InnerWorkings, Inc. (INWK)
Q1 2010 Earnings Call
May 6, 2010 5:30 pm ET
Joseph Busky – Chief Financial Officer
Eric Belcher – Chief Executive Officer
George Sutton - Craig-Hallum Capital
Vance Edelson - Morgan Stanley
Kevin Steinke - Barrington Research
Jeff Blaeser - Morgan Joseph & Co. Inc.
Nathan Brochmann - William Blair & Company, L.L.C.
[Sondeep Swadia] for Youssef Squali - Jefferies & Co.
Previous Statements by INWK
» InnerWorkings, Inc. Q2 2009 Earnings Call Transcript
» InnerWorkings, Inc. Q1 2009 Earnings Call Transcript
» InnerWorkings, Inc. Q4 2008 Earnings Call Transcript
Ladies and gentlemen, welcome to your InnerWorkings, Incorporated quarterly earnings call. (Operator Instructions) And now it’s my pleasure to announce your host, Joe Busky.
Thanks John. Good afternoon everyone and thank you for joining us on our first quarter 2010 earnings call. This is Joe Busky and I am the Chief Financial Officer at InnerWorkings. As usual, joining me on the call today is our Chief Executive Officer, Eric Belcher.
Before we begin I’d 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. Listeners to the call are advised to review our SEC filings, including the risk factors contained in our most recent Form 10-K.
This call will discuss, among other financial performance measures, adjusted EBITDA which is a non-GAAP financial performance measure. Please refer to the company’s first quarter earnings release, issued earlier today, for a reconciliation of adjusted GAAP to operating income. And please note that this call is intended for investors and analysts, and may not be reproduced in the media or in part without our prior consent.
And now at this time I’ll spend a few minutes on our financial results, and then Eric will highlight some of our achievements for the quarter and finally we’ll finish with your questions.
Our revenues for the first quarter were $112.2 million. Compared to the first quarter of 2009, revenue increased 19%. This increase was attributable to a $16 million or 17% of new account growth from 2009 wins, and same customer organic growth of 2%. The 2% increase in same customer spend is spread evenly across our two sales channels of enterprise and transactional. Our same customer revenue improved significantly from the 25% decline we experienced in 2009, and we are extremely encouraged by this increase in revenue versus Q1 last year, and regard it as a positive sign that the credit industries are turning to health.
We firmly believe that this continued execution of our strategy will drive sustained improvement in our top line results in 2010 and beyond. And for the first time in the company’s history, our Q1 revenue has exceeded the previous Q4 revenue which has historically been the strongest quarter for InnerWorkings from a seasonality standpoint. This sequential revenue increase is a reflection of our new approach to landing and ramping enterprise accounts. And in addition, many of our recent enterprise wins yield greater impact in the first half of the year versus the second half. For example, Scotts Miracle-Gro has heavy spring season mailings and SKYY Spirits has summer promotional materials such as retail displays that are largely produced and shipped in the first half of the year. These and other new enterprise wins are slightly impacting the company’s historical seasonality pattern. Going forward, based on our internal projections, we expect that revenue growth will be distributed somewhat more evenly throughout this year than was the case in previous years.
In the quarter we added seven new enterprise clients and these wins bring our total number of enterprise clients to 179 versus 150 at the end of Q1, 2009. Enterprise accounts represented 70% of total revenue and transactional sales represented 30% during the quarter versus a 65/35 enterprise, transactional split in the first quarter of ’09.
Reported gross profit for the quarter was $26.9 million and reported gross margin was 24% versus $23 million and 24.4% Q1 of ’09. The 40 basis point year-over-year decline in gross margin is attributable to the heavier mix of enterprise sales in the current quarter.
Our SG&A as a percentage of revenue continues to show improvement as it declined 230 basis points versus the first quarter of ’09. Our SG&A was $22 million in the quarter, an increase of $1.4 million versus the first quarter of ’09. And of course the majority of this dollar increase from the first quarter of ’09 to the first quarter of 2010 is due to higher sales expense on the 19% increase in sales. SG&A expense and SG&A expense as a percentage of revenue did increase sequentially versus the fourth quarter of ’09 by $1.4 million and 50 basis points, with the dollar increase due to sales expense on higher sales in the quarter, the ending of temporary furlough and management compensation cuts in ’09 and the normal Q1 versus Q4 increase in the company’s FICA and Medicare expense.
Our reported diluted earnings per share for the quarter were $0.05 versus $0.01 in the first quarter of ’09. This EPS figure includes a gain of approximately $0.01 from the sale of Echo’s stock, and remember I stated previous our sales of the Echo stock will be dollar cost averaged over time.