INNERWORKINGS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 6, 2020

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8-K - 8-K - INNERWORKINGS INCinwkq22020form8k.htm


Exhibit 99.1

InnerWorkings Announces Second Quarter 2020 Results

CHICAGO, IL - August 6, 2020 - InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing engineering firm, today announced financial results for the three and six months ended June 30, 2020. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

“As we had anticipated, a reduction in global economic activity impacted marketing spend by our clients and therefore resulted in a significant decline in our second-quarter revenue. We took swift action to dramatically reduce our costs while still meeting the high standard by which we serve our clients,” said Chief Executive Officer Rich Stoddart. “The proposed acquisition of our company by HH Global announced in July is expected to close by the end of the fourth quarter. We are excited about this combination and remain focused on delivering for our clients.”

Financial and Business Highlights

•
Gross revenue was $203.3 million in the second quarter of 2020, a decrease of 28.4% compared to $283.9 million in the second quarter of 2019.
•
Gross profit was $48.4 million, or 23.8% of gross revenue in the second quarter of 2020, compared to $68.4 million, or 24.1% of gross revenue, in the same period of last year.
•
Selling, general and administrative expenses were $45.1 million in the second quarter, down 21.4% compared to $57.4 million in the second quarter of 2019.
•
Net loss for the second quarter of 2020 was $(7.9) million, or $(0.15) per diluted share, compared to net loss of $(0.5) million, or $(0.01) per diluted share in the second quarter of 2019. Year-to-date net loss was $(10.8) million, compared to $(2.6) million in the same period of 2019.
•
Adjusted diluted (loss) earnings per share for the second quarter of 2020 was $(0.07), compared to $0.05 in the second quarter of 2019.
•
Adjusted EBITDA was $6.1 million in the second quarter of 2020, compared to $13.0 million in the second quarter of 2019. Year-to-date adjusted EBITDA was $19.0 million, compared to $20.4 million in the same period of 2019.
•
Additional work from new and existing clients awarded so far in 2020 amounts to approximately $56 million of annual revenue at full run-rate.

Conference Call
Due to the previously announced proposed acquisition of InnerWorkings by HH Global Group Limited, the company will not conduct a conference call or webcast to discuss the second quarter results and will not provide annual guidance.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as “non-GAAP financial measures” by the SEC: adjusted EBITDA and adjusted diluted earnings per share. 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. 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 and adjusted 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 and our Form 8-K filed on May 11, 2020.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) engineers marketing for leading brands across a wide range of industries. We dive deep into clients’ brand strategies to deliver solutions that leverage our global expertise, certified supplier base, proven methods, and proprietary technology. By engineering marketing across key touch points in the customer journey, we power campaigns that drive value, enhance awareness and inspire action. With services that include creative, print, direct mail, branded merchandise, luxury packaging, retail environments, and digital solutions, we’re elevating beyond execution to shape brand experience. For more information visit: www.inwk.com.
CONTACT:
InnerWorkings, Inc.
Bridget Freas
312.589.5613
bfreas@inwk.com




Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Revenue
$
203,311

 
$
283,861

 
$
464,671

 
$
551,072

Cost of goods sold
154,890

 
215,463

 
352,808

 
420,664

Gross profit
48,421

 
68,398

 
111,863

 
130,408

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative expenses
45,117

 
57,404

 
96,756

 
113,235

Depreciation and amortization
3,310

 
3,233

 
6,437

 
5,849

Goodwill impairment
—

 
—

 
7,191

 
—

Intangible and other asset impairments
609

 
—

 
883

 
—

Restructuring charges
3,644

 
3,698

 
7,281

 
7,632

(Loss) income from operations
(4,259
)
 
4,063

 
(6,685
)
 
3,692

Other income (expense):
 
 
 
 
 
 
 
Interest income
53

 
104

 
109

 
202

Interest expense
(3,201
)
 
(2,486
)
 
(7,587
)
 
(5,232
)
(Loss) gain from change in fair value of warrant
(120
)
 
—

 
5,085

 
—

Foreign exchange gain (loss)
862

 
237

 
(1,929
)
 
(239
)
Other income
221

 
42

 
1,117

 
78

Total other expense
(2,185
)
 
(2,103
)
 
(3,205
)
 
(5,191
)
(Loss) income before income taxes
(6,444
)
 
1,960

 
(9,890
)
 
(1,499
)
Income tax expense
1,468

 
2,468

 
862

 
1,053

Net loss
$
(7,912
)
 
$
(508
)
 
$
(10,752
)
 
$
(2,552
)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
Numerator:
 
 
 
 
 
 
 
 
Net loss - basic
 
$
(7,912
)
 
$
(508
)
 
$
(10,752
)
 
$
(2,552
)
Adjustments:
 
 
 
 
 
 
 
 
Change in fair value of Initial Warrant liability
 
—

 
—

 
(5,085
)
 
—

Net loss - diluted
 
$
(7,912
)
 
$
(508
)
 
$
(15,837
)
 
$
(2,552
)
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
52,327

 
51,773

 
52,233

 
51,830

Issuance of Initial Warrant
 
1,335

 
—

 
1,335

 
—

Weighted average shares outstanding - basic and diluted
 
53,662

 
51,773

 
53,568

 
51,830

 
 
 
 
 
 
 
 
 
Basic loss per share
 
$
(0.15
)
 
$
(0.01
)
 
$
(0.20
)
 
$
(0.05
)
Diluted loss per share
 
$
(0.15
)
 
$
(0.01
)
 
$
(0.30
)
 
$
(0.05
)




Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
June 30, 2020
 
December 31, 2019
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
35,311

 
$
42,711

Accounts receivable, net of allowance for doubtful accounts of $3,470 and $3,830, respectively
158,636

 
202,406

Unbilled revenue
23,900

 
48,396

Other receivables
9,858

 
28,194

Inventories
37,303

 
34,977

Prepaid expenses
13,021

 
10,680

Other current assets
6,981

 
7,301

Total current assets
285,010

 
374,665

Property and equipment, net
36,357

 
37,224

Intangibles and other assets:
 
 
 
Goodwill
144,967

 
152,210

Intangible assets, net
6,693

 
7,714

Right of use assets, net
46,805

 
51,159

Deferred income taxes
2,183

 
2,182

Other non-current assets
3,018

 
4,129

Total intangibles and other assets
203,666

 
217,394

Total assets
$
525,033

 
$
629,283

Liabilities and stockholders' equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
96,866

 
$
142,136

Accrued expenses
43,350

 
50,975

Deferred revenue
10,572

 
9,568

Revolving credit facility - current
76

 
593

Term loan - current
10,000

 
7,500

Other current liabilities
25,969

 
35,665

Total current liabilities
186,833

 
246,437

Lease liabilities
42,487

 
46,075

Revolving credit facility - non-current
40,476

 
60,086

Term loan - non-current
79,800

 
89,242

Deferred income taxes
8,053

 
8,053

Other long-term liabilities
1,762

 
1,138

Total liabilities
359,411

 
451,031

Commitments and contingencies
 
 
 
Stockholders' equity:
 
 
 
Common stock
6

 
6

Additional paid-in capital
248,215

 
245,311

Treasury stock at cost
(78,418
)
 
(81,471
)
Accumulated other comprehensive loss
(27,348
)
 
(22,449
)
Retained earnings
23,167

 
36,855

Total stockholders' equity
165,622

 
178,252

Total liabilities and stockholders' equity
$
525,033

 
$
629,283

 



Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2020
 
2019
Cash flows from operating activities
 
 
 
Net loss
$
(10,752
)
 
$
(2,552
)
Adjustments to reconcile net loss to net cash from operating activities:
 

 
 

Depreciation and amortization
6,437

 
5,849

Stock-based compensation expense
2,521

 
2,141

Bad debt provision
426

 
689

Contract implementation cost amortization
135

 
213

Goodwill impairment
7,191

 
—

Long-lived asset impairment
883

 
—

Change in fair value of warrant
(5,085
)
 
—

Change in fair value of embedded derivatives
(519
)
 
—

Unrealized foreign exchange loss
1,184

 
—

Other operating activities, net
1,085

 
224

Change in assets and liabilities:
 
 
 
Accounts receivable and unbilled revenue
61,059

 
(10,099
)
Inventories
(3,134
)
 
4,582

Prepaid expenses and other assets
17,147

 
(4,163
)
Accounts payable
(41,351
)
 
(18,146
)
Accrued expenses and other liabilities
(19,190
)
 
22,551

Net cash provided by operating activities
18,037

 
1,289

 
 
 
 
Cash flows from investing activities
 

 
 

Purchases of property and equipment
(5,127
)
 
(6,881
)
Net cash used in investing activities
(5,127
)
 
(6,881
)
 
 
 
 
Cash flows from financing activities
 

 
 
Net borrowings from old revolving credit facility
—

 
14,908

Net repayments on new revolving credit facility
(19,830
)
 
—

Net short-term secured borrowings
—

 
(833
)
Payments on term loan
(2,500
)
 
—

Proceeds from exercise of stock options
—

 
63

Payment of debt issuance costs
—

 
(935
)
Other financing activities, net
(130
)
 
(156
)
Net cash (used in) provided by financing activities
(22,460
)
 
13,047

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
2,150

 
(226
)
(Decrease) increase in cash and cash equivalents
(7,400
)
 
7,229

Cash and cash equivalents, beginning of period
42,711

 
26,770

Cash and cash equivalents, end of period
$
35,311

 
$
33,999





Reconciliation of Adjusted EBITDA and Adjusted Diluted Earnings Per Share
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net loss
$
(7,912
)
 
$
(508
)
 
$
(10,752
)
 
$
(2,552
)
Benefit for income tax
1,468

 
2,468

 
862

 
1,053

Interest income
(53
)
 
(104
)
 
(109
)
 
(202
)
Interest expense
3,201

 
2,486

 
7,587

 
5,232

Change in fair value of warrant
120

 
—

 
(5,085
)
 
—

Foreign exchange loss
(862
)
 
(237
)
 
1,929

 
239

Depreciation and amortization
3,310

 
3,233

 
6,437

 
5,849

Stock-based compensation - equity classified awards
1,554

 
1,402

 
3,034

 
2,141

Stock-based compensation - liability classified awards (SARs)
127

 
46

 
(513
)
 
46

Goodwill impairment
—

 
—

 
7,191

 
—

Intangible and other asset impairments
609

 
—

 
883

 
—

Restructuring charges
3,644

 
3,698

 
7,281

 
7,632

Merger-related transaction costs
790

 
—

 
790

 
—

Professional fees related to control remediation
356

 
550

 
620

 
916

Executive search fees
—

 
—

 
—

 
80

Sales and use tax audit
—

 
—

 
—

 
25

Other income
(221
)
 
(42
)
 
(1,117
)
 
(78
)
Adjusted EBITDA
$
6,131

 
$
12,992

 
$
19,038

 
$
20,381



 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net loss
$
(7,912
)
 
$
(508
)
 
$
(10,752
)
 
$
(2,552
)
Restructuring charges
3,644

 
3,698

 
7,281

 
7,632

Executive search fees
—

 
—

 
—

 
80

Merger-related transaction costs
790

 
—

 
790

 
—

Professional fees related to control remediation
356

 
550

 
620

 
916

Sales and use tax audit
—

 
—

 
—

 
25

Change in fair value of warrant and derivatives
36

 
—

 
(5,604
)
 
—

Goodwill impairment
—

 
—

 
7,191

 
—

Intangible and other asset impairments
609

 
—

 
883

 
—

Income tax effects of adjustments
(1,115
)
 
(961
)
 
(2,071
)
 
(1,994
)
Adjusted net (loss) income
$
(3,592
)
 
$
2,779

 
$
(1,662
)
 
$
4,107

 
 
 
 
 
 
 
 
GAAP weighted-average shares outstanding – diluted
53,662

 
51,773

 
53,568

 
51,830

Effect of dilutive securities:
 
 
 
 
 
 
 
Employee stock options and restricted common shares
—

 
156

 
—

 
104

Adjusted weighted-average shares outstanding – diluted
53,662

 
51,929

 
53,568

 
51,934

Adjusted diluted (loss) earnings per share
$
(0.07
)
 
$
0.05

 
$
(0.03
)
 
$
0.08



INNERWORKINGS INC Reports