InnerWorkings Announces Fourth Quarter and Full Year 2012 Results and 2013 Guidance

  InnerWorkings Announces Fourth Quarter and Full Year 2012 Results and 2013
  Guidance

  Announces record quarterly revenue, adjusted EBITDA and adjusted operating
 cash flow; forecasts 2013 organic revenue growth of 16 to 20 percent and EPS
                          growth of 39 to 49 percent

Business Wire

CHICAGO -- February 13, 2013

InnerWorkings, Inc. (NASDAQ: INWK), a leading global marketing supply chain
company, today reported results for the fourth quarter and fiscal year ended
December 31, 2012.

Quarterly Highlights:

  *Record revenue of $208.0 million, an increase of 19% compared to revenue
    of $175.2 million in the fourth quarter of 2011. Growth was driven by 16%
    organic growth in this quarter versus the fourth quarter of 2011.
  *Record adjusted cash flow generated from operations of $21.9 million, an
    increase of 94% compared to $11.3 million in the fourth quarter of 2011.
    Please refer to the non-GAAP reconciliation table below for more
    information.
  *Adjusted diluted earnings per share increased by 25% to $0.15 per diluted
    share in the fourth quarter, compared to $0.12 per adjusted diluted share
    in the year-earlier period. Please refer to the non-GAAP reconciliation
    table below for more information.
  *Record adjusted EBITDA of $12.5 million, compared to $11.2 million in the
    year-earlier period. Please refer to the non-GAAP reconciliation table
    below for more information.

Fiscal Year Highlights:

  *Record revenue for fiscal year 2012 of $797.7 million, an increase of 26%
    compared to revenue of $633.8 million in fiscal year 2011. Growth was
    driven by 19% organic growth year-over-year.
  *Adjusted cash flow generated from operations of $20.7 million in 2012,
    compared to $29.0 million in fiscal year 2011. Please refer to the
    non-GAAP reconciliation table below for more information.
  *Full year adjusted diluted earnings per share increased by 17% to $0.41 in
    2012 compared to $0.35 in 2011. Please refer to the non-GAAP
    reconciliation table below for more information.
  *Adjusted EBITDA was $45.3 million, an increase of 20% compared to $37.6
    million in fiscal year 2011. Please refer to the non-GAAP reconciliation
    table below for more information.
  *Full year 2012 enterprise account growth was 30% driven by the successful
    ramp-up of several new large enterprise client contracts and full year
    middle market account growth was 15% driven primarily by strong inside
    sales results.

“2012 was a record year for InnerWorkings, driven by over $100 million of
organic revenue from new enterprise clients,” said Eric D. Belcher, Chief
Executive Officer of InnerWorkings. “We invested wisely in our global platform
last year, built up our inside sales business, and added the necessary
leadership across our international organization to drive our future growth.
We enter this year with a strong sense of confidence in our ability to win new
large contracts that will again drive strong organic growth in 2013 and
beyond.”

Additional fourth quarter 2012 financial and operational highlights include
the following:

  *80% of the Company’s revenue was generated from domestic sales, while 20%
    was derived from international sales activity. Enterprise clients
    accounted for 75% of sales with middle market clients accounting for 25%
    of sales.
  *The Company had a net benefit on the change in fair value of contingent
    consideration of $3.5 million related to acquisitions in Europe, which was
    recorded in the fourth quarter of 2012. All InnerWorkings acquisitions are
    structured under a contingent consideration arrangement, pursuant to which
    earn-out payments will not be made unless certain performance measures are
    met. Due to the softness in Europe, some of the applicable performance
    measures were not met in the fourth quarter of 2012, and as a result, the
    Company recorded a net benefit to release a portion of its contingent
    consideration obligations. Please refer to the non-GAAP reconciliation
    table below for more information.
  *The Company also recorded an incremental non-cash stock-based compensation
    expense of $2.0 million due to a better than forecasted employee retention
    rate than was assumed at the date of equity grant.
  *Net debt declined by 26% sequentially and stood at $47.8 million at the
    end of the fourth quarter. The debt-to-leverage ratio was at a four year
    low of 1.4 times trailing twelve month adjusted EBITDA at the end of the
    fourth quarter.

“We were not only able to maintain our growth and execute against our strategy
by investing in the business over the past year, but we also made significant
contributions to strengthen our balance sheet,” said Joseph M. Busky, Chief
Financial Officer. “We look forward to seeing our strategic 2012 investments
in inside sales, Brazil and China turn profitable in 2013.”


Revenue Growth - Comparing 2012 to 2011
                               Q4 $(MM)  Q4 %    FY’12 $(MM)  FY’12 %
                                Change     Change   Change        Change
New Enterprise Account Growth   $25        14%      $102          16%
New Middle Market Growth        $4         2%       $14           2%
Same Customer Spend             $0         0%       $3            1%
2011-2012 Acquisitive Growth   $4        2%      $45          7%
Total Revenue Growth           $33       19%     $164         26%
Total Organic Revenue Growth   $29       16%     $120         19%
                                                                  

Outlook

The Company anticipates 2013 annual revenue of $930 million to $960 million,
which reflects 16 to 20 percent organic growth. GAAP diluted earnings per
share are expected to range between $0.57 to $0.61 in 2013, which reflects
growth of 39 to 49 percent versus 2012 adjusted diluted earnings per share
excluding legal settlement expense of $0.41.

Conference Call

A conference call will be broadcast live on Wednesday, February 13, 2013 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 “Events & Presentations” section of InnerWorkings’ website at
investor.inwk.com/events.cfm.

About InnerWorkings, Inc.

InnerWorkings, Inc. (NASDAQ: INWK) is a leading global marketing supply chain
company servicing corporate clients across a wide range of industries. With
proprietary technology, an extensive supplier network and deep domain
expertise, the Company procures, manages and delivers printed materials and
promotional products as part of a comprehensive outsourced enterprise
solution. InnerWorkings is based in Chicago, IL, employs approximately 1,300
individuals, and maintains 46 global offices. Among the many industries
InnerWorkings services are: retail, financial services, hospitality,
non-profits, healthcare, food & beverage, broadcasting & cable, education,
transportation and utilities.

For more information visit: www.inwk.com.

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, which represents income from operations with the
    addition of depreciation and amortization, stock-based compensation
    expense, any change in the fair value of contingent consideration
    liabilities, and excluding legal settlement expense;
  *Non-GAAP Adjusted Operating Cash Flow, which represents net cash provided
    by (used in) operating activities, excluding the adjustment for cash tax
    benefits arising from option exercises and the pre-payment of VAT
    assessments in the United Kingdom; and
  *Non-GAAP Earnings per Diluted Share, which represents earnings per diluted
    share, excluding legal settlement expense.

We believe that Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Cash
Flow and Non-GAAP Earnings per Diluted 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 Operating Cash Flow and Non-GAAP Earnings per Diluted 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 Operating Cash Flow and Non-GAAP Earnings per Diluted 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 reconciliations of these non-GAAP financial measures to the
nearest comparable GAAP measures, see "Reconciliation of Non-GAAP Adjusted
EBITDA, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP Earnings per
Diluted 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.

                                                                
Consolidated
Statements of
Income

                   Three Months Ended December 31,   Twelve Months Ended December
                                                     31,
                   2011            2012              2011            2012
Revenue            $ 175,234,543   $ 207,986,321     $ 633,846,120   $ 797,698,870
Cost of goods       132,634,714    158,683,629     484,483,592    612,275,393 
sold
Gross profit         42,599,829      49,302,692        149,362,528     185,423,477
Operating
expenses:
  Selling,
  general and        32,258,617      36,320,495        115,624,276     143,632,284
  administrative
  expenses
  Depreciation
  and                2,781,934       2,713,120         10,171,758      10,790,452
  amortization
  Preference
  claim              -               1,099,386         950,000         1,099,386
  settlement
  charge
  VAT settlement    -              1,485,088       -              1,485,088   
  charge
Income from         7,559,278      7,684,603       22,616,494     28,416,267  
operations
Total other         582,779        (159,936    )    1,879,122      (1,081,138  )
income (expense)
Income before        8,142,057       7,524,667         24,495,616      27,335,129
taxes
Income tax          2,377,452      1,551,211       8,102,609      8,223,241   
expense
Net income         $ 5,764,605     $ 5,973,456      $ 16,393,007    $ 19,111,888  
                                                                     
Basic earnings     $ 0.12          $ 0.12            $ 0.35          $ 0.39
per share
Diluted earnings   $ 0.12          $ 0.12            $ 0.34          $ 0.37
per share
                                                                     
Weighted average
shares               46,658,537      50,012,513        46,428,443      48,811,218
outstanding,
basic
Weighted average
shares               49,188,391      51,781,752        48,826,958      51,409,819
outstanding,
diluted

                                                              
Consolidated Balance Sheets
                                                                 
                                                 December 31,
                                                 2011            2012
                                                                 
Cash and cash equivalents                        $ 13,219,385    $ 17,218,899
Short-term investments                             1,129,757       -
Accounts receivable, net of allowance for          124,946,621     149,246,568
doubtful accounts
Unbilled revenue                                   28,318,751      30,798,230
Inventories                                        14,201,606      17,406,863
Prepaid expenses                                   11,066,451      16,210,053
Other current assets                               15,605,267      22,565,321
Total long-term assets                            249,165,348    268,797,648
Total assets                                     $ 457,653,186   $ 522,243,582
                                                                 
Accounts payable-trade                           $ 102,290,443   $ 121,132,051
Other current liabilities                          46,091,094      52,260,288
Revolving credit facility                          60,000,000      65,000,000
Other long-term liabilities                        67,769,862      60,689,936
Total stockholders' equity                        181,501,787    223,161,307
Total liabilities and stockholders' equity       $ 457,653,186   $ 522,243,582

                                                            
Cash Flow Data
                                                               
                                             Twelve Months Ended December 31,
                                             2011              2012
Net cash provided by operating activities    $ 27,830,536      $ 8,200,443
Net cash used in investing activities          (33,575,352 )     (14,706,533 )
Net cash provided by financing activities     14,067,712      10,794,780  
Effect of exchange rate changes on cash       (362,783    )    (289,176    )
and cash equivalents
Increase (decrease) in cash and cash           7,960,113         3,999,514
equivalents
Cash and cash equivalents, beginning of       5,259,272       13,219,385  
period
Cash and cash equivalents, end of period     $ 13,219,385     $ 17,218,899  

                                                                 
Reconciliation of Adjusted EBITDA, Adjusted Operating Cash Flows and Adjusted
Diluted earnings per share
                                              
                Three Months Ended December 31,   Twelve Months Ended December
                                                  31,
                2011             2012             2011             2012
                                                                   
Operating       $ 7,559,278      $ 7,684,603      $ 22,616,494     $ 28,416,267
income
Depreciation
and               2,781,934        2,713,120        10,171,758       10,790,452
amortization
Stock-based
compensation      1,087,157        3,021,797        3,976,187        6,192,870
expense
Preference
claim             -                1,099,386        950,000          1,099,386
settlement
charge
VAT
settlement        -                1,485,088        -                1,485,088
charge
Change in
fair value of    (255,223   )    (3,522,454 )    (147,529   )    (2,724,978 )
contingent
consideration
Adjusted        $ 11,173,146    $ 12,481,540    $ 37,566,910    $ 45,259,085 
EBITDA
                                                                   
                Three Months Ended December 31,   Twelve Months Ended December
                                                  31,
                2011             2012             2011             2012
                                                                   
Net cash
provided by     $ 10,807,280     $ 21,300,927     $ 27,830,536     $ 8,200,443
operating
activities
Excess tax
benefit from
exercise of       477,629          570,433          1,144,345        8,922,623
stock awards
*
Prepayment of
VAT
assessment in    -              -              -              3,604,866  
United
Kingdom **
Adjusted net
cash provided   $ 11,284,909    $ 21,871,360    $ 28,974,881    $ 20,727,932 
by operating
activities
                                                                   
* 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 which the company is close to settling.
                                                                   
                Three Months Ended December 31,   Twelve Months Ended December
                                                  31,
                2011             2012             2011             2012
Net income      $ 5,764,605      $ 5,973,456      $ 16,393,007     $ 19,111,888
Preference
claim
settlement        -                668,449          577,619          668,449
charge, net
of tax
VAT
settlement       -              1,121,241      -              1,121,241  
charge, net
of tax
Net income,
excluding
legal           $ 5,764,605      $ 7,763,146      $ 16,970,626     $ 20,901,578
settlement
expense
                                                                   
Weighted
average
shares            49,188,391       51,781,752       48,826,958       51,409,819
outstanding,
diluted
                                                                
Adjusted
Diluted EPS,
excluding       $ 0.12          $ 0.15          $ 0.35          $ 0.41       
legal
settlements
                                                                                

Contact:

InnerWorkings, Inc.
Patti K. Doyle, (312) 784-2607
pdoyle@inwk.com
 
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