Harte Hanks, Inc. (OTCQX: HRTH), an industry leader in CRM marketing with Marketing Services, Fulfillment & Logistics, and Customer Care segments, indicated in its earnings release that it is in a strong financial and working capital position. 

It entered 2021 with $29.4 million in cash and cash equivalents and anticipate an income tax refund of $7.5 million by year-end 2021. We continue to realize operational efficiencies and expect further cost reductions as we implement a new cloud-based ERP system. Our operating segments are well-positioned for growth and we expect the Company to be EBITDA positive for 2021.

Recent Operational and Financial Highlights

  • GAAP net income of $1.0 million for the fourth quarter compared to GAAP net loss of $2.9 million in the year-ago period.
  • $24.6 million reduction in GAAP net loss; GAAP net loss of $1.7 million for the full year compared to a GAAP net loss of $26.3 million last year, including $16.6 million of income tax benefit.
  • $10.6 million operating loss for the full year compared to an operating loss of $21.6 million last year.
  • Customer Care segment operating income increased $10.6 million year over year: operating income of $5.8 million for full year compared to operating loss of $4.8 million last year.
  • Exited unprofitable Direct Mail production facility and sold related assets for $2.0 million.

The Company structured its business into three operating segments: Marketing Services, Fulfillment & Logistics, and Customer Care. In 2020, we made significant operational progress in each of these three segments:

  • Marketing Services – focused sales on integrated CRM solutions utilizing strength in 1st party data expertise. Wins for the quarter include a global appliance manufacturer, a leader in B2B tech, and a top 3 global CPG company, all CRM services contracts.
  • Fulfillment & Logistics – Brian Linscott, COO, oversaw a facilities consolidation and ongoing implementation of a cloud-based warehouse system. In addition, the Company continues to build a full-service B2B and B2C e-commerce fulfillment offering. Wins for the quarter include a leading animal health company, and a B2C technology brand.
  • Customer Care – transformed from a call center BPO to a tech-first offering, aggregating cross-channel interactions to provide clients with a 360-degree customer profile, leveraging our CRM services from the Marketing Services business. Wins for the quarter include a leading sports league, a regional bank, and a global consulting firm.

Leadership appointments

The Company appointed the following executives to leadership positions, including:

  • Marketing Services – Joyce Karel, Chief Commercial Officer, now leads the Marketing Services business and manages all clients, sales, and marketing efforts across the enterprise. Ms. Karel held C-Suite positions at marketing agencies, including MRM/McCann, Wunderman, and Digitas.
  • Fulfillment & Logistics – Pat O’Brien, appointed to Managing Director, is an experienced and innovative operational leader with prior experience at Wayfair and Bain Consulting.
  • Customer Care – Ben Chacko, promoted to Managing Director, led a very strong 2020 performance for the Customer Care business.

“Each segment of our business sits in large addressable markets made greater by the proliferation of e-commerce, and further underscored by the behavioral shifts caused by the COVID-19 pandemic,” said Andrew Benett, Executive Chairman and Chief Executive Officer. “We developed our growth strategy to capitalize on the accelerated e-commerce transformation, and, given our unique end-to-end offering, we believe we are better positioned than our competitors in this new business environment. Our strong client relationships in high growth categories, such as Financial Services, Healthcare, CPG, and B2B tech, have room to grow, and leveraging our deep leadership bench, we will focus on adding great value to these relationships.”

“As we enter 2021, we feel confident in our turnaround as a Company. Our Customer Care business is back on track, delivering strong performance after years of decline. We have new executives leading Marketing Services and Fulfillment & Logistics, and we expect to see improved performance in 2021 in these businesses. We have the balance sheet and financial resources necessary to implement our plan,” concluded Mr. Benett.

Fourth Quarter 2020 Results

Fourth-quarter revenues were $47.1 million, compared to $52.3 million during the same quarter last year with increases in Customer Care of $5.2 million offset by a decrease in Marketing Services of $1.0 million and a decrease in Fulfillment & Logistics of $9.4 million. This decrease was partially due to the shutdown of our mail production facilities which accounted for $4.0 million of the decrease in Fulfillment & Logistics. Fourth-quarter revenues were down sequentially $627,000 compared to $47.7 million last quarter.

Fourth-quarter operating loss was $368,000, compared to an operating income of $422,000 in the same quarter last year. The Company’s cost reduction efforts included lower operating expenses by $4.5 million. Customer Care also delivered strong performance with an increase in operating income of $2.5 million compared to the same quarter last year.

Full Year 2020 Results

Revenues were $176.9 million for the full-year 2020, compared to $217.6 million for the prior year, a $40.7 million, or a 18.7% decline.

The Company has organized itself around three interconnected segments: Marketing Services, Fulfillment & Logistics, and Customer Care, and will be reporting on these three segments moving forward. By segment, 2020 revenue in Marketing Services was $57.1 million, compared to $66.2 million in 2019. This decline was largely driven by COVID related decreases in client budgets, as seen across the Company’s peer set in this category. Despite this decrease in revenue, EBITDA margin improved by 200 bps over the same period. Operating income in this segment was $5.0 million compared to $4.7 million in 2019. In Customer Care, 2020 revenue was $58.7 million versus $48.4 million in 2019. Operating income was $5.8 million, up from a loss of $4.8 million a year ago. In Fulfillment & Logistics Services, revenue declined to $61.1 million from $103.0 million in 2019, while operating loss was $2.7 million compared to a loss of $1.1 million in 2019. The decline was driven by continued underperformance in the Company’s mail business facilities, which were shut down in 2020 as well as declining volumes for existing clients.

Operating loss was $10.6 million for the full-year 2020, compared to an operating loss of $21.6 million for the prior year. The improvement was a result of the Company’s aggressive cost reduction efforts that lowered operating expenses by 21.6%, or $51.7 million.

Adjusted Operating Loss was $436,000 for the full-year 2020, compared to a loss of $8.7 million in the prior year. Loss attributable to common stockholders for the full-year 2020 was $2.2 million, or a loss of $0.34 per basic and diluted share. In 2019, net loss attributable to common stockholders was $26.8 million, or loss of $4.26 per basic share and diluted share. Net loss in 2020 included an income tax benefit of $16.6 million.

Source:  Harte Hanks Earnings Release