By Hannah Jordan, Tuesday 15 May 2018
InnerWorkings, the US-based print management and marketing giant that has a UK subsidiary, is facing legal action from investors once again over alleged financial misreporting.
The $1.9bn-turnover global company, which acquired Birmingham, UK-based print management firm e-trinsic in 2008, is accused of making false or misleading statements and failing to disclose that errors were contained in the company’s financial statements for the fiscal years ending 31 December 2017, 2016, and 2015 including all interim periods.
On 11 May a number of US law firms, including New York-based Gainey McKenna and Egleston, Rosen Law Firm, Pawar Law Group, RM Law, Bernstein Liebhard and Bronstein, Gewirtz and Grossman, were among the first to announce the filing of a class action lawsuit seeking compensation for investors who bought shares in the Nasdaq-listed firm between 11 August 2015 and 7 May 2018.
It followed an announcement on 7 May by InnerWorkings, whose chief executive Eric Belcher stood down in March this year, stating that it was postponing the release of its Q1 2018 results until 31 May “due to errors in its historical financial statements identified during the course of its first quarter financial reporting close process”. Belcher was succeeded by Rich Stoddard, who moved from his role as global president of Leo Burnett Worldwide.
Investors were advised that it would be “restating its financial statements for the years ended December 31, 2017, 2016, and 2015, and all interim periods within those years”, whilst an initial assessment by the firm estimates “an aggregate impact that includes a decrease in income before income taxes" of $2.5 - $4.5m for the year ended 31 December 2017, $1.5 - $2.5m for 2016 and $500,000-$1.5m for the 2015 financial year.
It is not the first time that InnerWorkings, which employs around 2,000 globally, has faced allegations of falsely reporting its figures. On 27 February 2014 a lawsuit was filed against InnerWorkings on behalf of investors who had acquired shares between 15 February 2012 and 6 November 2013. It accused the company of inflating its revenue, cashflow and adjusted Ebitda figures, resulting in misleading financial statements.
Between 2009 and 2012, InnerWorkings Inc reported an increase in total revenues rose from $400.5m to $797.7m with respective net income increasing from $6.31m to $19.11m, Meanwhile the company’s share price swelled from $2.10 in February 2009 to as high as $15.64 in March 2013.
In April 2013 InnerWorkings announced a revised full year guidance and in November that year it lowered its revenue guidance and GAAP diluted earnings per share guidance citing performance issues with Productions Graphics, its French subsidiary acquired in 2011.
Then in February 2014 InnerWorkings announced that its financial statements from Q4 2011 to Q3 2013 were no longer reliable after the firm reached the conclusion that Production Graphics president Christophe Delaune, who had been fired in October 2013, had been inflating the subsidiary’s results to meet earn-out targets relating to the acquisition agreement. By February 2014 the share price had tumbled to $7.39.
A settlement was reached that saw InnerWorkings pay out around $6m to investors.
Given the length of time involved in the latest claims, any settlement amount could turn out to be substantially more than this.
No-one from InnerWorkings or the law firms listed was available to comment.