Harte Hanks (HHS) Q2 2024 earnings summary

Executive summary

• Completed a major sales transformation, centralizing and expanding the sales and marketing organization, and hiring a new Chief Customer and Data Officer to drive data and AI initiatives.

• Successfully terminated Pension Plan I, resulting in a $38.2 million charge, a $10.1 million tax benefit, and $6.1 million cash contribution, with $1.3 million to be paid in Q3.

• Project Elevate transformation program underway, targeting $16 million in cost savings by end of 2025, with $1.3 million in restructuring charges recorded YTD.

• Segment realignment in 2024 separated Sales Services from Customer Care to enhance strategic focus.

• Launched new products and secured a significant new marketing services account with a global automotive manufacturer.

Financial highlights

• Q2 2024 revenue was $45.0 million, down 5.7% year-over-year from $47.8 million.

• Operating income was $1.4 million, compared to $1.7 million in Q2 2023; adjusted operating income was $2.5 million versus $3.4 million.

• Net loss of $27.8 million (or $3.84 per share), including $38.2 million pension termination charge and $10.1 million tax benefit; excluding these, net income would have been $0.3 million.

• Adjusted EBITDA was $3.6 million, down from $4.4 million in Q2 2023.

• Cash and cash equivalents at quarter-end were $11 million, with no debt and $24 million to $25 million available under the credit facility.

Outlook and guidance

• Management expects improved revenues in the second half of 2024, assuming a supportive economy, with a robust sales pipeline and new business wins expected to contribute into 2025.

• Project Elevate cost savings target of $16 million by end of 2025; 2024 savings expected to exceed $6 million.

• Too early to predict sequential quarterly revenue improvement for Q3 or Q4, but Q4 typically benefits from seasonality and a stronger new business outlook.

• Marketing services and international expansion, especially in Europe, are focal points for growth in 2025.

• No substantial doubt about ability to continue as a going concern for the next twelve months.