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8-K - 8-K - INNERWORKINGS INCa15-4458_18k.htm

Exhibit 99.1

 

GRAPHIC

 

InnerWorkings Announces Fourth Quarter and Full Year 2014 Results

 

·                  Achieves record revenue and adjusted EBITDA for full year;

·                  Forecasts revenue to increase 8% to 11% on a constant currency basis and Non-GAAP diluted EPS to grow 25% to 35% in 2015;

·                  Announces share repurchase authorization

 

CHICAGO — February 12, 2015 —  InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today reported results for the fourth quarter and fiscal year ended December 31, 2014.  For all Non-GAAP references, please refer to the Non-GAAP reconciliation table below for more information.

 

Fourth Quarter Highlights:

 

·                  Revenue of $246.6 million, an increase of 2% year-over-year (4% on a constant currency basis).

 

·                  Record Non-GAAP Adjusted EBITDA of $12.5 million, an increase of 127% year-over-year (129% on a constant currency basis).

 

·                  Non-GAAP diluted earnings per share of $0.07 on a reported and constant currency basis, up from a $0.02 loss in the fourth quarter of 2013.

 

·                  Non-GAAP Adjusted Cash Flow of $3.6 million, compared to $27.1 million in the same period last year, primarily attributable to timing of accounts payable.

 

Fiscal Year Highlights:

 

·                  Record revenue of $1.0 billion, an increase of 12% on a year-over-year basis (13% on a constant currency basis).  Over twothirds of the revenue growth in 2014 was organic.  Please refer to the revenue growth table below for more information.

 

·                  Record Non-GAAP Adjusted EBITDA of $42.8 million, an increase of 59% compared to $26.9 million in 2013 (60% growth on a constant currency basis).

 

·                  Non-GAAP diluted earnings per share of $0.20, an increase of 122% over 2013.  Full year Non-GAAP diluted earnings per share on a constant currency basis were $0.21.

 

·                  Non-GAAP Adjusted Cash Flow of $(9.7) million, compared to $33.5 million in 2013, primarily attributable to timing of accounts payable.

 

“2014 was a very successful year for InnerWorkings as we drove double digit revenue growth again

 



 

and improved our profitability profile significantly during the year,” said Eric D. Belcher, Chief Executive Officer of InnerWorkings.  “We reached an important milestone as we crossed the one billion dollar revenue mark, and more importantly, we leveraged our newer capabilities, added depth to our global management team, and shifted our focus to long-term organic growth.”

 

Additional Highlights

 

·                  Today, the Company announces a new four-year client agreement signed in January 2015 with a Fortune 500 consumer packaged goods company.  With this addition, InnerWorkings is under long-term contracts with seven of the largest CPG companies in the world.

 

·                  This win adds to an impressive roster of new clients launched in 2014, which includes Callaway, Energizer, FedEx, Novartis, Pizza Hut, Sanofi and Staples.

 

·                  The North America segment accounted for 68% of revenue and international segments accounted for 32% in 2014, compared to a 74%/26% mix in 2013.

 

Revenue Growth - Comparing 2014 to 2013

 

 

 

Reported Currency

 

Constant Currency

 

 

 

$(MM)

 

% Change

 

$(MM)

 

% Change

 

Organic Enterprise Account Growth

 

$

74

 

8

%

$

83

 

9

%

Loss of Spend from Large Customer (1)

 

$

(9

)

-1

%

$

(9

)

-1

%

Acquisitive Growth

 

$

44

 

5

%

$

44

 

5

%

Total Revenue Growth

 

$

109

 

12

%

$

118

 

13

%

 


(1) Includes loss of spending from large retail customer previously announced in April 2013.

 

Share Repurchase Authorization

 

InnerWorkings also announced today that its Board of Directors authorized a share repurchase program. Under the program, InnerWorkings is authorized to repurchase up to $20 million of its outstanding common stock over the next two years. The timing and amount of any share repurchases will be determined based on market conditions, share price and other factors, and the program may be discontinued or suspended at any time. Repurchases will be made in compliance with SEC rules and other legal requirements.

 

“The share repurchase program gives us the option to capitalize on opportunities provided by the market to create additional shareholder value, while maintaining the flexibility to invest in our growth,” Belcher commented.

 

Outlook

 

The Company expects 2015 annual revenue to range between $1.04 billion and $1.06 million, representing growth of 4% to 6% over 2014 (8% to 11% over 2014 on a constant currency basis).  2015 Non-GAAP Adjusted EBITDA is forecasted to be between $49 million and $51 million, representing growth of 14% to 19% over 2014.  2015 Non-GAAP diluted earnings per share, which

 



 

exclude contingent liability impacts, are expected to be $0.25 to $0.27, representing growth of 25% to 35% over 2014.

 

Belcher concluded, “In the year ahead, we will continue our focus on driving organic growth by acquiring new customers and expanding existing relationships, while demonstrating increased operating leverage as we grow our profitability faster than the top-line.  We are proud of the many new Fortune 500 clients that have adopted our solution, and we are very excited about the opportunity ahead.”

 

Conference Call

 

A conference call will be broadcast live on Thursday, February 12, 2015 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, Joseph M. Busky, Chief Financial Officer, and Ryan Spohn, Senior Vice President and Controller.

 

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.

 

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 Operating Cash Flow, Non-GAAP diluted earnings per share and constant currency. 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. 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 is calculated by retranslating current and prior period results at a consistent rate. This approach is based on the pricing currency for each country, which is typically the functional currency. All of these non-GAAP financial measures 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 “GAAP to Non-GAAP Reconciliation” 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.

 

Contact:

InnerWorkings, Inc.

Brad Moore

312-277-1510

bmoore@inwk.com

 



 

Condensed Consolidated Statements of Income

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2013

 

2014

 

2013

 

2014

 

Revenue

 

$

242,877,133

 

$

246,641,995

 

$

890,959,963

 

$

1,000,132,771

 

Cost of goods sold

 

188,558,680

 

187,792,177

 

688,933,899

 

770,673,282

 

Gross profit

 

54,318,453

 

58,849,818

 

202,026,064

 

229,459,489

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

50,259,656

 

48,613,035

 

183,443,438

 

195,006,221

 

Depreciation and amortization

 

4,669,365

 

4,791,541

 

13,663,859

 

17,723,493

 

Change in fair value of contingent consideration

 

(663,005

)

(36,129,951

)

(31,330,567

)

(37,873,588

)

Goodwill impairment charge

 

 

 

37,908,000

 

 

Intangible asset impairment charges

 

 

2,710,435

 

 

2,710,435

 

Restructuring and other charges

 

 

 

4,321,862

 

 

Income (loss) from operations

 

52,437

 

38,864,758

 

(5,980,528

)

51,892,928

 

Total other expense

 

(1,095,006

)

(1,763,205

)

(3,235,749

)

(5,117,858

)

Income (loss) before income taxes

 

(1,042,569

)

37,101,553

 

(9,216,277

)

46,775,070

 

Income tax expense (benefit)

 

(574,043

)

(351,922

)

(555,928

)

2,313,145

 

Net income (loss)

 

$

(468,526

)

$

37,453,475

 

$

(8,660,349

)

$

44,461,925

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

(0.01

)

$

0.71

 

$

(0.17

)

$

0.85

 

Diluted earnings (loss) per share

 

$

(0.01

)

$

0.69

 

$

(0.17

)

$

0.84

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

52,125,182

 

52,805,370

 

50,875,131

 

52,095,481

 

Weighted average shares outstanding, diluted

 

52,125,182

 

53,976,304

 

50,875,131

 

53,103,943

 

 



 

Condensed Consolidated Balance Sheets

 

 

 

December 31,

 

December 31,

 

 

 

2013

 

2014

 

Cash and cash equivalents

 

$

18,606,030

 

$

22,577,942

 

Accounts receivable, net of allowance for doubtful accounts

 

171,832,907

 

179,465,922

 

Unbilled revenue

 

27,483,544

 

31,698,924

 

Inventories

 

26,473,732

 

27,162,642

 

Prepaid expenses

 

11,746,965

 

12,684,237

 

Other current assets

 

23,528,025

 

31,228,064

 

Total long-term assets

 

334,995,575

 

327,022,683

 

Total assets

 

$

614,666,778

 

$

631,840,414

 

 

 

 

 

 

 

Accounts payable-trade

 

$

169,243,349

 

$

144,044,592

 

Other current liabilities

 

49,655,185

 

50,668,747

 

Revolving credit facility

 

69,000,000

 

104,538,750

 

Other long-term liabilities

 

81,326,670

 

36,441,756

 

Total stockholders’ equity

 

245,441,574

 

296,146,569

 

Total liabilities and stockholders’ equity

 

$

614,666,778

 

$

631,840,414

 

 



 

Cash Flow Data

 

 

 

Year Ended December 31,

 

 

 

2013

 

2014

 

Net cash provided by (used in) operating activities

 

$

37,370,935

 

$

(12,048,138

)

Net cash used in investing activities

 

(31,526,947

)

(14,710,655

)

Net cash provided by (used in) financing activities

 

(4,647,458

)

31,789,409

 

Effect of exchange rate changes on cash and cash equivalents

 

190,601

 

(1,058,704

)

Increase in cash and cash equivalents

 

1,387,131

 

3,971,912

 

Cash and cash equivalents, beginning of period

 

17,218,899

 

18,606,030

 

Cash and cash equivalents, end of period

 

$

18,606,030

 

$

22,577,942

 

 



 

Reconciliation of Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Cash Flow, Non-GAAP Diluted Earnings Per Share and Non-GAAP Adjusted SG&A

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2013

 

2014

 

2013

 

2014

 

Operating income (loss)

 

$

52,437

 

$

38,864,758

 

$

(5,980,528

)

$

51,892,928

 

Depreciation and amortization

 

4,669,365

 

4,791,541

 

13,663,859

 

17,723,493

 

Stock-based compensation expense

 

1,696,843

 

1,328,345

 

4,733,031

 

5,351,572

 

Change in fair value of contingent consideration

 

(663,005

)

(36,129,951

)

(31,330,567

)

(37,873,588

)

Payments to former owner of Productions Graphics, net of cash recovered

 

(252,156

)

 

2,624,059

 

 

Goodwill impairment charge

 

 

 

37,908,000

 

 

Intangible asset impairment charges

 

 

2,710,435

 

 

2,710,435

 

Restructuring and other charges

 

 

 

4,321,862

 

 

Legal fees in connection with patent infringement defense

 

 

 

961,295

 

 

Restatement-related professional fees

 

 

 

 

2,093,104

 

Secured asset reserve

 

 

940,367

 

 

940,367

 

Non-GAAP Adjusted EBITDA

 

$

5,503,484

 

$

12,505,495

 

$

26,901,011

 

$

42,838,311

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2013

 

2014

 

2013

 

2014

 

Net cash provided by (used in) operating activities

 

$

27,907,085

 

$

3,989,598

 

$

37,370,935

 

$

(12,048,138

)

Excess tax benefit from exercise of stock awards *

 

(850,502

)

(147,380

)

(2,618,779

)

(147,380

)

Refund of VAT assessment in United Kingdom **

 

 

 

(2,166,664

)

 

Cash paid for settlement for preference claim

 

 

 

900,000

 

 

Net short-term advances on International receivables ***

 

 

(233,320

)

 

2,483,902

 

Non-GAAP Adjusted Operating Cash Flow

 

$

27,056,583

 

$

3,608,898

 

$

33,485,492

 

$

(9,711,616

)

 


* 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 in the U.K. and the refund of the prepayment less the final assessment.

*** US GAAP requires classification in financing activities despite inclusion in working capital on the balance sheet.

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2013

 

2014

 

2013

 

2014

 

Net income (loss)

 

$

(468,526

)

$

37,453,475

 

$

(8,660,349

)

$

44,461,925

 

Change in fair value of contingent consideration, net of tax

 

(610,877

)

(36,122,230

)

(29,657,518

)

(37,570,797

)

Payments to former owner of Productions Graphics, net of cash recovered, net of tax

 

(174,662

)

 

1,616,825

 

 

Goodwill impairment charge

 

 

 

37,908,000

 

 

Intangible asset impairment charges

 

 

1,656,693

 

 

1,656,693

 

Restructuring and other charges

 

 

 

2,614,726

 

 

Legal fees in connection with patent infringement defense, net of tax

 

 

 

625,034

 

 

Restatement-related professional fees, net of tax

 

 

 

 

1,266,328

 

Secured asset reserve, net of tax

 

 

567,982

 

 

567,982

 

Adjusted net income

 

$

(1,254,065

)

$

3,555,920

 

$

4,446,718

 

$

10,382,131

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, diluted

 

52,125,182

 

53,976,304

 

50,875,131

 

53,103,943

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Diluted Earnings Per Share

 

$

(0.02

)

$

0.07

 

$

0.09

 

$

0.20

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2013

 

2014

 

2013

 

2014

 

Selling, general and administrative expenses

 

$

50,259,656

 

$

48,613,035

 

$

183,443,438

 

$

195,006,221

 

Restatement-related professional fees

 

 

 

 

(2,093,104

)

Legal fees in connection with patent infringement defense

 

 

 

(961,295

)

 

Payments to former owner of Productions Graphics, net of cash recovered

 

252,156

 

 

(2,624,059

)

 

Secured asset reserve

 

 

(940,367

)

 

(940,367

)

Non-GAAP Adjusted SG&A

 

$

50,511,812

 

$

47,672,668

 

$

179,858,084

 

$

191,972,750