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 second quarter
ended June 30, 2019.
Recent Operational and Financial Highlights
- The receipt of $15.9 million in aggregate tax refunds during
the second quarter increased cash to $39 million as of June 30,
2019, which will further advance business improvement
initiatives;
- Significant progress toward the goal of achieving positive
adjusted EBITDA on a quarterly basis later this year;
- Doubling of new business awarded through Q2 2019 of $6.2
million compared to the same period last year;
- Second quarter net loss of ($3.8) million narrowed from ($6.7)
million in the same period last year;
- Second quarter adjusted EBITDA improved to ($1.8) million from
($3.7) million in the same period last year despite revenue
declines of $14.9 million.
Harte Hanks President Andrew Harrison stated, “The strategic
transition to improve Harte Hanks’ financial performance and
streamline the cost structure to align expenses with revenues is
taking hold. In the second quarter of 2019, on a year-over-year
basis, we reduced our operating expenses by $14.6 million, which
nearly offset the $14.9 million revenue decline. We are operating
with discipline and rigor to stabilize our business. Based on
our current plan, positive adjusted EBITDA is an attainable goal as
early as the fourth quarter of this year, and we expect to generate
positive adjusted EBITDA for the full year of 2020.”
“We also have begun to convert our growing pipeline of new
business opportunities into revenue,” Harrison added. “We have won
business with new customers in the first half that will generate
approximately $6.2 million in revenue over the course of the year,
double what we generated last year from new customers. In the first
half of the year, we recognized $1.7 million in revenue from new
customers compared to $700,000 in the first half of 2018.”
“During the quarter, we received $15.9 million in aggregate tax
refunds and ended the quarter with a cash position of $39 million,”
Harrison concluded. “The receipt of these funds will allow the
Company to advance further cost-cutting and business improvement
initiatives that are needed to restore profitability and revitalize
long-term growth.”
Second Quarter 2019 Results
Second quarter 2019 revenues were $54.7 million, compared to
$69.6 million during the same quarter last year, a $14.9 million,
or a 21.5% decline. This decline was due to lower revenue in the
B2B, Consumer, Financial Services, Retail and Transportation
verticals, offset by an increase in the Healthcare vertical.
Second quarter operating loss was $6.6 million, compared to an
operating loss of $6.3 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 $7.9 million or 20% reduction in
labor expense.
Second quarter 2019 Adjusted Operating Loss was $3.1 million,
compared to a loss of $5.6 million in the prior year quarter. The
decrease in Adjusted Operating Loss was related to reduced
production and distribution expense associated partially with the
Company’s cost reduction efforts.
Loss attributable to common stockholders for the second quarter
of 2019 was $3.9 million, or a loss of $0.63 per basic and diluted
share. In the prior year period, earnings attributable to common
stockholders was $6.9 million, or $1.10 per basic and diluted
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
5687186. 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 5687186. 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:
The Company reports its financial results in accordance with
generally accepted accounting principles (“GAAP”). In this press
release and our related earnings conference call, 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. 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 Loss” as a measure useful to both management and
investors in their analysis of the Company’s Condensed Consolidated
Statements of Operations (Unaudited) because it facilitates a
period to period comparison of Operating Revenue and Operating Loss
by excluding significant, unusual, non-recurring items in 2019 and
2018. The most directly comparable measure for this non-GAAP
financial measure is Operating Loss.
The Company also presents the non-GAAP financial measure
“Adjusted 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 gain on sale, interest expense
(benefit), income tax expense (benefit), depreciation and
amortization expense, restructuring expense, stock-based
compensation expenses, and other non-cash expenses. The most
directly comparable measure for Adjusted EBITDA is Net
Income/(Loss). We believe Adjusted 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 Adjusted
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 foregoing measures do not serve as a substitute and should
not be construed as a substitute for GAAP performance, but provide
supplemental information concerning our performance that our
investors and we find useful. 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. 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:FNK IRRob
Fink646-809-4048Rob@fnkir.com
Source: Harte Hanks, Inc
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Harte Hanks, Inc. |
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|
Condensed Consolidated Statements of Operations (Unaudited) |
|
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|
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|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
In thousands, except per share data |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Operating revenues |
|
$ |
54,686 |
|
|
$ |
69,633 |
|
|
$ |
113,836 |
|
|
$ |
150,829 |
|
Operating expenses |
|
|
|
|
|
|
|
|
Labor |
|
|
31,778 |
|
|
|
39,725 |
|
|
|
65,445 |
|
|
|
90,381 |
|
Production and distribution |
|
|
17,816 |
|
|
|
26,358 |
|
|
|
40,816 |
|
|
|
50,506 |
|
Advertising, selling, general and administrative |
|
|
7,127 |
|
|
|
7,955 |
|
|
|
14,602 |
|
|
|
17,232 |
|
Restructuring expense |
|
|
3,281 |
|
|
|
- |
|
|
|
7,787 |
|
|
|
Depreciation, software and intangible asset amortization |
|
|
1,297 |
|
|
|
1,903 |
|
|
|
2,740 |
|
|
|
4,054 |
|
Total operating expenses |
|
|
61,299 |
|
|
|
75,941 |
|
|
|
131,390 |
|
|
|
162,173 |
|
Operating loss |
|
|
(6,613 |
) |
|
|
(6,308 |
) |
|
|
(17,554 |
) |
|
|
(11,344 |
) |
Other expenses (income) |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
388 |
|
|
|
183 |
|
|
|
609 |
|
|
|
1,112 |
|
Gain on sale from 3Q |
|
|
(5,000 |
) |
|
|
- |
|
|
|
(5,000 |
) |
|
|
(30,954 |
) |
Other, net |
|
|
1,854 |
|
|
|
827 |
|
|
|
3,429 |
|
|
|
1,969 |
|
Total other expenses (income) |
|
|
(2,758 |
) |
|
|
1,010 |
|
|
|
(962 |
) |
|
|
(27,873 |
) |
Loss before income taxes |
|
|
(3,855 |
) |
|
|
(7,318 |
) |
|
|
(16,592 |
) |
|
|
16,529 |
|
Income tax expense (benefit) |
|
|
(52 |
) |
|
|
(584 |
) |
|
|
738 |
|
|
|
(9,364 |
) |
Net Income/(loss) |
|
|
(3,803 |
) |
|
|
(6,734 |
) |
|
|
(17,330 |
) |
|
|
25,893 |
|
Less: Earnings attributable to participating securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,059 |
|
Less Preferred stock dividends |
|
|
124 |
|
|
|
124 |
|
|
|
246 |
|
|
|
207 |
|
Income/(loss) attributable to common stockholders |
|
$ |
(3,927 |
) |
|
$ |
(6,858 |
) |
|
$ |
(17,576 |
) |
|
$ |
22,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.63 |
) |
|
$ |
(1.10 |
) |
|
$ |
(2.80 |
) |
|
$ |
3.64 |
|
Diluted |
|
$ |
(0.63 |
) |
|
$ |
(1.10 |
) |
|
$ |
(2.80 |
) |
|
$ |
3.62 |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
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|
|
Basic |
|
|
6,272 |
|
|
|
6,226 |
|
|
|
6,270 |
|
|
|
6,220 |
|
Diluted |
|
|
6,272 |
|
|
|
6,226 |
|
|
|
6,270 |
|
|
|
6,250 |
|
|
|
|
|
|
|
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|
|
|
|
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|
Balance Sheet Data (Unaudited) |
|
June 30, |
|
December 31, |
|
|
|
|
In thousands |
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
39,000 |
|
|
$ |
20,882 |
|
|
|
|
|
Total debt |
|
$ |
18,700 |
|
|
$ |
14,200 |
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
Harte Hanks, Inc. |
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|
Revenue Mix (Unaudited) |
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|
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|
|
|
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|
|
|
|
Vertical Markets - Percent of Revenue |
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
|
2019 |
2018 |
|
2019 |
2018 |
B2B |
|
20.3 |
% |
21.3 |
% |
|
21.0 |
% |
22.2 |
% |
Consumer Brands |
|
21.7 |
% |
22.7 |
% |
|
21.1 |
% |
23.3 |
% |
Financial Services |
|
22.4 |
% |
20.7 |
% |
|
22.2 |
% |
19.2 |
% |
Healthcare |
|
9.3 |
% |
5.9 |
% |
|
8.5 |
% |
5.6 |
% |
Retail |
|
19.5 |
% |
22.7 |
% |
|
20.2 |
% |
21.4 |
% |
Transportation |
|
6.9 |
% |
6.7 |
% |
|
7.1 |
% |
8.3 |
% |
|
|
100.0 |
% |
100.0 |
% |
|
100.0 |
% |
100.0 |
% |
|
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|
|
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|
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|
Harte Hanks, Inc. |
|
|
|
|
|
|
|
|
Reconciliations of Non-GAAP Financial Measures (Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
In thousands, except per share data |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net Income/(loss) |
|
$ |
(3,803 |
) |
|
$ |
(6,734 |
) |
|
$ |
(17,330 |
) |
|
$ |
25,893 |
|
Gain on sale |
|
|
(5,000 |
) |
|
|
- |
|
|
|
(5,000 |
) |
|
|
(30,954 |
) |
Income tax expenses (benefit) |
|
|
(52 |
) |
|
|
(584 |
) |
|
|
738 |
|
|
|
(9,364 |
) |
Interest expense, net |
|
|
388 |
|
|
|
183 |
|
|
|
609 |
|
|
|
1,112 |
|
Other, net |
|
|
1,854 |
|
|
|
827 |
|
|
|
3,429 |
|
|
|
1,969 |
|
Depreciation, software and intangible asset amortization |
|
|
1,297 |
|
|
|
1,903 |
|
|
|
2,740 |
|
|
|
4,054 |
|
Restructuring expense |
|
|
3,281 |
|
|
|
- |
|
|
|
7,787 |
|
|
|
- |
|
Stock-based compensation |
|
|
269 |
|
|
|
722 |
|
|
|
424 |
|
|
|
1,274 |
|
Adjusted EBITDA |
|
$ |
(1,766 |
) |
|
$ |
(3,683 |
) |
|
$ |
(6,603 |
) |
|
$ |
(6,016 |
) |
|
|
|
|
|
|
|
|
|
Operating loss |
|
$ |
(6,613 |
) |
|
$ |
(6,308 |
) |
|
$ |
(17,554 |
) |
|
$ |
(11,344 |
) |
Restructuring expense |
|
|
3,281 |
|
|
|
- |
|
|
|
7,787 |
|
|
|
- |
|
Stock-based compensation |
|
|
269 |
|
|
|
722 |
|
|
|
424 |
|
|
|
1,274 |
|
Adjusted operating loss |
|
$ |
(3,063 |
) |
|
$ |
(5,586 |
) |
|
$ |
(9,343 |
) |
|
$ |
(10,070 |
) |
Adjusted operating margin (a) |
|
|
-5.6 |
% |
|
|
-8.0 |
% |
|
|
-8.2 |
% |
|
|
-6.7 |
% |
|
|
|
|
|
|
|
|
|
(a) Adjusted
Operating Margin equals Adjusted Operating Loss divided by
Revenues. |
|
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