Company Announces Exit of Print Operations and Strategic Partnership for Direct Mail Production; Launches Two New Offerings Leveraging the Unique Capabilities of the Company

Harte Hanks, Inc. (NYSE: HHS), an industry leader in data-driven, omnichannel marketing, and customer relationship solutions and logistics, has announced financial results for the first quarter ended March 31, 2020.

Recent Operational and Financial Highlights

  • First quarter GAAP net income of $5.1 million compared to GAAP net loss of $13.5 million in the year ago period, inclusive of a $11.3 million one-time tax benefit
  • First quarter EBITDA improved to ($4.0) million compared to ($9.5) million in the same period last year
  • First quarter Adjusted EBITDA improved to ($2.4) million compared to ($4.4) million in the same period last year
  • Reduced quarterly operating expenses by 35% to $45.6 million compared to $70.1 million in same period last year
  • Effective June 30th, the Company will complete the exit of its direct mail operations, complete its transition to a strategic partnership with Summit Direct Mail, and close its Jacksonville facility, resulting in $2-3 million in expected annualized savings. Harte Hanks will manage client relationships and Summit will execute campaigns

First Quarter 2020 Results

  • First quarter revenues were $40.5 million, compared to $59.2 million during the same quarter last year, an $18.7 million, or a 31.6% decline. This decline was due to lower revenue in all verticals, led by Retail and Transportation.
  • First quarter operating loss was $5.1 million, compared to an operating loss of $10.9 million in the same quarter last year. The improvement was a result of the Company’s cost reduction efforts, which lowered operating expenses by $24.5 million, including a $9.7 million or 29% reduction in labor expense.
  • First quarter Adjusted Operating Loss was $3.5 million, compared to a loss of $5.9 million in the prior year quarter. The improvement in Adjusted Operating Loss reflects substantial cost-cutting actions taken by management.
  • Income attributable to common stockholders for the first quarter was $4.3 million, or $0.67 per diluted share, including a tax benefit of $11.3 million due to changes from the CARES Act allowing NOLs generated in 2018 through 2020 to be carried back for 5 years. In the prior year period, loss attributable to common stockholders was $13.6 million, or a loss of $2.18 per basic and diluted share.

“We are navigating a rapidly changing and uncertain environment, protecting the well-being of our employees while carefully evaluating expenses and business functions to ensure that we add value to our customers. We have made significant progress in our goal to position Harte Hanks for sustainable profitability, even during these challenging times,” commented Andrew Benett, Executive Chairman and Chief Executive Officer.

“The direct impact of COVID-19 on our operations was limited in the first quarter and generally confined to the month of March. Although we expect to see a more pronounced impact in the second quarter as a result of customer delays and near-term reductions in marketing spend, we believe attractive new opportunities are emerging. Customers are seeking to outsource marketing functions, and we provide many of these functions on a cost efficient basis. We are continuing to align our expenses with expected revenue levels, which was already a top Company priority, as we continue to transform the company to compete in the new economy.”

“Our evolution to an asset light organization, with a reduced physical footprint continued in the quarter,” Mr. Benett added. “The strategic partnership with Summit, effective June 30th, will enable Harte Hanks to continue to manage and service our customers while reducing the high fixed costs required to support in-house printing operations. With expanded capabilities under this partnership, Harte Hanks is well positioned to provide a full suite of marketing solutions and more efficiently reallocate resources to our marketing services and fulfillment businesses, where we see opportunities to leverage competitive differentiators to drive growth.”

Mr. Benett concluded, “We have accelerated our efforts to streamline our operations and transition from a holding company structure by integrating our activities, and reorienting our operations, putting the customer at the center of everything we do. These changes enable us to offer valuable and differentiated customer solutions, which makes us more integral to their operations. As part of this, we are ramping efforts to launch two new products in the second half of 2020, which are expected to position us for renewed growth. A new Sampling offering will leverage our core marketing services and fulfillment capabilities, and a Marketing-as-a-Service offering will provide cost efficient outsourcing services to customers looking to reduce variable costs across their organizations. We remain focused on achieving our targeted goal of positive free cash flow in the second half of 2021. We believe we have the plan and the resources required to achieve this important milestone.”

Source: Harte Hanks Earnings Release