Operator: Ladies and gentlemen, thank you for standing by, and welcome to the InnerWorkings Inc. Quarterly Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Bridget Freas. Thank you. Please go ahead.

Bridget Freas: Good afternoon and welcome to our first quarter 2020 earnings call. Joining me on the call today are Rich Stoddart, our Chief Executive Officer; and Don Pearson, our 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 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 and our Form 8-K filed on May 11. Any forward-looking statements represent our views only as of today and should not be relied upon as of any subsequent date. This call will discuss among other financial performance measures, adjusted EBITDA and adjusted diluted earnings per 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.

Rich Stoddart: Good afternoon, and thank you for joining us. 2020 is turning out to be an unusual year on many fronts. Our lives have been disrupted, first by the global pandemic of COVID-19, and then by the tragedy in Minnesota in May, and the subsequent protests across the country. I'm so grateful that very few of our employees have contracted COVID-19, and I'm hopeful based on the conversations happening across our country, and within our company, on what we can do to fight racial injustice, and how to make space to process, learn, and take action. Though most of us are still working from home, we're coming together as one InnerWorkings more than ever. So let's review where the business is, now that we're nearly halfway through the year. The first 10 weeks started out very strong. Our revenue was negatively impacted by COVID-19 late in the first quarter, but the high-quality of our revenue was evidenced in generating the highest quarterly gross margin since 2017. We also continue to demonstrate our success, lowering our cost to serve with a $4 million decrease in SG&A, which was down 7% compared to last year's first quarter. We were well on our way to an impressive year of profitable growth. As you know, last month we withdrew our original guidance for 2020, based on the increased economic uncertainty during the last few months. Visibility is still low. But as we approach the end of June, we can say with virtual certainty that our revenue and EBITDA will be down sequentially for the second quarter. It's difficult to predict what the trend will be into the back-half of the year, but we are seeing some green shoots. Following a declining trend since mid-March in our weekly purchase order activity, we have seen an increase in the dollar volume of POs received for the last two weeks. We think this could be an indication that our revenue bottomed in the second quarter. There is also a flurry of activity across many clients on marketing plans ready for launch, as they prepare for a rebound in their business activity. Now, I'd like to outline for you the specific actions we've taken to support near-term profitability in light of the expected decline in our revenue for the second quarter. Our number one variable cost is our salary costs. Beginning in April, we made a significant reduction in our headcount, terminating 172 jobs for an annualized cost savings of approximately $10 million. Further cost savings have also been action through furloughs to enable us to quickly bring back talent, in line with improving revenue. It is always difficult to reduce our employee base, especially with the tough economic times our employees are currently facing. But it was necessary to rightsize our cost structure, given a lower base of revenue, to give us the flexibility to react quickly to changes in our clients\ marketing budgets ahead. We also developed a robust process to ensure that we bring back jobs at a pace aligned with the recovery of the underlying business served. We canceled all employee merit increases and promotions for this year and implemented some temporary salary reductions, including a15% reduction in salary for me and the executive team. We terminated all non-essential consulting engagements and deferred certain investments in IT. We are naturally seeing a significant savings in travel costs due to due to the pandemic. Some of this reduction we believe is permanent, as we're finding ways to stay connected with less travel. Finally, we are accruing a significantly reduced employee bonus pool for 2020. Most of these actions were taken in late April and will therefore start to materialize in our second quarter results. Although a reduced accrual for 2020 employee bonuses did provide a small benefit to our first quarter results. Importantly, we have not limited our ability to support our clients as business activity rebounds. These cost actions will not only support our near-term profitability, but equally importantly, our liquidity and cash flow. Here are some additional things we're doing on that front. We deferred our payroll taxes until the end of 2021 and 2022, as provided by the CARES Act. Our Board of Directors elected to defer their cash compensation. And given the economic uncertainty, we are exploring ways to access additional liquidity if needed, which Don will discuss in a moment. We feel confident that these actions strike the right balance of maintaining critical investments, while protecting profit amid reduced revenue. We stand poised to bring back as many of our employees as possible when client activity increases. But we also have additional levers to further reduce costs, even if the trend worsens before it improves. Now, let's move to the new business front. We came out of the gate with several newly signed contracts this year. We've been awarded $32 million of new revenue at full run rate so far in 2020. As you may expect, we've seen a general slowdown in new business activity in the last three months. This is partly due to the general disruption of non-essential workflow for our key contacts within client prospects in response to the global pandemic, and the lack of face-to-face interactions between these contacts and our business development executives. But also by the need for clients and prospects to reevaluate their marketing plans in light of rapidly changing economic conditions. At this stage, we view the slowdown as temporary. Based on conversations we're having in recent weeks and the progress being made an active pursuits, we still see the potential for a strong year of new wins in 2020, depending in part on the pace of the recovery of the general economy. In fact, two of our five new wins this year are with new clients, both of which signed in April. One of these contracts is with one of the largest global food and beverage companies, and the other is with a global consulting firm. Importantly, no significant pursuits went away during the slowdown, but rather the pace of progress on those pursuits may have slowed temporarily. Most of our pursuits have remained very active and several are in the late stage of contracting. Our sales executives and deal review team are now just as busy as they were before the pandemic surfaced. Notably, a few prospects who previously de-prioritized their marketing engineering initiatives have since called us to dust off the original proposals, now that a driving efficiency in their marketing function is suddenly in focus. We are also being called on to help solve issues for companies who lacked technology tools, or whose supply chains broke down during the pandemic. What we will be able to surpass the $159 million of new signs from 2019, probably not, but we do feel good about the quality of our pipeline, and we're certainly going to aim high. We believe the value of our solution is even more apparent in times of economic uncertainty. We expect marketers will feel more emboldened in the coming months to embrace change management to drive efficiency, visibility and cost savings, and that plays right to our strengths. If 2020 isn't a record year of new signings, 2021 certainly could be. In sum, we're looking ahead with cautious optimism and full recognition of the heightened uncertainty and volatility that we can expect to face over the next several quarters. We're working hard to intelligently manage our short-term cost structure and navigate near-term challenges without letting up on our multiyear program to further improve our operational platform, and lay an even stronger foundation for profitable future growth. I'll now turn it over to Don.

Don Pearson: Thanks Rich. Hello everyone. Our gross revenue was $261 million in the first quarter, the decrease of 2% compared with $267 million in the first quarter of 2019. Excluding currency impact, our gross revenue declined only 1%. First quarter gross profit was $63 million or a 24.3% gross margin, a 2% increase compared to $62 million or 23.2% gross margin in the first quarter of 2019. This improvement is largely attributable to the higher quality base of revenue that we have today. We continue to expect our gross margin to be around 24% in the upcoming quarters. Selling general and administrative expenses were $52 million in the first quarter, down 7% compared to the first quarter of 2019. Net loss was $2.8 million in the first quarter, the loss of $0.15 per diluted share. Adjusted net income for the first quarter was $1.9 million or $0.04 per share, compared to $1.3 million or $0.03 per share in the first quarter of last year. First quarter adjusted EBITDA was $12.9 million, the 74% increase from $7.4 million in the first quarter of 2019. This improvement is due to higher gross margin and lower SG&A. Turning to the cash flow statement to the balance sheet. Cash flow used in operating activities was $9.7 million. At March 31, our net debt position was $126 million and our total debt to trailing 12 months EBITDA ratio is defined in our credit agreements was 3.0 times. We had $41 million in available borrowing, our ABL credit facility at quarter end. And as of today, available borrowings are $56 million. As we noted in our Form 8-K last month, we are currently evaluating the possibility of securing additional financing. We have an open and active dialogue with our lenders and we're also looking at the potential to participate in the Feds Main Street Lending Program. Given the wide range of scenarios for the pace and curve of the expected economic recovery, we think it's prudent to look at opportunities for some moderate amount of additional financing to enhance our financial flexibility and liquidity, in case we determined that that would be helpful to maintaining and growing our business over the next 12 to 18 months. Now, turning to the outlook for 2020. As Rich mentioned, we don't have enough visibility to give 2020 guidance today. We know our financial results will take a step back in the second quarter. But we have reason to be optimistic for the latter half of the year and into 2021 as he discussed. This is particularly true based on the real tangible progress we have made over the last 18 months to improve the business, with better contract underwriting, higher quality revenue, lower costs to serve and a healthier balance sheet. I want to make clear that we expect any disruption to growing our adjusted EBITDA this year will be directly attributable to fluctuations in our revenue stemming from the economic environment. Our initiatives to drive improved performance through high-quality revenue, cost reductions, and operational excellence are very much on track. We are successfully building a platform for long-term profitable growth. And now we would be glad to answer your questions.

Operator: [Operator Instructions] Our first question comes from George Sutton with Craig-Hallum. Your line is now open.

George Sutton: Thanks. Rich, you mentioned that you're seeing a flurry of activity for clients around the re-launch. Can you discuss that relative to what you're generally seeing in terms of budget shifts that might have taken place during the last few months? What I mean, by budget shift is move to digital.

Rich Stoddart: Thanks for the question, George. So as where we're seeing the most activities, especially relating to clients who have physical retail environments. When those stores shut down, clearly that activity slowed down. And we are seeing stores open up, we're seeing that specifically accelerate in Asia-Pacific as well accelerating in EMEA at this moment, and more slowly or at least behind the curve a little bit in North America. We are not seeing the end the physical store by any means. And we're seeing in many cases, this is an opportunity that clients are taking to remake and refashion their retail experiences for the future. At the same time as they're thinking about how they deal with a with a digitized e-com channel as well.

George Sutton: You mentioned you've made changes in your commission program. I wondered if you could just talk about what that might mean for your go-to-market plans and ability? Obviously, you always had a fairly talented or very talented sales group. Have you lost any of that dynamic with this change? Can you just give us a sense of what that might mean?

Rich Stoddart: Yes. Thanks for that question, George. We do have an extraordinarily talented business development team. I think it's one of the crown jewels of InnerWorkings. We have lost none of those individuals. They are all signed on to continue and have all signed up to the new agreements. I think they've done an admirable job of adjusting to a work from home environment. As you know, sales as a full contact sport and we've pivoted to. We're doing assessments now virtually by Zoom call, by Skype call, by Microsoft Teams. And I'll just underscore what I said in my remarks that the pace of new activity really hasn't slowed down. It's been stretched out to some degree, but we're not seeing the conversations halt. We're just seeing a bit of uncertainty injected into clients plans, and that's again stretched up the timeline a bit.

George Sutton: Last question from me. One of your other crown jewels has always been the InnerWorkings employees account managers that are on-site with the clients. Obviously, that's gone through some adjustment. How has that changed? And has that impacted your ability to be part of those marketing programs?

Rich Stoddart: Yes. Thanks for that one. So I'm really proud of our employees, especially when we're in an on-site environment. And we're used to working hand in glove, shoulder to shoulder with our clients that is disruptive. In every single one of those cases, our clients are shut down as well. And so we move very rapidly to a work from home environment. I think the collaboration between our on-site employees and our clients is at a very high level. Thankfully, we had as an enterprise migrated to Microsoft Teams only about six months ago, and that we moved to work from home without a hitch. I'm seeing emails and messages from our clients thanking us for being there for them, being part of their families. So in some almost odd way being a part has brought us closer together with our clients. And I think everyone's looking forward to seeing each other in a in a real environment rather than a virtual environment suit.

George Sutton: Got you. Thanks for taking the questions.

Operator: Thank you. Our next question comes from Chris McGinnis with Sidoti. Your line is now open.

Chris McGinnis: Afternoon. Thanks for taking my questions and I hope all is well. Maybe is there any context you can kind of place around demand trends for Q2? And, maybe where you're at since it's a late in the quarter itself already?

Rich Stoddart: Yes. So I'd say Chris, we're not, sorry I'm getting feedback courtesy of -- Don, could you go on mute? Is that better? Yes, there we go. So Chris, we're not seeing enough specifically to have great visibility to the quarter even though it's late. Things are shifting literally day by day, moment by moment. As you saw this morning, almost 18% increase in retail sales. And yesterday you saw people talking about positive wave two. So we're dealing with it in real time. And I think our visibility is certainly less clear than we wish it to be. But I think this is where everyone sits.

Chris McGinnis: Fair enough. And then just given that, you do offer that cost savings you talked about in your opening comments. Are there new companies maybe coming in or maybe new channels that are coming into given kind of the cost savings capabilities that you offer, given the environment?

Rich Stoddart: There are new companies and new pursuits that had not been active before that we are engaged with. We've also seen as I said, some clients through had kind of phone called in a pursuit, reactivate because they need our offering. And I think we've also seen some new channels open up especially as it relates again to detail, and installations of hand sanitizer cashier barriers, floor cleaning to deal with us sort of post-COVID safe retail environment have had some significant uptake on some new offerings in that regard.

Chris McGinnis: Great. And then just one last question. Just, you've been around the industry for a long time. I was wondering your thoughts maybe on the changes given COVID? And how it relates to the business overall? And maybe any real opportunities that are coming out of COVID-19 that you see going forward?

Rich Stoddart: Well, I think we've all learned how to deal with the technology. And I guess we're learning that technology's imperfect on this call as well. But I think the ability to do our jobs in a way that's enabled by technology and increasing productivity is one thing. We're talking a lot about, what is the future of work? What is work from home look like down the road? One, I am not pining to return to two hours of commuting every day, and I suspect I'm not the only one. So I think we're seeing that. I think we are seeing people -- our clients really think about where they're getting the biggest bang for the buck in their marketing. I do think you're going to see on the back end of this a drive for technology, visibility, efficiency and brand consistency, and accelerated, because it's a moment of disruption and in moments of disruption people want to find better ways to do things. And so I do think you will see a lot more interrogation if this term the new normal, I think there's a new normal in marketing. And we'd like to think that we're leading that new normal.

Operator: Thank you. And our next question comes from Kevin Steinke with Barrington Research. Your line is now open.

Kevin Steinke: Hey, good afternoon. So, you mentioned obviously that in the near-term, some of the new business pursuits have slowed down but have not gone away. At the same time, you've seen the pipeline pick up due to the economic environment, given your value proposition. So maybe any more color on that strengthening of the longer-term pipeline? And you mentioned, potential for record new business in 2021. And how that ties to what you're seeing coming into the pipeline now in this environment?

Rich Stoddart: Well, thanks for the question, Kevin. I hope you're well also. I think what I'd say first is anytime you have a sort of a delay in a pipeline, but again, nothing's going away, you're sort of stacking things up. You're just sort of snow plowing the pipeline to later in time. And so that has the potential, it looks like we have a number of things that may materialize on a more common path, right, rather than staggered over time. So that's observation one. Observation two is that I do think, again, we are seeing clients rethink how they go to market. And that rethinking, we believe bodes well for our pipeline. We're seeing clients pick up the phone, we're seeing some significant RFP activity, you know we don't love RFPs and we're quite selective, but, when we think it's something that we can really bring a lot of value we will participate. And we're seeing new conversations open up even in a moment where we can have a face to face meeting. And then lastly, I think, again the sort of anything exposed to physical retail, that's where we're seeing a lot of activity, a few stores open, test stores, that they want to pilot, they want to think about new ways of doing things. And that has a sort of a flywheel effect that rolls to the other stores and that will happen over the next 12 to 18 months, you're going to see acceleration in the physical retail space.

Kevin Steinke: Okay, great. And then obviously, like you mentioned that things are changing day to day, a lot of volatility, but you also mentioned some green shoots emerging in the last couple of weeks and a flurry of marketing activity being planned by your clients. So maybe any thoughts about what you are seeing on that front and potential for a pick-up in the second-half or any potential sustainability in those emerging green shoots you're seeing?

Rich Stoddart: Well, it's of course hard to predict on sustainability because there again, there are so many unknowns, right? If I knew, when the vaccine would come, when the virus would be over, if there's a second wave all of those questions. We're now seeing some states with acceleration in cases, whereas others we're seeing deceleration. So all those factors are impossible, I think for anyone to predict. What I will say is we've been looking very closely at our PO data, as I talked about in my remarks. And we have seen an improvement in both dollar volume and absolute volume of POs in the last two weeks. And two weeks does not necessarily make a trend, but it is pointing in the right direction. And that gives us some sense that perhaps the bottom is Q2, and that's a leading indicator to improve demand heading into Q3. So that's why we called out that one metric is being we believe a leading indicator that at least now is potentially indicating improvement and growth from here.

Kevin Steinke: Okay. And then, lastly, you highlighted the quality of revenue and the strong gross margin in the quarter. Has there been any pick up in the pace at which you're reexamining existing contracts that might be on the lower end of profitability in terms of renegotiating or exiting and just maybe an overall update on that initiative?

Rich Stoddart: Yes. So maybe I'll have the topline and then let Don jump in. So this is I would call this not -- we're building this into the culture of the company, that quality of revenue is a part of the discipline that we expect to apply to new business to existing business. I'm really pleased with the way that's been adopted by the company. I think everyone's thinking that way. Ultimately, it shouldn't require a deal review to have to think about that. It should just be part of the way we do business. And I think we feel very good about the progress we've made. It is a continual discipline. You're seeing it show up in the quality of new business we're bringing on board. And we will continue to apply it as a metric against which we think about our business overall. But Don, you want to add any color to that.

Don Pearson: Yes. I think I'd largely just echo what you said, Rich. It's in the culture, it's in the cadence, it's in how we operate. Certainly, it's in the weekly deal review, but it's in the type of business that we're looking at now. And we continue to have our account performance reviews, and look at any accounts that are not performing up to par. But again, that's part of our cadence in our culture. So I'd say there's no acceleration or change. It's just how we operate the business today.

Kevin Steinke: Okay, great. Well, thank you for taking questions.

Rich Stoddart: Thank you.

Operator: Thank you and I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program. And you may now disconnect.