Harte Hanks, Inc. (NYSE: HHS), an industry leader in data-driven,
omni-channel marketing and customer relationship solutions and
logistics, today announced financial results for the first quarter
ended March 31, 2019.
Harte Hanks President Andrew Harrison stated, “In the first
quarter of 2019, on a year-over-year basis, revenue declined $22.0
million and operating expenses declined by $16.1 million. More
telling of our efforts, revenue (excluding the results of 3Q
Digital which was sold in February of 2018) declined $15.1
million. We are operating with discipline and rigor, and, as
a result, on the same basis (excluding the results of 3Q Digital),
the company reduced cash operating expenses by $14.1 million,
nearly offsetting the full scope of our revenue decline.”
“During the quarter, we also made some important operational
improvements that were necessary to address the challenges facing
Harte Hanks,” Harrison added “Notably, we strengthened our new
business pipeline and made important progress advancing the
restructuring efforts that began in the second half of 2018. In
2019 we reduced our vendor costs by more than $5 million on an
annualized basis and are in the process of advancing initiatives to
remove an additional $3 million in annualized vendor-related
savings. We will continue to aggressively pursue additional cost
cutting opportunities across the organization as the year
progresses.”
Harte Hanks Chief Financial Officer Mark Del Priore added, “We
ended the quarter with a cash position of more than $20 million.
Subsequent to the quarter end, we received a $5 million
Contingent Payment related to the Qualified Sale of 3Q Digital as
defined in the Purchase and Sale Agreement dated February 28,
2018. In addition, we have extended our revolving credit line
by 12 months, to April 2021, and expect to further bolster our
balance sheet with approximately $16 million of tax refunds that we
anticipate receiving as part of our 2018 tax filing. Based on our
current initiatives and visibility, we believe that the Company has
the balance sheet and resources needed to restore profitability and
revitalize growth.”
First Quarter 2019 Results
First quarter 2019 revenues were $59.1 million, compared to
$81.2 million during the same quarter last year, a $22.1 million,
or a 27.2% decline. This decline was due to lower revenue in our
B2B, Consumer, Financial Services, Retail and Transportation
verticals, offset by an increase in our Healthcare vertical. 3Q
Digital’s revenue, which contributed revenue of $6.9 million in the
first quarter of 2018, was absent from first quarter 2019 results.
Excluding this impact, first quarter 2019 revenues would have
declined $15.1 million or 20.4%. The 3Q Digital business was sold
in the first quarter of 2018.
First quarter operating loss was $10.9 million, compared to an
operating loss of $5.0 million in the same quarter last year. The
loss was a result of lower revenue, which was meaningfully offset
by the impact of the company’s cost reduction efforts which lowered
operating expenses, including a $12.1 million or 26.3% reduction in
labor expense and the absence of expenses related to the company’s
3Q Digital business.
First quarter 2019 Adjusted Operating Loss was $6.4 million,
compared to a loss of $4.4 million in the prior year quarter. The
decrease in Adjusted Operating Income was due to the impact of
lower revenue, partially offset by the company’s cost reduction
efforts, which reduced expenses.
Loss attributable to common stockholders for the first quarter
of 2019 was $13.6 million, or a loss of $2.18 per basic and diluted
share. In the prior year period, earnings attributable to common
stockholders was $32.6 million, or $5.24 per basic and $4.67 per
diluted per share.
Conference Call Information
The company will host a conference call to discuss these results
today at 4:30 p.m. ET. To access the live call, please dial (888)
394-8218 (toll free) or (323) 701-0225 and reference conference ID
6115880. The conference call will also be webcasted live in the
Investors Events section of the Harte Hanks website.
Following the conclusion of the live call, a telephonic replay
will be available for 48 hours by dialing (844) 512-2921 or (412)
317-6671 and using the pin number 6115880. The replay will also be
available for at least 90 days in the Investors Events section of
the Harte Hanks website.
About Harte Hanks:Harte Hanks is an industry
leader in data-driven, omni-channel marketing solutions and
logistics. The fuel that powers this Company is customer data. We
offer clients around the world the strategic guidance they need
across the customer data landscape as well as the executional
know-how in database build and management, data analytics,
data-driven creativity, digital media, direct mail, customer
contact, client fulfillment, and marketing and product logistics.
Harte Hanks has approximately 3000 employees delivering solutions
in North America, Asia-Pacific and Europe. For more information,
visit Harte Hanks at www.hartehanks.com, call 800-456-9748, or
email us at pr@hartehanks.com.
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) market conditions that may adversely impact marketing
expenditures and (ii) 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, 2018 which was filed on March 18,
2019.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:
In this press release and our related earnings conference call,
the company may use certain non-GAAP measures of financial
performance, including “Revenues without 3Q Digital” and “Adjusted
Operating Loss,” in order to provide investors with a better
understanding of operating results and underlying trends to assess
the company’s performance and liquidity. The most directly
comparable measure for these non-GAAP financial measures are
Operating Revenues and Operating Loss. The company evaluates its
operating performance based on several measures, including these
non-GAAP financial measures. The company believes that the
presentation of these 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. In
particular, the use of the non-GAAP financial measures “Revenues
without 3Q Digital” and “Adjusted Operating Loss” are useful to
both management and investors in their analysis of the company’s
Condensed Consolidated Statements of Operations (Unaudited) because
they facilitate a period to period comparison of Operating revenue
and Operating Loss by excluding significant, unusual, non-recurring
items in 2019 and 2018. However, there are limitations to the use
of these 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.
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.
Investor Contact:Hayden IRRob Fink,
646-415-8972HHS@HaydenIR.com
Source: Harte Hanks, Inc
Harte Hanks, Inc. |
|
|
|
|
Consolidated Statements of
Operations (Unaudited) |
|
|
|
|
|
|
Three Months Ended March 31, |
In
thousands, except per share data |
|
2019 |
|
2018 |
Operating revenues |
|
$ |
59,150 |
|
|
$ |
81,198 |
|
Operating expenses |
|
|
|
|
Labor |
|
|
33,815 |
|
|
|
50,656 |
|
Production and distribution |
|
|
23,000 |
|
|
|
24,149 |
|
Advertising, selling, general and administrative |
|
|
7,475 |
|
|
|
9,277 |
|
Impairment of assets and contract termination |
|
|
4,358 |
|
|
|
- |
|
Depreciation, software and intangible asset amortization |
|
|
1,442 |
|
|
|
2,151 |
|
Total operating expenses |
|
|
70,090 |
|
|
|
86,233 |
|
Operating loss |
|
|
(10,940 |
) |
|
|
(5,035 |
) |
Other expenses (income) |
|
|
|
|
Interest expense, net |
|
|
220 |
|
|
|
929 |
|
Gain on sale |
|
|
- |
|
|
|
(30,954 |
) |
Other, net |
|
|
1,577 |
|
|
|
1,141 |
|
Total other expenses (income) |
|
|
1,797 |
|
|
|
(28,884 |
) |
Income/(loss) before income
taxes |
|
|
(12,737 |
) |
|
|
23,849 |
|
Income tax expense
(benefit) |
|
|
790 |
|
|
|
(8,780 |
) |
Net Income/(loss) |
|
|
(13,527 |
) |
|
|
32,629 |
|
Less Preferred stock dividends |
|
|
122 |
|
|
|
- |
|
Income/(loss) attributable to
common stockholders |
|
$ |
(13,649 |
) |
|
$ |
32,629 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common
share |
|
|
|
|
Basic |
|
$ |
(2.18 |
) |
|
$ |
5.24 |
|
Diluted |
|
|
(2.18 |
) |
|
|
4.67 |
|
|
|
|
|
|
Weighted-average common shares
outstanding |
|
|
|
|
Basic |
|
|
6,268 |
|
|
|
6,213 |
|
Diluted |
|
|
6,268 |
|
|
|
6,990 |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(Unaudited) |
|
March 31, |
|
March 31, |
In
thousands |
|
2019 |
|
2018 |
Cash and cash equivalents |
|
$ |
20,942 |
|
|
$ |
22,846 |
|
Total debt |
|
$ |
18,700 |
|
|
$ |
- |
|
|
|
|
|
|
Harte Hanks, Inc. |
|
|
|
Revenue Mix (Unaudited) |
|
|
|
|
|
|
|
Vertical Markets - Percent of
Revenue |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2019 |
2018 |
B2B |
|
21.6 |
% |
23.3 |
% |
Consumer Brands |
|
20.6 |
% |
24.1 |
% |
Financial Services |
|
21.9 |
% |
18.0 |
% |
Healthcare |
|
7.8 |
% |
5.5 |
% |
Retail |
|
20.8 |
% |
19.3 |
% |
Transportation |
|
7.3 |
% |
9.8 |
% |
|
|
100.0 |
% |
100.0 |
% |
|
|
|
|
|
|
Harte Hanks, Inc. |
|
|
|
|
Reconciliations of Non-GAAP
Financial Measures |
|
|
|
|
|
|
Three Months Ended March 31, |
In
thousands, except per share data |
|
2019 |
|
2018 |
Net Income/(loss) |
|
$ |
(13,527 |
) |
|
$ |
32,629 |
|
Gain on sale |
|
|
- |
|
|
|
(30,954 |
) |
Income tax expenses
(benefit) |
|
|
790 |
|
|
|
(8,780 |
) |
Interest expense, net |
|
|
220 |
|
|
|
929 |
|
Other, net |
|
|
1,577 |
|
|
|
1,141 |
|
Depreciation, software and
intangible asset amortization |
|
|
1,442 |
|
|
|
2,151 |
|
Impairment of assets and
contract termination |
|
|
4,358 |
|
|
|
- |
|
Stock-based compensation |
|
|
150 |
|
|
|
551 |
|
Adjusted EBITDA (a) |
|
$ |
(4,990 |
) |
|
$ |
(2,333 |
) |
|
|
|
|
|
(a) This table will not be included in the press release |
|
|
|
|
|
|
|
|
|
Operating loss |
|
$ |
(10,940 |
) |
|
$ |
(5,035 |
) |
Impairment of assets and
contract termination |
|
|
4,358 |
|
|
|
- |
|
Stock-based compensation |
|
|
150 |
|
|
|
551 |
|
Adjusted operating loss |
|
$ |
(6,432 |
) |
|
$ |
(4,484 |
) |
Adjusted Operating Margin (a) |
|
|
-10.9 |
% |
|
|
-5.5 |
% |
|
|
|
|
|
(a) Adjusted
Operating Margin equals Adjusted Operating Income divided by
Revenues. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended Mar 31, |
|
|
2019 |
|
2018 |
Operating revenues |
|
$ |
59,150 |
|
|
$ |
81,198 |
|
Less: 3Q Digital revenues |
|
|
- |
|
|
|
6,899 |
|
Revenues without 3Q Digital |
|
$ |
59,150 |
|
|
$ |
74,299 |
|
|
|
|
|
|
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