U.S. Markets close in 2 hrs 23 mins

Edited Transcript of INWK earnings conference call or presentation 31-Jul-18 9:00pm GMT

Q1 2018 InnerWorkings Inc Earnings Call

Chicago Aug 6, 2018 (Thomson StreetEvents) -- Edited Transcript of InnerWorkings Inc earnings conference call or presentation Tuesday, July 31, 2018 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Bridget Freas

* Charles D. Hodgkins

InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives

* Richard S. Stoddart

InnerWorkings, Inc. - President, CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Christopher Paul McGinnis

Sidoti & Company, LLC - Special Situations Equity Analyst

* George Frederick Sutton

Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst

* Kevin Mark Steinke

Barrington Research Associates, Inc., Research Division - MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to the InnerWorkings, Inc. Quarterly Earnings Call. (Operator Instructions)

I would now like to introduce Bridget Freas, please go ahead.

--------------------------------------------------------------------------------

Bridget Freas, [2]

--------------------------------------------------------------------------------

Good afternoon, and welcome to our first quarter 2018 earnings call. Joining me on the call today are Rich Stoddart, our Chief Executive Officer; and Chip Hodgkins, our interim Chief Financial Officer. We issued a press release with additional information earlier today, which is available on our website, www.inwk.com.

Please note, this call will include forward-looking statements relating 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. Additional information concerning these risks, uncertainties and assumptions is contained in our SEC filings, including the Risk Factors section contained in our most recent Form 10-K. Any forward-looking statements represent our views only as of today and should not be relied upon as of any subsequent dates.

This call will discuss, among other financial performance measures, non-GAAP adjusted EBITDA and non-GAAP earnings per diluted share. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP measures to the most comparable GAAP measures. This call is intended for investors and analysts, and may not be reproduced in the media in whole or in part without our prior consent.

I'll now turn it over to Rich.

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Bridget. Good afternoon, and thank you for joining our earnings call today. I want to start off by telling you that our bottom line performance in the first quarter is unacceptable. I'll leave it to Chip to get into the details in a moment, but I want to make it clear that this level of SG&A expense, relative to the size of our net revenue, must be addressed aggressively.

Earlier this year, we assembled core members of our leadership team and took a hard look at the way we operate, concluding that in its current form, our business is not adequately scalable from a staffing perspective. There's a lack of consistency across our operations, which has become much too decentralized to be efficient.

We have devoted a lot of time and effort to develop a plan to address these issues and have engaged third-party resources to provide additional support and expertise. This plan entails operational profit improvements, realigning underperforming operations, centralizing certain functions, better utilizing our real estate and essentially rewiring the way we do business. This plan is still in development, however, steps to improve our cost structure are already in progress.

These cost savings will be offset in the short term, however, by investments we're making over the next 12 months to drive operational discipline and enable more standardized processes and automation.

These investments further impacted our first quarter SG&A and there's still some investment to make. But we determined this was necessary to do our jobs better and will enable us to permanently take out cost for the long term. These are the right steps to take for a business that continues to perform well for our clients and continues to grow.

Our first quarter results demonstrate our success consistently increasing our growth in net revenue and winning additional work. From what I'm hearing from our clients and prospects, the market opportunity has never been better for InnerWorkings and I'll get into that detail in a moment.

This growth trajectory gives us the courage to make the operational investments necessary to efficiently support our future growth. We're confident that we're on a path that will drive returns for our shareholders while maintaining the same high quality of work from our clients.

I'd like to switch gears now and share more about that, the great work we do for many of the world's best brands. As I've met with many of you in the investment community and got to know many of our clients in the last few months, I've been surprised by how differently each group perceives our business. Many in the investment community still think of InnerWorkings as a print management company, yet it's rare to see traditional print as a key component of the work performed for our large clients.

Let me give you a glimpse of my early client interactions, all of which evidenced how central our solution is to our clients. I went to Detroit to see the team managing production and creative services for the highly-strategic direct marketing program for Quicken Loans. Only 8 months in and already our team and technology deployed are making an impact, facilitating and streamlining the mortgage offer acquisition process with best-in-class marketing execution.

During my visit with Jaguar Land Rover, a client we've been supporting for over a year, I was incredibly impressed by the digitally-enabled retail solution we're deploying globally. I heard from JLR that we have delivered everything we promised in this initial partnership and they love the InnerWorkings team.

Next, I went down the road from our headquarters to see Beam Suntory, one of our largest clients, who we are now supporting globally across their point of sale marketing spectrum. What did I not see there? Print. Just like a host of others I've met with in recent weeks. I want to make it very clear, InnerWorkings is not a print management company. We are a marketing execution agency supporting the world's best brands across the marketing spectrum, from branded merchandise, to packaging, to digital, to point-of-sale displays.

Let me share some data with you. Of our top 5 clients, we estimate that less than 15% of our revenue comes from traditional print. For the business as a whole, print makes up about 30%, much of which is legacy work that we've maintained from the early days of our business. But it doesn't dominate the discussions we're having today with our largest clients and prospects.

Our value proposition is in our expertise as the first line of defense for the brand, using our proprietary technology and knowledge of the supply chain to drive transparency, brand consistency and efficiencies in the marketing operations of large global corporations. This underscores why I came to InnerWorkings and why I see so much potential in our addressable market.

While listening to what our clients and prospects want to see from us, this value proposition is very clear, which is why we have signed more than $70 million in additional work with new and existing clients year-to-date.

I'll tell you a little bit about our latest win, which is with a marketing communications company adjacent to our space. This new win is a bit unique in that it's a strategic partnership whereby we will manage the direct marketing procurement on behalf of this company's clients in cases where our profit, scale and technology will deliver efficiencies.

This is the second strategic partnership we signed this year. The first being the alliance we formed with a big 4 accounting and consulting firm, supporting the marketing execution needs of their advisory clients as discussed on last quarter's call.

We're excited by our success signing new work and that our client relationships continues to strengthen and broaden. But we're also seeing a pullback from one client in particular that I'd like to share with you, because it will impact our 2018 growth.

We've been rolling out new store openings and freshed retail environments for this apparel company globally for the last decade, but a change in marketing strategy is causing this long-standing client to put a pause on new stores. We expect to be a critical marketing-execution partner for the long-term and this may only be a temporary hiatus. But it is the main reason we are lowering our gross revenue guidance for 2018, which Chip will detail for you in a moment. The reduction in this revenue is another reason we're aggressively cutting back our SG&A expense. We have to adjust our staffing.

Meanwhile, our pipeline continues to develop with unique opportunities, including growing verticals for us like financial services, technology and cosmetics across a broad base of our service offerings.

I'm very excited about the path ahead for InnerWorkings, but rest assured that our full senior management team is laser-focused on making the critical changes necessary to our operations in the pursuit of profitable growth.

Chip will now take us through our financial performance. Chip?

--------------------------------------------------------------------------------

Charles D. Hodgkins, InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives [4]

--------------------------------------------------------------------------------

Thanks, Rich. Hi, everyone. Before discussing our first quarter results, I want to provide some color about what prompted us to amend our 2017 10-K, which was filed last Friday.

While completing our Q1 2018 financial statements, we became aware of a few specific instances where cost of goods sold were recorded in the wrong period. These are unfortunate errors resulting from the manual processes in our accounting and operations functions in which we are investing to fix. This timing error affected 0.5% of our approximately $850 million in annual cost of goods sold. But because the amount is material to our pretax income, we had the obligation to restate our results to reflect the accurate timing.

Last quarter, you may recall that we had a material weakness in revenue recognition. That was a real wake-up call, which prompted us to launch several initiatives to improve our accounting processes and the way we interact with our operating teams. While the discovery of these errors was unrelated to the revenue recognition challenges, they both evidence a larger issue, reinforcing the importance of the initiatives already in flight. Being able to efficiently and accurately report financial statements is the price of admission for a publicly traded company and we take these errors very seriously.

To help bolster these improvement initiatives, we are excited to announce that we've hired a Chief Accounting Officer, John Bosshart. John brings an extensive background in leading best-in-class accounting functions for companies larger and more complex than InnerWorkings, including driving transformational change. I'm excited to have him on board to oversee all aspects of our global accounting and reporting and partner with me to continue to develop our accounting infrastructure. We have work to do to bring our reporting processes to the standard our shareholders should expect but these efforts are being driven by key leaders in our company with clear directives that this is a top priority.

Relating to this, the discovery of these errors also conveys that our profitability in 2017 was weaker than we had originally reported, though consistent with the range we recently disclosed. This realization, combined with our disappointing first quarter profit performance, prompted us to conduct a thorough review of the way we operate and we are planning bold steps to improve it, as Rich explained. I have full confidence in our path forward, though the payback of our actions will take several quarters to be realized.

I'll take you through the impacts of this in our financial guidance for 2018 in a moment. But first, I'd like to review our Q1 2018 results.

Our first quarter gross revenue was $274.5 million, an increase of 4% over the first quarter of 2017. Our gross profit or net revenue was $66.1 million, up 2% over the same period last year. Our gross margin was 24.1% in the first quarter and we expect a similar gross margin for the remainder of the year. Net income was a loss of $1.7 million or $0.03 per share.

First quarter non-GAAP earnings per share was a loss of $0.02, down from earnings of $0.08 a year ago. The only difference between our GAAP and non-GAAP earnings per share relate to professional fees incurred in adopting the new revenue recognition standard or ASC 606. Adjusted EBITDA was $7.4 million in the first quarter, down from $12.5 million in the first quarter of last year. Adjusted EBITDA was 11.2% of net revenue in the first quarter compared to 19.3% a year ago.

Our tax rate in the first quarter was impacted by losses in entities that have valuation allowances against deferred tax assets as well as by other onetime impacts. Excluding these items, our effective tax rate was 26.5% in the first quarter.

Now to the cash flow statement and balance sheet. Cash provided by operating activities was $34.3 million, up from $0.1 million in the first quarter of 2017. Cash provided by operating activities for the trailing 12-month period was a record $50.2 million. While we continue to expect 2018 to be a much stronger cash flow year than 2017, the first quarter benefited from strong collections early in the year, following our temporarily elevated accounts receivable balance at year-end 2017.

We decided to return our rising cash flow to shareholders. We repurchased $8 million in common stock during the first quarter and have repurchased $25 million year-to-date as of today. We have $9 million remaining authorized on a repurchase program through May 2019.

Our net debt position was $75.4 million as of March 31, 2018, which was approximately 1.4x our adjusted EBITDA for the trailing 12-month period.

Now turning to the outlook for 2018. We continue to be pleased by our recent growth but are disappointed by our level of SG&A expense and are making investments to improve our ability to drive returns as discussed earlier.

We're lowering our 2018 guidance for gross revenue by $40 million, mainly to account for the reduction in marketing spend with the one client Rich mentioned. We expect gross revenue to be between $1.155 billion and $1.19 billion. We expect to provide specific 2018 guidance for non-GAAP adjusted EBITDA and non-GAAP earnings per diluted share in the next couple of weeks, following completion of a cost reduction and business improvement plan currently being developed.

However, I can tell you that the elevated level of SG&A expense that you see in the first quarter has continued through the second quarter. So although, we are taking aggressive steps to correct this, from our vantage point at the end of July, we anticipate 2018 profitability to be lower than 2017 with cost reduction measures making a more positive impact on our 2019 profitability.

I'll now turn it back over to Rich before we open for Q&A.

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Thanks, Chip. So what should you take away from this call? Three things: One, our profit performance last year and first quarter of this year is unacceptable, and we're taking aggressive actions and building a holistic plan to quickly lower SG&A. Make no mistake, we understand the magnitude of what has to be done and that we need to rebuild your confidence in us. Two, our value proposition resonates with client more than ever before. We're excited by the $70 million of new work signed so far this year and we continue to load the pipeline with attractive client pursuits. And three, we have an incredibly talented and dedicated workforce, and I have full confidence in their ability to drive the necessary changes in our business and create shareholder value. We continue to attract the best talent who every day demonstrate their expertise and enthusiasm in serving our clients.

We will now be glad to answer your questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes from the line of George Sutton with Craig-Hallum.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [2]

--------------------------------------------------------------------------------

I wondered if you could give us a perspective on your thought process around the 1% to 4% revenue growth rate this year? And just give us a sense of aspirationally, what are the long-term plans for growth for the business?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Yes. I would say -- thank you, George. Thanks for the question. Clearly, the growth rates that we're seeing and the direction we've given you is clearly not what we aspired to. We see this as an aberration. It literally is one client, who's pulled back on their spend, and I would say mid- to high single digits is where this business should be capable of growing and how we expect it to grow into the future.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [4]

--------------------------------------------------------------------------------

Okay. The number one question I got yesterday with the series of announcements was around Engine Capital. It's not necessarily a brand name, not necessarily a large owner. So I think most folks were kind of curious what they did to obtain the seats on the board and what their plans were. Would you be able to go into that a little bit?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Sure, I could. I mean, clearly the press release and the 8-K give you most of the important terms. Let me be clear that the -- we were in the midst of a board refresh and Engine Capital, obviously, it has a point of view as the shareholder, as all our shareholders might. We had discussions with them and we aligned on the refresh of the board. And we think, we've got some terrifically talented directors joining, and that is to the benefit of everybody. So we're pleased that Engine Capital supported those new directors and the other initiatives that we prioritized.

--------------------------------------------------------------------------------

George Frederick Sutton, Craig-Hallum Capital Group LLC, Research Division - Partner, Co-Director of Research & Senior Research Analyst [6]

--------------------------------------------------------------------------------

Lastly, if I could, if I look at the bookings this year versus a year ago, can you just give us a sense of what you're seeing relative to opportunities materializing in different verticals and categories?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [7]

--------------------------------------------------------------------------------

Yes. I would -- so I would say beer, wine and spirits continues to be a strong vertical. We are seeing some opportunity in financial services, as well, continue to develop. It's obviously a priority of ours to start to build out some additional verticals, which is why we reorganized into a vertical structure. Or earlier this year, when we pushed through a reorg. But I -- the opportunities in the pipeline, George, I would characterize as across the -- across our verticals, not necessarily concentrated in any given place.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

And our next question comes from the line of Chris McGinnis with Sidoti.

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [9]

--------------------------------------------------------------------------------

So just -- I guess, just thinking about the demand side. Have you been impacted at all from any of the restatement or kind of any of the issues of that up until now?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [10]

--------------------------------------------------------------------------------

In what context, Chris?

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [11]

--------------------------------------------------------------------------------

On the demand side. I mean, has anyone been hesitant to work with you? Have you seen anything to that effect? Just as you go through that restatement, it's been a little bit -- was there any concern on any customers? And do you think that -- getting this out of the way now opens up the door maybe for some different opportunities for now?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [12]

--------------------------------------------------------------------------------

Yes. I'll answer the demand side in a couple of ways, right? So we've seen -- I think we have 1 or 2 clients that had a couple of questions, nothing substantive. And we've got, obviously, a lot of activity in the pipeline and it simply hasn't come up. It hasn't been an issue. No one's been concerned by it. So if you're asking, has the restatement in and of itself spooked anyone, the answer's absolutely not. The other thing I'd say on the demand side is we're continuing to attract great people and that's another part of demand that I think's extraordinarily important, that we are a people business. And it's not scared great people away. I'll point you to John Bosshart, who's been a great add that Chip talked about as our Chief Accounting Officer. So I think, it's a -- we would tell you that the restatement has been a nonissue on both those fronts.

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [13]

--------------------------------------------------------------------------------

Great. And then just touch on the SG&A, just on the growth year-over-year, can you just talk about where the dollars spent is on that increase? And is there any onetime related to the restatement that you could think of backing out towards the normalization?

--------------------------------------------------------------------------------

Charles D. Hodgkins, InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives [14]

--------------------------------------------------------------------------------

Yes. There's not a ton related to the restatement, because it -- the Q1, the restatement really didn't began until Q2. But I would say, as we look at SG&A, it's -- and looking forward, it's a mix of onetime investments we're making in the business to improve our processes and build a more scalable business as well as things that will take -- some of it will take time to work its way through the system.

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [15]

--------------------------------------------------------------------------------

Okay. And then maybe just on the increase from last year to this year. If you can just maybe point out a couple of the major components for that growth?

--------------------------------------------------------------------------------

Charles D. Hodgkins, InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives [16]

--------------------------------------------------------------------------------

It's a mix. Some of it is back office and some of it's at the account levels, given relative to where revenue's coming in.

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [17]

--------------------------------------------------------------------------------

Okay. Okay. Could you maybe just talk a little bit about just with -- digital got a lot of attention last year and the share movement deck. Can you just maybe give an update on how that's trending? And how that's playing out for you guys?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [18]

--------------------------------------------------------------------------------

Chris, you're referring to digital retail, I assume. So, yes, I just spoke about JLR and I was out there, that was one of my early visits. That project is going quite well and I think, as it continues to develop, I think it'll be actually a showcase of what innovation in digital at retail looks like. And we are in a number of conversations with other clients in different spaces, all of whom have the same desire, which is, how do I use my brick-and-mortar infrastructure to compete more effectively in a digital world and drive brand experiences? So we have a lot of belief that this is an area that will continue to grow. I would tell you, it's still in its early days with JLR, but we're already seeing signs that, that expertise that we've built can be applicable in other retail environments.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

And our next question comes from the line of Kevin Steinke with Barrington Research.

--------------------------------------------------------------------------------

Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [20]

--------------------------------------------------------------------------------

So you talked about in your comments that your structure is too decentralized. Just trying to get a sense, as you looked across your organization and analyzed it, maybe how you got to that point? It's been quite a few years since you've done acquisitions, but is there, perhaps, legacy of some of the deals done in the past where they weren't fully integrated? Or I'm just trying to get a sense as to how the structure is now and where you can take it? Or what your vision is for where you can take it?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [21]

--------------------------------------------------------------------------------

Yes. Thanks for the question, Kevin. I think we would say that it really is not primarily around acquisitions in that history. It's a -- look, one of the greatest strengths of InnerWorkings is that this is an extraordinarily client-centric organization. And we do whatever it takes to deliver for our clients and I think, as the result, as our client engagements have grown in number, as they've grown in complexity, as they've grown in globality, we look in -- and look at where we fit today and we realize that systems, processes, controls, ways of working, are not consistent enough across our client base. And that's really where the biggest opportunity lies. It's just simplifying the way we work and recognizing that, yes, every client is certainly unique, we'll always honor that, and our first priority is delivering great work for our clients, but making sure that we're simplifying in every way possible the way we do the work that we do, I think, is where the leverage is.

--------------------------------------------------------------------------------

Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [22]

--------------------------------------------------------------------------------

Okay. Yes, so it sounds like maybe there's just been staffing built up around certain larger clients and maybe you see a way to centralize some of that work so you can serve a number of clients with staff that can be leveraged. Is that a fair way to characterize that?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [23]

--------------------------------------------------------------------------------

I think that's some of it. I think some of it, as Chip said, is in support functions, right? So as we think about IT, as we think about other support functions in the organization, how we just make sure we've got the right structure around it to be most efficient. And I would say, look, part of this is, I think, centralization is a lever. Part of this is also just making sure that the consistency of the way we do the work isn't creating more -- the inconsistency isn't creating more work on the back end. So I think we're just being inefficient in how we work and we can do this faster, right, without even driving centralization. So it's kind of all 3 of those things.

--------------------------------------------------------------------------------

Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [24]

--------------------------------------------------------------------------------

Okay. As you talked about the investments, I think, over the next 12 months, is there any way -- it doesn't sound like you're ready to quantify it. But just maybe at least segment those investments into buckets in terms of spending on outside consultants to maybe analyze the cost structure versus investments in the accounting and finance function. I don't even know if those are part of it, but I'm just trying to get a sense of what sort of buckets you see in the investments that you're going to make or how you'd segment those out.

--------------------------------------------------------------------------------

Charles D. Hodgkins, InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives [25]

--------------------------------------------------------------------------------

Kevin, those are a couple of the buckets. I think we'll plan in a couple of weeks to have a very full and satisfying description of our plans.

--------------------------------------------------------------------------------

Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [26]

--------------------------------------------------------------------------------

Okay. How about on the technology front, as you've analyzed the business, do you see a need to make significant investments there? Do you feel like your systems are up to speed with this new structure you want to create? Or do you need to invest more in technology in any significant way?

--------------------------------------------------------------------------------

Charles D. Hodgkins, InnerWorkings, Inc. - Interim CFO and Senior VP of Corporate Development & Strategic Initiatives [27]

--------------------------------------------------------------------------------

We don't -- we're not looking at significant additional investments in technology. The system that we have is fantastic. It works -- it can work really well for our people. I think getting our people to use the technology in consistent ways is really the goal. So it's more about changing behavior than requiring substantial additional tools. I would add on the technology side, we -- I think compared to the past, we could be more disciplined about using the tool that we have that clients love. There is -- just being more disciplined about not putting out -- needing to do custom development and sticking to just configuring the existing system that we've developed.

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [28]

--------------------------------------------------------------------------------

Yes, I'll just tag on to that, Kevin, and say, while Chip's answer is absolutely spot on that we don't see incremental investment, we do invest on an annual basis significantly in our technology to continue to develop it. It's -- the vast majority of our client engagements and our pipeline pursuits have the technology involved in one or multiple ways. So do we do see it as an important advantage and we're not -- we're certainly not pulling back on that stance, we just don't see it as incremental investment beyond our plan.

--------------------------------------------------------------------------------

Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [29]

--------------------------------------------------------------------------------

Okay. Makes sense. So it sounds like the business pipeline is still good and building. So from your view, Rich, do you feel like the business development function is working the way it should? Do we need to make more investments there, change the processes? I think, there's already been quite a bit of energy dedicated to that. But do you see anything incremental to be done on that front?

--------------------------------------------------------------------------------

Richard S. Stoddart, InnerWorkings, Inc. - President, CEO & Director [30]

--------------------------------------------------------------------------------

So I would say, I think the business development function is the current strength. I think it's a very strong team who really understands what an enterprise global pursuit looks like. The nuances, intricacies and frankly, degree of difficulty in that kind of pursuit. I think we can always add great new staff to that team, but based on what I've seen and a number of pursuits I've been on, I think we've got a very strong team and that's not a place that we have to go fix, based on looking at the pipeline and looking at the way they're performing.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

And that does conclude today's program. Ladies and gentleman, thank you for participating in today's conference, and you may all disconnect. Everyone, have a wonderful day.