Harte Hanks Reports Second Quarter 2021 Financial Results
Company posts increase in revenues and positive net income.
AUSTIN, Texas, Aug. 12, 2021 /PRNewswire/ -- Harte Hanks, Inc. (OTCQX: HRTH), an industry leader in data-driven, omnichannel marketing, today announced financial results for the second quarter ended June 30, 2021.
Second Quarter Operational and Financial Highlights
- Revenues improved by 18% to $49.3 million, compared to $41.6 million in the same period last year.
- Operating income of $1.4 million, compared to operating loss of ($5.9) million in the same period last year.
- Net income of $10.6 million, compared to net loss of ($6.2) million in the same period last year.
- EBITDA improved to $2.1 million compared to ($4.8) million in the same period last year.1
- Adjusted EBITDA improved to $4.4 million compared to $480,000 in the same period last year.1
- On June 23, 2021, the Company promoted Brian Linscott to Chief Executive Officer. Mr. Linscott has served as the Company's Chief Operating Officer since January 2020.
The second quarter results by segment were as follows:
1) Customer Care, $19.2 million in revenue, 39% of total - Revenue increased by $4 million from the previous year quarter and year-over-year EBITDA improved to $3.4 million from $2.1 million. Customer Care continued to experience strong revenue tailwinds from COVID-related project work. New business wins for the quarter included a major regional sports network for streaming support and an expanded relationship with two media entertainment organizations.
2) Fulfillment & Logistics, $15.9 million in revenue, 32% of total - Revenue increased by $2.5 million compared to the previous year quarter and year-over-year EBITDA improved to $1.7 million from ($1 million). The consolidation of Fulfillment operations into the Kansas City facility resulted in increased margins for the quarter. New business wins for the quarter included product sampling campaigns for a Fortune 500 CPG company and fulfillment of branded product and apparel for a leading U.S. tech company.
3) Marketing Services, $14.2 million revenue, 29% of total - Revenue increased by $1.2 million compared to the previous year quarter and year-over-year EBITDA improved to $1.7 million from $1.2 million. New business wins for the quarter included a major global packaged goods company, a leading North American automotive parts retailer, and a national sports association.
Harte Hanks CEO, Brian Linscott, commented: "I want to thank our Harte Hanks team for delivering another strong quarter with improvement across each of our business segments. We are excited about our new business wins and continued profitable growth and remain focused on executing margin improvement initiatives and identifying cost reduction opportunities across all segments. As a result, we believe our efforts will deliver significant incremental EBITDA improvement in 2022." Mr. Linscott continued: "I am proud to work alongside our seasoned leadership team and look forward to building on the favorable progress we have made over the last two years."
Second Quarter 2021 Results
Second quarter revenues were $49.3 million, up from $41.6 million a year ago and up sequentially from $43.8 million in the first quarter of 2021. Continued growth in our Customer Care segment led our second quarter performance.
Second quarter operating income was $1.4 million, compared to an operating loss of ($5.9) million in the second quarter of 2020. The improvement resulted from the Company's revenue increases and cost reduction efforts, including a 10% reduction in advertising, selling, general and administrative expense as well as a 67% reduction in restructuring expense.
Second quarter Adjusted Operating Income2 was $3.7 million, compared to a loss of ($563,000) in the second quarter of 2020. The improvement in Adjusted Operating Income reflects improved revenue and continued cost-cutting actions taken by management. Income attributable to common stockholders for the second quarter was $9.1 million, or $1.36 and $1.27 per basic and diluted share, respectively. This includes a $10 million gain on extinguishment of debt related to forgiveness of the Company's PPP loan.
Conference Call Information
The Company will host a conference call and live webcast to discuss these results today at 4:30 p.m. EST. To access the live call, please dial (866) 548-4713 (toll free) or (323) 794-2093 and reference conference ID 6013966. The conference call will also be webcast live in the Investors Events section of the Harte Hanks website and can be accessed from the link here.
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 6013966. The replay will also be available for at least 90 days in the Investors Events section of the Harte Hanks website.
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) the outbreak of diseases, such as the COVID-19 coronavirus and new variants thereof, which has curtailed travel to and from certain countries and geographic regions, disrupted business operations and reduced consumer spending, (ii) market conditions that may adversely impact marketing expenditures and (iii) 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, 2020 which was filed on March 24, 2021. 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 Income (Loss)" as a measure useful to both management and investors in their analysis of the Company's financial results because it facilitates a period-to-period comparison of Operating Revenue and Operating Income (Loss) by excluding restructuring expense, impairment expense and stock-based compensation. The most directly comparable measure for this non-GAAP financial measure is Operating Income (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 interest expense net , income tax expense (benefit), depreciation expense, restructuring expense, impairment expense, stock-based compensation expense, 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.
EBITDA is the Company's measure of segment profitability. For additional information please see the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
About Harte Hanks:
Harte Hanks (OTCMKTS: HRTH) is a global omnichannel customer experience company. We work with clients to define, execute, and optimize their customer journey through our Marketing Services, Customer Care, and Fulfillment and Logistics offerings. From visionary thinking to tactical execution, Harte Hanks partners with some of the world's most respected brands to create unforgettable customer experiences, including Bank of America, Cisco, IBM, Pfizer, Sony and Ford, among others. Headquartered in Austin, Texas, Harte Hanks has more than 2,000 employees in offices across the Americas, Europe and Asia Pacific.
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 Relations Contact:
Sheila Ennis
Abernathy MacGregor
415-745-3294
[email protected]
| 1 |
EBITDA and Adjusted EBITDA are non-GAAP financial measures. See "Supplemental Non-GAAP Financial Measures" below. EBITDA is also the Company's measure of segment profitability. For additional information please see the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. |
| 2 |
Adjusted Operating Income is a non-GAAP financial measure. See "Supplemental Non-GAAP Financial Measures" below. |
| Harte Hanks, Inc. |
|
|
|
|
|
|
|
|
| Condensed Consolidated Statements of Operations (Unaudited) |
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Six Months Ended |
||||
| In thousands, except per share data |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
| Revenues |
|
$ 49,259 |
|
$ 41,601 |
|
$ 93,013 |
|
$ 82,123 |
| Operating expenses |
|
|
|
|
|
|
|
|
| Labor |
|
28,366 |
|
25,613 |
|
54,718 |
|
49,561 |
| Production and distribution |
|
12,460 |
|
10,518 |
|
23,729 |
|
23,764 |
| Advertising, selling, general and administrative |
|
4,591 |
|
5,093 |
|
8,712 |
|
11,041 |
| Restructuring expense |
|
1,744 |
|
5,219 |
|
3,942 |
|
6,585 |
| Depreciation expense |
|
663 |
|
1,043 |
|
1,361 |
|
2,164 |
| Total operating expenses |
|
47,824 |
|
47,486 |
|
92,462 |
|
93,115 |
| Operating Income (loss) |
|
1,435 |
|
(5,885) |
|
551 |
|
(10,992) |
| Other expenses (income), net |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
155 |
|
298 |
|
423 |
|
609 |
| Gain on extinguishment of debt (Paycheck Protection Program Term Note) |
(10,000) |
|
- |
|
(10,000) |
|
- |
|
| Other, net |
|
456 |
|
1,570 |
|
471 |
|
2,327 |
| Total other (income) expenses, net |
|
(9,389) |
|
1,868 |
|
(9,106) |
|
2,936 |
| Income (loss) before income taxes |
|
10,824 |
|
(7,753) |
|
9,657 |
|
(13,928) |
| Income tax expense (benefit) |
|
255 |
|
(1,518) |
|
846 |
|
(12,811) |
| Net income (loss) |
|
10,569 |
|
(6,235) |
|
8,811 |
|
(1,117) |
| Less Preferred Stock dividends |
|
124 |
|
123 |
|
246 |
|
247 |
| Less: Earnings attributable to participating securities |
|
1,361 |
|
- |
|
1,118 |
|
- |
| Income (loss) attributable to common stockholders |
|
$ 9,084 |
|
$ (6,358) |
|
$ 7,447 |
|
$ (1,364) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Income (loss) per common share |
|
|
|
|
|
|
|
|
| Basic |
|
$ 1.36 |
|
$ (0.99) |
|
$ 1.12 |
|
$ (0.21) |
| Diluted |
|
$ 1.27 |
|
$ (0.99) |
|
$ 1.05 |
|
$ (0.21) |
| |
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
| Basic |
|
6,686 |
|
6,453 |
|
6,669 |
|
6,386 |
| Diluted |
|
7,193 |
|
6,453 |
|
7,131 |
|
6,386 |
| Harte Hanks, Inc. |
|
|
|
|
|
|
|
|
| Reconciliations of Non-GAAP Financial Measures (Unaudited) |
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Six Months Ended |
||||
| In thousands, except per share data |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
| Net Income (loss) |
|
$ 10,569 |
|
$ (6,235) |
|
$ 8,811 |
|
$ (1,117) |
| Gain on extinguishment of debt |
|
(10,000) |
|
- |
|
(10,000) |
|
- |
| Income tax expense (benefit) |
|
255 |
|
(1,518) |
|
846 |
|
(12,811) |
| Interest expense, net |
|
155 |
|
298 |
|
423 |
|
609 |
| Other, net |
|
456 |
|
1,570 |
|
471 |
|
2,327 |
| Depreciation expense |
|
663 |
|
1,043 |
|
1,361 |
|
2,164 |
| EBITDA |
|
$ 2,098 |
|
$ (4,842) |
|
$ 1,912 |
|
$ (8,828) |
| |
|
|
|
|
|
|
|
|
| Restructuring expense |
|
1,744 |
|
5,219 |
|
3,942 |
|
6,585 |
| Stock-based compensation |
|
541 |
|
103 |
|
763 |
|
319 |
| Adjusted EBITDA |
|
$ 4,383 |
|
$ 480 |
|
$ 6,617 |
|
$ (1,924) |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
$ 1,435 |
|
$ (5,885) |
|
$ 551 |
|
$ (10,992) |
| Restructuring expense |
|
1,744 |
|
5,219 |
|
3,942 |
|
6,585 |
| Stock-based compensation |
|
541 |
|
103 |
|
763 |
|
319 |
| Adjusted operating income (loss) |
|
$ 3,720 |
|
$ (563) |
|
$ 5,256 |
|
$ (4,088) |
| Adjusted operating margin (a) |
|
7.6% |
|
(1.4)% |
|
5.7% |
|
(5.0)% |
| |
|
|
|
|
|
|
|
|
| (a) Adjusted Operating Margin equals Adjusted Operating Income (loss) divided by Revenues. |
||||||||
| Harte Hanks, Inc. |
|
|
|
|
| Condensed Consolidated Balance Sheets (Unaudited) |
|
|
|
|
| |
|
|
|
|
| In thousands, except per share data |
|
June 30, 2021 |
|
December 31, 2020 |
| |
|
|
|
|
| ASSETS |
|
|
|
|
| Current Assets |
|
|
|
|
| Cash and cash equivalents |
|
$ 19,291 |
|
$ 29,408 |
| Restricted cash |
|
3,681 |
|
4,154 |
| Accounts receivable (less allowance for doubtful accounts of $351 at |
|
47,735 |
|
41,533 |
| Contract assets |
|
338 |
|
613 |
| Prepaid expenses |
|
3,032 |
|
2,256 |
| Prepaid income tax and income tax receivable |
|
7,487 |
|
7,388 |
| Other current assets |
|
905 |
|
886 |
| Total current assets |
|
82,469 |
|
86,238 |
| |
|
|
|
|
| Net property, plant and equipment |
|
6,033 |
|
5,878 |
| Right-of-use assets |
|
22,566 |
|
24,750 |
| Other assets |
|
2,629 |
|
2,632 |
| Total assets |
|
$ 113,697 |
|
$ 119,498 |
| |
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
| Current liabilities |
|
|
|
|
| Accounts payable and accrued expenses |
|
$ 16,981 |
|
$ 16,294 |
| Accrued payroll and related expenses |
|
8,123 |
|
5,248 |
| Short-term debt |
|
- |
|
4,926 |
| Deferred revenue and customer advances |
|
5,959 |
|
4,661 |
| Customer postage and program deposits |
|
6,005 |
|
6,497 |
| Other current liabilities |
|
2,678 |
|
2,903 |
| Short-term lease liabilities |
|
6,870 |
|
6,663 |
| Total current liabilities |
|
46,616 |
|
47,192 |
| |
|
|
|
|
| Long-term debt |
|
13,100 |
|
22,174 |
| Pensions |
|
65,298 |
|
67,490 |
| Long-term lease liabilities |
|
19,085 |
|
21,295 |
| Other long-term liabilities |
|
2,434 |
|
4,747 |
| Total liabilities |
|
146,533 |
|
162,898 |
| |
|
|
|
|
| Preferred Stock |
|
9,723 |
|
9,723 |
| |
|
|
|
|
| Stockholders' deficit |
|
|
|
|
| Common stock |
|
12,121 |
|
12,121 |
| Additional paid-in capital |
|
336,938 |
|
383,043 |
| Retained earnings |
|
804,934 |
|
796,123 |
| Less treasury stock |
|
(1,132,075) |
|
(1,178,799) |
| Accumulated other comprehensive loss |
|
(64,477) |
|
(65,611) |
| Total stockholders' deficit |
|
(42,559) |
|
(53,123) |
| |
|
|
|
|
| Total liabilities, Preferred Stock and stockholders' deficit |
|
$ 113,697 |
|
$ 119,498 |
| Harte Hanks, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
| Statement of Operations by Segments (Unaudited) |
|
|
|
|
|
|
|
|
|
|||
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Quarter ended June 30, |
|
Marketing |
|
Customer |
|
Fulfillment & |
|
Restructuring |
|
Unallocated |
|
Total |
| |
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
| 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ 14,208 |
|
$ 19,191 |
|
$ 15,860 |
|
$ — |
|
$ — |
|
$ 49,259 |
| Segment Operating Expense |
|
$ 11,377 |
|
$ 15,138 |
|
$ 13,426 |
|
$ — |
|
$ 5,476 |
|
$ 45,417 |
| Restructuring |
|
$ — |
|
$ — |
|
$ — |
|
$ 1,744 |
|
$ — |
|
$ 1,744 |
| Contribution margin |
|
$ 2,831 |
|
$ 4,053 |
|
$ 2,434 |
|
$ (1,744) |
|
$ (5,476) |
|
$ 2,098 |
| Overhead Allocation |
|
$ 1,105 |
|
$ 703 |
|
$ 779 |
|
$ — |
|
$ (2,587) |
|
$ — |
| EBITDA |
|
$ 1,726 |
|
$ 3,350 |
|
$ 1,655 |
|
$ (1,744) |
|
$ (2,889) |
|
$ 2,098 |
| Depreciation |
|
$ 144 |
|
$ 203 |
|
$ 192 |
|
$ — |
|
$ 124 |
|
$ 663 |
| Operating income (loss) |
|
$ 1,582 |
|
$ 3,147 |
|
$ 1,463 |
|
$ (1,744) |
|
$ (3,013) |
|
$ 1,435 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ 12,965 |
|
$ 15,227 |
|
$ 13,409 |
|
$ — |
|
$ — |
|
$ 41,601 |
| Segment Operating Expense |
|
$ 10,479 |
|
$ 12,226 |
|
$ 13,450 |
|
$ — |
|
$ 5,069 |
|
$ 41,224 |
| Restructuring |
|
$ — |
|
$ — |
|
$ — |
|
$ 5,219 |
|
$ — |
|
$ 5,219 |
| Contribution margin |
|
$ 2,486 |
|
$ 3,001 |
|
$ (41) |
|
$ (5,219) |
|
$ (5,069) |
|
$ (4,842) |
| Overhead Allocation |
|
$ 1,286 |
|
$ 873 |
|
$ 973 |
|
$ — |
|
$ (3,132) |
|
$ — |
| EBITDA |
|
$ 1,200 |
|
$ 2,128 |
|
$ (1,014) |
|
$ (5,219) |
|
$ (1,937) |
|
$ (4,842) |
| Depreciation |
|
$ 140 |
|
$ 240 |
|
$ 495 |
|
$ — |
|
$ 168 |
|
$ 1,043 |
| Operating income (loss) |
|
$ 1,060 |
|
$ 1,888 |
|
$ (1,509) |
|
$ (5,219) |
|
$ (2,105) |
|
$ (5,885) |
SOURCE Harte Hanks, Inc.
Related Links
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article