InnerWorkings: Mispriced Compounder

Charles Hoeveler presented his in-depth investment thesis on InnerWorkings (Nasdaq: INWK) at Best Ideas 2017.

InnerWorkings is an industry-leading outsourced print procurement services company with best-in-class technology and the longest operating history in the industry. INWK’s TAM is in the hundreds of billions, basically the global print marketing budgets for the Fortune 1000. The company is at least 2x larger than its nearest competitor. It has overhauled its capital allocation and operational strategy in the last three years.INWK boasts a capital-light “services” business model, converting 50-60% of adjusted EBITDA to FCF, and an enterprise client retention rate in the high-90s (in percentage terms). Charles believes the company can grow organically 8-12% for the foreseeable future while increasing EBITDA margins by ~50%, a true capital compounder in the small-cap arena (market capitalization of $550 million, EV of $640 million). The shares trade at ~8.1x/6.3x 2017/2018 EBITDA (our estimates… well above the Street), a substantial discount to intrinsic value. We see 100% upside in a base case over the next two years.

About the instructor:

Charles Hoeveler is the senior managing partner of Norwood Capital Partners, LP, a concentrated, fundamental value-based long/short investment fund. Norwood relies on primary research to build a portfolio of dominant businesses trading at a discount to intrinsic value. Charles has 15 years of experience in institutional asset management. Prior to founding Norwood in 2010, he served as senior research analyst at Lazard Asset Management. He has also held roles at Deutsche Banc Alex Brown and Security Capital Group.

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