In a Nutshell

*Gross revenue was up, but the firm reported a net loss and lower EBITDA for the quarter ending March 31.

*Decreased spend from a major client prompted InnerWorkings to lower its anticipated sales tally for 2018.

Top 40 distributor InnerWorkings (asi/168860) reported a net loss of $1.7 million, or $0.03 per diluted share, during the first quarter of 2018, the Chicago-based company recently announced. EBITDA was also down during the three-month period ending March 31, dropping from $12.5 million in Q1 2017 to $7.4 million during this year’s first quarter.

Looking ahead, InnerWorkings lowered its gross revenue guidance range for 2018 from a previous $1.195 billion to $1.230 billion, to $1.155 billion to $1.190 billion. “This decrease in guidance is mainly due to a significant reduction in marketing spend from one of the company’s largest clients,” InnerWorkings said in a statement.

Meanwhile, InnerWorkings also anticipates that 2018 profitablity will be lower than in 2017, due to growth in SG&A expenses. “Following completion of a cost reduction and business improvement plan currently being developed, the company expects to provide specific 2018 guidance for non-GAAP adjusted EBITDA and non-GAAP earnings per diluted share,” InnerWorkings said.

The $1.7 million Q1 loss this year compared to $5.7 million in net income, or $0.10 per diluted share, in the first quarter of 2017. Still, there were bright spots for InnerWorkings in the first quarter. Gross revenue was $274.5 million, an increase of 4% compared to the first quarter of 2017. InnerWorkings also said that it has been awarded additional work from new and existing clients so far during 2018, which collectively is expected to exceed $70 million of annual revenue at full run-rate.

“We continue to grow our gross and net revenue and win additional work, but our growth in operating expense is unacceptable in my view and we are taking the necessary actions to put us on a path to maximize shareholder value,” said CEO Rich Stoddart.

Rich Stoddart recently became president and CEO of InnerWorkings.

This spring, InnerWorkings delayed the release of its first quarter results after discovering that financial statements it had issued during the previous three years contained errors. An interim chief financial officer, Chip Hodgkins, is in place at InnerWorkings following the December 2017 departure of former CFO Jeffrey P. Pritchett, who company executives said departed following a personal conduct issue.

Interim CFO Chip Hodgkins.

“Our first quarter financial results reflect initial investments we are making to drive operational improvements, but also the need for aggressive actions to lower our SG&A expenses,” said Hodgkins. “We are in the final stages of developing a plan and leveraging third-party expertise to reduce our cost structure while driving returns for our clients and our shareholders.”

With estimated 2017 North American promotional product revenue of $147 million, InnerWorkings ranked 15^th on Counselor’s just-released list of the largest distributors in the industry.