inwk investor presentation - printstockwatch · procurement outsourcing is expected to continue...
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inwk investor presentation
inwk | we make marketing happen
Safe Harbor + GAAP Reconciliation
This presentation 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 presentation. 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.
This presentation includes the following financial measures defined as "non-GAAP financial measures" by the Securities
and Exchange Commission: Non-GAAP Adjusted EBITDA, Non-GAAP diluted earnings per share and constant currency.
We believe these measures provide useful information to investors because they provide information about the estimated
financial performance of the Company's ongoing business. These measures are used by management in its financial and
operational decision-making and evaluation of overall operating 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 for revenue, gross profit and Non-GAAP Adjusted EBITDA is calculated by
retranslating current period results 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. All of these non-GAAP financial measures 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, please
see the "GAAP to Non-GAAP Reconciliation” included in the appendix and in our SEC filings.
investor presentation | 2016
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inwk | we make marketing happen
Who We Are
3
An asset-light, fully outsourced
global solution, InnerWorkings
designs, procures and executes
branded marketing materials
and retail experiences for the
world’s leading brands.
we make marketing happen.
NASDAQ: INWK
~$400Mmarket cap
EPS growing
+20%97% enterprise
client retention rate
13Bmarketing pieces
produced annually through our technology
investor presentation | 2016
inwk | we make marketing happen
InnerWorkings delivers a
comprehensive suite of
services to meet our clients’
execution needs.
Our Offerings
4
events &
promotions
retail
environments
& displays
creative
services
management
product
packaging
ecommerce &
fulfillment
branded
merchandise
investor presentation | 2016
inwk | we make marketing happen
What We Manage
5
prepress
• Design a
supply chain
that optimizes
total cost of
ownership
• Shrink lead
times
• Ensure on-
time delivery
• Factor in
business
continuity
plans
• Maintain
product
integrity
• Identify most
efficient
formats
• Minimize costs
and reduce
waste
creativeprint, pos,
packaging
inbound
logisticskitting /
fulfillmentdistribution
• Maintain and
enhance
quality
• Utilize
international
network of
specialists for
site visits and
quality control
• Consolidate
spend to
realize
economies of
scale
• Unlock value
through
ideation and
value
engineering
business process reengineering to
improve efficiency & cost savings
change management
• Creative
design from
merchandising
through to
manufacturing
• Optimized for
production
investor presentation | 2016
inwk | we make marketing happen
Where Do We Fit in the Marketplace
6
outsourced
marketing
execution firm
Outside
Creative Agency
Trend toward decoupling of
marketing strategy and
marketing execution
Corporate
Marketing
Trend toward freeing up
marketing professionals
from execution tasks
Corporate
Procurement
Trend toward outsourcing non-core
internal procurement functions to
third party specialists
Everything from design
execution and procurement
to production management
and installation of
marketing materials
supporting the brand
investor presentation | 2016
inwk | we make marketing happen
Why Outsource Marketing Execution Services?
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marketing procurement organizational
• Innovation
• Brand stewardship
• Speed to market
• Enhanced decision making
• Centralized knowledge &
continuity
• Execution within budget
• Increased line of sight
• Increased cost savings
• Increased spend visibility
• Streamlined processes
• Consistent data capture
• Enabling technology systems
• Leveraged buying
• Improved service levels
alongside heightened
efficiencies
• A new level of accountability
• Flexibility to support rapidly
changing business needs
growth of marketing channels and ecommerce has made it more difficult and costly for
companies to maintain a unified brand in-house
investor presentation | 2016
inwk | we make marketing happen
Our Investment Value Proposition
investor presentation | 2015
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unique ability
to drive value for
clients
recurring
revenue from
diverse, blue-chip
client base
scalable
business model
aligned with client
interests
leader in
favorable market
inwk
inwk | we make marketing happen
Leader in Favorable Market
investor presentation | 2016
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~$600B
Marketing procurement
increasingly becoming a non-
core function fit to be outsourced
Marketing Materials, POS, Direct
Mail + Packaging (1)
$250B+
Procurement outsourcing is
expected to continue growing
~12% per year
Business Process
Outsourcing (2)
(1) Source: Smithers Pira.
(2) Source: Everest Group (data is for managed procurement spend).
large, fragmented addressable market and growing BPO trend
inwk | we make marketing happen
Unique Ability to Drive Value for Clients
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commerce
Short lead time and direct
access to global purchasing
execution
collaborate
Provides pivotal visibility
and encourages sharing
successful marketing ideas
procure
Utilize millions of objective
data records to source with
intelligence
approve
Easy on-demand ordering
with transparent reporting
and automated approvals
investor presentation | 2016
43 countries. 28 currencies. 13 languages.
9,000+ suppliers. 45,000+ daily external users.
cutting-edge technology with extensive real-time data
unmatched breadth of offering and supplier network on a global platform
achieve brand consistency and
high marketing impact across
comprehensive suite of services
buying power and domain
expertise enable significantly
lower costs for clients
creative
services
ecommerce
+ fulfillment
management
branded
merchandise
retail
environments
+ displays
events +
promotions
product
packaging
inwk | we make marketing happen
Recurring Revenue from Diverse, Blue-Chip Client Base
Managing non-newsprint purchasing supply chain for custom
publishing, direct mail, and field marketing collateral.
Global marketing across the entire marketing execution
spectrum – from print and retail displays to branded
merchandise, eCommerce, and events and promotions.
Global print sourcing partner including catalogs, retail
signage systems, event marketing, promotional
products, and direct mail.
Original enterprise client from 2005, focus is on
merchandising, commercial print, and eCommerce.
Manage marketing process & execution for POS,
merchandising, displays, barware and premiums across
portfolio.
Bringing Nike’s retail vision to a massive global audience via
retail experience design, manufacturing, inventory, and
distribution.
Working across three continents to manage print, events and
promotions, temporary and permanent retail display signage,
and fixtures.
Providing end-to-end solution including onsite creative
agency, commercial print, direct mail, and retail experiences.
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investor presentation | 2016
long term contracts;
high switching costs
~97%
retention rate
minimal client
concentration
largest account
<6% of sales
creates business
partnership; not
transactional relationship
~85% of sales from
enterprise clients
established relationships with large multinational firms
inwk | we make marketing happen
Case Study: Energizer
challenge
Energizer noticed delays in getting its merchandising materials to market as costs began to escalate. Energizer executives also needed tighter control of their global brand standards.
solution
InnerWorkings transformed Energizer’s global marketing execution across international retail locations - concept development, design, prototyping, engineering, sourcing, production, warehousing and global logistics of materials
InnerWorkings’ unique combination of expertise in brand delivery, global scale and underpinning proprietary technology enabled a total solution to complex challenges by consolidating its global procurement of merchandising materials through:
o Building one core display catalog that fits all retail environments worldwide
o Centralizing creative control of design and sourcing
o Launching an eCommerce platform to enable global purchasing from a single site
o Overhauling its end-to-end global in-store marketing supply chain
results
> 10+ percent savings on initial unit costs
> Reduced global merchandising program suppliers from 75+ to one
> Shortened time to market
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investor presentation | 2016
inwk | we make marketing happen
Case Study: Nike
challenge
Nike needed a reliable, cost-effective ally to produce and deliver its Partner concept stores across Europe, the Middle East, and emerging markets.
solution
InnerWorkings kicked off this global retail program by creating, producing, and installing Nike’s largest store in Spain and the largest Partner store in Europe. As the program’s scope grew, inwk:
o Engineered and procured materials in China
o Managed global logistics
o Launched an online ordering portal
results
> Installed and delivered 48 Partner stores throughout Europe, the Middle East, and emerging markets in only one year
> Additional stores slated for rollout
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investor presentation | 2016
inwk | we make marketing happen
Case Study: InterContinental Hotels Group
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2009
InterContinental Hotels Group sought a centralized solution to its fragmented spend across brands such as Holiday Inn, Crown Plaza, and Hotel Indigo
Multi-year enterprise agreement in North and South America included global management of the first and fastest growing loyalty program in the hotel industry
2013
Built on the success in the Americas to include Europe, the Middle East,
Greater China, and Asia Pacific
Sourcing and procuring all categories of print and promotional materials
throughout all of IHG’s global regions
today
InnerWorkings developed and manages an integrated solution to serve IHG’s
marketing inventory management needs beginning with creative design to
strategic sourcing to e-commerce technology and global fulfillment services
InnerWorkings’ eStore interface facilitates the processing of more than 12,000
orders from 71 percent of the IHG hotels annually, representing improvements
in savings to the group’s franchise community, better speed-to-market, and
improved compliance with brand standards
investor presentation | 2016
inwk | we make marketing happen
Scalable Business Model Aligned with Client Interests
investor presentation | 2016
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….adds new opportunities to create value for clients at low incremental cost to INWK
$10MMin new business
with…
23%gross profit
margin requires…
~$1.2MMin overhead
10% - 12%contribution
margin1
result
global platform with increasing category and industry vertical expertise….
7service
offerings
40+countries
served
2011 Today
2service
offerings
16countries
served
1. Contribution margin represents impact after fully ramped
inwk | we make marketing happen
Economic Model Illustration
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ENTERPRISE CLIENT ECONOMICS BEFORE/AFTER ENGAGING INWK
Before After Savings %
Product Costs $10,000,000 $8,800,000 $1,200,000 12%
Overhead Costs (staffing) $500,000 $0 $500,000 100%
Total Procurement Costs $10,500,000 $8,800,000 $1,700,000 16%
INWK ECONOMICS
Revenue $8,800,000
Cost of Goods Sold ($6,776,000)
Gross Profit $2,024,000
Gross Margin% 23%
Overhead Costs (people, technology,
commissions, etc.) ($1,144,000)
Contribution Profit $ 880,000
Contribution Margin% 10%
investor presentation | 2016
1. Contribution profit represents impact after fully ramped
gain-share structure aligns interests; incentivizes surpassing client savings goals
Gross margin achieved through
our technology, scale, category
and vertical expertise, and
supplier network
inwk | we make marketing happen
technology
& data
breadth of
offering
client vertical
experience
global
platform
aligned
w/client
interests
internal marketing +
procurement
advertising agencies
large manufacturers
marketing procurement
outsourcing firms
Premier Provider in a Fragmented Marketplace
investor presentation | 2016
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inwk | we make marketing happen investor presentation | 2016
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Successful Organic Growth Strategy
growth within existing clients
wins in 2015
Creative Services Product Packaging
Geography Creative Services
Retail Environment +
Displays & Branded
Merchandise
Print Management
new contracts
Direct Mail +
Marketing CollateralRetail Environment +
Displays
Print Management
Creative Services
+ strong pipeline of prospects
inwk | we make marketing happen
$400
$482
$632
$790
$891
$1,000
2009 2010 2011 2012 2013 2014 2015 2016 EST.
Track Record of Consistent Revenue Growth
investor presentation | 2016
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$mm
over $135MM in new organic contractual awards in 2015
$1,060 - $1,080$1,029
Note: 2015 revenue grew 9.3% in constant currency; 2016 revenue expected to increase 6% - 8% in constant currency and excluding two small exited markets.
inwk | we make marketing happen
Financial Outlook
investor presentation | 2016
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$mm except EPS
2013 2014 2015 2016 Outlook
Revenue $891 $1,000 $1,029 $1,060 - $1,080
Gross Margin% 22.7% 22.9% 23.3% 23.0% - 23.5%
Non-GAAP Adjusted
EBITDA$26.9 $42.8 $51.9 $58.0 - $62.0
Non-GAAP Adjusted
EBITDA Margin%3.0% 4.3% 5.1% 5.5% – 5.7%
Non-GAAP Diluted EPS $0.09 $0.20 $0.25 $0.30 - $0.33
please see appendix for GAAP to Non-GAAP reconciliation
double-digit adj. EBITDA and EPS growth; significant margin expansion
2016 revenue expected to grow 6% - 8% excluding currency impacts and exited operations
inwk | we make marketing happen
Current Strategy and Long Term Objectives
investor presentation | 2016
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target 10% organic revenue growth
margin improvement
achieve 8% adjusted EBITDA margin
(5.1% in 2015)
current strategy
long term objectives
organic growth
focused on enterprise
contracts
cross sell new services
and geographies
inside of existing
accounts
cost and operational
discipline
inwk | we make marketing happen
Significant Opportunity to Grow Earnings and Cash Flow
investor presentation | 2016
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• increase share of wallet through breadth of product categories – leverage scale and
suite of offerings to increase customer penetration
• new business win momentum – $135MM in new contracts in 2015
• global scale and investments in technology support higher-margin growth
operating leverage
• add to high-performing team
• strengthen go-to-market and pricing strategies
• improve sales tools and revamp sales compensation
maximize pipeline through
improved sales productivity
• align supplier terms with clients to create a more unified supply chain
• incorporate working capital terms in new client contracts
• enhance billing practices to lower DSOs
improve working capital
management
• executing organic growth strategy; no acquisitions made in last 2 years
• no contingent consideration payments expected beyond 2017
declining earnout
obligations
• align infrastructure with clients
• fully integrate prior acquisitions
• accelerate best practice improvement
recently-announced
global realignment
expected to improve
annual profitability by
$5.0-$6.0 million
inwk | we make marketing happen
Capital Allocation Priorities
investor presentation | 2016
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capital investment invest in sales platform and technology – highest expected return on capital
excess cashrepurchase shares to opportunistically return cash
to shareholders
balance sheet optimize financial flexibility, access to debt, and cost of capital
cash total debttotal debt /
LTM adj. EBITDA
as of December 30, 2015 $30.8 million $99.3 million 1.9x
inwk | we make marketing happen
We Make Marketing Happen
investor presentation | 2016
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Through comprehensive technology
platform, an extensive supplier network,
substantial procurement data, buying
power, and deep domain expertise
how we do it
To be the preeminent marketing
execution partner for the world’s
most famous brands through our
comprehensive capabilities,
industry-leading technology,
strategic geographic footprint,
and focus on innovation
We empower clients to maximize the
return on marketing investment by
delivering substantial savings,
shorter lead times, greater brand
consistency, and a new level of
control and transparency across the
marketing supply chain
our vision
the value we bring
inwk
Global Fortune 1000 corporations,
primarily in the CPG, retail,
financial services, pharma, media
and not-for-profit verticals
who we serve
appendix
inwk | we make marketing happen
GAAP to Non-GAAP Reconciliation 2013 - 2015
investor presentation | 2016
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($ in thousands) Year Ended December 31,
2015 2014 2013
Net income (loss) ($32,338) $44,462 ($8,660)
Income tax expense (benefit) 12,665 2,313 (556)
Total other expense 7,678 5,118 3,236
Depreciation and amortization 17,472 17,723 13,664
Stock-based compensation expense 5,873 5,352 4,733
Change in fair value of contingent consideration (270) (37,874) (31,331)
Goodwill impairment charge 37,539 — 37,908
Intangible asset impairment charges 202 2,710 —
Restructuring and other charges 1,053 — 4,322
Restatement-related professional fees — 2,093 —
Payments to former owner of PG — — 2,624
e-Lynxx fees — — 961
Secured asset reserve 2,023 940 —
Non-GAAP Adjusted EBITDA $51,896 $42,838 $26,901
($ in thousands) Year Ended December 31,
2015 2014 2013
Net income (loss) ($32,338) $44,462 ($8,660)
Change in fair value of contingent consideration, net
of tax (282) (37,571) (29,658)
Goodwill impairment charge 37,539 — 37,908
Intangible asset impairment charges, net of tax 153 1,657 —
Restructuring and other charges, net of tax 873 — 2,615
Venezuela remeasurement charges 1,521 — —
Secured asset reserve, net of tax 1,239 568 —
Restatement-related professional fees, net of tax — 1,266 —
Payments to former owner of PG — — —
e-Lynxx fees — — 625
Realignment-related income tax charges 4,685 — 1,617
Adjusted net income 13,389 10,382 4,447
Weighted average shares outstanding, diluted 53,515 53,104 50,875
Non-GAAP Diluted Earnings Per Share $0.25 $0.20 $0.09
inwk | we make marketing happen
Our Global Leadership
investor presentation | 2016
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Eric D. Belcher, President and CEOEric is a well-established expert on the subject of improving the efficiency, effectiveness and transparency of the global marketing supply chain. A frequent guest speaker at major industry conferences, he is
regularly sought out by industry media and has also testified before the U.S. Congress to help define marketing execution best practices. Prior to joining InnerWorkings, Eric served as Chief Operating Officer
and Chief Financial Officer of manroland North America, and before that, he led project teams at Marakon Associates, an international management consulting firm. He currently serves on the Advisory Board for
the Polsky Center for Entrepreneurship at Chicago Booth
Jeffrey P. Pritchett, Executive Vice President and CFOJeff previously served as Head of the Finance Practice and a Senior Operating Executive at Cerberus Operations and Advisory Company, LLC (COAC), an affiliate of Cerberus Capital Management, L.P. At
COAC, Jeff supported the firm’s portfolio companies in driving strategic initiatives and improving their financial and operating performance, while also leading operational diligence for new Cerberus investments.
He served as Interim Executive Chairman of the Board of TransCentra, Inc. and as a Board Member of Remington Outdoors Company, Inc. in conjunction with his role at COAC. Prior to joining COAC, Jeff
served in numerous finance and strategy roles at Vertis Communications, a marketing communications company, where he ended his tenure as Interim CFO
Ron Provenzano, General CounselRon previously spent 8 years as Deputy General Counsel of RR Donnelley, a printing and print services company, where his responsibilities included leading the international legal function and advising
management and the board in governance, risk and compliance matters. Ron has also served as General Counsel of Huron Consulting Group, a business consulting company and Vice President, Associate
General Counsel of Interpublic Group, one of the largest global advertising and marketing services agencies in the world
Alex Castroneves, President and Managing Director, LATAM, EMEA, and APACAlex oversees all of our international business and focuses on growth, innovation, and exceptional client service. Alex joined the company in 2012, launching our Brazil office and then expanding our reach
throughout the entire Latin America region. Before joining InnerWorkings, Alex developed his professional career in large consumer goods corporations and business start-ups, working in key executive positions
in Latin America. He worked at A.T. Kearney Management Consulting as a Senior Principal and also served as a core member of the Consumer Goods & Retail Practice in the region
Pat McCusker, President, North AmericaPat manages our business in North America, driving growth and best-in-class service for our clients. Since joining InnerWorkings in 2011, Pat has held numerous sales and operations roles, including
developing new relationships across retail, financial services, and consumer goods clients. Prior to InnerWorkings, Pat was an Associate Partner with McKinsey & Company in the firm’s Chicago and London
offices where he primarily served B2C clients across retail, consumer goods, and technology sectors
Leigh Segall, Chief Marketing OfficerLeigh is responsible for all aspects of the company’s global marketing strategy. Prior to joining InnerWorkings, she was the Vice President of Marketing for Leapfrog Online, one of the nation’s largest digital
marketing companies. Leigh also spent seven years with SAVO, the leading sales enablement technology company in the U.S., where she built and oversaw its consulting practice and then moved on to lead
SAVO’s marketing function as Chief Marketing Officer. In addition, Leigh served as Executive Director and chief spokesperson for Youth Venture, a national not-for-profit organization based in Washington, DC
Rob Burkart, Chief Information Officer
Rob has led the Business Technology group since 2013. He ensures that we create, maintain and publish the technology that gives us valuable insights into the global marketing supply chain – and helps us
make smart data-driven decisions for our clients. Rob previously led sales, operations and forecasting groups for InnerWorkings, and prior to joining InnerWorkings in 2009, honed his experience in such diverse
industries as aerospace, building materials and electronics
Oliver Kimberley, Senior Vice President, Head of Global Client SolutionsOliver has more than 10 years of experience working in marketing execution, managed services, and outsourcing across the globe. Oliver’s focus is to work closely with new and existing clients to design custom
solutions to fit their needs using our people, best-in-class processes, and proprietary technology. Oliver oversees the Sourcing, Implementation, Training, and Supplier Relations groups globally that focus on
successful transitions and on client growth