All Three Operating Segments Generate Positive Operating Income

Harte Hanks, Inc. (NASDAQ:HHS), a leading global customer experience company focused on bringing companies closer to customers for nearly 100 years, has announced financial results for the third quarter, the period ended September 30, 2022.

Harte Hanks CEO, Brian Linscott, commented: “Harte Hanks continues to deliver improved operating metrics, including solid year-over-year growth as new agreements offset the erosion of pandemic-related projects and legacy direct mail projects. Each of our operating segments is operating efficiently, delivering positive contribution margin, and driving consistent profitability. A higher mix of logistics revenue compressed our gross and operating margins, but we were able to generate $2.5 million from the sale of unused IP addresses, a legacy digital asset that we monetized to further bolster our cash position.”

Demand for our Fulfillment and Logistics services continues to grow, giving us increasing confidence that we will grow our top-line this year and drive significant improvements in operating income and cash generation for the full-year,” added Linscott. “Simultaneously, our sales pipeline for Marketing Services and Customer Care continues to strengthen, and we believe we are well-positioned for growth in 2023. With our restructuring fully complete, we are focused on profitable growth and continuing to provide tangible value to our clients.”

Third Quarter Financial Highlights

  • Revenues increased by 8.7% to $53.9 million, compared to $49.6 million in the same period in the prior year.
  • Fulfillment & Logistics Services grew 55.6%, offsetting declines in Marketing Services (11.6%) and Customer Care (12.1%) revenue related to sunsetting projects.
  • Operating income of $3.8 million, compared to operating income of $4.2 million in the same period in the prior year, resulted in a decrease of 10.7% due to revenue mix and increased stock compensation expense.
  • Net income of $7.2 million, inclusive of $2.5 million in other income related to the sale of unused IP addresses, was an increase compared to net income of $4.4 million in the same period in the prior year.
  • Diluted EPS delivered was $0.83 for the third quarter of 2022 vs. $0.52 for the same period in the prior year.
  • EBITDA was $4.4 million compared to $ 4.8 million in the same period in the prior year, the decrease was mainly driven by increased stock compensation costs in the current quarter.[1]

Segment Highlights

  • Customer Care, $17.4 million in revenue, 32% of total – Revenue decreased by 12.1%, or $2.4 million, from the prior year quarter, and year-over-year EBITDA decreased by 26.0% to $3.0 million from $4.0 million. Decreased revenue was driven by sunsetting of pandemic-related projects. New business wins for the quarter included:
    • An existing Fulfillment & Logistics customer in the beverage and spirits industry engaged Harte Hanks to provide call center and digital support agents with specialized foreign languages skills serving regions outside of the U.S.
    • Harte Hanks was awarded an outbound lead generation project. Our Marketing Services and Customer Care teams will partner with a hospitality client to increase its international offering and accelerate growth.
  • Fulfillment & Logistics Services, $23.5 million in revenue, 44% of total – Revenue increased by 55.6%, or $8.4 million, compared to the prior year quarter; and year-over-year EBITDA improved 64.0% to $2.8 million from $1.7 million. New business wins for the quarter included:
    • Harte Hanks Logistics recently won a “Less-than-Truckload” (LTL) contract from a national logistics provider. The win has led to further opportunities with full Truckload (TL) lanes given our ability to secure competitive pricing and unparalleled service.
    • Harte Hanks Fulfillment is partnering with a new client to execute an employee recognition program for a large retailer. The program includes digitally printing and fulfilling personalized awards/certificates along with promotional products depending on the level of achievement.
  • Marketing Services, $13.0 million in revenue, 24% of total – Revenue decreased by 11.6% compared to the prior year quarter and year-over-year EBITDA decreased 30.7% to $1.9 million from $2.8 million. Decreased revenue was mainly driven by a reduction of Direct Mail work for clients. New business wins for the quarter included:
    • As mentioned above in Customer Care, Harte Hanks was selected by a market leader in the hospitality industry to implement an international omnichannel campaign to increase its offering in the market and accelerate growth. The campaign will cover direct mail, telemarketing, email, and social channels.
    • The Marketing Services team has expanded their program footprint beyond Annual Enrollment Periods to include Affordable Care Act strategy work for a major health plan client. The expanded partnership further solidifies our position in this important category within healthcare.

[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.

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Source:  Harte Hanks Earnings Release