Harte Hanks (NYSE:HHS), a leader in developing customer
relationships, experiences and defining interaction-led marketing,
today announced financial results for its fourth quarter and year
ended December 31, 2017.
"During 2017 we made progress in our strategic turnaround. We
introduced new capabilities with our data and database offerings,
improved customer satisfaction and reduced operating costs,”
commented Karen Puckett, the company’s President and Chief
Executive Officer. “Progress continued into the fourth quarter;
however, our revenue comparison was challenged due to exposure to
several large retailers.”
“In 2018, we will continue to focus on customer satisfaction and
strive to generate additional bookings from new and existing
clients, by leveraging our new capabilities, in part through our
recently announced Wipro partnership,” she continued. “We believe
our new data and database offerings are being well received in the
marketplace and we intend to continue to make investments to
support their adoption, while also focusing on cost containment
throughout our business.”
“As of year-end, we had zero debt and $8.4 million in cash.
Since then, we have further improved our financial flexibility by
increasing and extending the term of our undrawn credit facility,
entering a strategic partnership with Wipro, reinforced by their
preferred stock investment and by selling our 3Q Digital
subsidiary,” stated Jon Biro, the company’s Chief Financial
Officer. “With significant liquidity, we are now well positioned to
invest in our business and seek new business opportunities.”
Fourth Quarter Results
The following table presents financial highlights of the
company's continuing operations for the fourth quarter of 2017 and
2016.
RESULTS FROM CONTINUING
OPERATIONS |
|
(In thousands, except
per share amounts) |
Three Months Ended December 31, |
|
|
2017 |
|
|
2016 |
|
% Change |
Revenues |
$ |
99,866 |
|
$ |
110,107 |
|
(9.3 |
) |
Operating income
(loss) |
|
(33,682 |
) |
|
(34,514 |
) |
(2.4 |
) |
Adjusted Operating
Income (1) |
|
1,673 |
|
|
4,438 |
|
(62.3 |
) |
Adjusted Operating
Margin (1) |
|
1.7 |
% |
|
4.0 |
% |
|
Net income (loss) |
|
(29,341 |
) |
|
(72,891 |
) |
(59.7 |
) |
Earnings (loss) per
share |
|
(4.73 |
) |
|
(11.83 |
) |
60.0 |
|
|
|
|
|
|
|
|
|
|
Shares outstanding
(weighted-average common and common equivalent shares
outstanding) |
|
6,208 |
|
|
6,161 |
|
0.8 |
|
|
|
|
|
|
|
|
|
|
(1) |
See table
for reconciliation of GAAP results to adjusted results. |
|
|
|
Fourth quarter 2017 revenues were $99.9 million, compared to
$110.1 million during the same quarter last year, representing a
9.3% decline. The decline was due to decreases in revenue from our
retail, B2B, consumer and healthcare verticals.
Fourth quarter 2017 Adjusted Operating Income was $1.7 million,
compared to $4.4 million in the year-ago quarter. The decline was
due to lower revenues, partially offset by lower labor costs, due
to headcount reductions, and lower production costs, mostly within
the mail and logistics service area.
Operating loss in the quarter was $33.7 million and included a
goodwill impairment charge of $34.5 million. This compares to an
operating loss of $34.5 million in the year ago quarter, which
included a goodwill impairment charge of $38.7 million.
Net loss for the fourth quarter of 2017 was $29.3 million, or a
loss of $4.73 per common share, compared to net loss from
continuing operations of $72.9 million, or a loss of $11.83 per
common share in the prior year.
Full-Year Results
The following table presents financial highlights of the
company's continuing operations for 2017 and 2016.
RESULTS FROM CONTINUING
OPERATIONS |
|
(In thousands, except
per share amounts) |
Twelve Months Ended December 31, |
|
|
2017 |
|
|
2016 |
|
% Change |
Revenues |
$ |
383,906 |
|
$ |
404,412 |
|
(5.1 |
) |
Operating income
(loss) |
|
(40,865 |
) |
|
(53,837 |
) |
(24.1 |
) |
Adjusted Operating
Income (Loss) (1) |
|
(3,693 |
) |
|
(12,495 |
) |
(70.4 |
) |
Adjusted Operating
Margin (1) |
|
(1.0 |
)% |
|
(3.1 |
)% |
|
Net income (loss) |
|
(41,860 |
) |
|
(89,778 |
) |
(53.4 |
) |
Earnings (loss) per
share |
|
(6.76 |
) |
|
(14.60 |
) |
(53.7 |
) |
|
|
|
|
|
|
|
|
|
Shares outstanding
(weighted-average common and common equivalent shares
outstanding) |
|
6,192 |
|
|
6,149 |
|
0.7 |
|
|
|
|
|
|
|
|
|
|
(1) |
See table
for reconciliation of GAAP results to adjusted results. |
|
|
2017 revenues were $383.9 million, compared to $404.4 million,
in 2016, representing a 5.1% revenue decline. Revenues declined in
our retail, healthcare, and B2B verticals due to reduced mail
volumes, partially offset by an increase in agency services in our
financial vertical.
2017 Adjusted Operating Loss was $3.7 million, compared to a
$12.5 million Adjusted Operating Loss in 2016. Despite revenue
declines, Adjusted Operating Loss improved due to lower labor
expenses and production expenses driven by lower direct mail
volumes and lower employee related expenses within advertising,
selling, general and administrative expenses.
For the year, operating loss was $40.9 million and included a
goodwill impairment charge of $34.5 million, compared to $53.8 in
2016, including a $38.7 million goodwill impairment charge.
Full year, net loss from continuing operations for 2017 was
$41.9 million, or a loss of $6.76 per common share, compared to a
loss of $89.8 million or loss of $14.60 per common share for
2016.
The company will host a conference call to discuss the earnings
release today at 5:00 p.m. Eastern Time.
To access an audio webcast, please use the link available in the
Investors Events section of the Harte Hanks website. The conference
call number is (800)-239-9838 for domestic callers and +1
(323)-794-2551 for international callers. The conference ID is
8305260.
An audio replay will be available shortly after the call through
Saturday, April 7, 2018 at (844) 512-2921, or +1 (412) 317-6671,
with conference ID 8305260. The replay also will be available for
one year in the Investors section of the Harte Hanks website.
About Harte Hanks:Harte Hanks is a global
marketing services firm specializing in multi-channel marketing
solutions that connect our clients with their customers in powerful
ways. Experts in defining, executing and optimizing the customer
journey, Harte Hanks offers end-to-end marketing services including
consulting, strategic assessment, data, analytics, digital, social,
mobile, print, direct mail and contact center. From visionary
thinking to tactical execution, Harte Hanks delivers smarter
customer interactions for some of the world's leading brands. Harte
Hanks’ 5,000+ employees are located in North America, Asia-Pacific
and Europe. For more information, visit Harte Hanks at
www.hartehanks.com, call 800-456-9748, email us at
pr@hartehanks.com. Follow us on Twitter @hartehanks or Facebook at
https://www.facebook.com/HarteHanks.
As used herein, “Harte Hanks” 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.
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, (ii) the impact of economic environments and
competitive pressures on the financial condition, marketing
expenditures and activities of our clients and prospects, and (iii)
our ability to access capital markets; (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; the impact of privacy, consumer
protection and other similar regulations, including (i) our ability
to protect our facilities against security breaches and other
interruptions and to protect sensitive personal information of our
clients and their customers; and (ii) our ability to respond to
increasing concern, regulation and legal action over consumer
privacy issues, including changing restrictions on unsolicited
marketing communications and requirements for collection,
processing and use of information;() (g) fluctuations in fuel
prices, paper prices, postal rates and postal delivery schedules;
(h) the number of shares, if any, that we may repurchase in
connection with our repurchase program; (i) unanticipated
developments regarding litigation or other contingent liabilities;
(j) the ability to complete divestitures and integrate and
successfully leverage newly-acquired service offerings as
anticipated; (l) the impact of changes to the composition of
our Board of Directors and key management team, and (m) 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, 2016 and in our Quarterly Report on Form 10-Q for the
three and nine months ended September 30, 2017. 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.
Regulation G Reconciliation
This press release also contains references to the following
non-GAAP financial measures: (i) Adjusted Operating Income, which
we define as operating income before goodwill impairment charges
and share-based compensation expense; and (ii) Adjusted Operating
Margin, which we define as Adjusted Operating Income divided by
revenue. Reconciliations of these non-GAAP financial measures to
the most directly comparable GAAP financial measures are provided
in the tables below. The company evaluates its operating
performance based on several measures, including non-GAAP financial
measures. The company believes that certain non-GAAP
financial measures 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. Any supplemental financial measures
referred to are not calculated in accordance with GAAP and they
should not be considered substitutes for net income as an indicator
of operating performance.
Harte
Hanks, Inc. |
|
|
|
|
Consolidated Statements of Operations (Unaudited) |
|
|
|
|
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
In thousands, except per share data |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Operating revenues |
$ |
99,866 |
|
$ |
110,107 |
|
$ |
383,906 |
|
$ |
404,412 |
|
Operating expenses |
|
|
|
|
Labor |
|
57,780 |
|
|
60,817 |
|
|
230,280 |
|
|
245,298 |
|
Production and distribution |
|
28,965 |
|
|
32,545 |
|
|
109,090 |
|
|
117,126 |
|
Advertising, selling, general and administrative |
|
9,953 |
|
|
9,642 |
|
|
40,384 |
|
|
44,804 |
|
Impairment of goodwill |
|
34,510 |
|
|
38,669 |
|
|
34,510 |
|
|
38,669 |
|
Depreciation, software and intangible asset amortization |
|
2,340 |
|
|
2,948 |
|
|
10,507 |
|
|
12,352 |
|
Total
operating expenses |
|
133,548 |
|
|
144,621 |
|
|
424,771 |
|
|
458,249 |
|
Operating income (loss) |
|
(33,682 |
) |
|
(34,514 |
) |
|
(40,865 |
) |
|
(53,837 |
) |
Other expenses |
|
|
|
|
Interest
expense, net |
|
1,283 |
|
|
1,055 |
|
|
4,826 |
|
|
3,454 |
|
Other, net |
|
977 |
|
|
10,914 |
|
|
6,063 |
|
|
11,857 |
|
Total other expenses |
|
2,260 |
|
|
11,969 |
|
|
10,889 |
|
|
15,311 |
|
Loss
from continuing operations before income taxes |
|
(35,942 |
) |
|
(46,483 |
) |
|
(51,754 |
) |
|
(69,148 |
) |
Income tax expense (benefit) |
|
(6,601 |
) |
|
26,408 |
|
|
(9,894 |
) |
|
20,630 |
|
Loss
from continuing operations |
|
(29,341 |
) |
|
(72,891 |
) |
|
(41,860 |
) |
|
(89,778 |
) |
|
|
|
|
|
Loss
from discontinued operations, net of income taxes |
|
- |
|
|
(45,139 |
) |
|
- |
|
|
(41,159 |
) |
|
|
|
|
|
Net loss |
$ |
(29,341 |
) |
$ |
(118,030 |
) |
$ |
(41,860 |
) |
$ |
(130,937 |
) |
|
|
|
|
|
Basic earnings (loss) per common share |
|
|
|
|
Continuing operations |
$ |
(4.73 |
) |
$ |
(11.83 |
) |
$ |
(6.76 |
) |
$ |
(14.60 |
) |
Discontinued operations |
|
- |
|
|
(7.33 |
) |
|
- |
|
|
(6.69 |
) |
Basic loss per common share |
$ |
(4.73 |
) |
$ |
(19.16 |
) |
$ |
(6.76 |
) |
$ |
(21.29 |
) |
|
|
|
|
|
Weighted-average common shares outstanding |
|
6,208 |
|
|
6,161 |
|
|
6,192 |
|
|
6,149 |
|
|
|
|
|
|
Diluted earnings (loss) per common share |
|
|
|
|
Continuing operations |
$ |
(4.73 |
) |
$ |
(11.83 |
) |
$ |
(6.76 |
) |
$ |
(14.60 |
) |
Discontinued operations |
|
- |
|
|
(7.33 |
) |
|
- |
|
|
(6.69 |
) |
Diluted loss per common share |
$ |
(4.73 |
) |
$ |
(19.16 |
) |
$ |
(6.76 |
) |
$ |
(21.29 |
) |
|
|
|
|
|
Weighted-average common and common equivalent shares
outstanding... |
|
6,208 |
|
|
6,161 |
|
|
6,192 |
|
|
6,149 |
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data (Unaudited) |
December 31, |
December 31, |
|
|
In thousands |
|
2017 |
|
|
2016 |
|
|
|
Cash and cash
equivalents |
$ |
8,397 |
|
$ |
46,005 |
|
|
|
Total debt |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
Harte
Hanks, Inc. |
|
|
|
|
Revenue
Mix (Unaudited) |
|
|
|
|
Vertical
Markets - Percent of Revenue |
|
|
|
|
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
B2B |
22.0 |
% |
21.5 |
% |
21.7 |
% |
21.5 |
% |
Consumer
Brands |
21.3 |
% |
20.2 |
% |
23.0 |
% |
21.8 |
% |
Financial Services |
15.1 |
% |
13.7 |
% |
15.7 |
% |
14.1 |
% |
Healthcare |
7.0 |
% |
7.0 |
% |
6.0 |
% |
7.2 |
% |
Retail |
25.2 |
% |
29.8 |
% |
24.9 |
% |
27.2 |
% |
Transportation |
9.4 |
% |
7.8 |
% |
8.7 |
% |
8.2 |
% |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
|
|
|
|
|
Harte
Hanks, Inc. |
|
|
|
|
Reconciliations of Non-GAAP Financial Measures |
|
|
|
|
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
Operating income (loss) |
$ |
(33,682 |
) |
$ |
(34,514 |
) |
$ |
(40,865 |
) |
$ |
(53,837 |
) |
Goodwill
impairment |
|
34,510 |
|
|
38,669 |
|
|
34,510 |
|
|
38,669 |
|
Stock-based compensation |
|
845 |
|
|
283 |
|
|
2,662 |
|
|
2,673 |
|
Adjusted
operating income (loss) |
$ |
1,673 |
|
$ |
4,438 |
|
$ |
(3,693 |
) |
$ |
(12,495 |
) |
Adjusted
operating margin |
|
1.7 |
% |
|
4.0 |
% |
|
-1.0 |
% |
|
-3.1 |
% |
|
|
|
|
|
(a)
Adjusted Operating Margin equals Adjusted Operating Income divided
by Revenues. |
|
|
|
|
|
Media Contact:Scott
Hamilton303-214-5563scott.hamilton@hartehanks.com
Harte Hanks (NYSE:HHS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Harte Hanks (NYSE:HHS)
Historical Stock Chart
From Apr 2023 to Apr 2024