Core Enterprise Business Remains Strong; Third Quarter Results and Full Year Guidance Impacted by Performance of the Productions Graphics Business Acquired in 2011
CHICAGO - InnerWorkings, Inc. (NASDAQ: INWK), a leading global marketing supply chain company, today reported results for the three months ended September 30, 2013.
- Revenue increased 16% to $232.6 million, compared to $199.8 million in the third quarter of 2012. New enterprise account growth was $20 million, representing 10% growth over the prior year period.
- Non-GAAP Adjusted EBITDA was $8.5 million, compared to $11.3 million in the third quarter of 2012, due primarily to lower profitability from Productions Graphics and the spending reduction by a large retail customer announced in the first quarter of 2013. Please refer to the Non-GAAP reconciliation table below for more information.
- Non-GAAP Adjusted Operating Cash Flow was $1.6 million, compared to Non-GAAP Adjusted Operating Cash Flow of $1.4 million in the third quarter of 2012. Please refer to the non-GAAP reconciliation table below for more information.
- A restructuring and write down charge of $4.3 million, or a $0.05 impact to GAAP diluted earnings per share, was incurred to transition the Inside Sales division to a new customer acquisition strategy.
- Non-GAAP diluted earnings per share were $0.05, compared to $0.10 in the third quarter of 2012. Approximately $0.05 of the Non-GAAP diluted earnings per share underperformance is attributable to the Productions Graphics business versus the same period in 2012. GAAP diluted earnings per share were $0.14 compared to $0.10 in the third quarter of 2012, due primarily to a $0.87 impact from a contingent liability release related to the performance of Productions Graphics, partially offset by a related European goodwill impairment charge of $0.73.
“While our core enterprise business continues to drive our growth globally, the performance of Productions Graphics in Europe and the restructuring of our Inside Sales division resulted in lower profitability for the quarter,” said Eric D. Belcher, Chief Executive Officer of InnerWorkings. “We have already taken action to proactively address these areas of our business. In Europe, we have installed new leadership and, with our Inside Sales division, we are pivoting towards a new customer acquisition strategy through a channel partnership.”
Additional third quarter 2013 financial and recent operational highlights include the following:
- 78% of the Company’s revenues were generated from the enterprise channel, with the remaining 22% derived from the middle market channel.
- An enterprise agreement was signed with a new global consumer package goods company to manage their permanent in-store display program, in addition to providing traditional print management services. The Company estimates this new agreement will generate approximately $15 million of annual revenue once it is fully implemented.
- New agreements have been signed with several existing clients to expand into new geographies around the world. Most recently, the Company became the global provider of print and promotional materials for Intercontinental Hotel Group by expanding its relationship into Europe and the Middle East.
- New client agreements were signed with two large charitable organizations to manage direct mail campaigns and other fundraising materials. These agreements further establish the Company’s growing presence in the non-profit sector.
“While we are disappointed by the results of Productions Graphics, we remain confident in our long-term growth in Europe,” said Joseph M. Busky, Chief Financial Officer. “Our year-over-year organic growth in the region was 10% in the third quarter and the European-based businesses we have acquired this year have exceeded our expectations.”