Net Income Improves by $5 Million with Growth Across the
Business
CHELMSFORD, Mass., May 12, 2022
/PRNewswire/ -- Harte Hanks, Inc. (NASDAQ: HHS),
a global customer experience company, today announced financial
results for the first quarter, the period ended March 31,
2022.
First Quarter Financial Highlights
- Revenues improved by 12% to $49.0
million, compared to $43.8
million in the same period in the prior year.
- Growth was broad-based, with revenue for each segment
increasing, led by 28% growth in Fulfillment & Logistics
services and 7% growth in Customer Care.
- Diluted EPS of $0.39 for the
first quarter of 2022 vs. $(0.28) for
the same period in the prior year.
- Operating income of $3.9 million,
compared to an operating loss of $0.9
million in the same period in the prior year.
- Net income of $3.3 million,
compared to a net loss of $1.8
million in the same period in the prior year.
- EBITDA improved to $4.5 million
compared to negative $0.2 million in
the same period in the prior year.1
Segment Highlights
- Customer Care, $17.8
million in revenue, 36% of total - Revenue
increased by 7.2%, or $1.2 million,
from the prior year quarter and year-over-year EBITDA improved to
$3.5 million from $2.6 million. New business wins for the quarter
included:
-
- A premium television network expanded its existing services
with Harte Hanks Customer Care, from event based to ongoing steady
state work. Consistent delivery by Harte Hanks' Philippines team led to high levels of
customer satisfaction and contributed to the client's decision to
expand their services.
- An existing Fulfillment & Logistics client experienced a
production issue with a consumer product and hired Harte Hanks to
respond to its customers concerns and facilitate returns. Within a
week's notice, Harte Hanks Customer Care hired and onboarded over
200 agents to proactively engage with our clients' consumers.
- Fulfillment & Logistics Services, $18.4 million in revenue, 38% of total -
Revenue increased by 28.4%, or $4.1
million, compared to the prior year quarter; and
year-over-year EBITDA improved to $2.4
million from $1.2 million. New
business wins for the quarter included:
-
- A large nutritional CPG partner engaged Harte Hanks to fulfill
and distribute custom sample kits of their top selling nutritional
drinks to key consumer demographics.
- A growing eCommerce alternative to Amazon hired Harte Hanks to
manage all Middle Mile freight for dozens of top selling brands.
Harte Hanks was selected to manage this multi-million-dollar
account based on our competitive pricing, technology platform, and
comprehensive customer service.
- Marketing Services, $12.9
million in revenue, 26% of total - Revenue
increased by 0.4% or $46,000 compared
to the prior year quarter and year-over-year EBITDA improved
to $1.5 million from $0.6 million. New business wins for the quarter
included:
-
- A targeted healthcare marketing platform for the Pharma/OTC
industry selected Harte Hanks and our Data Solutions team to secure
and enhance targeted lists with a wide array of health conditions
to enable our client to provide disease-state and therapy-specific
educational content that powers more productive patient-physician
dialogues at every step of the patient journey.
- A global technology manufacturer chose Harte Hanks to utilize
its proprietary knowledge to expand the audience of customers and
prospects in North America
demonstrating Intent-to-purchase. Using our expertise, Harte Hanks
identifies individuals as they search for products and services on
the internet to help manufacturers deliver "on target" product
messaging. Harte Hanks was selected because of its skill in a wide
variety of data and predictive modeling solutions which are needed
to execute targeted campaigns.
Harte Hanks CEO, Brian Linscott,
commented: "The new, streamlined Harte Hanks has developed clear
differentiators and compelling solutions that are in demand from
our top-tier customer base. The result is increased and diversified
revenue by segment and customer, and a stable platform for
long-term profitable growth. Our growing presence in the healthcare
and consumer products verticals is driving incremental
opportunities, enabling us to better utilize our existing capacity
in Kansas City and Boston. Additionally, we continue to prove our
expertise in Customer Care, as more and more customers rely on us
to deliver unique solutions for their most valuable asset, their
customers. We are increasingly confident that 2022 will be a year
of bottom-line growth for Harte Hanks."
"Our focus this year, in addition to growing our business and
expanding our relationships with our customers, is improving our
operating margins by fully taking advantage of our asset-lite
operating model and investment in technology," continued Mr.
Linscott. "The initial results validate our strategy, with
consistent and growing profitability including a $5.0 million positive swing in net income. Harte
Hanks is now built for sustainable profitability, and we are
working to leverage our platform to create lasting shareholder
value."
Consolidated First Quarter 2022 Results
First quarter revenues were $49.0 million, up 12.1% from
$43.8 million in the first quarter of
2021. All three segments delivered year-over-year growth.
First quarter operating income was $3.9
million, compared to an operating loss of $0.9 million in the first quarter of 2021.
The improvement resulted from the Company's revenue increases and
cost reduction efforts.
Net income for the quarter was $3.3
million, up from a net loss of $1.8
million in the first quarter last year. Income attributable
to common stockholders for the first quarter was $2.8 million,
or $0.40 per basic share and $0.39 per fully diluted share, compared to loss
attributable to common shareholders of $1.9
million, or $(0.28) per basic
and diluted share.
Balance Sheet and Liquidity
Harte Hanks ended the quarter with $12.2
million in cash, cash equivalents and restricted cash,
compared to $15.1 million at
December 31, 2021. At March 31, 2021, the Company had no short-term
debt, $5 million in long-term debt
and $51.3 million in outstanding
long-term pension liability. On December 31,
2021, the Company had no short-term debt, $5 million in long-term debt and $52.5 million in outstanding long-term pension
liability.
The company anticipates receiving a net operating loss (NOL) tax
refund of $7.6 million in 2022 which
will further enhance liquidity.
Conference Call Information
The Company will host a conference call and live webcast to
discuss these results today at 4:30 p.m.
EST. Interested parties may access the webcast at
https://www.webcaster4.com/Webcast/Page/2810/45439 or may access
the conference call by dialing in the
United States (844) 369-8770 or internationally (862)
298-0840.
A replay of the call can also be accessed via phone through
May 26, 2022, by dialing (877)
481-4010 from the U.S., or (919) 882-2331 from outside the U.S. The
conference call replay passcode is 45439.
About Harte Hanks:
Harte Hanks (NASDAQ: HHS) is a leading global customer
experience company whose mission is to partner with clients to
provide them with CX strategy, data-driven analytics and actionable
insights combined with seamless program execution to better
understand, attract, and engage their customers.
Using its unparalleled resources and award-winning talent in the
areas of Customer Care, Fulfillment and Logistics, and Marketing
Services, Harte Hanks has a proven track record of driving results
for some of the world's premier brands including Bank of America,
GlaxoSmithKline, Unilever, Pfizer, HBOMax, Volvo, Ford, FedEx,
Midea, Sony, and IBM among others. Headquartered in Chelmsford, Massachusetts, Harte Hanks has
over 2,500 employees in offices across the Americas, Europe and Asia
Pacific.
For more information visit hartehanks.com
As used herein, "Harte Hanks" or "the Company" refers
to Harte Hanks, Inc. and/or its applicable operating
subsidiaries, as the context may require. Harte Hanks' logo and
name are trademarks of Harte Hanks.
Cautionary Note Regarding Forward-Looking Statements:
Our press release and related earnings conference call contain
"forward-looking statements" within the meaning
of U.S. federal securities laws. All such statements are
qualified by this cautionary note, provided pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.
Statements other than historical facts are forward-looking and may
be identified by words such as "may," "will," "expects,"
"believes," "anticipates," "plans," "estimates," "seeks," "could,"
"intends," or words of similar meaning. These forward-looking
statements are based on current information, expectations and
estimates and involve risks, uncertainties, assumptions and other
factors that are difficult to predict and that could cause actual
results to vary materially from what is expressed in or indicated
by the forward-looking statements. In that event, our business,
financial condition, results of operations or liquidity could be
materially adversely affected and investors in our securities could
lose part or all of their investments. These risks, uncertainties,
assumptions and other factors include: (a) local, national and
international economic and business conditions, including (i) the
outbreak of diseases, such as the COVID-19 coronavirus, which has
curtailed travel to and from certain countries and geographic
regions, created supply chain disruption and shortages, disrupted
business operations and reduced consumer spending, (ii) market
conditions that may adversely impact marketing expenditures, (iii)
the impact of the Russia/Ukraine conflict on the global economy and our
business, including impacts from related sanctions and export
controls and (iv) the impact of economic environments and
competitive pressures on the financial condition, marketing
expenditures and activities of our clients and prospects; (b) the
demand for our products and services by clients and prospective
clients, including (i) the willingness of existing clients to
maintain or increase their spending on products and services that
are or remain profitable for us, and (ii) our ability to predict
changes in client needs and preferences; (c) economic and other
business factors that impact the industry verticals we serve,
including competition and consolidation of current and prospective
clients, vendors and partners in these verticals; (d) our ability
to manage and timely adjust our facilities, capacity, workforce and
cost structure to effectively serve our clients; (e) our ability to
improve our processes and to provide new products and services in a
timely and cost-effective manner though development, license,
partnership or acquisition; (f) our ability to protect our
facilities against security breaches and other interruptions and to
protect sensitive personal information of our clients and their
customers; (g) our ability to respond to increasing concern,
regulation and legal action over consumer privacy issues, including
changing requirements for collection, processing and use of
information; (h) the impact of privacy and other regulations,
including restrictions on unsolicited marketing communications and
other consumer protection laws; (i) fluctuations in fuel prices,
paper prices, postal rates and postal delivery schedules; (j) the
number of shares, if any, that we may repurchase in connection with
our repurchase program; (k) unanticipated developments regarding
litigation or other contingent liabilities; (l) our ability to
complete anticipated divestitures and reorganizations, including
cost-saving initiatives; (m) our ability to realize the expected
tax refunds; and (n) other factors discussed from time to time in
our filings with the Securities and Exchange Commission,
including under "Item 1A. Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2021 which was
filed on March 21, 2022. The forward-looking statements in
this press release and our related earnings conference call are
made only as of the date hereof, and we undertake no obligation to
update publicly any forward-looking statement, even if new
information becomes available or other events occur in the
future.
Supplemental Non-GAAP Financial Measures:
The Company reports its financial results in accordance with
generally accepted accounting principles ("GAAP"). However, the
Company may use certain non-GAAP measures of financial performance
in order to provide investors with a better understanding of
operating results and underlying trends to assess the Company's
performance and liquidity in this press release and our related
earnings conference call. We have presented herein a reconciliation
of these measures to the most directly comparable GAAP financial
measure.
The Company presents the non-GAAP financial measure "Adjusted
Operating Income (Loss)" as a measure useful to both management and
investors in their analysis of the Company's financial results
because it facilitates a period-to-period comparison of Operating
Revenue and Operating Income (Loss) by excluding restructuring
expense, impairment expense and stock-based compensation. The most
directly comparable measure for this non-GAAP financial measure is
Operating Income (Loss).
The Company presents the non-GAAP financial measure "EBITDA" as
a supplemental measure of operating performance in order to provide
an improved understanding of underlying performance trends. The
Company defines "Adjusted EBITDA" as earnings before interest
expense net, income tax expense (benefit) and depreciation expense.
The most directly comparable measure for EBITDA is Net Income
(Loss). We believe EBITDA is an important performance metric
because it facilitates the analysis of our results, exclusive of
certain non-cash items, including items which do not directly
correlate to our business operations; however, we urge investors to
review the reconciliation of non-GAAP EBITDA to the comparable GAAP
Net Income (Loss), which is included in this press release, and not
to rely on any single financial measure to evaluate the Company's
financial performance.
The use of non-GAAP measures do not serve as a substitute and
should not be construed as a substitute for GAAP performance but
should provide supplemental information concerning our performance
that our investors and we find useful. The Company evaluates its
operating performance based on several measures, including this
non-GAAP financial measures. The Company believes that the
presentation of this non-GAAP financial measures in this press
release and earnings conference call presentations are useful
supplemental financial measures of operating performance for
investors because they facilitate investors' ability to evaluate
the operational strength of the Company's business. However, there
are limitations to the use of this non-GAAP measures, including
that they may not be calculated the same by other companies in our
industry limiting their use as a tool to compare results. Any
supplemental non-GAAP financial measures referred to herein are not
calculated in accordance with GAAP and they should not be
considered in isolation or as substitutes for the most comparable
GAAP financial measures.
EBITDA is the Company's measure of segment
profitability.
Investor Relations Contact:
Rob Fink
FNK IR
HHS@fnkir.com
646-809-4048
1
|
EBITDA is a non-GAAP
financial measure. See "Supplemental Non-GAAP Financial
Measures" below. EBITDA is also the Company's measure of
segment profitability.
|
Harte Hanks,
Inc
|
|
|
|
|
Consolidated
Statements of Operations (Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
In thousands, except
per share data
|
|
2022
|
|
2021
|
Revenues
|
|
$
49,062
|
|
$ 43,754
|
Operating
expenses
|
|
|
|
|
Labor
|
|
25,945
|
|
26,352
|
Production and
distribution
|
|
13,991
|
|
11,269
|
Advertising, selling,
general and administrative
|
|
4,633
|
|
4,121
|
Restructuring
expense
|
|
—
|
|
2,198
|
Depreciation
expense
|
|
599
|
|
698
|
Total operating
expenses
|
|
45,168
|
|
44,638
|
Operating income
(loss)
|
|
3,894
|
|
(884)
|
Other income
|
|
|
|
|
Interest expense,
net
|
|
134
|
|
268
|
Other (income) expense,
net
|
|
(39)
|
|
15
|
Total other
income
|
|
95
|
|
283
|
Income (Loss) before
income taxes
|
|
3,799
|
|
(1,167)
|
Income tax
expense
|
|
454
|
|
591
|
Net income
(loss)
|
|
3,345
|
|
(1,758)
|
Less: Preferred stock
dividends
|
|
122
|
|
122
|
Less: Earnings
attributable to participating securities
|
|
404
|
|
-
|
Income (loss)
attributable to common stockholders
|
|
$
2,819
|
|
$ (1,880)
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) per
common share
|
|
|
|
|
Basic
|
|
$
0.40
|
|
$
(0.28)
|
Diluted
|
|
$
0.39
|
|
$
(0.28)
|
|
|
|
|
|
Weighted-average common
shares outstanding
|
|
|
|
|
Basic
|
|
6,991
|
|
6,651
|
Diluted
|
|
7,286
|
|
6,651
|
|
|
|
|
|
Harte Hanks,
Inc
|
|
|
|
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
|
|
|
|
|
|
|
|
In thousands, except
per share data
|
|
March 31,
2022
|
|
December 31,
2021
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
9,652
|
|
$
11,911
|
Restricted
cash
|
|
2,559
|
|
3,222
|
Accounts receivable
(less allowance for doubtful accounts of $314 at
March 31, 2022 and $266 at December 31, 2021)
|
|
49,034
|
|
41,051
|
Unbilled accounts
receivable
|
|
7,067
|
|
8,134
|
Contract
assets
|
|
908
|
|
622
|
Prepaid
expenses
|
|
2,614
|
|
1,948
|
Prepaid income tax and
income tax receivable
|
|
6,791
|
|
7,456
|
Other current
assets
|
|
1,229
|
|
1,031
|
Total current
assets
|
|
79,854
|
|
75,375
|
|
|
|
|
|
Net property, plant and
equipment
|
|
8,577
|
|
7,747
|
Right-of-use
assets
|
|
20,298
|
|
22,142
|
Other assets
|
|
2,385
|
|
2,597
|
Total
assets
|
|
$
111,114
|
|
$
107,861
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
19,647
|
|
$
16,132
|
Accrued payroll and
related expenses
|
|
4,274
|
|
7,028
|
Deferred revenue and
customer advances
|
|
5,821
|
|
3,942
|
Customer postage and
program deposits
|
|
6,167
|
|
6,496
|
Other current
liabilities
|
|
2,903
|
|
2,291
|
Short-term lease
liabilities
|
|
5,792
|
|
6,553
|
Total current
liabilities
|
|
44,604
|
|
42,442
|
|
|
|
|
|
Long-term
debt
|
|
5,000
|
|
5,000
|
Pensions liabilities -
Qualified plans
|
|
26,476
|
|
27,359
|
Pension liabilities -
Nonqualified plan
|
|
24,867
|
|
25,140
|
Long-term lease
liabilities
|
|
17,728
|
|
19,215
|
Other long-term
liabilities
|
|
3,287
|
|
3,697
|
Total
liabilities
|
|
121,962
|
|
122,853
|
|
|
|
|
|
Preferred
Stock
|
|
9,723
|
|
9,723
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
Common stock
|
|
12,121
|
|
12,121
|
Additional paid-in
capital
|
|
278,432
|
|
290,711
|
Retained
earnings
|
|
814,439
|
|
811,094
|
Less treasury
stock
|
|
(1,072,741)
|
|
(1,085,313)
|
Accumulated other
comprehensive loss
|
|
(52,822)
|
|
(53,328)
|
Total stockholders'
deficit
|
|
(20,571)
|
|
(24,715)
|
|
|
|
|
|
Total liabilities,
Preferred Stock and stockholders' deficit
|
|
$
111,114
|
|
$
107,861
|
|
|
|
|
|
Harte Hanks,
Inc
|
|
|
|
|
Reconciliations of
Non-GAAP Financial Measures (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
In thousands, except
per share data
|
|
2022
|
|
2021
|
Net Income
(loss)
|
|
$
3,345
|
|
$ (1,758)
|
Income tax
expense
|
|
454
|
|
591
|
Interest expense,
net
|
|
134
|
|
268
|
Other (income) expense,
net
|
|
(39)
|
|
15
|
Depreciation
expense
|
|
599
|
|
698
|
EBITDA
|
|
$
4,493
|
|
$
(186)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
$
3,894
|
|
$
(884)
|
Restructuring
expense
|
|
-
|
|
2,198
|
Stock-based
compensation
|
|
288
|
|
222
|
Adjusted operating
income
|
|
$
4,182
|
|
$
1,536
|
Adjusted operating
margin (a)
|
|
8.5%
|
|
3.5%
|
|
|
|
|
|
(a) Adjusted Operating
Margin equals Adjusted Operating Income (loss) divided by
Revenues
|
|
|
|
|
|
Harte Hanks,
Inc
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Operations by Segments (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March
31, 2022
|
|
Marketing
Services
|
|
Customer
Care
|
|
Fulfillment
&
Logistics
Services
|
|
Restructuring
|
|
Unallocated
Corporate
|
|
Total
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ 12,924
|
|
$ 17,742
|
|
$
18,396
|
|
$
—
|
|
$
—
|
|
$
49,062
|
Segment Operating
Expense
|
|
$ 10,350
|
|
$ 13,560
|
|
$
15,159
|
|
$
—
|
|
$
5,500
|
|
$
44,569
|
Restructuring
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
—
|
Contribution margin
(loss)
|
|
$
2,574
|
|
$
4,182
|
|
$
3,237
|
|
$
—
|
|
$
(5,500)
|
|
$ 4,493
|
Shared
Services
|
|
$
1,113
|
|
$
718
|
|
$
851
|
|
$
—
|
|
$
(2,682)
|
|
$
—
|
EBITDA
|
|
$
1,461
|
|
$
3,464
|
|
$
2,386
|
|
$
—
|
|
$
(2,818)
|
|
$ 4,493
|
Depreciation
|
|
$
102
|
|
$
202
|
|
$
202
|
|
$
—
|
|
$
93
|
|
$
599
|
Operating income
(loss)
|
|
$
1,359
|
|
$
3,262
|
|
$
2,184
|
|
$
—
|
|
$
(2,911)
|
|
$ 3,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March
31, 2021
|
|
Marketing
Services
|
|
Customer
Care
|
|
Fulfillment
&
Logistics
Services
|
|
Restructuring
|
|
Unallocated
Corporate
|
|
Total
|
2021
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
Revenues
|
|
$ 12,878
|
|
$ 16,544
|
|
$
14,332
|
|
$
—
|
|
$
—
|
|
$
43,754
|
Segment Operating
Expense
|
|
$ 11,041
|
|
$ 13,074
|
|
$
12,174
|
|
$
—
|
|
$
5,453
|
|
$
41,742
|
Restructuring
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
2,198
|
|
$
—
|
|
$ 2,198
|
Contribution margin
(loss)
|
|
$
1,837
|
|
$
3,470
|
|
$
2,158
|
|
$
(2,198)
|
|
$
(5,453)
|
|
$
(186)
|
Shared
Services
|
|
$
1,255
|
|
$
870
|
|
$
941
|
|
$
—
|
|
$
(3,066)
|
|
$
—
|
EBITDA
|
|
$
582
|
|
$
2,600
|
|
$
1,217
|
|
$
(2,198)
|
|
$
(2,387)
|
|
$
(186)
|
Depreciation
|
|
$
151
|
|
$
254
|
|
$
167
|
|
$
—
|
|
$
126
|
|
$
698
|
Operating income
(loss)
|
|
$
431
|
|
$
2,346
|
|
$
1,050
|
|
$
(2,198)
|
|
$
(2,513)
|
|
$
(884)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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multimedia:https://www.prnewswire.com/news-releases/harte-hanks-generates-12-revenue-growth-delivers-0-39-in-eps-for-the-first-quarter-of-2022--301545501.html
SOURCE Harte Hanks, Inc.