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): November 7, 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.)
 
 
 
203 North LaSalle Street
Suite 1800
Chicago, Illinois
 
60601
(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
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value
 
INWK
 
Nasdaq Global Market





Item 2.02     Results of Operations and Financial Condition.*

On November 7, 2019, InnerWorkings, Inc. (the “Company”) issued a press release announcing its financial results for its fiscal quarter ended September 30, 2019. 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 November 7, 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: November 7, 2019
By:
/s/ Donald W. Pearson
 
Name:
Donald W. Pearson
 
Title:
Chief Financial Officer





Exhibit



InnerWorkings Announces Third Quarter 2019 Results
Record $142 million in new business awarded to date in 2019
Adjusted EBITDA up 15% year to date

CHICAGO, IL - November 7, 2019 - InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three and nine months ended September 30, 2019. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

“We are successfully executing our strategy to achieve profitable growth,” said Chief Executive Officer Rich Stoddart. “Our year-to-date operating expenses have declined despite growth in revenue and we have continued to sign more business with new and existing clients, reaching a new annual record with a robust pipeline and two months remaining in the year.”

Financial and Business Highlights

Gross revenue was $286.5 million in the third quarter of 2019, an increase of 6% compared to $270.9 million in the third quarter of 2018. Excluding currency impact, third quarter gross revenue increased 7% compared to the same period of last year.
Gross profit (net revenue) was $68.2 million, or 23.8% of gross revenue in the third quarter of 2019, compared to $64.0 million, or 23.6% of gross revenue, in the same period of last year. Third quarter gross profit (net revenue) increased 6% over the prior period and 7% excluding currency impact.
Net loss for the third quarter of 2019 was $(2.2) million, or $(0.04) per diluted share, compared to net loss of $(44.9) million, or $(0.87) per diluted share in the third quarter of 2018.
Adjusted diluted earnings per share for the third quarter of 2019 was $0.05, compared to $0.04 in the third quarter of 2018. Year-to-date adjusted diluted earnings per share was $0.12, compared to $0.03 in the same period of 2018.
Adjusted EBITDA was $11.6 million in the third quarter of 2019, compared to $12.2 million in the third quarter of 2018. Year-to-date adjusted EBITDA was $31.8 million, an increase of 15% compared to the same period of 2018.
Additional work from new and existing clients awarded to date in 2019 amounts to approximately $142 million of annual revenue at full run-rate.
“We have already surpassed 2018's full-year adjusted EBITDA only three quarters into 2019,” said Don Pearson, Chief Financial Officer. “We expect this momentum to continue as we finish the year and into 2020 as we continue to realize the benefits of our $15 million cost reduction plan announced in March 2019. We are on track to realize $4 million of these cost savings this year, with most of the remaining $11 million to be realized next year, setting the stage for significant sustainable profitable growth in 2020 and beyond.”

Outlook

The Company is adjusting its guidance for gross revenue primarily to reflect approximately $20 million of negative currency impact sustained year to date. Gross revenue is now expected to be in a range of $1.13 to $1.15 billion for 2019, which represents 1% to 3% growth compared to 2018. The revised revenue guidance compares to prior guidance of $1.15 to $1.18 billion. The Company is maintaining its 2019 guidance for adjusted EBITDA, which is expected to be in the range of $44 to $47 million. The Company is revising its adjusted diluted earnings per share guidance to be in the range of $0.16 to $0.20 for 2019, compared to the prior guidance range of $0.20 to $0.24, primarily due to higher interest and income tax expenses than previously expected.

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, adjusted 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, adjusted diluted earnings per share, and constant currency included in this release.

The Company has not quantitatively reconciled its guidance for adjusted EBITDA and adjusted diluted earnings per share to their most comparable GAAP measures because certain of the reconciling items that impact these measures, including restructuring charges, stock-based compensation expense and control remediation-related fees affecting the period, have not occurred, are outside the Company’s control, or cannot be reasonably predicted. Accordingly, reconciliations to the nearest GAAP financial measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the Company’s results.

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 2,000 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)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenue
$
286,525

 
$
270,850

 
$
837,816

 
$
827,356

Cost of goods sold
218,356

 
206,808

 
639,385

 
632,376

Gross profit
68,169

 
64,042

 
198,431

 
194,980

Operating expenses:


 


 


 


Selling, general and administrative expenses
59,938

 
56,142

 
174,404

 
176,312

Depreciation and amortization
3,090

 
3,265

 
8,939

 
10,438

Goodwill impairment

 
27,887

 

 
27,887

Intangible and other asset impairments

 
16,818

 

 
16,818

Restructuring charges
3,055

 
3,142

 
10,687

 
3,142

Income (loss) from operations
2,086

 
(43,212
)
 
4,401

 
(39,617
)
Other income (expense):


 


 


 


Interest income
37

 
19

 
239

 
135

Interest expense
(4,376
)
 
(1,769
)
 
(9,608
)
 
(4,854
)
Other expense
(1,736
)
 
(301
)
 
(2,196
)
 
(1,734
)
Total other expense
(6,075
)
 
(2,051
)
 
(11,565
)
 
(6,453
)
Loss before income taxes
(3,989
)
 
(45,263
)
 
(7,164
)
 
(46,070
)
Income tax expense (benefit)
(1,815
)
 
(326
)
 
(1,359
)
 
851

Net loss
$
(2,174
)
 
$
(44,937
)
 
$
(5,805
)
 
$
(46,921
)
 


 

 

 

Basic and diluted net loss per share
$
(0.04
)
 
$
(0.87
)
 
$
(0.11
)
 
$
(0.90
)
 
 
 
 
 
 
 
 
Weighted-average shares outstanding – basic
53,320

 
51,688

 
53,235

 
52,384

Weighted-average shares outstanding – diluted
53,320

 
51,688

 
53,235

 
52,384

 




Condensed Consolidated Balance Sheets
(In thousands)
 
September 30, 2019
 
December 31, 2018
 
(unaudited)
 
 
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
38,488

 
$
26,770

Accounts receivable, net of allowance for doubtful accounts of $4,247 and $4,880, respectively
190,992

 
193,253

Unbilled revenue
65,584

 
46,474

Other receivables
39,317

 
23,727

Inventories
64,136

 
56,001

Prepaid expenses
13,973

 
16,982

Other current assets
13,271

 
10,379

Total current assets
425,761

 
373,586

Property and equipment, net
36,714

 
82,933

Intangibles and other assets:
 

 
 

Goodwill
152,191

 
152,158

Intangible assets, net
8,230

 
9,828

Right of use assets, net
51,726

 

Deferred income taxes
1,112

 
1,195

Other non-current assets
4,333

 
2,976

Total intangibles and other assets
217,592

 
166,157

Total assets
$
680,067

 
$
622,676

Liabilities and stockholders' equity
 

 
 

Current liabilities:
 
 
 
Accounts payable
169,173

 
158,449

Accrued expenses
44,096

 
35,474

Deferred revenue
18,526

 
17,614

Revolving credit facility - current
4,585

 
142,736

Term loan - current
6,250

 

Other current liabilities
32,325

 
26,231

Total current liabilities
274,955

 
380,504

Lease liabilities
47,094

 

Revolving credit facility - non-current
76,829

 

Term loan - non-current
89,991

 

Deferred income taxes
8,257

 
8,178

Other non-current liabilities
2,486

 
50,903

Total liabilities
499,612

 
439,585

Commitments and contingencies
 
 
 
Stockholders' equity:
 
 
 
Common stock
6

 
6

Additional paid-in capital
243,706

 
239,960

Treasury stock at cost
(81,471
)
 
(81,471
)
Accumulated other comprehensive loss
(25,045
)
 
(24,309
)
Retained earnings
43,259

 
48,905

Total stockholders' equity
180,455

 
183,091

Total liabilities and stockholders' equity
$
680,067

 
$
622,676

 




Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
 
 
 
 
Cash flows from operating activities
 
 
 
Net loss
$
(5,805
)
 
$
(46,921
)
Adjustments to reconcile net loss to net cash from operating activities:
 

 
 

Depreciation and amortization
8,939

 
10,438

Stock-based compensation expense
4,219

 
3,624

Bad debt provision
1,447

 
888

Implementation cost amortization
250

 
344

Goodwill impairment

 
27,887

Intangible and long-lived asset impairment

 
16,818

Change in fair value of warrant
950

 

Change in fair value of embedded derivative
(97
)
 

Unrealized foreign exchange loss
986

 

Other operating activities
705

 
(189
)
Change in assets:
 

 
 

Accounts receivable and unbilled revenue
(21,245
)
 
5,810

Inventories
(8,767
)
 
(16,469
)
Prepaid expenses and other assets
(29,141
)
 
(7,903
)
Change in liabilities:
 

 
 

Accounts payable
12,403

 
20,350

Accrued expenses and other liabilities
25,378

 
(4,572
)
Net cash (used in) provided by operating activities
(9,778
)
 
10,105

 
 
 
 
Cash flows from investing activities
 

 
 

Purchases of property and equipment
(10,012
)
 
(7,835
)
Payments for acquisition, net of cash acquired
(390
)
 

Net cash used in investing activities
(10,402
)
 
(7,835
)
 
 
 
 
Cash flows from financing activities
 

 
 

Net borrowings (repayments) from old revolving credit facility
(142,583
)
 
23,230

Net borrowings (repayments) from new revolving credit facility
81,472

 

Net short-term secured (repayments) borrowings
(833
)
 
55

Proceeds from term loan
100,000

 

Payments on term loan
(1,250
)
 

Repurchases of common stock

 
(25,689
)
Proceeds from exercise of stock options
63

 
416

Payment of debt issuance costs
(5,488
)
 
(545
)
Other financing activities
(242
)
 
(746
)
Net cash provided by (used in) financing activities
31,139

 
(3,279
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
759

 
(1,958
)
Increase (Decrease) in cash and cash equivalents
11,718

 
(2,967
)
Cash and cash equivalents, beginning of period
26,770

 
30,562

Cash and cash equivalents, end of period
$
38,488

 
$
27,595






Reconciliation of Adjusted EBITDA and Adjusted Diluted Earnings Per Share
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net loss
$
(2,174
)
 
$
(44,937
)
 
$
(5,805
)
 
$
(46,921
)
Income tax (benefit) expense
(1,815
)
 
(326
)
 
(1,359
)
 
851

Interest income
(37
)
 
(19
)
 
(239
)
 
(135
)
Interest expense
4,376

 
1,769

 
9,608

 
4,854

Other expense
1,736

 
301

 
2,196

 
1,734

Depreciation and amortization
3,090

 
3,265

 
8,939

 
10,438

Stock-based compensation expense
1,783

 
801

 
3,924

 
3,624

Stock appreciation rights marked to market
248

 

 
294

 

Goodwill impairment

 
27,887

 

 
27,887

Intangible and long-lived asset impairment

 
16,818

 

 
16,818

Restructuring charges
3,055

 
3,142

 
10,687

 
3,142

Professional fees related to ASC 606 implementation

 

 

 
1,092

Senior leadership transition and other employee-related costs

 
1,153

 

 
1,153

Obsolete retail inventory

 
950

 

 
950

Executive search fees

 

 
80

 
235

Control remediation-related fees
378

 
1,358

 
918

 
1,895

Sales and use tax audit

 

 
1,235

 

Other professional fees
967

 
81

 
1,343

 
162

Adjusted EBITDA
$
11,607

 
$
12,243

 
$
31,821

 
$
27,779

 




 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net loss
$
(2,174
)
 
$
(44,937
)
 
$
(5,805
)
 
$
(46,921
)
Goodwill impairment

 
27,887

 

 
27,887

Intangible and long-lived asset impairment, net of tax

 
14,037

 

 
14,037

Restructuring charges, net of tax
2,401

 
2,584

 
8,203

 
2,584

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

 
844

 

 
844

Obsolete inventory, net of tax

 
769

 

 
769

Professional fees related to ASC 606 implementation, net of tax

 

 

 
819

Executive search fees, net of tax

 

 
60

 
176

Control remediation-related fees, net of tax
281

 
984

 
683

 
1,387

Sales and use tax audit, net of tax

 

 
920

 

Other professional fees, net of tax
721

 
59

 
1,001

 
119

Fair value of warrants and derivatives
853

 

 
853

 

Foreign exchange loss
773

 

 
773

 

Adjusted net income
$
2,855

 
$
2,227

 
$
6,688

 
$
1,701

 
 
 
 
 
 
 
 
GAAP Weighted-average shares outstanding – diluted
53,320

 
51,688

 
53,235

 
52,384

Effect of dilutive securities:
 
 
 
 
 
 
 
Employee stock options and restricted common shares
4

 
304

 
280

 
633

Adjusted Weighted-average shares outstanding – diluted
53,324

 
51,992

 
53,515

 
53,017

Adjusted diluted earnings per share
$
0.05

 
$
0.04

 
$
0.12

 
$
0.03