clients in managing their print procurement needs."

Conference Call

A conference call will be broadcast live on Wednesday, November 8, 2006, at 10:00 a.m. Central Time (11:00 a.m. Eastern). Interested parties are invited to listen to the live webcast by visiting the Investor section of InnerWorkings' website at www.iwprint.com. A replay of the webcast will be available later that day in the same section of the website.

About InnerWorkings, Inc.

Chicago-based InnerWorkings, Inc. is a leading provider of print procurement solutions to corporate clients in the United States. InnerWorkings creates a competitive bid process to procure, purchase and deliver printed products as part of a comprehensive outsourced enterprise solution and in individual transactions. InnerWorkings procures printed products for clients across a wide range of industries, such as advertising, consumer products, publishing and retail. For more information on InnerWorkings, visit: www.iwprint.com.

Forward-Looking Statements

This release contains statements relating to projections or future results. These statements are forward-looking statements under the federal securities laws. We can give no assurance that any projections or 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 the prospectus we recently filed with the SEC.

                         InnerWorkings, Inc.
           Condensed Consolidated Statements of Operations
                             (Unaudited)

                        Three months ended       Nine months ended
                            September 30,           September 30,
                          2005        2006        2005        2006
                      ------------------------------------------------


Revenue               $23,467,034 $41,784,814 $54,625,921 $99,361,724
Cost of goods sold     18,669,715  32,239,588  43,359,033  78,227,822
                      ------------------------------------------------
Gross profit            4,797,319   9,545,226  11,266,888  21,133,902

Operating expenses:
  Selling, general,
   and administrative
   expenses             3,096,873   5,665,111   7,711,180  12,770,496
  Depreciation and
   amortization           105,190     240,123     255,547     574,016
                      ------------------------------------------------
Income from operations  1,595,256   3,639,992   3,300,161   7,789,390

Other income
 (expense):
  Interest income          18,829     314,897      54,035     492,231
  Interest expense         (7,678)    (64,050)    (72,188)   (148,539)
  Minority interest             -           -      58,244           -
  Other, net               (2,396)     (2,394)     (7,186)     (4,784)
                      ------------------------------------------------
Total other income
 (expense)                  8,755     248,453      32,905     338,908
                      ------------------------------------------------
Income before taxes     1,604,011   3,888,445   3,333,066   8,128,298
Income tax expense              -  (1,521,225)          -  (3,215,327)
                      ------------------------------------------------
Net income              1,604,011   2,367,220   3,333,066   4,912,971
Dividends on preferred
 shares                  (170,625)   (293,740)   (583,789) (1,408,740)
                      ------------------------------------------------
Net income applicable
 to common
 shareholders          $1,433,386  $2,073,480  $2,749,277  $3,504,231
                      ================================================
  Basic earnings per
   share                    $0.04       $0.06       $0.09       $0.13
  Diluted earnings per
   share                    $0.04       $0.05       $0.09       $0.13

                         InnerWorkings, Inc.
                Condensed Consolidated Balance Sheets


                                          December 31,   September 30,
                                              2005           2006
                                          ----------------------------
                                                          (Unaudited)
Assets
Current assets:
  Cash and cash equivalents                 $2,962,740    $34,283,536
  Marketable securities                              -      9,969,356
  Accounts receivable, net of allowance
   for doubtful accounts of $173,839 in
   2005 and $285,302 in 2006                14,520,055     29,535,931
  Unbilled revenue                           1,974,920      6,530,966
  Prepaid expenses                           2,612,752      5,332,651
  Advances to related parties                  124,534              -
  Deferred income taxes                              -        729,709
  Other current assets                       1,486,407        824,359
                                          ----------------------------
Total current assets                        23,681,408     87,206,508

Property and equipment, net                  1,538,794      2,399,395

Intangibles and other assets:
  Goodwill                                     352,954      5,128,981
  Intangible assets, net of accumulated
   amortization of $236,711 in 2005 and
   $429,550 in 2006                            930,774      3,443,935
  Deposits                                      12,176         76,505
  Investment                                   125,000        125,000
  Deferred income taxes                              -      5,699,740
  Other assets                                  43,559         36,373
                                          ----------------------------
                                             1,464,463     14,510,534
                                          ----------------------------
Total assets                               $26,684,665   $104,116,437
                                          ============================


Liabilities and stockholders'
 deficit/members' equity
Current liabilities:
  Accounts payable - trade                 $13,488,237    $19,092,994
  Due to seller                                      -      1,070,000
  Distribution payable                       2,987,000              -
  Outstanding line of credit                 2,923,511              -
  Current maturities of capital lease
   obligations                                 109,185         74,094
  Customer deposits                            284,407      1,432,188
  Other liabilities                             51,697         41,504
  Deferred revenue                                   -        489,247
  Accrued expenses                             297,310      3,144,563
                                          ----------------------------
Total current liabilities                   20,141,347     25,344,590
Capital lease obligations, less current
 maturities                                    283,645        238,424
Commitments and contingencies                        -              -
                                          ----------------------------
Total liabilities                           20,424,992     25,583,014

Class D, convertible redeemable preferred
 shares, $3.125 par value, 1,600,000
 shares authorized, 1,600,000 shares
 issued and outstanding in 2005;
 liquidation preference of $5,000,000        5,007,525              -

Stockholders' deficit/members' equity:
  Class B, convertible preferred shares,
   $.80 par value, 937,500 shares
   authorized, 937,500 shares issued and
   outstanding in 2005; liquidation
   preference of $1,500,000                    770,625              -
  Class A, common shares, $0 par value,
   60,000,000 shares authorized,
   31,926,375 shares issued and
   outstanding in 2005                       2,635,091              -
    Common Stock, par value $0.00001 per
     share, no shares authorized, no
     shares issued and outstanding;
     200,000,000 shares authorized,
     44,014,319 shares issued and
     outstanding                                          115,344,105
  Member receivable                           (188,469)             -
  Additional paid-in capital                    46,500      5,322,591
  Treasury stock at cost                             -    (40,000,000)
  Unrealized loss on marketable securities           -        (30,644)
  Retained earnings (deficit)               (2,011,599)    (2,102,629)
                                          ----------------------------
Total stockholders' deficit/members'
 equity                                      1,252,148     78,533,423
                                          ----------------------------
Total liabilities and stockholders'
 deficit/members' equity                   $26,684,665   $104,116,437
                                          ============================

                         InnerWorkings, Inc.
           Condensed Consolidated Statements of Cash Flows
                             (Unaudited)

                                                Nine Months Ended
                                                   September 30,
                                                2005         2006
                                            --------------------------

Cash flows from operating activities
Net income                                    $3,333,066   $4,912,971
Adjustments to reconcile net income to net
 cash provided by (used in) operating
 activities:
  Minority interest                              (58,244)           -
  Deferred income taxes                                -      174,629
  Depreciation and amortization                  255,547      575,531
  Noncash stock compensation expense              87,500      311,230
  Bad debt provision                              27,939      111,463
  Deferred financing expense                       7,186        7,186
  Change in assets:
    Accounts receivable                       (1,203,213) (10,711,332)
    Unbilled revenue                          (1,270,838)  (3,618,186)
    Prepaid expenses and other                (3,469,345)    (316,651)
  Change in liabilities:
    Accounts payable                           4,855,418      557,487
    Customer deposits                            597,568   (3,175,288)
    Accrued expenses and other                    42,893    3,252,725
                                            --------------------------
Net cash provided by (used in) operating
 activities                                    3,205,477   (7,918,235)

Cash flows from investing activities
Purchases of property and equipment             (706,964)    (980,300)
Purchase of marketable securities               (762,220) (10,000,000)
Investment in Echo                              (125,000)           -
Purchase of Graphography                               -   (2,975,929)
Purchase of CoreVision                           (37,500)     (10,000)
                                            --------------------------
Net cash used in investing activities         (1,631,684) (13,966,229)

Cash flows from financing activities
Net repayments of note payable, bank            (678,154)  (4,796,414)
Collection of member receivable                        -      188,469
Principal payments on capital lease
 obligations                                     (40,079)     (80,312)
Tax benefit of stock options exercised                 -      370,213
Advances to related parties                     (188,038)     124,534
Payments of distributions                     (1,399,853)  (3,107,634)
Payment of dividends on preferred shares        (821,642)  (1,646,136)
Preference payments on preferred shares                -   (5,500,000)
Issuance of shares                             2,160,000  110,294,066
Payment of issuance costs                              -   (2,641,526)
Payments for share repurchase                          -  (40,000,000)
                                            --------------------------
Net cash provided by (used in) financing
 activities                                     (967,766)  53,205,260
                                            --------------------------
Increase in cash and cash equivalents            606,027   31,320,796
Cash and cash equivalents, beginning of
 period                                        1,475,791    2,962,740
                                            --------------------------
Cash and cash equivalents, end of period      $2,081,818  $34,283,536
                                            ==========================

Supplemental disclosure of cash flow
 information
Cash paid during the period for interest         $55,435      $86,125
                                            ==========================

Non-cash investing activity
Settlement of advances to related parties as
 part of Insight acquisition                    $313,438           $-
Issuance of options in connection with
 Insight acquisition                              46,500            -
Due to seller in connection with CoreVision
 acquisition                                                1,070,000

Non-cash financing activity
Unrealized loss on available for sale
 investments                                          $-      $30,644

(inwk-e)

SOURCE: InnerWorkings, Inc.

InnerWorkings, Inc.
Mark Desky, 312-604-5470
mdesky@iwprint.com

Copyright Business Wire 2006

News Provided by COMTEX