Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): March 5, 2019
 
INNERWORKINGS, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
(State or other jurisdiction
of incorporation)
 
000-52170
(Commission
File Number)
 
20-5997364
(I.R.S. Employer
Identification No.)
 
 
 
600 West Chicago Avenue
Suite 850
Chicago, Illinois
 
60654
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
(312) 642-3700
(Registrant’s telephone number, including area code)
 
 
 
 
 
N/A
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
 





Item 2.02     Results of Operations and Financial Condition.*

On March 5, 2019, InnerWorkings, Inc. (the “Company”) issued a press release announcing its financial results for its fiscal quarter and year ended December 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01     Financial Statements and Exhibits.

(d) Exhibits:

Exhibit No.
Description
 
Press Release dated March 5, 2019.

*The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.







SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
INNERWORKINGS, INC.
 
 
 
Dated: March 5, 2019
By:
/s/ Donald W. Pearson
 
Name:
Donald W. Pearson
 
Title:
Chief Financial Officer





Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12758851&doc=3
InnerWorkings Announces Fourth Quarter and Full-Year 2018 Results
Over $40M in new business awarded to date in 2019; $136 million signed in 2018

CHICAGO, IL - March 5, 2019 - InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three and twelve months ended December 31, 2018. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

“Our solution is resonating more than ever in the marketplace and we're excited by the global brands we're onboarding or who are expanding their work with InnerWorkings already in 2019,” said Chief Executive Officer Rich Stoddart. “It has become clear that translating this growth into returns for our shareholders requires a multi-year transformation to drive sustainable operating leverage in our business. Through the progress we've made on our cost reduction plan, we've also developed a better understanding of what is required to realize the full potential of this business. We are committed to doing the hard work to significantly improve the return on every dollar spent serving our clients, while still delivering the same excellent service quality they expect.”
Financial and Business Highlights

Gross revenue was $294.2 million in the fourth quarter of 2018, a decrease of 4% compared to $305.4 million in the fourth quarter of 2017. Excluding currency impacts, fourth quarter gross revenue decreased 2% compared to the same period of last year. Full-year gross revenue was $1,121.6 million, a decrease of 1% compared to $1,138.4 million in 2017.
Gross profit (net revenue) was $60.1 million, or 20.4% of gross revenue in the fourth quarter of 2018, compared to $68.8 million, or 22.5% of revenue, in the same period of last year.
Net loss for the fourth quarter of 2018 was $(29.3) million, or $(0.57) per diluted share, compared to net loss of $(0.7) million, or $(0.01) per diluted share in the fourth quarter of 2017. Fourth quarter net loss includes $20.9 million of goodwill and other asset impairment charges, $5.5 million of inventory and other operational adjustments impacting gross profit, and $2.7 million of bad debt expense. The impacts to gross profit and bad debt mainly result from unprofitable client relationships that have been terminated.
Non-GAAP diluted loss per share for the fourth quarter of 2018 was $(0.11), compared to earnings of $0.01 in the fourth quarter of 2017.
Adjusted EBITDA was $1.3 million in the fourth quarter of 2018, compared to $10.8 million in the fourth quarter of 2017.
Additional work from new and existing clients awarded during 2018 amounts to $136 million of annual revenue at full run-rate and more than $40 million was awarded in year-to-date 2019. The 2019 multi-year agreements span across five clients, including an expansion with global premium spirits producer Beam Suntory and a new engagement with one of the world's top commercial and retail banks.

“At year-end 2018, we had actioned nearly $15 million of the $20 million in previously announced cost reduction measures, with another $3 million being actioned in the first quarter of 2019,” said Don Pearson, Chief Financial Officer. “But this original scope is not enough as our cost to serve our clients is still too high. With the assistance of third-party experts, we have launched a second phase of further profit enhancement opportunities, focused on driving consistency and sustainable efficiencies in our operations. We expect to realize $3 million of cost savings from this phase in the second half of 2019 and another $12 million in 2020 and beyond. These initiatives are designed to put in place a cost structure and operating platform that will deliver sustainable profitable growth. We look forward to updating you on our progress.”

Outlook

The Company expects gross revenue to be in a range of $1.15 to $1.18 billion, which represents growth of 3% to 5% compared to 2018. Adjusted EBITDA is expected to be in a range of $42 to $46 million dollars, which represents growth of 45% to 58% compared to 2018. Non-GAAP diluted earnings per share guidance for 2019 is expected to be $0.20 to $0.24.







Conference Call

Rich Stoddart, Chief Executive Officer, and Don Pearson, Chief Financial Officer, will host a conference call to discuss the results today at 4:00 p.m. Central time (5:00 p.m. Eastern time).

The phone number to access the conference call is (877) 771-7024. A live audio webcast of the call will be available through InnerWorkings' website at http://investor.inwk.com/events. A replay of the webcast will be available later today at the same location.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as “non-GAAP financial measures” by the SEC: adjusted EBITDA, non-GAAP diluted earnings per share and constant currency revenue. The Company believes these measures provide useful information to investors because they provide further insights into the Company’s financial performance. These measures are also used by management in its financial and operational decision-making and evaluation of overall performance. With respect to constant currency, we believe such presentation allows investors to measure our financial performance exclusive of foreign currency exchange fluctuations more clearly. Constant currency revenue is calculated by retranslating current period revenue at a consistent rate with the prior period results. This approach is based on the pricing currency for each country, which is typically the functional currency. 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, please see the reconciliation of adjusted EBITDA, non-GAAP diluted earnings per share, and constant currency included in this 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.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) is the leading global marketing execution firm serving Fortune 1000 brands across a wide range of industries. As a comprehensive outsourced enterprise solution, the Company leverages proprietary technology, an extensive supplier network and deep domain expertise to streamline the production of branded materials and retail experiences across geographies and formats. InnerWorkings is headquartered in Chicago, IL and employs 2,100 individuals to support global clients in the execution of multi-faceted brand campaigns in every major market around the world. InnerWorkings serves many industries, including: retail, financial services, hospitality, consumer packaged goods, nonprofit, healthcare, food & beverage, broadcasting & cable, automotive, and transportation. For more information visit: www.inwk.com.
CONTACT:
InnerWorkings, Inc.
Bridget Freas
312.589.5613
bfreas@inwk.com






Condensed Consolidated Statements of Operations
(In thousands, except per share data)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(unaudited)

 
(as restated)

 
(unaudited)

 
 
Revenue
$
294,195

 
$
305,367

 
$
1,121,551

 
$
1,138,361

Cost of goods sold
234,077

 
236,580

 
866,453

 
862,903

Gross profit
60,118

 
68,787

 
255,098

 
275,458

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative expenses
61,651

 
61,398

 
237,963

 
227,253

Depreciation and amortization
2,551

 
3,987

 
12,988

 
13,390

Change in fair value of contingent consideration

 

 

 
677

Goodwill impairment charge
19,574

 

 
47,461

 

Intangible and other asset impairments
1,303

 

 
18,121

 

Restructuring and other charges
2,889

 

 
6,031

 

Income (loss) from operations
(27,850
)
 
3,402

 
(67,466
)
 
34,138

Other income (expense):
 
 
 
 
 
 
 
Interest income
84

 
20

 
218

 
97

Interest expense
(2,895
)
 
(1,490
)
 
(7,749
)
 
(4,729
)
Other, net
118

 
(826
)
 
(1,616
)
 
(1,788
)
Total other expense
(2,693
)
 
(2,297
)
 
(9,147
)
 
(6,420
)
Income (loss) before income taxes
(30,543
)
 
1,105

 
(76,613
)
 
27,718

Income tax expense
(1,284
)
 
1,843

 
(434
)
 
11,288

Net income (loss)
$
(29,259
)
 
$
(738
)
 
$
(76,179
)
 
$
16,430

 
 
 
 
 
 
 
 
Basic (loss)/earnings per share
$
(0.57
)
 
$
(0.01
)
 
$
(1.46
)
 
$
0.31

Diluted (loss)/earnings per share
$
(0.57
)
 
$
(0.01
)
 
$
(1.46
)
 
$
0.30

 
 
 
 
 
 
 
 
Weighted average shares outstanding, basic
51,773

 
54,113

 
52,230

 
53,851

Weighted average shares outstanding, diluted
51,773

 
54,113

 
52,230

 
54,944

 




Condensed Consolidated Balance Sheets
(in thousands)
December 31, 2018
 
December 31, 2017
 
(unaudited)

 
 
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
26,770

 
$
30,562

Accounts receivable, net of allowance for doubtful accounts
193,253

 
205,386

Unbilled revenue
46,474

 
50,016

Inventories
56,001

 
40,694

Prepaid expenses
17,274

 
18,565

Other current assets
33,727

 
37,865

Total current assets
373,499

 
383,088

Property and equipment, net
82,933

 
36,714

Intangibles and other assets:
 
 
 

Goodwill
151,016

 
199,946

Intangible assets, net
9,828

 
27,563

Deferred income taxes
1,195

 
691

Other assets
2,976

 
1,636

Total intangibles and other assets
165,015

 
229,836

Total assets
$
621,447

 
$
649,638

Liabilities and stockholders' equity
 
 
 

Current liabilities:
 
 
 
Accounts payable
$
158,449

 
$
141,164

Revolving credit facility - current
142,736

 

Other current liabilities
26,205

 
24,078

Deferred revenue
17,614

 
17,620

Accrued expenses
34,605

 
34,391

Total current liabilities
379,609

 
217,253

Revolving credit facility - noncurrent

 
128,398

Deferred income taxes
6,056

 
12,043

Other long-term liabilities
52,698

 
7,399

Total liabilities
438,363

 
365,093

Stockholders' equity:
 
 
 
Common stock
6

 
6

Additional paid-in capital
239,960

 
235,199

Treasury stock at cost
(81,471
)
 
(55,873
)
Accumulated other comprehensive loss
(24,309
)
 
(19,229
)
Retained earnings
48,898

 
124,442

Total stockholders' equity
183,084

 
284,545

Total liabilities and stockholders' equity
$
621,447

 
$
649,638

 




Condensed Consolidated Statement of Cash Flows
(in thousands)
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
 
(unaudited)
 
 
Cash flows from operating activities
 
 
 
 
Net income (loss)
 
$
(76,179
)
 
$
16,430

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
12,988

 
13,390

Stock-based compensation expense
 
5,302

 
6,820

Deferred income taxes
 
(6,562
)
 
4,072

Change in fair value of contingent consideration liability
 

 
677

Goodwill impairment
 
47,461

 

Intangible and other asset impairments
 
18,121

 

Bad debt provision
 
3,601

 
454

Implementation cost amortization
 
433

 

Other operating activities
 
254

 
210

Change in assets, net of acquisitions:
 
 
 
 
Accounts receivable and unbilled revenue
 
4,112

 
(41,877
)
Inventories
 
(16,325
)
 
(4,245
)
Prepaid expenses and other assets
 
1,518

 
(13,547
)
Change in liabilities, net of acquisitions:
 
 
 
 
Accounts payable
 
21,959

 
18,152

Accrued expenses and other liabilities
 
6,374

 
11,162

Net cash provided by operating activities
 
23,057

 
11,698

 
 
 
 
 
Cash flows from investing activities
 
 
 
 

Purchases of property and equipment
 
(11,263
)
 
(12,483
)
Proceeds from sale of property and equipment
 
122

 

Net cash used in investing activities
 
(11,141
)
 
(12,483
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 

Net borrowing (repayments) of revolving credit facility
 
14,539

 
(867
)
Net short-term secured borrowings
 
(1,525
)
 
20,709

Repurchases of common stock
 
(25,689
)
 
(10,885
)
Payments of contingent consideration
 

 
(10,989
)
Proceeds from exercise of stock options
 
545

 
2,663

Other financing activities
 
(1,606
)
 
(1,156
)
Net cash used in financing activities
 
(13,736
)
 
(525
)
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
(1,972
)
 
948

Decrease in cash and cash equivalents
 
(3,792
)
 
(362
)
Cash and cash equivalents, beginning of period
 
30,562

 
30,924

Cash and cash equivalents, end of period
 
$
26,770

 
$
30,562






Reconciliation of Adjusted EBITDA and Non-GAAP Diluted Earnings Per Share
(Unaudited)
(in thousands)
 
Three Months Ended 
 December 31,
 
Twelve Months Ended 
 December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
(as restated)
 
 
 
 
Net (loss) income
 
$
(29,259
)
 
$
(738
)
 
$
(76,179
)
 
$
16,430

Income tax expense
 
(1,284
)
 
1,843

 
(434
)
 
11,288

Interest income
 
(84
)
 
(20
)
 
(218
)
 
(97
)
Interest expense
 
2,895

 
1,491

 
7,749

 
4,729

Other, net
 
(118
)
 
826

 
1,616

 
1,788

Depreciation and amortization
 
2,551

 
3,987

 
12,988

 
13,390

Stock-based compensation expense
 
1,677

 
1,524

 
5,302

 
6,820

Goodwill impairment
 
19,574

 

 
47,461

 

Intangible and other asset impairments
 
1,303

 

 
18,121

 

Restructuring charges
 
2,889

 

 
6,031

 

Senior leadership transition and other employee-related costs
 
267

 

 
1,420

 

Business development realignment
 

 
529

 

 
715

Obsolete retail inventory
 

 

 
950

 

Change in fair value of contingent consideration
 

 

 

 
677

Professional fees related to ASC 606 implementation
 

 

 
1,093

 
829

Executive search costs
 

 
454

 
235

 
454

Restatement-related professional fees
 
402

 

 
2,297

 

Other professional fees
 
467

 

 
629

 

Czech currency impact on procurement margin
 

 
860

 

 
860

Adjusted EBITDA
 
$
1,280

 
$
10,756

 
$
29,061

 
$
57,883

 




(in thousands, except per share amounts)
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
(as restated)
 
 
 
 
Net (loss) income
 
$
(29,259
)
 
$
(738
)
 
$
(76,179
)
 
$
16,430

Czech exit from exchange rate commitment, net of tax
 

 

 

 
294

Goodwill impairment
 
19,574

 

 
47,461

 

Intangible and other asset impairments, net of tax
 
977

 

 
15,014

 

Restructuring charges, net of tax
 
2,025

 

 
4,609

 

Senior leadership transition and other employee-related costs, net of tax
 
221

 

 
1,065

 

Business development realignment, net of tax
 

 

 

 
875

Change in fair value of contingent consideration
 

 

 

 
677

Obsolete retail inventory, net of tax
 

 

 
769

 

Professional fees related to ASC 606 implementation, net of tax
 

 
324

 
819

 
528

Executive search fees, net of tax
 

 
282

 
176

 
282

Restatement-related professional fees, net of tax
 
336

 

 
1,723

 

Other professional fees, net of tax
 
353

 
 
 
472

 

Czech currency impact on procurement margin, net of tax
 

 
697

 

 
697

Accelerated depreciation of internal use software, net of tax
 

 
246

 

 
246

Non-GAAP net (loss) income
 
$
(5,773
)
 
$
811

 
$
(4,071
)
 
$
20,029

Weighted-average shares outstanding, diluted
 
51,773

 
55,175

 
52,230

 
54,944

Non-GAAP diluted (loss) earnings per share
 
$
(0.11
)
 
$
0.01

 
$
(0.08
)
 
$
0.36