InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three months ended September 30, 2016. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.
Financial Highlights
- Gross revenue was $280.0 million in the third quarter, an increase of 5.8% compared with $264.7 million in the third quarter of 2015. Year-to-date gross revenue was $820.3 million, an increase of 8.1% compared with $759.0 million in the prior year period.
- Gross profit (net revenue) was $67.8 million, or 24.2% of gross revenue in the third quarter, a 6.6% increase compared to $63.6 million, or 24.0% of gross revenue, in the same period of last year. Year-to-date gross profit (net revenue) was $194.8 million, or 23.8% of gross revenue, an increase of 9.7% compared to the prior-year period.
- Net income for the third quarter was $4.3 million, or $0.08 per diluted share, and year-to-date net loss was $0.7 million or $0.01 per diluted share.
- Non-GAAP diluted earnings per share for the third quarter were $0.11, compared to $0.09 a year ago. Year-to-date non-GAAP diluted earnings per share were $0.26 compared to $0.18 in the same period of 2015.
- Non-GAAP adjusted EBITDA was $16.9 million in the third quarter, reflecting 5.4% growth as compared to $16.1 million in the third quarter of 2015. Year-to-date non-GAAP adjusted EBITDA was $43.4 million, an increase of 15.2% compared to $37.7 million in the same period of 2015.
Business Highlights
- InnerWorkings has continued to sign new enterprise contracts in recent months, bringing the year-to-date collective total to more than $100 million of annual gross revenue at full run-rate, with about half stemming from expanded relationships with active clients.
- The largest of the new client contracts is expected to generate $10 million of annual revenue at full run-rate and makes InnerWorkings the preferred provider for marketing materials and direct mail, centralizing the marketing supply chain for a large U.S. media company.
- The largest increase of work within an existing account is an expansion of the Company’s long-term partnership with a client in the healthcare industry, growing the account to more than $20 million of revenue by rolling out the existing print and creative services offering from one business unit to all of the company’s U.S. and Canadian operations.
“We have devoted considerable energy to developing our presence in the international markets and new service offerings over the last few years, and the benefits of these investments are becoming more apparent,” said Eric D. Belcher, Chief Executive Officer of InnerWorkings. “With the strength of our global capabilities and rate of penetration with our existing accounts, I’m excited by our performance and the path I see ahead for InnerWorkings.”
“Our third quarter financial results demonstrate continued organic growth and further operating efficiency, particularly in our International segment,” said Jeffrey P. Pritchett, Chief Financial Officer of InnerWorkings. “We are raising our financial performance expectations for 2016 as we continue to execute ahead of plan.”
Outlook
The Company is raising its guidance for 2016 annual revenue and non-GAAP diluted earnings per share. InnerWorkings now expects 2016 revenue to range between $1.075 billion and $1.082 billion, compared to previous guidance of $1.06 to $1.08 billion. Non-GAAP diluted earnings per share is now expected to be $0.31 to $0.34, versus prior guidance of $0.30 - $0.33. Guidance for non-GAAP adjusted EBITDA is unchanged at $58.0 million to $62.0 million.
Conference Call
Eric D. Belcher, Chief Executive Officer, and Jeffrey P. Pritchett, Chief Financial Officer, will host a conference call to discuss the results today at 4:30 p.m. Central time (5:30 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.cfm. 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 Securities and Exchange Commission: non-GAAP adjusted EBITDA and non-GAAP diluted earnings per share. We believe these measures provide useful information to investors because they provide information about the estimated financial performance of the Company's ongoing business. These measures are used by management in its financial and operational decision-making and evaluation of overall operating 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 non-GAAP adjusted EBITDA and non-GAAP diluted earnings per share included in this release.
The Company has not quantitatively reconciled its guidance for non-GAAP adjusted EBITDA or non-GAAP diluted earnings per share to their most comparable GAAP measure because the Company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the Company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the nearest GAAP financial metric is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the Company’s financial 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 based in Chicago, IL and employs more than 1,500 individuals to support global clients in the execution of multi-faceted brand campaigns in every major market around the world. 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 | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenue | $ | 279,993 | $ | 264,720 | $ | 820,286 | $ | 759,043 | ||||||||
| Cost of goods sold | 212,212 | 201,109 | 625,465 | 581,387 | ||||||||||||
| Gross profit | 67,781 | 63,611 | 194,821 | 177,656 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 52,601 | 48,787 | 155,511 | 144,836 | ||||||||||||
| Depreciation and amortization | 5,066 | 4,485 | 14,382 | 12,842 | ||||||||||||
| Change in fair value of contingent consideration | 788 | 701 | 9,975 | 1,691 | ||||||||||||
| Restructuring and other charges | 466 | — | 4,433 | — | ||||||||||||
| Income from operations | 8,860 | 9,638 | 10,520 | 18,287 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 26 | 6 | 63 | 55 | ||||||||||||
| Interest expense | (1,191 | ) | (1,132 | ) | (3,252 | ) | (3,382 | ) | ||||||||
| Other, net | (114 | ) | (1,089 | ) | 16 | (992 | ) | |||||||||
| Total other expense | (1,279 | ) | (2,215 | ) | (3,173 | ) | (4,319 | ) | ||||||||
| Income before income taxes | 7,581 | 7,423 | 7,347 | 13,968 | ||||||||||||
| Income tax expense | 3,240 | 3,487 | 8,023 | 6,100 | ||||||||||||
| Net income (loss) | $ | 4,341 | $ | 3,936 | $ | (676 | ) | $ | 7,868 | |||||||
| Basic earnings (loss) per share | $ | 0.08 | $ | 0.07 | $ | (0.01 | ) | $ | 0.15 | |||||||
| Diluted earnings (loss) per share | $ | 0.08 | $ | 0.07 | $ | (0.01 | ) | $ | 0.15 | |||||||
| Weighted-average shares outstanding – basic | 53,818 | 52,973 | 53,536 | 52,759 | ||||||||||||
| Weighted-average shares outstanding – diluted | 54,772 | 53,349 | 53,536 | 53,457 | ||||||||||||
Condensed Consolidated Balance Sheets | |||||||
| (in thousands) | September 30, | December 31, | |||||
| (unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 20,787 | $ | 30,755 | |||
| Accounts receivable, net | 190,438 | 188,819 | |||||
| Unbilled revenue | 40,505 | 30,758 | |||||
| Inventories | 45,377 | 33,327 | |||||
| Prepaid expenses | 11,984 | 14,353 | |||||
| Other current assets | 30,528 | 31,825 | |||||
| Total current assets | 339,619 | 329,837 | |||||
| Property and equipment, net | 32,279 | 32,681 | |||||
| Intangibles and other assets: | |||||||
| Goodwill | 204,978 | 206,257 | |||||
| Intangible assets, net | 33,476 | 37,715 | |||||
| Deferred income taxes | 1,123 | 586 | |||||
| Other non-current assets | 1,426 | 1,391 | |||||
| Total intangibles and other assets | 241,003 | 245,949 | |||||
| Total assets | $ | 612,901 | $ | 608,467 | |||
| Liabilities and stockholders' equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 129,980 | $ | 170,244 | |||
| Current portion of contingent consideration | 19,320 | 11,387 | |||||
| Due to seller | 1,683 | 402 | |||||
| Accrued expenses | 21,037 | 17,866 | |||||
| Other current liabilities | 35,515 | 31,363 | |||||
| Total current liabilities | 207,535 | 231,262 | |||||
| Revolving credit facility | 133,734 | 99,258 | |||||
| Deferred income taxes | 11,594 | 10,526 | |||||
| Contingent consideration, net of current portion | — | 10,775 | |||||
| Other non-current liabilities | 2,235 | 2,510 | |||||
| Total liabilities | 355,098 | 354,331 | |||||
| Stockholders' equity: | |||||||
| Common stock | 6 | 6 | |||||
| Additional paid-in capital | 219,085 | 213,566 | |||||
| Treasury stock at cost | (51,724 | ) | (52,207 | ) | |||
| Accumulated other comprehensive loss | (15,518 | ) | (13,993 | ) | |||
| Retained earnings | 105,954 | 106,764 | |||||
| Total stockholders' equity | 257,803 | 254,136 | |||||
| Total liabilities and stockholders' equity | $ | 612,901 | $ | 608,467 | |||
| Condensed Consolidated Statement of Cash Flows | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| (in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net income (loss) | $ | 4,341 | $ | 3,936 | $ | (676 | ) | $ | 7,868 | |||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||||
| Depreciation and amortization | 5,066 | 4,485 | 14,382 | 12,842 | ||||||||||||
| Stock-based compensation expense | 1,740 | 1,226 | 4,097 | 4,854 | ||||||||||||
| Deferred income taxes | 227 | (598 | ) | 677 | 768 | |||||||||||
| Bad debt provision | 644 | 165 | 1,433 | 1,214 | ||||||||||||
| Change in fair value of contingent consideration | 788 | 701 | 9,975 | 1,691 | ||||||||||||
| Other operating activities | 52 | 52 | 157 | 157 | ||||||||||||
| Change in assets: | ||||||||||||||||
| Accounts receivable and unbilled revenue | (10,432 | ) | (7,247 | ) | (12,798 | ) | (17,558 | ) | ||||||||
| Inventories | (9,477 | ) | (2,271 | ) | (12,050 | ) | (13,116 | ) | ||||||||
| Prepaid expenses and other assets | (12,681 | ) | (14,157 | ) | 3,574 | (13,436 | ) | |||||||||
| Change in liabilities: | ||||||||||||||||
| Accounts payable | (6,280 | ) | (1,502 | ) | (40,264 | ) | 4,471 | |||||||||
| Accrued expenses and other liabilities | 3,229 | 6,964 | 7,861 | 2,989 | ||||||||||||
| Net cash used in operating activities | (22,783 | ) | (8,246 | ) | (23,632 | ) | (7,256 | ) | ||||||||
| Cash flows from investing activities | ||||||||||||||||
| Purchases of property and equipment | (3,057 | ) | (3,470 | ) | (10,502 | ) | (12,126 | ) | ||||||||
| Net cash used in investing activities | (3,057 | ) | (3,470 | ) | (10,502 | ) | (12,126 | ) | ||||||||
| Cash flows from financing activities | ||||||||||||||||
| Net borrowings from revolving credit facility | 22,169 | 16,093 | 34,722 | 23,489 | ||||||||||||
| Net short-term secured borrowings | (924 | ) | (1,220 | ) | (820 | ) | (551 | ) | ||||||||
| Repurchases of common stock | — | — | (4,897 | ) | ||||||||||||
| Payments of contingent consideration | (6,865 | ) | (5,833 | ) | (11,008 | ) | (8,010 | ) | ||||||||
| Proceeds from exercise of stock options | 911 | 52 | 2,002 | 650 | ||||||||||||
| Other financing activities | (206 | ) | (247 | ) | (680 | ) | (426 | ) | ||||||||
| Net cash provided by financing activities | 15,085 | 8,845 | 24,216 | 10,255 | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (64 | ) | (57 | ) | (50 | ) | (813 | ) | ||||||||
| Decrease in cash and cash equivalents | (10,819 | ) | (2,928 | ) | (9,968 | ) | (9,940 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 31,606 | 15,566 | 30,755 | 22,578 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 20,787 | $ | 12,638 | $ | 20,787 | $ | 12,638 | ||||||||
Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Diluted Earnings Per Share |
(Unaudited) |
| (in thousands) | Three Months Ended | Nine Months Ended | |||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Net income (loss) | $ | 4,341 | $ | 3,936 | $ | (676 | ) | $ | 7,868 | ||||||
| Income tax expense | 3,240 | 3,487 | 8,023 | 6,100 | |||||||||||
| Total other expense | 1,279 | 2,215 | 3,173 | 4,319 | |||||||||||
| Depreciation and amortization | 5,066 | 4,485 | 14,382 | 12,842 | |||||||||||
| Stock-based compensation expense | 1,740 | 1,226 | 4,097 | 4,854 | |||||||||||
| Change in fair value of contingent consideration | 788 | 701 | 9,975 | 1,691 | |||||||||||
| Restructuring and other charges | 466 | — | 4,433 | — | |||||||||||
| Non-GAAP Adjusted EBITDA | $ | 16,920 | $ | 16,050 | $ | 43,407 | $ | 37,674 | |||||||
| (in thousands, except per share amounts) | Three Months Ended | Nine Months Ended | |||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Net income (loss) | $ | 4,341 | $ | 3,936 | $ | (676 | ) | $ | 7,868 | ||||||
| Change in fair value of contingent consideration | 788 | 700 | 9,975 | 1,680 | |||||||||||
| Restructuring and other charges, net of tax | 382 | — | 3,964 | — | |||||||||||
| Realignment-related income tax charges | 263 | — | 898 | — | |||||||||||
| Adjusted net income | $ | 5,774 | $ | 4,636 | $ | 14,161 | $ | 9,548 | |||||||
| Weighted-average shares outstanding, diluted | 54,772 | 53,349 | 54,359 | 53,457 | |||||||||||
| Non-GAAP Diluted Earnings Per Share | $ | 0.11 | $ | 0.09 | $ | 0.26 | $ | 0.18 | |||||||
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Contacts:
InnerWorkings, Inc.
312.589.5613
bfreas@inwk.com
