CHICAGO--(BUSINESS WIRE)--InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today reported results for the three months ended September 30, 2014. For all non-GAAP references, please refer to the non-GAAP reconciliation table below for more information.
Highlights
- Revenue of $251.7 million, an increase of 8% compared to $232.6 million in the third quarter of 2013.
- Non-GAAP Adjusted EBITDA of $12.3 million, an increase of 41% compared to Non-GAAP Adjusted EBITDA of $8.7 million in the third quarter of 2013.
- Non-GAAP diluted earnings per share of $0.07, an increase of 40% compared to Non-GAAP diluted earnings per share of $0.05 in the third quarter of 2013.
- Non-GAAP Adjusted Operating Cash Flow of $(11.3) million, compared to Non-GAAP Adjusted Operating Cash Flow of $1.6 million in the third quarter of 2013.
"Our consistent growth and solid momentum continued in the third quarter as we landed major new client contracts, underscoring our opportunity within a large and underpenetrated market,” said Eric D. Belcher, Chief Executive Officer of InnerWorkings. “We also continued to grow both globally and through new service offerings with our existing clients. We had success in cross-selling our new retail displays and product packaging solutions and we look forward to rolling them out with additional clients.”
Additional financial and operational highlights include the following:
- Organic enterprise account growth was $19 million in the third quarter.
- Among several new enterprise agreements signed during the quarter, the most significant was with one of the world’s largest office supply retailers to manage in-store and corporate marketing materials.
- The North America segment accounted for 66% of revenue and international segments accounted for 34%, compared to a 70% / 30% mix in the third quarter of 2013.
| Revenue Growth - Comparing 2014 to 2013 | |||||||||
|
Q3 $(MM) Change |
Q3 % Change |
YTD $(MM) Change |
YTD% Change |
||||||
| Organic Enterprise Account Growth | $19 | 8% | $70 | 11% | |||||
| Loss of Spend from Large Customer 1 | $0 | 0% | ($9) | -1% | |||||
| Acquisitive Growth | $0 | 0% | $44 |
7% |
|||||
| Total Revenue Growth | $19 | 8% | $105 | 16% | |||||
|
1 Includes loss of spending from large retail customer announced in April 2013. |
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Outlook
The Company updated and narrowed its 2014 revenue guidance to $1 billion to $1.01 billion, which reflects 12 to 13 percent growth over 2013. 2014 Non-GAAP diluted earnings per share guidance was also updated to $0.20 to $0.23, compared to $0.09 in 2013.
“We’re delivering on our commitment to accelerate our bottom-line results, generating meaningful Adjusted EBITDA growth in each of the first three quarters this year,” said Joseph M. Busky, Chief Financial Officer of InnerWorkings. “Our updated outlook reflects foreign exchange impacts from our growing international business, as well as some ramp-up costs related to our large new enterprise partnership.”
Conference Call
The management team will host a conference call to discuss the Company’s third quarter 2014 results, which will be broadcast live on Wednesday, November 5, 2014, at 4:30 p.m. Central Time (5:30 p.m. Eastern Time). The live webcast discussion, which will include a Q&A session, will be hosted by Eric D. Belcher, Chief Executive Officer, and Joseph M. Busky, Chief Financial Officer.
To access the conference call by telephone, interested parties may dial (877) 771-7024. Interested parties are also invited to listen to the live webcast by visiting the Investor "Events & Presentations" section of InnerWorkings' website at investor.inwk.com/events.cfm. A replay of the webcast will be available later that day in the same section of the website.
Non-GAAP Financial Measures
This press release includes the following financial measures defined as "non-GAAP financial measures" by the Securities and Exchange Commission: Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per share. We believe that Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per share provide useful information to investors because they provide information about the estimated financial performance of the Company's ongoing business. Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per share are used by management in its financial and operational decision-making and evaluation of overall operating performance. Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per share may be different from similar measures used by other companies. 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, see "Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP 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.
About InnerWorkings
InnerWorkings, Inc. (NASDAQ: INWK) is the leading global marketing execution firm serving Fortune 500 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 based in Chicago, IL, employs approximately 1,500 individuals, and maintains 67 global offices in 30 countries. Among the many industries InnerWorkings serves are: retail, financial services, hospitality, consumer packaged goods, not-for-profits, healthcare, food & beverage, broadcasting & cable, and transportation. For more information visit: www.inwk.com.
| Condensed Consolidated Statements of Income (Unaudited) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Revenue | $ | 232,629,788 | $ | 251,651,521 | $ | 648,082,830 | $ | 753,490,776 | ||||||||
| Cost of goods sold | 179,448,580 | 194,553,275 | 500,375,219 | 582,881,105 | ||||||||||||
| Gross profit | 53,181,208 | 57,098,246 | 147,707,611 | 170,609,671 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 44,724,982 | 46,187,034 | 133,183,782 | 146,393,186 | ||||||||||||
| Depreciation and amortization | 3,880,431 | 4,387,438 | 8,994,494 | 12,931,952 | ||||||||||||
| Change in fair value of contingent consideration | (29,627,005 | ) | (1,570,129 | ) | (30,667,562 | ) | (1,743,637 | ) | ||||||||
| Goodwill impairment charge | 37,908,000 | - | 37,908,000 | - | ||||||||||||
| Restructuring and other charges | 4,321,862 | - | 4,321,862 | - | ||||||||||||
| Income (loss) from operations | (8,027,062 | ) | 8,093,903 | (6,032,965 | ) | 13,028,170 | ||||||||||
| Total other expense | (728,047 | ) | (1,180,813 | ) | (2,140,743 | ) | (3,354,653 | ) | ||||||||
| Income (loss) before income taxes | (8,755,109 | ) | 6,913,090 | (8,173,708 | ) | 9,673,517 | ||||||||||
| Income tax expense | 310,961 | 1,799,419 | 18,115 | 2,665,067 | ||||||||||||
| Net income (loss) | $ | (9,066,070 | ) | $ | 5,113,671 | $ | (8,191,823 | ) | $ | 7,008,450 | ||||||
| Basic earnings (loss) per share | $ | (0.18 | ) | $ | 0.10 | $ | (0.16 | ) | $ | 0.13 | ||||||
| Diluted earnings (loss) per share | $ | (0.18 | ) | $ | 0.10 | $ | (0.16 | ) | $ | 0.13 | ||||||
| Weighted average shares outstanding, basic | 51,157,933 | 52,655,284 | 50,743,576 | 51,974,408 | ||||||||||||
| Weighted average shares outstanding, diluted | 52,217,066 | 53,742,472 | 52,122,553 | 52,781,851 | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||
| December 31, | September 30, | |||||
| 2013 | 2014 | |||||
| (unaudited) | ||||||
| Cash and cash equivalents | $ | 18,606,030 | $ | 22,153,663 | ||
| Accounts receivable, net of allowance for doubtful accounts | 171,832,907 | 182,497,497 | ||||
| Unbilled revenue | 27,483,544 | 34,225,093 | ||||
| Inventories | 26,473,732 | 41,256,484 | ||||
| Prepaid expenses | 11,746,965 | 11,152,793 | ||||
| Other current assets | 23,528,025 | 35,966,267 | ||||
| Total long-term assets | 334,995,575 | 332,340,327 | ||||
| Total assets | $ | 614,666,778 | $ | 659,592,124 | ||
| Accounts payable-trade | $ | 169,243,349 | $ | 165,800,771 | ||
| Other current liabilities | 49,655,185 | 65,998,339 | ||||
| Revolving credit facility | 69,000,000 | 103,500,000 | ||||
| Other long-term liabilities | 81,326,670 | 62,497,110 | ||||
| Total stockholders' equity | 245,441,574 | 261,795,904 | ||||
| Total liabilities and stockholders' equity | $ | 614,666,778 | $ | 659,592,124 | ||
| Cash Flow Data (Unaudited) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2013 | 2014 | |||||||
| Net cash provided by (used in) operating activities | $ | 9,463,850 | $ | (16,037,736 | ) | |||
| Net cash used in investing activities | (28,486,508 | ) | (11,500,078 | ) | ||||
| Net cash provided by financing activities | 20,907,572 | 31,691,417 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 120,988 | (605,970 | ) | |||||
| Increase in cash and cash equivalents | 2,005,902 | 3,547,633 | ||||||
| Cash and cash equivalents, beginning of period | 17,218,899 | 18,606,030 | ||||||
| Cash and cash equivalents, end of period | $ | 19,224,801 | $ | 22,153,663 | ||||
| Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Cash Flow, Non-GAAP Diluted Earnings Per Share and Non-GAAP Adjusted SG&A | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Operating income | $ | (8,027,062 | ) | $ | 8,093,903 | $ | (6,032,965 | ) | $ | 13,028,170 | ||||||
| Depreciation and amortization | 3,880,431 | 4,387,438 | 8,994,494 | 12,931,952 | ||||||||||||
| Stock-based compensation expense | 982,082 | 1,374,496 | 3,036,188 | 4,023,227 | ||||||||||||
| Change in fair value of contingent consideration | (29,627,005 | ) | (1,570,129 | ) | (30,667,562 | ) | (1,743,637 | ) | ||||||||
| Payments to former owner of Productions Graphics, net of cash recovered | (910,811 | ) | - | 2,876,214 | - | |||||||||||
| Goodwill impairment charge | 37,908,000 | - | 37,908,000 | - | ||||||||||||
| Restructuring and other charges | 4,321,862 | - | 4,321,862 | - | ||||||||||||
| Legal fees in connection with patent infringement defense | 209,075 | - | 961,295 | - | ||||||||||||
| Restatement-related professional fees | - | - | - | 2,093,104 | ||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 8,736,572 | $ | 12,285,708 | $ | 21,397,526 | $ | 30,332,816 | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Net cash provided by (used in) operating activities | $ | 6,553,846 | $ | (11,849,650 | ) | $ | 9,463,850 | $ | (16,037,736 | ) | ||||||
| Excess tax benefit from exercise of stock awards * | (2,834,634 | ) | - | (1,768,277 | ) | - | ||||||||||
| Refund of VAT assessment in United Kingdom ** | (2,166,664 | ) | - | (2,166,664 | ) | - | ||||||||||
| Cash paid for settlement for preference claim | - | - | 900,000 | - | ||||||||||||
| Net short-term advances on International receivables *** | - | 521,313 | - | 2,717,222 | ||||||||||||
| Non-GAAP Adjusted Operating Cash Flow | $ | 1,552,548 | $ | (11,328,337 | ) | $ | 6,428,909 | $ | (13,320,514 | ) | ||||||
| * Represents a U.S. tax deduction in an amount equal to the excess of the market price of the stock on the date of exercise over exercise price. | ||||||||||||||||
| ** Represents a payment made to Her Majesty's Revenue and Customers for VAT assessments in the U.K. and the refund of the prepayment less the final assessment. | ||||||||||||||||
| *** US GAAP requires classification in financing activities despite inclusion in working capital on the balance sheet. | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Net income | $ | (9,066,070 | ) | $ | 5,113,671 | $ | (8,191,823 | ) | $ | 7,008,450 | ||||||
| Change in fair value of contingent consideration, net of tax | (28,489,495 | ) | (1,504,985 | ) | (29,046,641 | ) | (1,448,566 | ) | ||||||||
| Payments to former owner of Productions Graphics, net of cash recovered, net of tax | (630,896 | ) | - | 1,791,487 | - | |||||||||||
| Goodwill impairment charge | 37,908,000 | - | 37,908,000 | - | ||||||||||||
| Restructuring and other charges | 2,614,726 | - | 2,614,726 | - | ||||||||||||
| Legal fees in connection with patent infringement defense, net of tax | 135,941 | - | 625,034 | - | ||||||||||||
| Restatement-related professional fees, net of tax | - | - | - | 1,266,328 | ||||||||||||
| Adjusted net income | $ | 2,472,206 | $ | 3,608,686 | $ | 5,700,783 | $ | 6,826,212 | ||||||||
| Weighted average shares outstanding, diluted | 52,217,066 | 53,742,472 | 52,122,553 | 52,781,851 | ||||||||||||
| Non-GAAP Diluted Earnings Per Share | $ | 0.05 | $ | 0.07 | $ | 0.11 | $ | 0.13 | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Selling, general and administrative expenses | $ | 44,724,982 | $ | 46,187,034 | $ | 133,183,782 | $ | 146,393,186 | ||||||||
| Restatement-related professional fees | - | - | - | (2,093,104 | ) | |||||||||||
| Legal fees in connection with patent infringement defense | (209,075 | ) | - | (961,295 | ) | - | ||||||||||
| Payments to former owner of Productions Graphics, net of cash recovered | 910,811 | - | (2,876,214 | ) | - | |||||||||||
| Non-GAAP Adjusted SG&A | $ | 45,426,718 | $ | 46,187,034 | $ | 129,346,273 | $ | 144,300,082 | ||||||||
