InnerWorkings Announces Second Quarter 2014 Results

  InnerWorkings Announces Second Quarter 2014 Results   Achieves highest revenue in Company’s history driven by 23% revenue growth;                           62% Adjusted EBITDA growth  Business Wire  CHICAGO -- August 6, 2014  InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today reported results for the three months ended June 30, 2014.  Highlights    *Record revenue of $260.3 million, an increase of 23% compared to $210.9     million in the second quarter of 2013.   *Non-GAAP Adjusted EBITDA of $9.5 million, an increase of 62% compared to     Non-GAAP Adjusted EBITDA of $5.9 million in the second quarter of 2013.     Please refer to the non-GAAP reconciliation table below for more     information.   *Non-GAAP diluted earnings per share of $0.04, compared to Non-GAAP diluted     earnings per share of $0.02 in the second quarter of 2013. Please refer to     the non-GAAP reconciliation table below for more information.   *Non-GAAP Adjusted Operating Cash Flow of $6.4 million, an increase of 66%     compared to Non-GAAP Adjusted Operating Cash Flow of $3.9 million in the     second quarter of 2013. Please refer to the non-GAAP reconciliation table     below for more information.  "Our core enterprise business fueled record revenue for us in the second quarter. A large portion of this growth came from expanding our relationships with several of our long-standing Fortune 500 customers,” said Eric D. Belcher, Chief Executive Officer of InnerWorkings.  Additional financial and operational highlights include the following:    *Organic enterprise account growth was $27 million in the second quarter, a     13% increase over the prior-year period.   *The Company recently signed new enterprise agreements with Sanofi, a     global pharmaceutical firm; Newsday, one of the largest newspaper     publishers in the U.S.; and Edrington, the owner of leading spirits brands     around the world.   *The North America segment accounted for 70% of revenue and international     segments accounted for 30%, compared to a 77% / 23% mix in the second     quarter of 2013.  “Our international regions continue to generate strong organic growth, which positions us well for improved EBITDA margin in the second half of the year,” said Joseph M. Busky, Chief Financial Officer of InnerWorkings.                                                                     Revenue Growth - Comparing 2014 to 2013                                 Q2 $(MM)     Q2 %      YTD $(MM)    YTD%                                  Change        Change     Change        Change Organic Enterprise Account       $27           13%        $51           12% Growth Loss of Spend from Large         $0            0%         ($9)          (2)% Customer ^1 Acquisitive Growth               $22           10%        $44           11% Total Revenue Growth            $49          23%       $86          21%                                                                          ^1 Includes loss of spending from large retail customer previously announced in April 2013.   Outlook  The Company reaffirms its 2014 revenue guidance of $965 million to $1 billion, which reflects 8 to 12 percent growth over 2013. The Company also reaffirms its 2014 Non-GAAP diluted earnings per share guidance of $0.23 to $0.27, compared to $0.09 in 2013.  Conference Call  The management team will host a conference call to discuss the Company’s second quarter 2014 results, which will be broadcast live on Wednesday, August 6, 2014, 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.  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, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per share. We believe that Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per 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 SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per 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 SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per 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 a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see "Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted SG&A, Non-GAAP Adjusted Operating Cash Flow and Non-GAAP diluted earnings per 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.  About InnerWorkings  InnerWorkings, Inc. (NASDAQ: INWK) is the leading global marketing execution firm serving Fortune 500 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, employs approximately 1,500 individuals, and maintains 67 global offices in 30 countries. 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 June 30,           Six Months Ended June 30,                      2013              2014                2013              2014 Revenue              $ 210,875,626     $ 260,349,591       $ 415,453,042     $ 501,839,255 Cost of goods         162,699,024     201,422,560       320,926,639     388,327,830  sold Gross profit           48,176,602        58,927,031          94,526,403        113,511,425 Operating expenses:   Selling,   general and          41,347,183        50,634,671          88,458,800        100,206,152   administrative   expenses   Depreciation   and                  2,648,396         4,373,798           5,114,063         8,544,514   amortization   Change in fair   value of            (1,649,389  )    521,669           (1,040,557  )    (173,508    )   contingent   consideration Income from           5,830,412       3,396,893         1,994,097       4,934,267    operations Total other           (488,760    )    (1,058,167  )      (1,412,696  )    (2,173,840  ) expense Income before          5,341,652         2,338,726           581,401           2,760,427 income taxes Income tax expense               1,666,131       733,354           (292,846    )    865,648      (benefit) Net income           $ 3,675,521      $ 1,605,372        $ 874,247        $ 1,894,779                                                                                  Basic earnings       $ 0.07            $ 0.03              $ 0.02            $ 0.04 per share Diluted earnings     $ 0.07            $ 0.03              $ 0.02            $ 0.04 per share                                                                               Weighted average shares                 50,728,372        51,543,799          50,554,642        51,444,535 outstanding, basic Weighted average shares                 51,965,539        53,199,279          52,046,000        52,766,406 outstanding, diluted                                                                                              Condensed Consolidated Balance Sheets                                                                                                             December 31,      June 30,                                                2013              2014                                                                  (unaudited) Cash and cash equivalents                      $ 18,606,030      $ 23,364,199 Accounts receivable, net of allowance for        171,832,907       186,722,463 doubtful accounts Unbilled revenue                                 27,483,544        31,457,926 Inventories                                      26,473,732        26,762,086 Prepaid expenses                                 11,746,965        11,532,751 Other current assets                             23,528,025        31,604,673 Total long-term assets                          334,995,575      337,145,506 Total assets                                   $ 614,666,778     $ 648,589,604                                                                   Accounts payable-trade                         $ 169,243,349     $ 173,413,169 Other current liabilities                        49,655,185        72,258,306 Revolving credit facility                        69,000,000        89,000,000 Other long-term liabilities                      81,326,670        61,433,950 Total stockholders' equity                      245,441,574      252,484,179 Total liabilities and stockholders' equity     $ 614,666,778     $ 648,589,604                                                                      Cash Flow Data (Unaudited)                                                                                                         Six Months Ended June 30,                                             2013                2014 Net cash provided by (used in)              $ 2,910,004         $ (4,188,086 ) operating activities Net cash used in investing activities         (17,381,833 )       (8,429,758 ) Net cash provided by financing               11,507,540        17,309,399  activities Effect of exchange rate changes on cash      (90,254     )      66,614      and cash equivalents Increase (decrease) in cash and cash          (3,054,543  )       4,758,169 equivalents Cash and cash equivalents, beginning of      17,218,899        18,606,030  period Cash and cash equivalents, end of           $ 14,164,356       $ 23,364,199  period                                                                                Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Cash Flows, Non-GAAP Diluted EPS and Non-GAAP Adjusted SG&A                                                                                              Three Months Ended June 30,       Six Months Ended June 30,                         2013             2014             2013             2014                                                                             Operating income        $ 5,830,412      $ 3,396,893      $ 1,994,097      $ 4,934,267 Depreciation and          2,648,396        4,373,798        5,114,063        8,544,514 amortization Stock-based compensation              1,080,913        1,252,457        2,054,106        2,648,731 expense Change in fair value of contingent       (1,649,389 )     521,669          (1,040,557 )     (173,508    ) consideration Payments to former owner of Productions               (2,521,635 )     -                3,787,025        - Graphics, net of cash recovered Legal fees in connection with           506,880          -                752,220          - patent infringement defense Restatement-related      -              -               -              2,093,104    professional fees Non-GAAP Adjusted       $ 5,895,577     $ 9,544,817      $ 12,660,954    $ 18,047,108   EBITDA                                                                                                                                                                                 Three Months Ended June 30,       Six Months Ended June 30,                         2013             2014             2013             2014                                                                             Net cash provided by (used in)            $ 3,752,643      $ 4,220,257      $ 2,910,004      $ (4,188,086  ) operating activities Excess tax benefit from exercise of          115,291          -                1,066,357        - stock awards * Cash paid for settlement for            -                -                900,000          - preference claim Net short-term advances on              -              2,195,909       -              2,195,909    International receivables ** Non-GAAP Adjusted Operating Cash          $ 3,867,934     $ 6,416,166      $ 4,876,361     $ (1,992,177  ) Flows                                                                             * 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. ** US GAAP requires classification in financing activities despite inclusion in working capital on the balance sheet.                                                                                                                                                                                 Three Months Ended June 30,       Six Months Ended June 30,                         2013             2014             2013             2014 Net income              $ 3,675,521      $ 1,605,372      $ 874,247        $ 1,894,779 Change in fair value of contingent       (1,202,166 )     593,216          (557,146   )     56,419 consideration, net of tax Payments to former owner of Productions               (1,746,673 )     -                2,422,383        - Graphics, net of cash recovered, net of tax Legal fees in connection with           329,573          -                489,093          - patent infringement defense, net of tax Restatement-related professional fees,       -              -               -              1,266,328    net of tax Adjusted net income     $ 1,056,255      $ 2,198,588      $ 3,228,577      $ 3,217,526                                                                             Weighted average shares outstanding,       51,965,539       53,199,279       52,046,000       52,766,406 diluted                                                                          Non-GAAP Diluted        $ 0.02          $ 0.04           $ 0.06          $ 0.06         EPS                                                                                                                                                                                 Three Months Ended June 30,       Six Months Ended June 30,                         2013             2014             2013             2014 Selling, general and administrative      $ 41,347,183     $ 50,634,671     $ 88,458,800     $ 100,206,152 expenses Restatement-related       -                -                -                (2,093,104  ) professional fees Legal fees in connection with           (506,880   )     -                (752,220   )     - patent infringement defense Payments to former owner of Productions              2,521,635      -               (3,787,025 )    -            Graphics, net of cash recovered Non-GAAP Adjusted       $ 43,361,938    $ 50,634,671     $ 83,919,555    $ 98,113,048   SG&A                                                                                            Contact:  InnerWorkings, Inc. Brad Moore, (312) 277-1510 bmoore@inwk.com  
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