InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three and six months ended June 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 have taken bold steps to improve our profitability, including sustainable cost actions and optimizing our client relationships to ensure they meet our return thresholds. These actions have given us greater confidence in our profitability expectations for this year, enabling us to raise our EBITDA guidance range,” said Chief Executive Officer Rich Stoddart. “We expect to ramp more new revenue in the second half of 2019 on the back of record year-to-date contract signings as well as onboarding additional revenue from the recently announced acquisition of Madden Communications' marketing execution business.”

Financial and Business Highlights

  • Gross revenue was $284.1 million in the second quarter of 2019, an increase of 1% compared to $282.0 million in the second quarter of 2018. Excluding currency impact, second quarter gross revenue increased 3% compared to the same period of last year.
  • Gross profit (net revenue) was $69.1 million, or 24.3% of gross revenue in the second quarter of 2019, compared to $64.9 million, or 23.0% of gross revenue, in the same period of last year. Second quarter gross profit (net revenue) increased 6% over the prior period and 8% excluding currency impact.
  • Net loss for the second quarter of 2019 was $(1.2) million, or $(0.02) per diluted share, compared to net loss of $(0.3) million, or $(0.01) per diluted share in the second quarter of 2018.
  • Non-GAAP diluted earnings per share for the second quarter of 2019 was $0.06, compared to $0.01 in the second quarter of 2018. Year-to-date non-GAAP diluted earnings per share was $0.07, compared to a loss of $(0.01) in the same period of 2018.
  • Adjusted EBITDA was $13.6 million in the second quarter of 2019, compared to $8.2 million in the second quarter of 2018. Year-to-date adjusted EBITDA was $20.2 million, an increase of 30% compared to the same period of 2018.
  • Additional work from new and existing clients awarded to date in 2019 amounts to approximately $135 million of annual revenue at full run-rate. The latest of these wins includes a major expansion of our relationship with a global sportswear company and a new partnership supporting one of the world's leading beverage brands.
  • The acquisition of Madden Communications' marketing execution business on August 1, 2019 adds to InnerWorkings' capabilities in logistics and creative services and brings key clients in the beer, wine, and spirits vertical.

“Our second quarter adjusted EBITDA was more than twice the amount generated in the first quarter, reaching the highest level in almost 2 years,” said Don Pearson, Chief Financial Officer. “We expect to show positive momentum in the second half of 2019 as we begin to realize the benefits of our $15 million cost reduction plan announced in March. We expect to realize a minimum of $3 million in cost savings from the annual run rate of at least $9 million in cost savings initiatives being actioned this year, with the balance to be actioned next year. Looking further ahead, we expect the realization of these benefits combined with the high quality revenue of recent client wins to provide significant sustainable profitable growth in 2020 and beyond.”

Outlook

The Company is maintaining its revenue and non-GAAP diluted earnings per share guidance and raising its adjusted EBITDA guidance for 2019. Revenue is expected 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 $44 to $47 million, which compares to prior guidance of $42 to $46 million. 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 2,000 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.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Revenue

$

284,053

 

 

$

281,967

 

 

$

551,291

 

 

$

556,506

 

Cost of goods sold

214,986

 

 

217,096

 

 

421,029

 

 

425,568

 

Gross profit

69,067

 

 

64,871

 

 

130,262

 

 

130,938

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative expenses

58,661

 

 

59,002

 

 

114,466

 

 

120,169

 

Depreciation and amortization

3,233

 

 

3,514

 

 

5,849

 

 

7,173

 

Restructuring charges

3,698

 

 

—

 

 

7,632

 

 

—

 

Income from operations

3,475

 

 

2,355

 

 

2,315

 

 

3,596

 

Other income (expense):

 

 

 

 

 

 

 

Interest income

104

 

 

54

 

 

202

 

 

115

 

Interest expense

(2,486

)

 

(1,517

)

 

(5,232

)

 

(3,085

)

Other income (expense), net

279

 

 

(588

)

 

(460

)

 

(1,433

)

Total other expense

(2,103

)

 

(2,051

)

 

(5,490

)

 

(4,403

)

Income (loss) before income taxes

1,372

 

 

304

 

 

(3,175

)

 

(807

)

Income tax expense

2,541

 

 

603

 

 

456

 

 

1,176

 

Net loss

$

(1,169

)

 

$

(299

)

 

$

(3,631

)

 

$

(1,983

)

 

 

 

 

 

 

 

 

Basic loss per share

$

(0.02

)

 

$

(0.01

)

 

$

(0.07

)

 

$

(0.04

)

Diluted loss per share

$

(0.02

)

 

$

(0.01

)

 

$

(0.07

)

 

$

(0.04

)

 

 

 

 

 

 

 

 

Weighted-average shares outstanding – basic

51,883

 

 

51,770

 

 

51,857

 

 

52,738

 

Weighted-average shares outstanding – diluted

51,883

 

 

51,770

 

 

51,857

 

 

52,738

 

Condensed Consolidated Balance Sheets

(In thousands)

 

 

June 30, 2019

 

December 31, 2018

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

33,999

 

 

$

26,770

 

Accounts receivable, net

188,687

 

 

193,253

 

Unbilled revenue

60,911

 

 

46,474

 

Inventories

51,553

 

 

56,001

 

Prepaid expenses

15,132

 

 

16,982

 

Other current assets

28,707

 

 

34,106

 

Total current assets

378,989

 

 

373,586

 

Property and equipment, net

36,466

 

 

82,933

 

Intangibles and other assets:

 

 

 

Goodwill

152,203

 

 

152,158

 

Intangible assets, net

8,774

 

 

9,828

 

Right of use assets

50,460

 

 

—

 

Deferred income taxes

1,091

 

 

1,195

 

Other non-current assets

3,613

 

 

2,976

 

Total intangibles and other assets

216,141

 

 

166,157

 

Total assets

$

631,596

 

 

$

622,676

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

140,492

 

 

158,449

 

Accrued expenses

37,446

 

 

35,474

 

Deferred revenue

21,532

 

 

17,614

 

Revolving credit facility - current

157,675

 

 

142,736

 

Other current liabilities

34,877

 

 

26,231

 

Total current liabilities

392,022

 

 

380,504

 

Lease liabilities

46,615

 

 

—

 

Deferred income taxes

8,295

 

 

8,178

 

Other non-current liabilities

1,995

 

 

50,903

 

Total liabilities

448,927

 

 

439,585

 

Stockholders' equity:

 

 

 

Common stock

6

 

 

6

 

Additional paid-in capital

242,010

 

 

239,960

 

Treasury stock at cost

(81,471

)

 

(81,471

)

Accumulated other comprehensive loss

(23,309

)

 

(24,309

)

Retained earnings

45,433

 

 

48,905

 

Total stockholders' equity

182,669

 

 

183,091

 

Total liabilities and stockholders' equity

$

631,596

 

 

$

622,676

 

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

2019

 

2018

 

 

 

 

Cash flows from operating activities

 

 

 

Net loss

$

(3,631

)

 

$

(1,983

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

Depreciation and amortization

5,849

 

 

7,173

 

Stock-based compensation expense

2,141

 

 

2,823

 

Bad debt provision

689

 

 

630

 

Implementation cost amortization

213

 

 

263

 

Other operating activities

224

 

 

(154

)

Change in assets:

 

 

 

Accounts receivable and unbilled revenue

(10,225

)

 

21,643

 

Inventories

4,488

 

 

(87

)

Prepaid expenses and other assets

(4,318

)

 

9,424

 

Change in liabilities:

 

 

 

Accounts payable

(17,670

)

 

(18,735

)

Accrued expenses and other liabilities

23,529

 

 

1,643

 

Net cash provided by operating activities

1,289

 

 

22,640

 

 

 

 

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(6,881

)

 

(5,490

)

Net cash used in investing activities

(6,881

)

 

(5,490

)

 

 

 

 

Cash flows from financing activities

 

 

 

Net borrowings from revolving credit facility

14,908

 

 

8,629

 

Net short-term secured repayments

(833

)

 

(578

)

Repurchases of common stock

—

 

 

(25,689

)

Proceeds from exercise of stock options

63

 

 

284

 

Payment of debt issuance costs

(935

)

 

—

 

Other financing activities

(156

)

 

(695

)

Net cash provided by (used in) financing activities

13,047

 

 

(18,049

)

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(226

)

 

(1,397

)

Increase (Decrease) in cash and cash equivalents

7,229

 

 

(2,296

)

Cash and cash equivalents, beginning of period

26,770

 

 

30,562

 

Cash and cash equivalents, end of period

$

33,999

 

 

$

28,266

 

Reconciliation of Adjusted EBITDA and Non-GAAP Diluted Earnings (Loss) Per Share

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Net loss

$

(1,169

)

 

$

(299

)

 

$

(3,631

)

 

$

(1,983

)

Income tax expense

2,541

 

 

603

 

 

456

 

 

1,176

 

Interest income

(104

)

 

(54

)

 

(202

)

 

(115

)

Interest expense

2,486

 

 

1,517

 

 

5,232

 

 

3,085

 

Other income (expense), net

(279

)

 

588

 

 

460

 

 

1,433

 

Depreciation and amortization

3,233

 

 

3,514

 

 

5,849

 

 

7,173

 

Stock-based compensation expense

1,402

 

 

1,406

 

 

2,141

 

 

2,823

 

Stock appreciation rights marked to market

46

 

 

—

 

 

46

 

 

—

 

Restructuring charges

3,698

 

 

—

 

 

7,632

 

 

—

 

Professional fees related to ASC 606 implementation

—

 

 

60

 

 

—

 

 

1,092

 

Executive search fees

—

 

 

234

 

 

80

 

 

234

 

Control remediation-related fees

175

 

 

537

 

 

540

 

 

537

 

Sales and use tax audit

1,235

 

 

—

 

 

1,235

 

 

—

 

Other professional fees

376

 

 

80

 

 

376

 

 

80

 

Adjusted EBITDA

$

13,640

 

 

$

8,186

 

 

$

20,214

 

 

$

15,535

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Net loss

$

(1,169

)

 

$

(299

)

 

$

(3,631

)

 

$

(1,983

)

Restructuring charges, net of tax

2,772

 

 

—

 

 

5,802

 

 

—

 

Control remediation-related fees

130

 

 

403

 

 

402

 

 

403

 

Executive search fees, net of tax

—

 

 

176

 

 

60

 

 

176

 

Professional fees related to ASC 606 implementation, net of tax

—

 

 

45

 

 

—

 

 

819

 

Sales and use tax audit, net of tax

920

 

 

—

 

 

920

 

 

—

 

Other professional fees, net of tax

280

 

 

60

 

 

280

 

 

60

 

Adjusted net income (loss)

$

2,933

 

 

$

385

 

 

3,833

 

 

$

(525

)

Weighted-average shares outstanding, diluted

52,038

 

 

52,528

 

 

51,961

 

 

52,738

 

Non-GAAP diluted earnings (loss) per share

$

0.06

 

 

$

0.01

 

 

$

0.07

 

 

$

(0.01

)