InnerWorkings Announces Fourth Quarter and Full-Year 2018 Results

InnerWorkings, Inc. (NASDAQ: INWK), the leading global marketing execution firm, today announced financial results for the three and twelve months ended December 31, 2018. For all non-GAAP references below, please refer to the non-GAAP reconciliation tables at the end of this release for more information.

"Our solution is resonating more than ever in the marketplace and we're excited by the global brands we're onboarding or who are expanding their work with InnerWorkings already in 2019,” said Chief Executive Officer Rich Stoddart. "It has become clear that translating this growth into returns for our shareholders requires a multi-year transformation to drive sustainable operating leverage in our business. Through the progress we've made on our cost reduction plan, we've also developed a better understanding of what is required to realize the full potential of this business. We are committed to doing the hard work to significantly improve the return on every dollar spent serving our clients, while still delivering the same excellent service quality they expect.”

Financial and Business Highlights

• Gross revenue was $294.2 million in the fourth quarter of 2018, a decrease of 4% compared to $305.4 million in the fourth quarter of 2017. Excluding currency impacts, fourth quarter gross revenue decreased 2% compared to the same period of last year. Full-year gross revenue was $1,121.6 million, a decrease of 1% compared to $1,138.4 million in 2017.
• Gross profit (net revenue) was $60.1 million, or 20.4% of gross revenue in the fourth quarter of 2018, compared to $68.8 million, or 22.5% of revenue, in the same period of last year.
• Net loss for the fourth quarter of 2018 was $(29.3) million, or $(0.57) per diluted share, compared to net loss of $(0.7) million, or $(0.01) per diluted share in the fourth quarter of 2017. Fourth quarter net loss includes $20.9 million of goodwill and other asset impairment charges, $5.5 million of inventory and other operational adjustments impacting gross profit, and $2.7 million of bad debt expense. The impacts to gross profit and bad debt mainly result from unprofitable client relationships that have been terminated.
• Non-GAAP diluted loss per share for the fourth quarter of 2018 was $(0.11), compared to earnings of $0.01 in the fourth quarter of 2017.
• Adjusted EBITDA was $1.3 million in the fourth quarter of 2018, compared to $10.8 million in the fourth quarter of 2017.
• Additional work from new and existing clients awarded during 2018 amounts to $136 million of annual revenue at full run-rate and more than $40 million was awarded in year-to-date 2019. The 2019 multi-year agreements span across five clients, including an expansion with global premium spirits producer Beam Suntory and a new engagement with one of the world's top commercial and retail banks.

"At year-end 2018, we had actioned nearly $15 million of the $20 million in previously announced cost reduction measures, with another $3 million being actioned in the first quarter of 2019,” said Don Pearson, Chief Financial Officer. "But this original scope is not enough as our cost to serve our clients is still too high. With the assistance of third-party experts, we have launched a second phase of further profit enhancement opportunities, focused on driving consistency and sustainable efficiencies in our operations. We expect to realize $3 million of cost savings from this phase in the second half of 2019 and another $12 million in 2020 and beyond. These initiatives are designed to put in place a cost structure and operating platform that will deliver sustainable profitable growth. We look forward to updating you on our progress.”

Outlook

The Company expects gross revenue to be in a range of $1.15 to $1.18 billion, which represents growth of 3% to 5% compared to 2018. Adjusted EBITDA is expected to be in a range of $42 to $46 million dollars, which represents growth of 45% to 58% compared to 2018. Non-GAAP diluted earnings per share guidance for 2019 is expected to be $0.20 to $0.24.

Conference Call

Rich Stoddart, Chief Executive Officer, and Don Pearson, Chief Financial Officer, will host a conference call to discuss the results today at 4:00 p.m. Central time (5:00 p.m. Eastern time).

The phone number to access the conference call is (877) 771-7024. A live audio webcast of the call will be available through InnerWorkings' website at http://investor.inwk.com/events. A replay of the webcast will be available later today at the same location.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as "non-GAAP financial measures” by the SEC: adjusted EBITDA, non-GAAP diluted earnings per share and constant currency revenue. 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. 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 revenue is calculated by retranslating current period revenue at a consistent rate with the prior period results. This approach is based on the pricing currency for each country, which is typically the functional currency. 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, non-GAAP diluted earnings per share, and constant currency 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 1000 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 headquartered in Chicago, IL and employs 2,100 individuals to support global clients in the execution of multi-faceted brand campaigns in every major market around the world. InnerWorkings serves many industries, including: retail, financial services, hospitality, consumer packaged goods, nonprofit, healthcare, food & beverage, broadcasting & cable, automotive, and transportation. For more information visit: www.inwk.com.

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