InnerWorkings CEO Discusses Q3 2010 Results - Earnings Call Transcript
InnerWorkings Inc. (
)
Q3 2010 Earnings Call
November 4, 2010 05:30 pm ET
Executives
Joe Busky - CFO
Eric Belcher - President & CEO
Analysts
George Sutton - Craig-Hallum
Jeff Blaeser - Morgan Joseph
Yousseff Squali - Jefferies
Presentation
Operator
Good day ladies and gentlemen and welcome to the InnerWorkings, Inc quarterly earnings call. (Operator Instructions).
I would now like to introduce your host for today’s conference, Joe Busky, Chief Financial Officer.
Joe
Busky
Compare to:
Previous Statements by INWK
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InnerWorkings, Inc. Q2 2010 Earnings Call Transcript
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InnerWorkings, Inc. Q1 2010 Earnings Call Transcript
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InnerWorkings, Inc. Q2 2009 Earnings Call Transcript
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InnerWorkings, Inc. Q1 2009 Earnings Call Transcript
Thanks John. Good afternoon, everyone and thank you for joining us on our third quarter 2010 earnings call. This is Joe Busky and I am the Chief Financial Officer at InnerWorkings. Joining me on the call today, as always, is our Chief Executive Officer, Eric Belcher.
Before we begin, I would like to note that this call will include forward-looking statements related to future results that are made pursuant to the Safe Harbor provisions of the Federal Securities laws. These statements are subject to a variety of risks, uncertainties and assumptions that may cause actual results to differ materially from those stated or implied by the forward-looking statements.
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. And listeners to the call are advised to review our SEC filings, including the risk factors contained in our most recently filed Form 10-K.
This call will discuss, among other financial performance measures, adjusted EBITDA and adjusted revenue, which are non-GAAP financial performance measures. Please refer to the company’s third quarter earnings release issued earlier today for reconciliations of the adjusted GAAP and adjusted revenue to the nearest comparable GAAP measures. And also please note that this call is intended for investors and analysts, and may not be reproduced in the media in whole or in part without prior consent.
And now at this time, I’ll spend a few minutes on our financial results, and then Eric will highlight third quarter achievements and update you on the progress of the company’s growth initiatives and then we'll conclude as always with your questions.
Third quarter 2010 revenues were $119.1 million, an increase of 21% compared with the third quarter of '09, and 50% higher compared with adjusted revenue in the year earlier period. This uptick on an adjusted basis was attributable to 12 million or 11% new account organic growth, as well as same customer growth of 5%.
As Eric and I have discussed, our expectation was that 2009 new enterprise wins, these are accounts such as Unilever, Scotts, IHG, SkyPark and others would deliver new revenue in 2010 of at least $50 million.
The 12 million of new account growth in Q3 combined with the 35 million earned in first half of the year highlights the extent to which these accounts are successfully ramping as plan and generating substantial revenues.
We are encouraged by these results and expect this trend to continue in the months and years ahead. Revenues for the first nine months of 2010 was 351.8 million, an increase of 59.2 million or 20% versus the same period in '09. This increase was primarily driven by the 47 million in new account growth previously mentioned.
In the third quarter, we maintain momentum in the enterprise business as we added five new enterprise clients to our customer base. This brings our total number of enterprise clients to a 190, a gain of 24 compared with the third quarter of '09. And based on our wins this year and account pipeline we're still confident in our ability deliver 15% revenue growth in 2011 through our enterprise account wins.
In terms of our two primary sales channels, we saw a continued shift mix towards enterprise sales in the third quarter. Enterprise sales represented 72% of total revenue and transactional sales representing 28% of total revenue. This compares to a 65 to 35 split of enterprise and transaction revenues on the prior year third quarter. And although we do not target a specific mix of enterprise versus transactional revenue, we do believe this continued increase in the enterprise revenue bodes well for the company’s future, as this revenue is typically both contractual and recurring in nature.
Gross profit for the quarter was $28.5 million and gross margin was 23.9% versus adjusted gross margin of $25.8 million and 24.8% in Q3 2009. This year-over-year and 90 basis point decline in gross margin reflects the mix impact of greater enterprise sales in the third quarter of this year versus the prior year.
Moving on to expenses, our SG&A was $23.1 million or 19.4% of revenues in the third quarter. Year-over-year SG&A is up $3 million and this increase is primarily attributable to three factors; first, increased sales commission on higher revenue; second, an increase in stock-based compensation over the prior year due to an '09 benefit from a forfeiture rate adjustment; and third, the investment in our growth initiatives. And remember 100% of the investment in our growth initiatives is going towards sales and marketing.
And on sequential basis, SG&A is up primarily due to the same investments in our growth initiatives.
Our diluted earnings per share for the quarter were $0.05 versus $0.04 in the third quarter of '09. The third quarter EPS figure includes approximately $0.01 of gain from the sale of Echo Global Logistics stock that we intend to continue to sell over time. And excluding the gain on the sale of Echo stock in the current quarter, operationally EPS was $0.04 which is slack compared to the prior year quarter. However it bears noting that the current year quarter EPS includes approximately $0.01 of investment in our growth initiatives and $0.01 increased in stock-based compensation versus the prior year quarter due to the forfeiture rate adjustment in '09. These two items correlate the $0.02 versus the prior year. Another important takeaway is that year-to-date EPS excluding Echo gains in both periods is up 63% over year-to-date 2009.
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