$75M in new business awarded to date in
2019
InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing
execution firm, today announced financial results for the three
months ended March 31, 2019. For all non-GAAP references
below, please refer to the non-GAAP reconciliation tables at the
end of this release for more information.
“Our pursuit of operational excellence and cost reduction
measures have not impacted our ability to maintain strong
partnerships with our existing client base and attract additional
large, global brands,” said Chief Executive Officer Rich Stoddart.
“We have been awarded more new business in the first four months of
2019 than we had at this point in any prior year. We expect to
continue positive momentum through 2019, solidly positioning us on
our path toward profitable growth.”
Financial and Business Highlights
- Gross revenue was $267.2 million in the
first quarter of 2019, a decrease of 3% compared to $274.5 million
in the first quarter of 2018. Excluding currency impacts, first
quarter gross revenue increased 1% compared to the same period of
last year.
- Gross profit (net revenue) was $61.2
million, or 22.9% of gross revenue in the first quarter of 2019,
compared to $66.1 million, or 24.1% of revenue, in the same period
of last year. Excluding the impact of write-offs related to the
previous exit of certain client work, first quarter gross margin
would have been 23.2%.
- Net loss for the first quarter of 2019
was $(2.5) million, or $(0.05) per diluted share, compared to net
loss of $(1.7) million, or $(0.03) per diluted share in the first
quarter of 2018. First quarter 2019 net loss included $3.9 million
of restructuring charges related to the previously-announced cost
reduction plan.
- Non-GAAP diluted earnings per share for
the first quarter of 2019 was $0.02, compared to a loss of $(0.02)
in the first quarter of 2018.
- Adjusted EBITDA was $6.6 million in the
first quarter of 2019, compared to $7.4 million in the first
quarter of 2018.
- Additional work from new and existing
clients awarded to date in 2019 amounts to approximately $75
million of annual revenue at full run-rate. The latest of these
wins include new partnerships with one of the largest producers of
consumer discretionary products and a global manufacturer of home
improvement products.
“I am encouraged by the progress our teams are making to improve
the efficiency of our operations, which is reflected in our
sequential reduction in SG&A this quarter,” said Don Pearson,
Chief Financial Officer. “With the assistance of third-party
experts, we are at an advanced planning stage of the second phase
of cost reduction initiatives. Implementing these plans is expected
to deliver $3 million of cost savings in the second half of 2019
and another $12 million in 2020 and beyond. This is a key step to
create an operating platform that will enable sustainable
profitable growth.”
Outlook
The Company is maintaining its 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 $42 to $46 million, and 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 2,100 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 March 31, 2019
2018 Revenue $ 267,239 $ 274,539 Cost of goods
sold 206,043 208,472 Gross profit 61,196 66,067
Operating expenses: Selling, general and administrative expenses
55,805 61,167 Depreciation and amortization 2,617 3,659
Restructuring charges 3,934 — (Loss) income from
operations (1,160 ) 1,241 Other income (expense): Interest income
98 62 Interest expense (2,745 ) (1,568 ) Other, net (740 ) (846 )
Total other expense (3,387 ) (2,352 ) Loss before income taxes
(4,547 ) (1,111 ) Income tax (benefit) expense (2,085 ) 573
Net loss $ (2,462 ) $ (1,684 ) Basic loss per share $ (0.05
) $ (0.03 ) Diluted loss per share $ (0.05 ) $ (0.03 )
Weighted-average shares outstanding – basic 51,830 53,716
Weighted-average shares outstanding – diluted 51,830 53,716
Condensed Consolidated Balance
Sheets
(In thousands)
March 31, 2019 December 31, 2018
(unaudited)
Assets Current assets: Cash and cash equivalents
$ 25,851 $ 26,770 Accounts receivable, net 184,359 193,253 Unbilled
revenue 51,166 46,474 Inventories 46,927 56,001 Prepaid expenses
14,245 16,982 Other current assets 36,188 34,106
Total current assets 358,736 373,586 Property and equipment, net
35,952 82,933 Intangibles and other assets: Goodwill 152,181
152,158 Intangible assets, net 9,301 9,828 Right of use assets
39,391 — Deferred income taxes 1,073 1,195 Other non-current assets
3,486 2,976 Total intangibles and other assets
205,432 166,157 Total assets $ 600,120 $
622,676
Liabilities and stockholders' equity Current
liabilities: Accounts payable 149,813 158,449 Accrued expenses
31,339 35,474 Deferred revenue 20,945 17,614 Revolving credit
facility - current 138,923 142,736 Other current liabilities 31,493
26,231 Total current liabilities 372,513 380,504
Lease liabilities 35,044 — Deferred income taxes 8,268 8,178 Other
non-current liabilities 1,986 50,903 Total
liabilities 417,811 439,585 Stockholders' equity: Common stock 6 6
Additional paid-in capital 240,734 239,960 Treasury stock at cost
(81,471 ) (81,471 ) Accumulated other comprehensive loss (23,562 )
(24,309 ) Retained earnings 46,602 48,905 Total
stockholders' equity 182,309 183,091 Total
liabilities and stockholders' equity $ 600,120 $ 622,676
Condensed Consolidated Statement of
Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31, 2019
2018 Cash flows from operating
activities Net loss $ (2,462 ) $ (1,684 ) Adjustments to
reconcile net loss to net cash from operating activities:
Depreciation and amortization 2,617 3,659 Stock-based compensation
expense 739 1,417 Deferred income taxes — 30 Bad debt provision 385
538 Implementation cost amortization 143 125 Other operating
activities 102 52 Change in assets: Accounts receivable and
unbilled revenue 3,924 24,165 Inventories 9,149 2,131 Prepaid
expenses and other assets 116 2,941 Change in liabilities: Accounts
payable (8,351 ) (20,922 ) Accrued expenses and other liabilities
(870 ) 21,857 Net cash provided by operating activities
5,492 34,309
Cash flows from investing activities
Purchases of property and equipment (3,345 ) (2,874 ) Net cash used
in investing activities (3,345 ) (2,874 )
Cash flows from
financing activities Net repayments of revolving credit
facility (3,800 ) (9,023 ) Net short-term secured borrowings
(repayments) 1,256 (1,986 ) Repurchases of common stock — (8,048 )
Proceeds from exercise of stock options 63 7 Payment of debt
issuance costs (585 ) — Other financing activities (29 ) (67 ) Net
cash used in financing activities (3,095 ) (19,117 ) Effect
of exchange rate changes on cash and cash equivalents 29 594
(Decrease) increase in cash and cash equivalents (919 )
12,912 Cash and cash equivalents, beginning of period 26,770
30,562 Cash and cash equivalents, end of period $ 25,851
$ 43,474
Reconciliation of Adjusted EBITDA and
Non-GAAP Diluted Earnings Per Share
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended March 31, 2019
2018 Net loss $ (2,462 ) $ (1,684 ) Income tax
(benefit) expense (2,085 ) 573 Interest income (98 ) (62 ) Interest
expense 2,745 1,568 Other, net 740 846 Depreciation and
amortization 2,617 3,659 Stock-based compensation expense 739 1,417
Restructuring charges 3,934 — Professional fees related to ASC 606
implementation — 1,033 Executive search fees 80 —
Restatement-related professional fees 365 — Non-GAAP
Adjusted EBITDA $ 6,575 $ 7,350
Three Months Ended March 31, 2019 2018
Net loss $ (2,462 ) $ (1,684 ) Restructuring charges, net of tax
3,030 — Restatement-related professional fees, net of tax 272 —
Executive search fees, net of tax 60 — Professional fees related to
ASC 606 implementation, net of tax — 760 Adjusted net
income (loss) $ 900 $ (924 ) Weighted-average shares outstanding,
diluted 51,895 53,716 Non-GAAP diluted earnings
(loss) per share $ 0.02 $ (0.02 )
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InnerWorkings, Inc.Bridget Freas312.589.5613bfreas@inwk.com
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