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InnerWorkings Announces Second Quarter 2013 Results



  InnerWorkings Announces Second Quarter 2013 Results

    New Enterprise Business Momentum Continues to Position the Company for
                               Long-term Growth

Business Wire

CHICAGO -- August 8, 2013

InnerWorkings, Inc. (NASDAQ: INWK), a leading global marketing supply chain
company, today reported results for the three months ended June 30, 2013.

Quarterly Highlights:

  * Revenue was $210.9 million, compared to $201.4 million in the second
    quarter of 2012.
  * Non-GAAP Adjusted EBITDA was $5.4 million, compared to $11.9 million in
    the same period last year, due to a previously-announced loss of a portion
    of a significant client, lower inside sales profitability, and lower
    profitability in the EMEA region. Please refer to the Non-GAAP
    reconciliation table below for more information.
  * GAAP diluted earnings per share were $0.04, compared to GAAP diluted
    earnings per share of $0.09 in the second quarter of 2012.
  * Non-GAAP Adjusted Operating Cash Flow was $3.9 million, compared to
    Non-GAAP Adjusted Operating Cash Flow of $0.8 million in the second
    quarter of 2012. Please refer to the non-GAAP reconciliation table below
    for more information.
  * New organic enterprise account growth was $19.9 million in the second
    quarter.

“As expected, this wasn’t a particularly strong quarter by our standards,”
said Joseph M. Busky, Chief Financial Officer of InnerWorkings. “However, we
expect growth will accelerate in the second half of the year due to recent new
enterprise wins, contributions from acquisitions, and the overall seasonality
of our business.”

Additional second quarter 2013 financial and operational highlights include
the following:

  * 77% of the Company’s revenues were generated from the enterprise channel,
    with the remaining 23% derived from the middle market channel.
  * Today, a major new enterprise agreement was announced with Mondelez, one
    of the world’s largest snack companies. The long-term partnership
    encompasses $45 million of annual spending in Brazil and represents one of
    the largest agreements in the Company’s history.
  * Other new client agreements were recently signed with a large publisher,
    as well as with a Fortune 1000 financial services firm, both headquartered
    in North America.

"We continue to add new blue-chip clients in many regions around the world, as
evidenced most recently by the new commitment from Mondelez,” said Eric D.
Belcher, Chief Executive Officer of InnerWorkings. “Further, our multinational
clients are taking advantage of our new global scale by expanding with us into
additional markets. This is a trend we expect will drive significant long-term
growth for us.”

 
Revenue Growth - Comparing 2013 to 2012
                                    Q2                       YTD       
                                    $(MM)         Q2 %       $(MM)      YTD %
                                    Change        Change     Change     Change
New Enterprise Account Growth       $20           10%        $38        10%
New Middle Market Growth            $0            0%         $2         1%
Same Customer Spend                 ($8)          -4%        ($14)      -4%
Lost Customer Spending              ($8)          -4%        ($8)       -2%
Acquisitive Growth                  $6            3%         $8         2%
Total Revenue Growth                $10           5%         $25        6%
                                                                         
Total Organic Revenue Growth        $12           6%         $25        6%
(1)
 
(1) Organic Revenue Growth excludes Lost Customer Spending and Acquisitive
Growth.
 

Outlook

The Company is increasing its 2013 revenue guidance range from $900 to $930
million to $910 to $940 million, representing 14-18% growth over 2012. The
Company is reaffirming its 2013 GAAP EPS guidance of $0.45 to $0.50, which
represents 10-22% growth over 2012 adjusted diluted earnings per share.
Projected revenue and profit from recent acquisitions is expected to be offset
by lower Inside Sales profitability and lower same-customer spending
projections.

Conference Call

A conference call to discuss the Company’s second quarter 2013 results will be
broadcast live on Thursday, August 8, 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 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.

About InnerWorkings

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 1,400
individuals, and maintains 49 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 and Non-GAAP Adjusted Operating Cash Flow. We believe
that Non-GAAP Adjusted EBITDA and Non GAAP Adjusted Operating Cash Flow
provide useful information to investors because they provide information about
the estimated financial performance of the Company's ongoing business.
Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Operating Cash Flow are used by
management in its financial and operational decision-making and evaluation of
overall operating performance. Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted
Operating Cash Flow 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 and Non-GAAP Adjusted Operating Cash Flow” 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 June 30,           Six Months Ended June 30,
                   2012              2013                2012              2013
Revenue            $ 201,397,471     $ 210,875,626       $ 389,943,873     $ 415,191,751
Cost of goods        153,551,408       162,699,024         300,704,427       321,022,654  
sold
Gross profit         47,846,063        48,176,602          89,239,446        94,169,097
Operating
expenses:
Selling,
general and          37,644,103        42,257,681          70,727,367        83,993,470
administrative
expenses
Depreciation
and                  2,936,981         2,648,396           5,381,077         5,114,063    
amortization
Income from          7,264,979         3,270,525           13,131,002        5,061,564    
operations
Total other          (493,899    )     (488,760    )       (754,287    )     (1,412,696  )
expense
Income before        6,771,080         2,781,765           12,376,715        3,648,868
income taxes
Income tax           2,296,680         878,420             4,214,627         850,393      
expense
Net income         $ 4,474,400       $ 1,903,345         $ 8,162,088       $ 2,798,475    
                                                                            
Basic earnings     $ 0.09            $ 0.04              $ 0.17            $ 0.06
per share
Diluted
earnings per       $ 0.09            $ 0.04              $ 0.16            $ 0.05
share
                                                                            
Weighted
average shares       48,617,646        50,728,372          47,904,961        50,533,521
outstanding,
basic
Weighted
average shares       50,706,956        51,965,539          50,554,642        52,046,000
outstanding,
diluted
                                                                                          

Consolidated Balance Sheets
                                                                
                                               December 31,      June 30,
                                               2012              2013
                                                                  
Cash and cash equivalents                      $ 17,218,899      $ 14,164,356
Accounts receivable, net of allowance for        149,246,568       151,357,448
doubtful accounts
Unbilled revenue                                 30,798,230        27,041,664
Inventories                                      17,406,863        16,390,726
Prepaid expenses                                 16,210,053        16,276,354
Other current assets                             22,565,321        20,156,268
Total long-term assets                           268,797,648       321,587,535
Total assets                                   $ 522,243,582     $ 566,974,351
                                                                  
Accounts payable-trade                         $ 121,132,051     $ 117,661,216
Other current liabilities                        44,262,065        52,726,450
Revolving credit facility                        65,000,000        78,300,000
Other long-term liabilities                      68,870,021        87,210,243
Total stockholders' equity                       222,979,445       231,076,443
Total liabilities and stockholders' equity     $ 522,243,582     $ 566,974,351
                                                                    

Cash Flow Data
                                                              
                                            Six Months Ended June 30,
                                            2012               2013
Net cash provided by (used in)              $ (9,996,549 )     $ 8,305,023
operating activities
Net cash used in investing activities         (7,247,738 )       (17,381,833 )
Net cash provided by financing                16,119,500         6,112,521    
activities
Effect of exchange rate changes on cash       (123,182   )       (90,254     )
and cash equivalents
Decrease in cash and cash equivalents         (1,247,969 )       (3,054,543  )
Cash and cash equivalents, beginning of       13,219,385         17,218,899   
period
Cash and cash equivalents, end of           $ 11,971,416       $ 14,164,356   
period
                                                                

Reconciliation of Adjusted EBITDA and Adjusted Operating Cash Flows
                                                                      
                  Three Months Ended June 30,         Six Months Ended June 30,
                  2012             2013               2012             2013
                                                                        
Operating         $ 7,264,979      $ 3,270,525        $ 13,131,002     $ 5,061,564
income
Depreciation
and                 2,936,981        2,648,396          5,381,077        5,114,063
amortization
Stock-based
compensation        1,403,729        1,080,913          2,451,374        2,054,106
expense
Change in
fair value of       266,544          (1,649,389 )       466,685          (1,040,557 )
contingent
consideration
Adjusted          $ 11,872,233     $ 5,350,445        $ 21,430,138     $ 11,189,176  
EBITDA
                                                                        
                                                                        
                  Three Months Ended June 30,         Six Months Ended June 30,
                  2012             2013               2012             2013
                                                                        
Net cash
provided by
(used in)         $ (2,523,911 )   $ 3,752,643        $ (9,996,549 )   $ 8,305,023
operating
activities
Excess tax
benefit from
exercise of         3,283,275        115,291            7,447,068        1,066,357
stock awards
*
Cash paid for
settlement of       -                -                  -                900,000     
preference
claim
Adjusted net
cash provided
by (used in)      $ 759,364        $ 3,867,934        $ (2,549,481 )   $ 10,271,380  
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.

Contact:

InnerWorkings, Inc.
Brad Moore, (312) 277-1510
bmoore@inwk.com
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