ý
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended June 30, 2018
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¨
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from to
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Delaware
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20-5997364
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification No.)
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Large accelerated filer:
¨
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Accelerated filer:
x
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Non-accelerated filer:
¨
(Do not check if a smaller reporting company)
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Smaller reporting company:
¨
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Emerging growth company:
¨
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Page
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PART I. FINANCIAL INFORMATION
|
|
|
|
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Item 1.
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Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
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Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2018 and 2017 (Unaudited)
|
|
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Condensed Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017
|
|
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Condensed Consolidated Statement of Stockholders' Equity as of June 30, 2018 (Unaudited)
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (Unaudited)
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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|
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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|
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Item 4.
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Controls and Procedures
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PART II. OTHER INFORMATION
|
|
|
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Item 1.
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Legal Proceedings
|
|
|
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Item 1A.
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Risk Factors
|
|
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|
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
|
|
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Item 5.
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Other Information
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Item 6.
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Exhibits
|
|
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SIGNATURES
|
|
|
|
|
|
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Three Months Ended June 30,
|
|
Six Months Ended June 30,
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||||||||||||
|
2018
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|
2017
|
|
2018
|
|
2017
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||||||||
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(as restated)
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|
|
|
(as restated)
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||||||||
Revenue
|
$
|
281,967
|
|
|
$
|
280,066
|
|
|
$
|
556,506
|
|
|
$
|
544,471
|
|
Cost of goods sold
|
217,096
|
|
|
210,020
|
|
|
425,568
|
|
|
409,721
|
|
||||
Gross profit
|
64,871
|
|
|
70,046
|
|
|
130,938
|
|
|
134,750
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative expenses
|
59,002
|
|
|
55,054
|
|
|
120,169
|
|
|
108,669
|
|
||||
Depreciation and amortization
|
3,514
|
|
|
3,182
|
|
|
7,173
|
|
|
6,086
|
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
1,884
|
|
|
—
|
|
|
844
|
|
||||
Income from operations
|
2,355
|
|
|
9,926
|
|
|
3,596
|
|
|
19,151
|
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
54
|
|
|
12
|
|
|
115
|
|
|
46
|
|
||||
Interest expense
|
(1,517
|
)
|
|
(1,038
|
)
|
|
(3,085
|
)
|
|
(2,041
|
)
|
||||
Other, net
|
(588
|
)
|
|
(1,164
|
)
|
|
(1,433
|
)
|
|
(1,388
|
)
|
||||
Total other expense
|
(2,051
|
)
|
|
(2,190
|
)
|
|
(4,403
|
)
|
|
(3,383
|
)
|
||||
Income (loss) before income taxes
|
304
|
|
|
7,736
|
|
|
(807
|
)
|
|
15,768
|
|
||||
Income tax expense
|
603
|
|
|
3,362
|
|
|
1,176
|
|
|
5,716
|
|
||||
Net (loss) income
|
$
|
(299
|
)
|
|
$
|
4,374
|
|
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
|
|
|
|
|
|
|
|
||||||||
Basic (loss) earnings per share
|
$
|
(0.01
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.19
|
|
Diluted (loss) earnings per share
|
$
|
(0.01
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive (loss) income
|
$
|
(5,905
|
)
|
|
$
|
8,253
|
|
|
$
|
(4,226
|
)
|
|
$
|
15,911
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Assets
|
(unaudited)
|
|
(as restated)
|
||||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
28,266
|
|
|
$
|
30,562
|
|
Accounts receivable, net of allowance for doubtful accounts of $3,174 and $3,534, respectively
|
185,222
|
|
|
205,386
|
|
||
Unbilled revenue
|
47,906
|
|
|
50,016
|
|
||
Inventories
|
40,781
|
|
|
40,694
|
|
||
Prepaid expenses
|
20,584
|
|
|
18,565
|
|
||
Other current assets
|
26,296
|
|
|
37,865
|
|
||
Total current assets
|
349,055
|
|
|
383,088
|
|
||
Property and equipment, net
|
68,028
|
|
|
36,714
|
|
||
Intangibles and other assets:
|
|
|
|
|
|
||
Goodwill
|
199,135
|
|
|
199,946
|
|
||
Intangible assets, net
|
25,068
|
|
|
27,563
|
|
||
Deferred income taxes
|
1,084
|
|
|
691
|
|
||
Other non-current assets
|
2,047
|
|
|
1,636
|
|
||
Total intangibles and other assets
|
227,334
|
|
|
229,836
|
|
||
Total assets
|
$
|
644,417
|
|
|
$
|
649,638
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
122,452
|
|
|
$
|
141,164
|
|
Accrued expenses
|
34,386
|
|
|
34,391
|
|
||
Deferred revenue
|
20,022
|
|
|
17,620
|
|
||
Revolving credit facility - current (See Note 13)
|
136,538
|
|
|
—
|
|
||
Other current liabilities
|
22,770
|
|
|
24,078
|
|
||
Total current liabilities
|
336,168
|
|
|
217,253
|
|
||
Revolving credit facility - non-current
|
—
|
|
|
128,398
|
|
||
Financing obligation - build-to-suit leases (See Note 12)
|
31,147
|
|
|
—
|
|
||
Deferred income taxes
|
12,236
|
|
|
12,043
|
|
||
Other non-current liabilities
|
7,075
|
|
|
7,399
|
|
||
Total liabilities
|
386,626
|
|
|
365,093
|
|
||
Commitments and contingencies (See Note 12)
|
|
|
|
|
|
||
Stockholders' equity:
|
|
|
|
|
|
||
Common stock, par value $0.0001 per share, 200,000 and 200,000 shares authorized, 64,372 and 64,075 shares issued, and 51,684 and 54,055 shares outstanding, respectively
|
6
|
|
|
6
|
|
||
Additional paid-in capital
|
237,634
|
|
|
235,199
|
|
||
Treasury stock at cost, 12,688 and 10,020 shares, respectively
|
(81,471
|
)
|
|
(55,873
|
)
|
||
Accumulated other comprehensive loss
|
(21,472
|
)
|
|
(19,229
|
)
|
||
Retained earnings
|
123,094
|
|
|
124,442
|
|
||
Total stockholders' equity
|
257,791
|
|
|
284,545
|
|
||
Total liabilities and stockholders' equity
|
$
|
644,417
|
|
|
$
|
649,638
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional Paid-in-Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Earnings
|
|
Total
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2017 (as restated)
|
64,075
|
|
|
$
|
6
|
|
|
10,020
|
|
|
$
|
(55,873
|
)
|
|
$
|
235,199
|
|
|
$
|
(19,229
|
)
|
|
$
|
124,442
|
|
|
$
|
284,545
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,983
|
)
|
|
(1,983
|
)
|
||||||||||||
Total other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
(2,243
|
)
|
|
|
|
(2,243
|
)
|
||||||||||||
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,226
|
)
|
|||||||||||||
Issuance of common stock upon exercise of stock awards
|
297
|
|
|
—
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
|
(388
|
)
|
||||||||||
Acquisition of treasury shares
|
|
|
|
|
2,668
|
|
|
(25,598
|
)
|
|
|
|
|
|
|
|
(25,598
|
)
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
2,823
|
|
|
|
|
|
|
2,823
|
|
||||||||||||
Cumulative effect of change related to adoption of ASC 606
|
|
|
|
|
|
|
|
|
|
|
|
|
482
|
|
|
482
|
|
||||||||||||
Cumulative effect of change related to adoption of ASU 2016-16
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
153
|
|
||||||||||||
Balance at June 30, 2018
|
64,372
|
|
|
$
|
6
|
|
|
12,688
|
|
|
$
|
(81,471
|
)
|
|
$
|
237,634
|
|
|
$
|
(21,472
|
)
|
|
$
|
123,094
|
|
|
$
|
257,791
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
|
|
(as restated)
|
||||
Cash flows from operating activities
|
|
|
|
|
|
||
Net (loss) income
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
Adjustments to reconcile net (loss) income to net cash from operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
7,173
|
|
|
6,086
|
|
||
Stock-based compensation expense
|
2,823
|
|
|
2,921
|
|
||
Deferred income taxes
|
—
|
|
|
624
|
|
||
Bad debt provision
|
630
|
|
|
82
|
|
||
Implementation cost amortization
|
263
|
|
|
—
|
|
||
Change in fair value of contingent consideration
|
—
|
|
|
844
|
|
||
Payments of contingent consideration (See Note 3)
|
—
|
|
|
(662
|
)
|
||
Other operating activities
|
(154
|
)
|
|
104
|
|
||
Change in assets:
|
|
|
|
|
|
||
Accounts receivable and unbilled revenue
|
21,643
|
|
|
(26,620
|
)
|
||
Inventories
|
(87
|
)
|
|
1,890
|
|
||
Prepaid expenses and other assets
|
9,424
|
|
|
(971
|
)
|
||
Change in liabilities:
|
|
|
|
|
|
||
Accounts payable
|
(18,735
|
)
|
|
3,370
|
|
||
Accrued expenses and other liabilities
|
1,643
|
|
|
(69
|
)
|
||
Net cash provided by (used in) operating activities
|
22,640
|
|
|
(2,349
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
||
Purchases of property and equipment
|
(5,490
|
)
|
|
(7,024
|
)
|
||
Net cash used in investing activities
|
(5,490
|
)
|
|
(7,024
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
|
||
Net borrowings from revolving credit facility
|
8,629
|
|
|
11,491
|
|
||
Net short-term secured (repayments) borrowings
|
(578
|
)
|
|
37
|
|
||
Repurchases of common stock
|
(25,689
|
)
|
|
(10,041
|
)
|
||
Payments of contingent consideration
|
—
|
|
|
(1,427
|
)
|
||
Proceeds from exercise of stock options
|
284
|
|
|
1,319
|
|
||
Other financing activities
|
(695
|
)
|
|
(119
|
)
|
||
Net cash (used in) provided by financing activities
|
(18,049
|
)
|
|
1,260
|
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(1,397
|
)
|
|
726
|
|
||
Decrease in cash and cash equivalents
|
(2,296
|
)
|
|
(7,387
|
)
|
||
Cash and cash equivalents, beginning of period
|
30,562
|
|
|
30,924
|
|
||
Cash and cash equivalents, end of period
|
$
|
28,266
|
|
|
$
|
23,537
|
|
•
|
We recorded a net increase to opening retained earnings of
$0.5 million
as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to our capitalization of certain setup costs, inclusive of income tax effects. The details of the significant changes and quantitative impact of the changes for the three and six months ended
June 30, 2018
are disclosed below.
|
•
|
The Company previously recognized setup costs related to new customers as selling, general and administrative expense when they were incurred. Under ASC 606, the Company capitalizes certain setup costs as costs to fulfill a contract and amortizes them consistently with the pattern of transfer of the good or service to which the asset relates.
|
•
|
The following tables summarize the impacts of ASC 606 adoption on the Company’s consolidated financial statements for the periods ended
June 30, 2018
(in thousands, except per share data).
|
|
As Reported June 30, 2018
|
|
Adjustments
|
|
As Adjusted Without Adoption of ASC 606
|
||||||
Condensed consolidated balance sheet
|
|
|
|
|
|
||||||
Assets:
|
|
|
|
|
|
||||||
Other non-current assets
|
$
|
2,047
|
|
|
$
|
(628
|
)
|
|
$
|
1,419
|
|
Liabilities:
|
|
|
|
|
|
||||||
Deferred income taxes
|
12,236
|
|
|
(167
|
)
|
|
12,069
|
|
|||
Stockholders' equity:
|
|
|
|
|
|
||||||
Retained earnings
|
123,094
|
|
|
(461
|
)
|
|
122,633
|
|
|
As Reported Three Months Ended June 30, 2018
|
|
Adjustments
|
|
As Adjusted Without Adoption of ASC 606
|
||||||
Condensed consolidated statement of operations
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative expenses
|
$
|
59,002
|
|
|
$
|
5
|
|
|
$
|
59,007
|
|
Income from operations
|
2,355
|
|
|
(5
|
)
|
|
2,350
|
|
|||
Income before income taxes
|
304
|
|
|
(5
|
)
|
|
299
|
|
|||
Income tax expense
|
603
|
|
|
(1
|
)
|
|
602
|
|
|||
Net loss
|
(299
|
)
|
|
(4
|
)
|
|
(303
|
)
|
|||
Basic loss per share
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
Diluted loss per share
|
$
|
(0.01
|
)
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
As Reported Six Months Ended June 30, 2018
|
|
Adjustments
|
|
As Adjusted Without ASU Adoption of ASC 606
|
||||||
Condensed consolidated statement of operations
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative expenses
|
$
|
120,169
|
|
|
$
|
(21
|
)
|
|
$
|
120,148
|
|
Income from operations
|
3,596
|
|
|
21
|
|
|
3,617
|
|
|||
Loss before income taxes
|
(807
|
)
|
|
21
|
|
|
(786
|
)
|
|||
Income tax expense
|
1,176
|
|
|
5
|
|
|
1,181
|
|
|||
Net loss
|
(1,983
|
)
|
|
16
|
|
|
(1,967
|
)
|
|||
Basic loss per share
|
$
|
(0.04
|
)
|
|
$
|
—
|
|
|
$
|
(0.04
|
)
|
Diluted loss per share
|
$
|
(0.04
|
)
|
|
$
|
—
|
|
|
$
|
(0.04
|
)
|
Three months ended June 30, 2018
|
|
Reportable Segments
|
||||||||||
Geographical Market
|
|
North America
|
|
International
|
|
Total
|
||||||
United States and Canada
|
|
$
|
194,735
|
|
|
$
|
—
|
|
|
$
|
194,735
|
|
Europe and Asia
|
|
—
|
|
|
65,854
|
|
|
65,854
|
|
|||
Latin America
|
|
—
|
|
|
21,378
|
|
|
21,378
|
|
|||
Total
|
|
$
|
194,735
|
|
|
$
|
87,232
|
|
|
$
|
281,967
|
|
Six months ended June 30, 2018
|
|
Reportable Segments
|
||||||||||
Geographical Market
|
|
North America
|
|
International
|
|
Total
|
||||||
United States and Canada
|
|
$
|
384,012
|
|
|
$
|
—
|
|
|
$
|
384,012
|
|
Europe and Asia
|
|
—
|
|
|
130,768
|
|
|
130,768
|
|
|||
Latin America
|
|
—
|
|
|
41,726
|
|
|
41,726
|
|
|||
Total
|
|
$
|
384,012
|
|
|
$
|
172,494
|
|
|
$
|
556,506
|
|
|
North America
|
|
International
|
|
Total
|
||||||
Net goodwill as of December 31, 2017
|
$
|
170,685
|
|
|
$
|
29,262
|
|
|
$
|
199,946
|
|
Foreign exchange impact
|
(53
|
)
|
|
(758
|
)
|
|
(811
|
)
|
|||
Net goodwill as of June 30, 2018
|
$
|
170,632
|
|
|
$
|
28,504
|
|
|
$
|
199,135
|
|
|
June 30,
2018 |
|
December 31, 2017
|
|
Weighted
Average Life
|
||||
Customer lists
|
$
|
74,186
|
|
|
$
|
74,615
|
|
|
14.4
|
Non-compete agreements
|
959
|
|
|
964
|
|
|
4.1
|
||
Trade names
|
2,510
|
|
|
2,510
|
|
|
13.3
|
||
Patents
|
57
|
|
|
57
|
|
|
9.0
|
||
|
77,712
|
|
|
78,146
|
|
|
|
||
Less accumulated amortization
|
(52,644
|
)
|
|
(50,583
|
)
|
|
|
||
Intangible assets, net
|
$
|
25,068
|
|
|
$
|
27,563
|
|
|
|
|
|
Employee Severance and Related Benefits
|
|
Lease and Contract Termination Costs
|
|
Other
|
|
Total
|
||||||||
Balance at December 31, 2017
|
|
$
|
484
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
484
|
|
Cash payments
|
|
(47
|
)
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
||||
Balance at June 30, 2018
|
|
$
|
437
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
437
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
(as restated)
|
|
|
|
(as restated)
|
|
|||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income
|
$
|
(299
|
)
|
|
$
|
4,374
|
|
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding
–
basic
|
51,770
|
|
|
53,278
|
|
|
52,738
|
|
|
53,665
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Employee and director stock options and restricted common shares
|
—
|
|
|
1,150
|
|
|
—
|
|
|
1,025
|
|
||||
Contingently issuable shares
|
—
|
|
|
761
|
|
|
—
|
|
|
380
|
|
||||
Weighted-average shares outstanding
–
diluted
|
51,770
|
|
|
55,189
|
|
|
52,738
|
|
|
55,070
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic (loss) earnings per share
|
$
|
(0.01
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.19
|
|
Diluted (loss) earnings per share
|
$
|
(0.01
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.18
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
Foreign currency translation adjustments
|
|
Foreign currency translation adjustments
|
||||
Balance, beginning of period
|
$
|
(15,865
|
)
|
|
$
|
(18,820
|
)
|
Other comprehensive (loss) income before reclassifications
|
(5,607
|
)
|
|
3,880
|
|
||
Net current-period other comprehensive (loss) income
|
(5,607
|
)
|
|
3,880
|
|
||
Balance, end of period
|
$
|
(21,472
|
)
|
|
$
|
(14,940
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
Foreign currency translation adjustments
|
|
Foreign currency translation adjustments
|
||||
Balance, beginning of period
|
$
|
(19,229
|
)
|
|
$
|
(20,799
|
)
|
Other comprehensive (loss) income before reclassifications
|
(2,243
|
)
|
|
5,859
|
|
||
Net current-period other comprehensive (loss) income
|
(2,243
|
)
|
|
5,859
|
|
||
|
$
|
(21,472
|
)
|
|
$
|
(14,940
|
)
|
•
|
Level 1:
Inputs are quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2:
Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.
|
•
|
Level 3:
Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
|
|
North America
|
|
International
|
|
Other
|
|
Total
|
||||||||
Three Months Ended June 30, 2018:
|
|
|
|
|
|
|
|
||||||||
Revenue from third parties
|
$
|
194,735
|
|
|
$
|
87,232
|
|
|
$
|
—
|
|
|
$
|
281,967
|
|
Revenue from other segments
|
951
|
|
|
2,648
|
|
|
(3,599
|
)
|
|
—
|
|
||||
Total revenue
|
195,686
|
|
|
89,880
|
|
|
(3,599
|
)
|
|
281,967
|
|
||||
Adjusted EBITDA
(1)
|
18,372
|
|
|
2,049
|
|
|
(12,235
|
)
|
|
8,186
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Three Months Ended June 30, 2017 (as restated):
|
|
|
|
|
|
|
|
||||||||
Revenue from third parties
|
$
|
187,507
|
|
|
$
|
92,559
|
|
|
$
|
—
|
|
|
$
|
280,066
|
|
Revenue from other segments
|
1,087
|
|
|
2,987
|
|
|
(4,074
|
)
|
|
—
|
|
||||
Total revenue
|
188,594
|
|
|
95,546
|
|
|
(4,074
|
)
|
|
280,066
|
|
||||
Adjusted EBITDA
(1)
|
18,305
|
|
|
6,681
|
|
|
(8,493
|
)
|
|
16,493
|
|
|
North America
|
|
International
|
|
Other
|
|
Total
|
||||||||
Six Months Ended June 30, 2018:
|
|
|
|
|
|
|
|
||||||||
Revenue from third parties
|
$
|
384,012
|
|
|
$
|
172,494
|
|
|
$
|
—
|
|
|
$
|
556,506
|
|
Revenue from other segments
|
2,371
|
|
|
5,424
|
|
|
(7,795
|
)
|
|
—
|
|
||||
Total revenue
|
386,383
|
|
|
177,918
|
|
|
(7,795
|
)
|
|
556,506
|
|
||||
Adjusted EBITDA
(1)
|
35,588
|
|
|
4,140
|
|
|
(24,193
|
)
|
|
15,535
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 30, 2017 (as restated):
|
|
|
|
|
|
|
|
||||||||
Revenue from third parties
|
$
|
370,005
|
|
|
$
|
174,466
|
|
|
$
|
—
|
|
|
$
|
544,471
|
|
Revenue from other segments
|
2,842
|
|
|
6,347
|
|
|
(9,189
|
)
|
|
—
|
|
||||
Total revenue
|
372,847
|
|
|
180,813
|
|
|
(9,189
|
)
|
|
544,471
|
|
||||
Adjusted EBITDA
(1)
|
36,987
|
|
|
9,552
|
|
|
(17,537
|
)
|
|
29,002
|
|
(1)
|
Adjusted EBITDA, which represents income from operations with the addition of depreciation and amortization, stock-based compensation expense, change in fair value of contingent consideration liabilities, professional fees related to ASC 606 implementation and restatement of prior period financial statements, executive search expenses, and other expenses related to investment in operational and financial process improvements is considered a non-GAAP financial measure under SEC regulations. Income from operations is the most directly comparable financial measure calculated in accordance with GAAP. The Company presents this measure as supplemental information to help investors better understand trends in its business results over time. The Company’s management team uses Adjusted EBITDA to evaluate the performance of the business. Adjusted EBITDA is not equivalent to any measure of performance required to be reported under GAAP, nor should this data be considered an indicator of the Company’s overall financial performance and liquidity. Moreover, the Adjusted EBITDA definition the Company uses may not be comparable to similarly titled measures reported by other companies.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
(as restated)
|
|
|
|
(as restated)
|
|
|||||||
Adjusted EBITDA
|
8,186
|
|
|
16,493
|
|
|
15,535
|
|
|
29,002
|
|
||||
Depreciation and amortization
|
(3,514
|
)
|
|
(3,182
|
)
|
|
(7,173
|
)
|
|
(6,086
|
)
|
||||
Stock-based compensation expense
|
(1,406
|
)
|
|
(1,503
|
)
|
|
(2,823
|
)
|
|
(2,921
|
)
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
(1,884
|
)
|
|
—
|
|
|
(844
|
)
|
||||
Professional fees related to ASC 606 implementation
|
(60
|
)
|
|
—
|
|
|
(1,092
|
)
|
|
—
|
|
||||
Executive search fees
|
(234
|
)
|
|
—
|
|
|
(234
|
)
|
|
—
|
|
||||
Restatement-related professional fees
|
(537
|
)
|
|
—
|
|
|
(537
|
)
|
|
—
|
|
||||
Other professional fees
|
(80
|
)
|
|
—
|
|
|
(80
|
)
|
|
—
|
|
||||
Income from operations
|
2,355
|
|
|
9,926
|
|
|
3,596
|
|
|
19,151
|
|
||||
Interest income
|
54
|
|
|
12
|
|
|
115
|
|
|
46
|
|
||||
Interest expense
|
(1,517
|
)
|
|
(1,038
|
)
|
|
(3,085
|
)
|
|
(2,041
|
)
|
||||
Other, net
|
(588
|
)
|
|
(1,164
|
)
|
|
(1,433
|
)
|
|
(1,388
|
)
|
||||
Income (loss) before income taxes
|
$
|
304
|
|
|
$
|
7,736
|
|
|
$
|
(807
|
)
|
|
$
|
15,768
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
2018
|
|
% of Total
|
|
2017
|
|
% of Total
|
||||||
(dollars in thousands)
|
|
|
|
|
(as restated)
|
|
(as restated)
|
||||||
North America
|
$
|
194,735
|
|
|
69.1
|
%
|
|
$
|
187,507
|
|
|
67.0
|
%
|
International
|
87,232
|
|
|
30.9
|
%
|
|
92,559
|
|
|
33.0
|
%
|
||
Revenue from third parties
|
$
|
281,967
|
|
|
100.0
|
%
|
|
$
|
280,066
|
|
|
100.0
|
%
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
(in thousands, except per share data)
|
|
|
(as restated)
|
||||
Net (loss) income
|
$
|
(299
|
)
|
|
$
|
4,374
|
|
Denominator for dilutive earnings per share
|
51,770
|
|
|
55,189
|
|
||
Diluted (loss) earnings per share
|
$
|
(0.01
|
)
|
|
$
|
0.08
|
|
|
Six Months Ended June 30,
|
|||||||||||
|
2018
|
|
% of Total
|
|
2017
|
|
% of Total
|
|||||
(dollars in thousands)
|
|
|
|
|
(as restated)
|
|
(as restated)
|
|||||
North America
|
$
|
384,012
|
|
|
69.0
|
%
|
|
370,005
|
|
|
68.0
|
%
|
International
|
172,494
|
|
|
31.0
|
%
|
|
174,466
|
|
|
32.0
|
%
|
|
Revenue from third parties
|
$
|
556,506
|
|
|
100.0
|
%
|
|
544,471
|
|
|
100.0
|
%
|
|
Six Months Ended June 30,
|
|
||||||
|
2018
|
|
2017
|
|
||||
(in thousands, except per share data)
|
|
|
(as restated)
|
|
||||
Net (loss) income
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
|
Denominator for dilutive earnings per share
|
52,738
|
|
|
55,070
|
|
|
||
Diluted (loss) earnings per share
|
$
|
(0.04
|
)
|
|
$
|
0.18
|
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
2018
|
|
% of Total
|
|
2017
|
|
% of Total
|
||||||
(dollars in thousands)
|
|
|
|
|
(as restated)
|
|
(as restated)
|
||||||
North America
|
$
|
18,372
|
|
|
224.4
|
%
|
|
$
|
18,305
|
|
|
111.0
|
%
|
International
|
2,049
|
|
|
25.0
|
|
|
6,681
|
|
|
40.5
|
|
||
Other
(1)
|
(12,235
|
)
|
|
(149.5
|
)
|
|
(8,493
|
)
|
|
(51.5
|
)
|
||
Adjusted EBITDA
|
$
|
8,186
|
|
|
100.0
|
%
|
|
$
|
16,493
|
|
|
100.0
|
%
|
|
Six Months Ended June 30,
|
|||||||||||
|
2018
|
|
% of Total
|
|
2017
|
|
% of Total
|
|||||
(dollars in thousands)
|
|
|
|
|
(as restated)
|
|
(as restated)
|
|||||
North America
|
$
|
35,588
|
|
|
229.1
|
%
|
|
36,987
|
|
|
127.5
|
%
|
International
|
4,140
|
|
|
26.6
|
|
|
9,552
|
|
|
32.9
|
|
|
Other
(1)
|
(24,193
|
)
|
|
(155.7
|
)
|
|
(17,537
|
)
|
|
(60.5
|
)
|
|
Adjusted EBITDA
|
$
|
15,535
|
|
|
100.0
|
%
|
|
29,002
|
|
|
100.0
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||||||
|
|
|
(as restated)
|
|
|
|
(as restated)
|
|
||||||||
Net (loss) income
|
$
|
(299
|
)
|
|
$
|
4,374
|
|
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
|
Income tax expense
|
603
|
|
|
3,362
|
|
|
1,176
|
|
|
5,716
|
|
|
||||
Interest income
|
(54
|
)
|
|
(12
|
)
|
|
(115
|
)
|
|
(46
|
)
|
|
||||
Interest expense
|
1,517
|
|
|
1,038
|
|
|
3,085
|
|
|
2,041
|
|
|
||||
Other, net
|
588
|
|
|
1,164
|
|
|
1,433
|
|
|
1,388
|
|
|
||||
Depreciation and amortization
|
3,514
|
|
|
3,182
|
|
|
7,173
|
|
|
6,086
|
|
|
||||
Stock-based compensation expense
|
1,406
|
|
|
1,503
|
|
|
2,823
|
|
|
2,921
|
|
|
||||
Change in fair value of contingent consideration
|
—
|
|
|
1,884
|
|
|
—
|
|
|
844
|
|
|
||||
Professional fees related to ASC 606 implementation
|
60
|
|
|
—
|
|
|
1,092
|
|
|
—
|
|
|
||||
Executive search fees
|
$
|
234
|
|
|
$
|
—
|
|
|
$
|
234
|
|
|
$
|
—
|
|
|
Restatement-related professional fees
|
$
|
537
|
|
|
$
|
—
|
|
|
$
|
537
|
|
|
$
|
—
|
|
|
Other professional fees
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
Non-GAAP Adjusted EBITDA
|
$
|
8,186
|
|
|
$
|
16,493
|
|
|
$
|
15,535
|
|
|
$
|
29,002
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
||||||||
|
|
|
(as restated)
|
|
|
|
(as restated)
|
|
||||||||
Net (loss) income
|
$
|
(299
|
)
|
|
$
|
4,374
|
|
|
$
|
(1,983
|
)
|
|
$
|
10,052
|
|
|
Change in fair value of contingent consideration
|
—
|
|
|
1,884
|
|
|
—
|
|
|
844
|
|
|
||||
Czech exit from exchange rate commitment, net of tax
|
—
|
|
|
294
|
|
|
—
|
|
|
294
|
|
|
||||
Professional fees related to ASC 606 implementation, net of tax
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
819
|
|
|
$
|
—
|
|
|
Executive search fees, net of tax
|
$
|
176
|
|
|
$
|
—
|
|
|
$
|
176
|
|
|
$
|
—
|
|
|
Restatement-related professional fees, net of tax
|
$
|
403
|
|
|
$
|
—
|
|
|
$
|
403
|
|
|
$
|
—
|
|
|
Other professional fees, net of tax
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
Adjusted net income (loss)
|
$
|
385
|
|
|
$
|
6,552
|
|
|
$
|
(526
|
)
|
|
$
|
11,190
|
|
|
Weighted-average shares outstanding, diluted
|
52,528
|
|
|
55,189
|
|
|
52,738
|
|
|
55,070
|
|
|
||||
Non-GAAP diluted earnings (loss) per share
|
$
|
0.01
|
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.20
|
|
|
Period
|
|
Number of Shares Purchased
(2)
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
|||||
4/1/18-4/30/18
|
|
1,736
|
|
|
$
|
9.82
|
|
|
1,736
|
|
|
1,054
|
|
5/1/18-5/31/18
|
|
—
|
|
|
9.88
|
|
|
—
|
|
|
1,211
|
|
|
6/1/18-6/30/18
|
|
70
|
|
|
10.42
|
|
|
—
|
|
|
1,225
|
|
|
Total
|
|
1,806
|
|
|
$
|
9.84
|
|
|
1,736
|
|
|
|
|
(1)
|
The share repurchase plan authorized by our Board of Directors allows repurchases of up to $50 million of our common stock. The maximum number of shares that may yet be repurchased under the plan is estimated using the closing share price on the last day of each period presented.
|
(2)
|
Includes 69,520 shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of restricted stock.
|
Exhibit No
|
|
Description of Exhibit
|
|
Sixth Amendment to Credit Agreement, dated as of August 13, 2018, by and among InnerWorkings, Inc., the lenders party thereto and Bank of America, N.A., as Administrative Agent
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101.INS**
|
|
XBRL Instance Document
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
INNERWORKINGS, INC.
|
|
|
|
|
Date: August 14, 2018
|
By:
|
/s/ Richard S. Stoddart
|
|
|
Richard S. Stoddart
|
|
|
Chief Executive Officer
|
|
|
|
Date: August 14, 2018
|
By:
|
/s/ Charles D. Hodgkins III
|
|
|
Charles D. Hodgkins III
|
|
|
Interim Chief Financial Officer
|
Calendar Year
|
March 31
|
June 30
|
September 30
|
December 31
|
2017
|
3.00 to 1.0
|
3.00 to 1.0
|
3.00 to 1.0
|
3.00 to 1.0
|
2018
|
3.00 to 1.0
|
4.00 to 1.0
|
3.00 to 1.0
|
3.00 to 1.0
|
thereafter
|
3.00 to 1.0
|
3.00 to 1.0
|
3.00 to 1.0
|
3.00 to 1.0
|
1.
|
I have reviewed this quarterly report on Form 10-Q of InnerWorkings, Inc.;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
b)
|
designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
|
d)
|
disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2018
|
/s/ Richard S. Stoddart
|
|
Richard S. Stoddart
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of InnerWorkings, Inc.;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
b)
|
designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
|
d)
|
disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2018
|
/s/ Charles D. Hodgkins III
|
|
Charles D. Hodgkins III
|
|
Interim Chief Financial Officer
|
(1)
|
The Company’s quarterly report on Form 10-Q for the quarterly period ended
June 30, 2018
(the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material aspects, the financial condition and results of operations of the Company.
|
/s/ Richard S. Stoddart
|
|
Richard S. Stoddart
|
|
Chief Executive Officer
|
|
August 14, 2018
|
|
(1)
|
The Company’s quarterly report on Form 10-Q for the quarterly period ended
June 30, 2018
(the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material aspects, the financial condition and results of operations of the Company.
|
/s/ Charles D. Hodgkins III
|
|
Charles D. Hodgkins III
|
|
Interim Chief Financial Officer
|
|
August 14, 2018
|
|