Harte Hanks, Inc. (NYSE: HHS), an industry leader in data-driven,
omni-channel marketing solutions and logistics, today announced
financial results for the fourth quarter and full year ended
December 31, 2018.
Bant Breen, Harte Hanks’ Chief Executive Officer stated, “The
strategic transition that began in the second half of 2018 to
improve operational and financial performance accelerated in
January when the new executive leadership team joined the Company.
The actions that were implemented by the board of directors in the
latter part of 2018 to reduce spending, streamline operations and
refocus attention on our core competencies were an important first
step in stabilizing the business.”
“In my first 60 days as CEO I visited with the Harte Hanks team
in our offices across the country and met with many of our clients.
We are known for our innovative strategies, our tried and tested
best practices and commitment to real results, our creative problem
solving and having the talent that rolls up our sleeves and truly
can make things happen.”
“We believe we are at one of the most exciting inflection points
for how customer data is utilized from a marketing perspective.
With the perfect storm of privacy regulation, technological
possibility with machine-learning and cloud-based infrastructure,
Harte Hanks is in a powerful position to assist companies’
transition into this opt-in, omni-channel world where direct
customer relationships and first-party data matter more than ever.
We have taken steps to reposition our core service lines to the
market within the context of our data capabilities and we have
successfully begun building a pipeline of new opportunities.”
Breen concluded, “During and subsequent to the fourth quarter,
actions to reduce expenses and strengthen our balance sheet were
initiated and we ended 2018 with a cash position of more than $20
million. We believe there will be meaningful opportunities to
further streamline our organization going forward and as we advance
efforts to backfill our pipeline with new data driven
opportunities, we hope to offset the potential of future revenue
declines. Based on our current visibility, I believe that we
have the necessary runway to generate positive quarterly EBITDA
later this year.”
The following table presents comparative financial highlights of
the company's operations for the fourth quarters and full years
ended December 31, 2018 and 2017.
(In thousands, except per share data) |
|
For the Three Months EndedDecember
31, |
|
For the Years EndedDecember
31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
|
%Change |
|
2018 |
|
2017 |
|
%Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
$ |
70,209 |
|
|
$ |
99,866 |
|
|
(29.7 |
) |
|
$ |
284,628 |
|
|
$ |
383,906 |
|
|
(26.0 |
) |
Revenues without 3Q
Digital (1) |
|
$ |
70,209 |
|
|
$ |
90,195 |
|
|
(22.2 |
) |
|
$ |
277,729 |
|
|
$ |
347,832 |
|
|
(20.2 |
) |
Operating Income
(Loss) |
|
$ |
(4,338 |
) |
|
$ |
(33,682 |
) |
|
NM |
|
|
$ |
(26,034 |
) |
|
$ |
(40,865 |
) |
|
NM |
|
Adjusted Operating
Income / (Loss) (1) |
|
$ |
(3,145 |
) |
|
$ |
1,673 |
|
|
NM |
|
|
$ |
(21,727 |
) |
|
$ |
(3,693 |
) |
|
NM |
|
Income / (Loss)
attributable to common stockholders |
|
$ |
1,305 |
|
|
$ |
(29,341 |
) |
|
NM |
|
|
$ |
14,891 |
|
|
$ |
(41,860 |
) |
|
NM |
|
Basic Income (Loss) per
common share |
|
$ |
0.21 |
|
|
$ |
(4.73 |
) |
|
NM |
|
|
$ |
2.39 |
|
|
$ |
(6.76 |
) |
|
NM |
|
Diluted Income (Loss)
per common share |
|
$ |
0.21 |
|
|
$ |
(4.73 |
) |
|
NM |
|
|
$ |
2.38 |
|
|
$ |
(6.76 |
) |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The company’s 3Q Digital, Inc. subsidiary was sold on
February 28, 2018. Revenues without 3Q Digital and Adjusted
Operating Income/(Loss) are each non-GAAP financial measures. See
the attached table for reconciliation of these non-GAAP financial
measures to the most comparable GAAP measures.
NM – Not meaningful
Fourth Quarter 2018 Results
Fourth quarter 2018 revenues were $70.2 million, compared to
$99.9 million during the same quarter last year, a $29.7 million,
or a 29.7% 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 $9.7 million in the
fourth quarter of 2017, was absent from fourth quarter 2018
results. Excluding this impact, fourth quarter 2018 revenues would
have declined $20.0 million or 22.2%. The 3Q Digital business was
sold in the first quarter of 2018.
Fourth quarter operating loss was $4.3 million, compared to an
operating loss of $33.7 million in the same quarter last year. The
loss was due to lower revenue, which was partially offset by the
impact of the company’s cost reduction efforts which lowered
operating expenses, including a $12.9 million or 25.4% reduction in
labor expense and the absence of expenses related to the company’s
3Q Digital business.
Fourth quarter 2018 Adjusted Operating Income was a loss of $3.1
million, compared to income of $1.7 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.
Income attributable to common stockholders for the fourth
quarter of 2018 was $1.3 million, or Basic and Diluted Loss per
common share of $0.21. In the prior year period, the loss
attributable to common stockholders was $29.3 million, or Basic and
Diluted Loss per common share of $4.73.
Full Year 2018 Results
Full year 2018 revenues were $284.6 million, compared to $383.9
million for the full year 2017, a $99.3 million, or a 25.9%,
decline. This decline was due to lower revenues in all industry
verticals, led by Consumer Brands and Retail, along with the
absence of 3Q Digital revenue which contributed $6.9 million in
2018 compared to $36.0 million in 2017. Excluding this impact, full
year 2018 revenues would have declined $70.1 million or 20.2%. The
3Q Digital business was sold in the first quarter of 2018.
Full year 2018 operating loss was $26.0 million, compared to an
operating loss of $40.9 million in 2017. The loss was due to lower
revenues of $99.3 million, offset by a larger $114.1 million
decrease in operating expenses. The sale of 3Q Digital, which
accounted for a $26.8 million reduction in total operating expense,
partially contributed to the $114.1 million year-over-year
decline.
Full year 2018 Adjusted Operating Income was a loss of $21.7
million, compared to a loss of $3.7 million in 2017. 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.
Income attributable to common stockholders for the full year
2018 was $14.9 million, or Basic and Diluted income of $2.39 and
$2.38 per common share. This compares to a loss attributable to
common stockholders of $41.9 million, or Basic and Diluted Loss per
common share of ($6.76).
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 (800)
263-0877 (toll free) or (646) 828-8143 and reference conference ID
3968733. The conference call will also be webcasted live in the
Investors Events section of the Harte Hanks website at
http://investors.hartehanks.com/events-and-presentations.
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 3968733. 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 will be filed by 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 Income/(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
Revenues from continuing operations and Operating Income (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 Income/(Loss)” are
useful to both management and investors in their analysis of the
company’s 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 2018 and 2017. 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:Rob FinkHayden
IR646-415-8972HHS@HaydenIR.com
Source: Harte Hanks, Inc
|
|
|
|
|
|
|
|
|
Harte
Hanks, Inc. |
|
|
|
|
|
|
|
|
Consolidated Statements of Operations (Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
In thousands, except per share data |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Operating revenues |
|
$ |
70,209 |
|
|
$ |
99,866 |
|
|
$ |
284,628 |
|
|
$ |
383,906 |
|
Operating
expenses |
|
|
|
|
|
|
|
|
Labor |
|
|
37,856 |
|
|
|
57,780 |
|
|
|
163,857 |
|
|
|
230,280 |
|
Production and distribution |
|
|
26,730 |
|
|
|
28,965 |
|
|
|
100,253 |
|
|
|
109,090 |
|
Advertising, selling, general and administrative |
|
|
7,322 |
|
|
|
9,953 |
|
|
|
34,212 |
|
|
|
40,384 |
|
Impairment of assets |
|
|
1,066 |
|
|
|
34,510 |
|
|
|
4,888 |
|
|
|
34,510 |
|
Depreciation, software and intangible asset amortization |
|
|
1,573 |
|
|
|
2,340 |
|
|
|
7,452 |
|
|
|
10,507 |
|
Total operating expenses |
|
|
74,547 |
|
|
|
133,548 |
|
|
|
310,662 |
|
|
|
424,771 |
|
Operating
loss |
|
|
(4,338 |
) |
|
|
(33,682 |
) |
|
|
(26,034 |
) |
|
|
(40,865 |
) |
Other
expenses |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
262 |
|
|
|
1,283 |
|
|
|
1,551 |
|
|
|
4,826 |
|
Gain on sale |
|
|
- |
|
|
|
- |
|
|
|
(30,954 |
) |
|
|
- |
|
Other, net |
|
|
1,073 |
|
|
|
977 |
|
|
|
3,931 |
|
|
|
6,063 |
|
Total other expenses |
|
|
1,335 |
|
|
|
2,260 |
|
|
|
(25,472 |
) |
|
|
10,889 |
|
Income/(loss) before income taxes |
|
|
(5,673 |
) |
|
|
(35,942 |
) |
|
|
(562 |
) |
|
|
(51,754 |
) |
Income tax
benefit |
|
|
(7,312 |
) |
|
|
(6,601 |
) |
|
|
(18,112 |
) |
|
|
(9,894 |
) |
Net
Income/(loss) |
|
|
1,639 |
|
|
|
(29,341 |
) |
|
|
17,550 |
|
|
|
(41,860 |
) |
Less: Earnings attributable to participating securities |
|
|
209 |
|
|
|
- |
|
|
|
2,202 |
|
|
|
- |
|
Less Preferred stock dividends |
|
|
125 |
|
|
|
- |
|
|
|
457 |
|
|
|
- |
|
Income/(loss) attributable to common stockholders |
|
$ |
1,305 |
|
|
$ |
(29,341 |
) |
|
$ |
14,891 |
|
|
$ |
(41,860 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.21 |
|
|
$ |
(4.73 |
) |
|
$ |
2.39 |
|
|
$ |
(6.76 |
) |
Diluted |
|
|
0.21 |
|
|
|
(4.73 |
) |
|
|
2.38 |
|
|
$ |
(6.76 |
) |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
6,257 |
|
|
|
6,208 |
|
|
|
6,237 |
|
|
|
6,192 |
|
Diluted |
|
|
6,260 |
|
|
|
6,208 |
|
|
|
6,270 |
|
|
|
6,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data (Unaudited) |
|
December 31, |
|
December 31, |
|
|
|
|
In thousands |
|
2018 |
|
2017 |
|
|
|
|
Cash and
cash equivalents |
|
$ |
20,882 |
|
|
$ |
8,397 |
|
|
|
|
|
Total
debt |
|
$ |
14,200 |
|
|
$ |
- |
|
|
|
|
|
Harte
Hanks, Inc. |
|
|
|
|
|
|
Revenue Mix
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Vertical
Markets - Percent of Revenue |
|
|
|
|
|
|
|
|
Three Months EndedDec 31, |
|
Twelve Months EndedDec 31, |
|
|
2018 |
2017 |
|
2018 |
2017 |
B2B |
|
23.3 |
% |
|
22.0 |
% |
|
22.5 |
% |
|
21.7 |
% |
Consumer
Brands |
|
15.3 |
% |
|
21.3 |
% |
|
20.5 |
% |
|
23.0 |
% |
Financial
Services |
|
17.0 |
% |
|
15.1 |
% |
|
18.9 |
% |
|
15.7 |
% |
Healthcare |
|
10.2 |
% |
|
7.0 |
% |
|
7.0 |
% |
|
6.0 |
% |
Retail |
|
27.7 |
% |
|
25.2 |
% |
|
23.4 |
% |
|
24.9 |
% |
Transportation |
|
6.5 |
% |
|
9.4 |
% |
|
7.7 |
% |
|
8.7 |
% |
|
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
Harte
Hanks, Inc. |
|
|
|
|
|
|
|
|
Reconciliations of Non-GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
|
Three Months EndedDecember 31, |
|
Twelve Months EndedDecember 31, |
In thousands,
except per share data |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Operating loss |
|
$ |
(4,338 |
) |
|
$ |
(33,682 |
) |
|
$ |
(26,034 |
) |
|
$ |
(40,865 |
) |
Impairment of assets |
|
|
1,066 |
|
|
|
34,510 |
|
|
|
4,888 |
|
|
|
34,510 |
|
Stock-based compensation |
|
|
127 |
|
|
|
845 |
|
|
|
(581 |
) |
|
|
2,662 |
|
Adjusted
operating loss |
|
$ |
(3,145 |
) |
|
$ |
1,673 |
|
|
$ |
(21,727 |
) |
|
$ |
(3,693 |
) |
Adjusted
Operating Margin (a) |
|
|
-4.5 |
% |
|
|
1.7 |
% |
|
|
-7.6 |
% |
|
|
-1.0 |
% |
|
|
|
|
|
|
|
|
|
(a)
Adjusted Operating Margin equals Adjusted Operating Income divided
by Revenues. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedDec 31, |
|
Variance |
|
|
|
2018 |
|
|
|
2017 |
|
|
$ |
|
% |
Operating revenues |
|
$ |
70,209 |
|
|
$ |
99,866 |
|
|
$ |
29,657 |
|
|
|
29.7 |
% |
Less: 3Q
Digital revenues |
|
|
- |
|
|
|
9,671 |
|
|
|
9,671 |
|
|
|
- |
|
Revenues
without 3Q Digital |
|
$ |
70,209 |
|
|
$ |
90,195 |
|
|
$ |
19,986 |
|
|
|
22.2 |
% |
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