Delaware (State or other jurisdiction of incorporation) | 000-52170 (Commission File Number) | 20-5997364 (I.R.S. Employer Identification No.) |
600 West Chicago Avenue Suite 850 Chicago, Illinois | 60654 | |
(Address of principal executive offices) | (Zip Code) |
(312) 642-3700 (Registrant’s telephone number, including area code) |
N/A | ||
(Former name or former address, if changed since last report) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Item 2.02 | Results of Operations and Financial Condition.* |
Item 9.01 | Financial Statements and Exhibits. |
(d) | Exhibits: |
Exhibit No. | Description | ||
99.1* | Press Release dated November 7, 2017. |
INNERWORKINGS, INC. | |||
Dated: November 7, 2017 | By: | /s/ Jeffrey P. Pritchett | |
Name: | Jeffrey P. Pritchett | ||
Title: | Executive Vice President & Chief Financial Officer |
Exhibit No. | Description | |
Press Release dated November 7, 2017. |
• | Record gross revenue was $288.4 million in the third quarter, an increase of 3% compared with $280.0 million in the third quarter of 2016. Year-to-date gross revenue was $835.3 million, a 2% increase compared with $820.3 million in the prior period. |
• | Record gross profit (net revenue) was $72.5 million, or 25.1% of gross revenue in the third quarter, a 7% increase compared to $67.8 million, or 24.2% of gross revenue, in the same period of last year. Year-to-date gross profit (net revenue) was $207.0 million, or 24.8% of gross revenue, an increase of 6% compared to the prior-year period. |
• | Net income was $7.5 million or $0.14 per diluted share in the third quarter, compared to net income of $4.3 million or $0.08 per share in the third quarter of 2016. Year-to-date net income was $17.5 million or $0.32 per diluted share, compared to net income (loss) of $(0.7) million or $(0.01) per diluted share in the same period of 2016. |
• | Record non-GAAP diluted earnings per share was $0.15 in the third quarter, an increase of 46% compared to $0.11 in the third quarter of 2016. Year-to-date non-GAAP diluted earnings per share was $0.35, a 34% increase compared to $0.26 in the same period of 2016. |
• | Record non-GAAP adjusted EBITDA was $18.8 million in the third quarter, reflecting 11% growth as compared to $16.9 million in the third quarter of 2016. Year-to-date non-GAAP adjusted EBITDA was $47.7 million, an increase of 10% compared to $43.4 million in the same period of 2016. |
• | Non-GAAP adjusted EBITDA as a percentage of gross profit (net revenue) was 25.9% in the third quarter and 23.0% year to date, compared to 25.0% in the third quarter of 2016 and 22.3% for the first nine months of 2016. |
• | InnerWorkings has continued to sign new enterprise contracts in recent months, bringing the year-to-date cumulative total to more than $100 million of annual gross revenue at full run-rate. |
• | The largest of the new wins during the third quarter is a partnership with a Detroit-based financial services firm to manage the company's direct marketing and creative services execution. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 288,386 | $ | 279,993 | $ | 835,306 | $ | 820,286 | |||||||
Cost of goods sold | 215,867 | 212,212 | 628,282 | 625,465 | |||||||||||
Gross profit | 72,519 | 67,781 | 207,024 | 194,821 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative expenses | 57,134 | 52,601 | 165,647 | 155,511 | |||||||||||
Depreciation and amortization | 3,317 | 5,066 | 9,403 | 14,382 | |||||||||||
Change in fair value of contingent consideration | (167 | ) | 788 | 677 | 9,975 | ||||||||||
Restructuring and other charges | — | 466 | — | 4,433 | |||||||||||
Income from operations | 12,235 | 8,860 | 31,297 | 10,520 | |||||||||||
Other income (expense): | |||||||||||||||
Interest income | 31 | 26 | 77 | 63 | |||||||||||
Interest expense | (1,198 | ) | (1,191 | ) | (3,239 | ) | (3,252 | ) | |||||||
Other, net | 427 | (114 | ) | (962 | ) | 16 | |||||||||
Total other expense | (740 | ) | (1,279 | ) | (4,123 | ) | (3,173 | ) | |||||||
Income before income taxes | 11,495 | 7,581 | 27,173 | 7,347 | |||||||||||
Income tax expense | 3,967 | 3,240 | 9,694 | 8,023 | |||||||||||
Net income (loss) | $ | 7,528 | $ | 4,341 | $ | 17,479 | $ | (676 | ) | ||||||
Basic earnings (loss) per share | $ | 0.14 | $ | 0.08 | $ | 0.32 | $ | (0.01 | ) | ||||||
Diluted earnings (loss) per share | $ | 0.14 | $ | 0.08 | $ | 0.32 | $ | (0.01 | ) | ||||||
Weighted-average shares outstanding – basic | 53,964 | 53,818 | 53,962 | 53,536 | |||||||||||
Weighted-average shares outstanding – diluted | 55,189 | 54,772 | 55,127 | 53,536 |
September 30, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 27,682 | $ | 30,924 | |||
Accounts receivable, net of allowance for doubtful accounts of $2,692 and $2,622, respectively | 203,306 | 182,874 | |||||
Unbilled revenue | 50,130 | 32,723 | |||||
Inventories | 48,744 | 31,638 | |||||
Prepaid expenses | 22,018 | 18,772 | |||||
Other current assets | 31,850 | 24,769 | |||||
Total current assets | 383,730 | 321,700 | |||||
Property and equipment, net | 37,212 | 32,656 | |||||
Intangibles and other assets: | |||||||
Goodwill | 206,704 | 202,700 | |||||
Intangible assets, net | 28,745 | 31,538 | |||||
Deferred income taxes | 1,432 | 1,031 | |||||
Other assets | 1,312 | 1,374 | |||||
Total intangibles and other assets | 238,193 | 236,642 | |||||
Total assets | $ | 659,135 | $ | 590,999 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 129,600 | $ | 121,289 | |||
Current portion of contingent consideration | — | 19,283 | |||||
Accrued expenses | 32,994 | 30,068 | |||||
Other liabilities | 43,296 | 35,049 | |||||
Total current liabilities | 205,890 | 205,688 | |||||
Revolving credit facility | 149,184 | 107,468 | |||||
Deferred income taxes | 9,834 | 11,291 | |||||
Other long-term liabilities | 1,958 | 1,926 | |||||
Total liabilities | 366,866 | 326,374 | |||||
Commitments and contingencies (See Note 10) | |||||||
Stockholders' equity: | |||||||
Common stock, par value $0.0001 per share, 200,000 and 200,000 shares authorized, 63,964 and 63,391 shares issued, and 54,037 and 54,088 shares outstanding, respectively | 6 | 6 | |||||
Additional paid-in capital | 232,979 | 224,480 | |||||
Treasury stock at cost, 9,927 and 9,303 shares, respectively | (54,938 | ) | (49,458 | ) | |||
Accumulated other comprehensive loss | (12,772 | ) | (20,799 | ) | |||
Retained earnings | 126,994 | 110,397 | |||||
Total stockholders' equity | 292,269 | 264,625 | |||||
Total liabilities and stockholders' equity | $ | 659,135 | $ | 590,999 |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 17,479 | $ | (676 | ) | ||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Depreciation and amortization | 9,403 | 14,382 | |||||
Stock-based compensation expense | 5,296 | 4,097 | |||||
Deferred income taxes | (82 | ) | 677 | ||||
Bad debt provision | 268 | 1,433 | |||||
Change in fair value of contingent consideration | 677 | 9,975 | |||||
Other operating activities | 157 | 157 | |||||
Change in assets: | |||||||
Accounts receivable and unbilled revenue | (38,108 | ) | (12,798 | ) | |||
Inventories | (17,106 | ) | (12,050 | ) | |||
Prepaid expenses and other assets | (10,401 | ) | 3,574 | ||||
Change in liabilities: | |||||||
Accounts payable | 8,312 | (40,264 | ) | ||||
Accrued expenses and other liabilities | 11,722 | 7,861 | |||||
Net cash used in operating activities | (12,383 | ) | (23,632 | ) | |||
Cash flows from investing activities | |||||||
Purchases of property and equipment | (10,274 | ) | (10,502 | ) | |||
Net cash used in investing activities | (10,274 | ) | (10,502 | ) | |||
Cash flows from financing activities | |||||||
Net borrowings from revolving credit facility | 42,258 | 34,722 | |||||
Net short-term secured borrowings | 633 | (820 | ) | ||||
Repurchases of common stock | (10,041 | ) | — | ||||
Payments of contingent consideration | (15,345 | ) | (11,008 | ) | |||
Proceeds from exercise of stock options | 1,824 | 2,002 | |||||
Other financing activities | (850 | ) | (680 | ) | |||
Net cash provided by financing activities | 18,479 | 24,216 | |||||
Effect of exchange rate changes on cash and cash equivalents | 936 | (50 | ) | ||||
(Decrease) increase in cash and cash equivalents | (3,242 | ) | (9,968 | ) | |||
Cash and cash equivalents, beginning of period | 30,924 | 30,755 | |||||
Cash and cash equivalents, end of period | $ | 27,682 | $ | 20,787 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 7,528 | $ | 4,341 | $ | 17,479 | $ | (676 | ) | ||||||
Income tax expense | 3,967 | 3,240 | 9,694 | 8,023 | |||||||||||
Interest income | (31 | ) | (26 | ) | (77 | ) | (63 | ) | |||||||
Interest expense | 1,198 | 1,191 | 3,239 | 3,252 | |||||||||||
Other, net | (427 | ) | 114 | 962 | (16 | ) | |||||||||
Depreciation and amortization | 3,317 | 5,066 | 9,403 | 14,382 | |||||||||||
Stock-based compensation expense | 2,375 | 1,740 | 5,296 | 4,097 | |||||||||||
Change in fair value of contingent consideration | (167 | ) | 788 | 677 | 9,975 | ||||||||||
Restructuring and other charges | — | 466 | — | 4,433 | |||||||||||
Business development realignment | $ | 715 | $ | — | $ | 715 | $ | — | |||||||
Professional fees related to ASC 606 implementation | $ | 300 | $ | — | $ | 300 | $ | — | |||||||
Non-GAAP Adjusted EBITDA | $ | 18,775 | $ | 16,920 | $ | 47,688 | $ | 43,407 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 7,528 | $ | 4,341 | $ | 17,479 | $ | (676 | ) | ||||||
Change in fair value of contingent consideration | (167 | ) | 788 | 677 | 9,975 | ||||||||||
Czech exit from exchange rate commitment, net of tax | — | — | 294 | — | |||||||||||
Restructuring and other charges, net of tax | — | 382 | — | 3,964 | |||||||||||
Realignment-related income tax charges | — | 263 | — | 898 | |||||||||||
Business development realignment, net of tax | $ | 875 | $ | — | $ | 875 | $ | — | |||||||
Professional fees related to ASC 606 implementation, net of tax | 204 | — | 204 | — | |||||||||||
Adjusted net income | $ | 8,440 | $ | 5,774 | $ | 19,529 | $ | 14,162 | |||||||
Weighted-average shares outstanding, diluted | $ | 55,189 | $ | 54,772 | $ | 55,127 | $ | 54,359 | |||||||
Non-GAAP Diluted Earnings Per Share | $ | 0.15 | $ | 0.11 | $ | 0.35 | $ | 0.26 |