Harte Hanks (HHS) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue increased 1.1% year-over-year to $47.6 million, led by growth in Customer Care and Sales Services, while Marketing and Fulfillment & Logistics declined.

• Operating income was $1.9 million, down from $2.9 million in Q3 2023, with a 4.0% margin, impacted by restructuring and higher sales/marketing investment.

• Net income was $0.1 million ($0.02 per share), compared to $0.6 million ($0.09 per share) in Q3 2023; nine-month net loss was $27.9 million due to a $37.5 million pension charge.

• Project Elevate transformation program is underway, targeting $16 million in cost savings by end of 2025, with $6 million in 2024 and $0.8 million in Q3 restructuring charges.

• Strategic focus on sustainable growth, free cash flow optimization, and leveraging data and AI through the new Customer Excellence and Growth division.

Financial highlights

• Q3 2024 revenue: $47.6 million (+1.1% YoY); operating income: $1.9 million (down from $2.9 million YoY); net income: $0.1 million ($0.02/share).

• Adjusted operating income was $3.1 million, nearly flat year-over-year; adjusted EBITDA was $4.1 million, with a stable margin of 8.7%.

• Cash and cash equivalents were $5.9 million as of September 30, 2024, and $9.8 million as of October 31, 2024; $24 million available on credit line.

• No outstanding debt; $25 million credit facility remains undrawn.

• Capital expenditures for nine months were $3.1 million.

Outlook and guidance

• Q4 2024 revenue is expected to decline low to mid-single digits due to customer program changes, but management is confident in expanding the client base and driving sustainable growth.

• Project Elevate is on track to deliver $6 million in 2024 savings and $16 million by end of 2025.

• Focus remains on growing free cash flow and leveraging new organizational structures.