Document
false0001350381 0001350381 2020-06-16 2020-06-16


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): June 16, 2020
 
INNERWORKINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware
000-52170
20-5997364
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)

203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601
Phone: (312) 642-3700
(Address, zip code and telephone number, including area code, of principal executive offices)

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:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
  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

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.
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 June 16, 2020, InnerWorkings, Inc. (the “Company”) issued a press release announcing its financial results for its fiscal quarter ended March 31, 2020. 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 June 16, 2020.

*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: June 16, 2020
By:
/s/ Donald W. Pearson
 
Name:
Donald W. Pearson
 
Title:
Chief Financial Officer





Exhibit


Exhibit 99.1

InnerWorkings Announces First Quarter 2020 Results
Higher quality revenue drove 110 basis-point increase in gross margin;
SG&A reduced by $3.9 million, with further cost reductions actioned during the second quarter

CHICAGO, IL - June 16, 2020 - InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing engineering firm, today announced financial results for the three months ended March 31, 2020. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

“Our first quarter results demonstrate improved revenue quality and a leaner cost structure, giving us solid footing to navigate a challenging economic environment in the second quarter,” said Chief Executive Officer Rich Stoddart. “We have taken aggressive, swift action since April to right-size our cost structure while maintaining our ability to support our clients as business activity rebounds. We are also maintaining our focus on winning new business, with several new contracts awarded this year and significant demand for our solution in the sales pipeline.”

Financial and Business Highlights

Gross revenue was $261.4 million in the first quarter of 2020, a decrease of 2% compared to $267.2 million in the first quarter of 2019. Excluding currency impact, gross revenue decreased 1% in the first quarter of 2020.
Gross profit was $63.4 million, or 24.3% of gross revenue in the first quarter of 2020, compared to $62.0 million, or 23.2% of gross revenue, in the same period of last year.
Selling, general and administrative expenses were $51.9 million in the first quarter, down 7% compared to $55.8 million in the first quarter of 2019.
Net loss for the first quarter of 2020 was $(2.8) million, or $(0.15) per diluted share, compared to net loss of $(2.0) million, or $(0.04) per diluted share in the first quarter of 2019.
Adjusted diluted earnings per share for the first quarter of 2020 was $0.04, compared to $0.03 in the first quarter of 2019.
Adjusted EBITDA was $12.9 million in the first quarter of 2020, compared to $7.4 million in the first quarter of 2019.
Additional work from new and existing clients awarded so far in 2020 amounts to approximately $32 million of annual revenue at full run-rate.
“The first quarter represents sustainable cost improvement supporting a base of high-quality revenue with the healthiest balance sheet the company has had in two years. We have made significant progress in our multi-year transformation, but there is still work to do to optimize the platform. We will continue to react quickly to changes in economic conditions, but this will not disrupt the groundwork we have been laying for a long future of profitable growth,” said Don Pearson, Chief Financial Officer.

Outlook
Due to continued economic uncertainty and low visibility, the Company is not providing specific financial guidance at this time.
“We are expecting a decline in revenue and profit in the second quarter, but we took immediate action to reduce costs and minimize the impact on our margins. While we feel we’ve taken the right steps to adjust to the current environment, there is still a great deal of uncertainty about how long the general economic downturn will last, the extent of the adverse impact on our clients, and the degree to which those in turn will adversely impact our business. Although the current economic environment is volatile and the timing and pace of recovery from the COVID-19 pandemic is unclear, we are encouraged by our recent conversations with clients, which indicate increasing momentum in planning for a resurgence of marketing activity,” said Rich Stoddart. “We believe we are well-poised for an acceleration of new client wins as marketers become more motivated to seek ways to drive cost savings and efficiencies in response to a difficult economy, and to benefit from the eventual improved marketing spend by our clients. The breadth of our work across verticals and geographies, the stability of our longstanding client relationships, and our multi-year transformation underway give us confidence in our ability to navigate the near-term uncertainty and in the strength of our business long term.”







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 and adjusted diluted earnings per share. 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. 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 and adjusted diluted earnings per share 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 and our Form 8-K filed on May 11, 2020.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) engineers marketing for leading brands across a wide range of industries. We dive deep into clients’ brand strategies to deliver solutions that leverage our global expertise, certified supplier base, proven methods, and proprietary technology. By engineering marketing across key touch points in the customer journey, we power campaigns that drive value, enhance awareness and inspire action. With services that include creative, print, direct mail, branded merchandise, luxury packaging, retail environments, and digital solutions, we’re elevating beyond execution to shape brand experience. 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 March 31,
 
2020
 
2019
Revenue
$
261,360

 
$
267,211

Cost of goods sold
197,918

 
205,201

Gross profit
63,442

 
62,010

Operating expenses:
 
 
 
Selling, general and administrative expenses
51,913

 
55,830

Depreciation and amortization
3,127

 
2,617

Goodwill impairment
7,191

 

Restructuring charges
3,637

 
3,934

Loss from operations
(2,426
)
 
(371
)
Other income (expense):
 
 
 
Interest income
56

 
98

Interest expense
(4,386
)
 
(2,745
)
Change in fair value of warrant
5,205

 

Foreign exchange loss
(2,791
)
 
(476
)
Other income
896

 
36

Total other expense
(1,020
)
 
(3,087
)
Loss before income taxes
(3,446
)
 
(3,458
)
Income tax benefit
(606
)
 
(1,414
)
Net loss
$
(2,840
)
 
$
(2,044
)
 
 
Three Months Ended March 31,
 
2020
 
2019
Numerator:
 
 
 
Net loss - basic
$
(2,840
)
 
$
(2,044
)
Adjustments:
 
 
 
Change in fair value of Initial Warrant liability
(5,205
)
 

Net loss - diluted
$
(8,045
)
 
$
(2,044
)
 
 
 
 
Denominator:
 
 
 
Weighted average shares outstanding
52,139

 
51,830

Issuance of Initial Warrant
1,335

 

Weighted average shares outstanding - basic and diluted
53,474

 
51,830

 
 
 
 
Basic loss per share
$
(0.05
)
 
$
(0.04
)
Diluted loss per share
$
(0.15
)
 
$
(0.04
)





Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
March 31, 2020
 
December 31, 2019
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
30,775

 
$
42,711

Accounts receivable, net of allowance for doubtful accounts of $2,758 and $3,830, respectively
181,604

 
202,406

Unbilled revenue
43,773

 
48,396

Inventories
34,795

 
34,977

Prepaid expenses
13,623

 
10,680

Other current assets
35,617

 
35,495

Total current assets
340,187

 
374,665

Property and equipment, net
36,671

 
37,224

Intangibles and other assets:
 
 
 
Goodwill
144,925

 
152,210

Intangible assets, net
7,193

 
7,714

Right of use assets, net
48,284

 
51,159

Deferred income taxes
2,182

 
2,182

Other non-current assets
3,864

 
4,129

Total intangibles and other assets
206,448

 
217,394

Total assets
$
583,306

 
$
629,283

Liabilities and stockholders' equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
123,519

 
$
142,136

Accrued expenses
46,137

 
50,975

Deferred revenue
9,495

 
9,568

Revolving credit facility - current
69

 
593

Term loan - current
8,750

 
7,500

Other current liabilities
29,059

 
35,665

Total current liabilities
217,029

 
246,437

Lease liabilities
44,314

 
46,075

Revolving credit facility - non-current
59,753

 
60,086

Term loan - non-current
81,762

 
89,242

Deferred income taxes
8,053

 
8,053

Other long-term liabilities
504

 
1,138

Total liabilities
411,415

 
451,031

Commitments and contingencies
 
 
 
Stockholders' equity:
 
 
 
Common stock
6

 
6

Additional paid-in capital
246,769

 
245,311

Treasury stock at cost
(81,471
)
 
(81,471
)
Accumulated other comprehensive loss
(27,545
)
 
(22,449
)
Retained earnings
34,132

 
36,855

Total stockholders' equity
171,891

 
178,252

Total liabilities and stockholders' equity
$
583,306

 
$
629,283

 




Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net loss
$
(2,840
)
 
$
(2,044
)
Adjustments to reconcile net loss to net cash from operating activities:
 

 
 

Depreciation and amortization
3,127

 
2,617

Stock-based compensation expense
840

 
739

Bad debt provision
(438
)
 
385

Contract implementation cost amortization
67

 
143

Goodwill impairment
7,191

 

Long-lived asset impairment
273

 

Change in fair value of warrant
(5,205
)
 

Change in fair value of embedded derivatives
(435
)
 

Unrealized foreign exchange loss
2,075

 

Other operating activities, net
531

 
102

Change in assets and liabilities:
 
 
 
Accounts receivable and unbilled revenue
17,728

 
3,928

Inventories
(1,277
)
 
9,165

Prepaid expenses and other assets
(5,302
)
 
274

Accounts payable
(14,089
)
 
(9,207
)
Accrued expenses and other liabilities
(11,991
)
 
(610
)
Net cash (used in) provided by operating activities
(9,745
)
 
5,492

 
 
 
 
Cash flows from investing activities
 

 
 

Purchases of property and equipment
(3,190
)
 
(3,345
)
Net cash used in investing activities
(3,190
)
 
(3,345
)
 
 
 
 
Cash flows from financing activities
 

 
 

Net repayments on old revolving credit facility

 
(3,800
)
Net repayments on new revolving credit facility
(633
)
 

Net short-term secured borrowings

 
1,256

Payments on term loan
(1,250
)
 

Proceeds from exercise of stock options

 
63

Payment of debt issuance costs

 
(585
)
Other financing activities, net
(22
)
 
(29
)
Net cash used in financing activities
(1,905
)
 
(3,095
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
2,904

 
29

Decrease in cash and cash equivalents
(11,936
)
 
(919
)
Cash and cash equivalents, beginning of period
42,711

 
26,770

Cash and cash equivalents, end of period
$
30,775

 
$
25,851






Reconciliation of Adjusted EBITDA and Adjusted Diluted Earnings Per Share
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Net loss
$
(2,840
)
 
$
(2,044
)
Benefit for income tax
(606
)
 
(1,414
)
Interest income
(56
)
 
(98
)
Interest expense
4,386

 
2,745

Change in fair value of warrant
(5,205
)
 

Foreign exchange loss
2,791

 
476

Depreciation and amortization
3,127

 
2,617

Stock-based compensation - equity classified awards
1,480

 
739

Stock-based compensation - liability classified awards (SARs)
(640
)
 

Goodwill impairment
7,191

 

Long-lived asset impairment
273

 

Restructuring charges
3,637

 
3,934

Professional fees related to control remediation
264

 
365

Executive search fees

 
80

Sales and use tax audit

 
25

Other income
(896
)
 
(36
)
Adjusted EBITDA
$
12,906

 
$
7,389



 
Three Months Ended March 31,
 
2020
 
2019
Net loss
$
(2,840
)
 
$
(2,044
)
Restructuring charges
3,637

 
3,934

Professional fees related to control remediation
264

 
365

Change in fair value of warrant and derivatives
(5,640
)
 

Goodwill impairment
7,191

 

Long-lived asset impairment
273

 

Executive search fees

 
80

Sales and use tax audit

 
25

Income tax effects of adjustments
(971
)
 
(1,024
)
Adjusted net income
$
1,914

 
$
1,336

 
 
 
 
GAAP weighted-average shares outstanding – diluted
53,474

 
51,830

Effect of dilutive securities:
 
 
 
Employee stock options and restricted common shares
762

 
65

Adjusted weighted-average shares outstanding – diluted
54,236

 
51,895

Adjusted diluted earnings per share
$
0.04

 
$
0.03