Results Impacted by Previously Announced Spending Reduction from Large Customer; New Organic Enterprise Business Continues to Fuel Growth

CHICAGO--(BUSINESS WIRE)-- InnerWorkings, Inc. (NASDAQ: INWK), a leading global marketing supply chain company, today reported results for the three months ended March 31, 2013.

Quarterly Highlights:

• Revenue was $204.3 million, compared to $188.5 million in the first quarter of 2012.
• Non-GAAP Adjusted EBITDA was $5.8 million, compared to Non-GAAP Adjusted EBITDA of $9.6 million in the first quarter of 2012. Please refer to the non-GAAP reconciliation table below for more information.
• GAAP diluted earnings per share were $0.02, compared to GAAP diluted earnings per share of $0.07 in the first quarter of 2012.
• Non-GAAP Adjusted Operating Cash Flow was $6.4 million, compared to Non-GAAP Adjusted Operating Cash Outflow of $3.3 million in the first quarter of 2012. Please refer to the non-GAAP reconciliation table below for more information.
• New organic enterprise account growth was $18.1 million in the first quarter.

"Our team is excited about our global enterprise opportunity," said Eric D. Belcher, Chief Executive Officer of InnerWorkings. "Our pipeline is strong and we expect to achieve our new organic enterprise revenue goals again this year."

Additional first quarter 2013 financial and operational highlights include the following:

• The enterprise channel accounted for 79% of revenue and middle market accounted for 21%, consistent with the revenue mix in the first quarter of 2012.
• Gross profit margin was 22.5%, compared to 22.0% in the prior year period.
• DB Studios, a California-based distributor of permanent point-of-purchase displays was acquired in March 2013. DB Studios is expected to generate revenues of approximately $20 million during the period from acquisition date to the end of the year.

"While we continue to realize solid new enterprise growth, we are disappointed by our modest growth in the first quarter due to a decrease in a large customer's spending," said Joseph M. Busky, Chief Financial Officer of InnerWorkings. "Given the new enterprise activity happening across our global footprint, we anticipate stronger results for the balance of the year."

Revenue Growth - Comparing 2013 to 2012
				Q1 $(MM) Change				Q1 % Change
New Enterprise Account Growth				$18				10%
New Middle Market Growth				$2				1%
Same Customer Spend				($6)				-3%
Acquisitive Growth				$3				1%
Total Revenue Growth				$16				8%
Total Organic Revenue Growth				$13				7%

Outlook

The Company reaffirms its recently revised 2013 revenue and EPS guidance. 2013 revenue guidance of $900 million to $930 million represents 13-17% growth over 2012, and 2013 EPS guidance of $0.45 to $0.50 represents 10-22% growth over 2012 adjusted diluted earnings per share.

Conference Call

A conference call to discuss the Company's first quarter 2013 results will be broadcast live on Friday, May 10, 2013, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). The live webcast discussion, which will include a Q&A session, will be hosted by Eric D. Belcher, Chief Executive Officer, and Joseph M. Busky, Chief Financial Officer.

To access the conference call by telephone, interested parties may dial (877) 771-7024. Interested parties are also invited to listen to the live webcast by visiting the Investor "Events & Presentations" section of InnerWorkings' website at investor.inwk.com/events.cfm. A replay of the webcast will be available later that day in the same section of the website.

About InnerWorkings

InnerWorkings, Inc. (NASDAQ: INWK) is a leading global marketing supply chain company servicing corporate clients across a wide range of industries. With proprietary technology, an extensive supplier network and deep domain expertise, the Company procures, manages and delivers printed materials and promotional products as part of a comprehensive outsourced enterprise solution. InnerWorkings is based in Chicago, IL, employs approximately 1,400 individuals, and maintains 49 global offices. Among the many industries InnerWorkings services are: retail, financial services, hospitality, non-profits, healthcare, food & beverage, broadcasting & cable, education, transportation and utilities.

For more information visit: www.inwk.com.

Non-GAAP Financial Measures

This press release includes the following financial measures defined as a "non-GAAP financial measures" by the Securities and Exchange Commission: Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Operating Cash Flow. We believe that Non-GAAP Adjusted EBITDA and Non GAAP Adjusted Operating Cash Flow provide useful information to investors because they provide information about the estimated financial performance of the Company's ongoing business. Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Operating Cash Flow are used by management in its financial and operational decision-making and evaluation of overall operating performance. Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Operating Cash Flow may be different from similar measures used by other companies. 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, see "Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Operating Cash Flow" 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.

Consolidated Statements of Income
			Three Months Ended March 31,
			2012				2013
Revenue			$	188,546,402			$	204,316,125
Cost of goods sold				147,153,019				158,323,630
Gross profit				41,393,383				45,992,495
Operating expenses:
	Selling, general and administrative expenses			33,083,264				41,735,789
	Depreciation and amortization			2,444,096				2,465,667
Income from operations				5,866,023				1,791,039
Total other expense				(260,388	)			(923,936	)
Income before income taxes				5,605,635				867,103
Income tax expense				1,917,947				(28,027	)
Net income			$	3,687,688			$	895,130
Basic earnings per share			$	0.08			$	0.02
Diluted earnings per share			$	0.07			$	0.02
Weighted average shares outstanding, basic				47,193,327				50,338,994
Weighted average shares outstanding, diluted				50,013,569				52,006,801

Consolidated Balance Sheets
		December 31,			March 31,
		2012			2013
Cash and cash equivalents		$	17,218,899		$	10,609,171
Accounts receivable, net of allowance for doubtful accounts			149,246,568			150,492,103
Unbilled revenue			30,798,230			30,191,086
Inventories			17,406,863			15,310,762
Prepaid expenses			16,210,053			19,880,172
Other current assets			22,565,321			22,456,346
Total long-term assets			268,797,648			309,247,680
Total assets		$	522,243,582		$	558,187,320
Accounts payable-trade		$	121,132,051		$	126,701,960
Other current liabilities			44,262,065			49,223,149
Revolving credit facility			65,000,000			70,500,000
Other long-term liabilities			68,870,021			84,196,997
Total stockholders' equity			222,979,445			227,565,214
Total liabilities and stockholders' equity		$	522,243,582		$	558,187,320

Cash Flow Data
		Three Months Ended March 31,
		2012				2013
Net cash provided by (used in) operating activities		$	(7,472,638	)		$	4,552,380
Net cash used in investing activities			(3,189,117	)			(9,148,187	)
Net cash provided by (used in) financing activities			12,886,424				(1,854,875	)
Effect of exchange rate changes on cash and cash equivalents			221,918				(159,046	)
Increase (decrease) in cash and cash equivalents			2,446,587				(6,609,728	)
Cash and cash equivalents, beginning of period			13,219,385				17,218,899
Cash and cash equivalents, end of period		$	15,665,972			$	10,609,171

Reconciliation of Adjusted EBITDA and Adjusted Operating Cash Flows
		Three Months Ended March 31,
		2012				2013
Operating income		$	5,866,023			$	1,791,039
Depreciation and amortization			2,444,096				2,465,667
Stock-based compensation expense			1,047,645				973,193
Change in fair value of contingent consideration			200,141				608,832
Adjusted EBITDA		$	9,557,905			$	5,838,731
		Three Months Ended March 31,
		2012				2013
Net cash provided by (used in) operating activities		$	(7,472,638	)		$	4,552,380
Excess tax benefit from exercise of stock awards *			4,163,793				951,066
Cash paid for settlement of preference claim			-				900,000
Adjusted net cash provided by (used in) operating activities		$	(3,308,845	)		$	6,403,446

* Represents a U.S. tax deduction in an amount equal to the excess of the market price of the stock on the date of exercise over exercise price.

InnerWorkings, Inc.
Brad Moore, (312) 277-1510
bmoore@inwk.com

Source: InnerWorkings, Inc.

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