hrth20220511

hrth20220511_8k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________________________________________

FORM 8-K

___________________________________________________

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

May 12 2022

Date of Report (Date of Earliest Event Reported)

___________________________________________________

Harte Hanks, Inc.
(Exact Name of Registrant as Specified in its Charter)

___________________________________________________

Delaware	1-7120	74-1677284

(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

2 Executive Drive Chelmsford, MA 01824 (512) 434-1100
(Address of principal executive offices and Registrant’s telephone number, including area code)

___________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HHS	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On May 12, 2022, Harte Hanks issued a press release announcing its financial results for its first quarter 2022. The full text of the press release is furnished with this Current Report as Exhibit 99.1 and is incorporated by reference herein.

The information contained in this Item 2.02 (including Exhibit 99.1) of this Current Report is furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, notwithstanding any general incorporation by reference language in other Harte Hanks filings.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No	Description

99.1	Press Release of Harte Hanks, Inc. dated May 12, 2022 announcing first quarter 2022 financial results

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HARTE HANKS, INC.


Date: May 12, 2022	By:	/s/ Laurilee Kearnes
		Name: Laurilee Kearnes Title: Chief Financial Officer

Harte Hanks Generates 12% Revenue Growth, Delivers $0.39 in EPS for the First Quarter of 2022

Chelmsford, Massachusetts – May 12, 2022 -- Harte Hanks, Inc. (NASDAQ: HHS), a global customer experience company, today announced financial results for the first quarter, the period ended March 31, 2022.

¹ EBITDA is a non-GAAP financial measure. See “Supplemental Non-GAAP Financial Measures” below. EBITDA is also the Company’s measure of segment profitability.

Harte Hanks CEO, Brian Linscott, commented: “The new, streamlined Harte Hanks has developed clear differentiators and compelling solutions that are in demand from our top-tier customer base. The result is increased and diversified revenue by segment and customer, and a stable platform for long-term profitable growth. Our growing presence in the healthcare and consumer products verticals is driving incremental opportunities, enabling us to better utilize our existing capacity in Kansas City and Boston. Additionally, we continue to prove our expertise in Customer Care, as more and more customers rely on us to deliver unique solutions for their most valuable asset, their customers. We are increasingly confident that 2022 will be a year of bottom-line growth for Harte Hanks.”

“Our focus this year, in addition to growing our business and expanding our relationships with our customers, is improving our operating margins by fully taking advantage of our asset-lite operating model and investment in technology,” continued Mr. Linscott. “The initial results validate our strategy, with consistent and growing profitability including a $5.0 million positive swing in net income. Harte Hanks is now built for sustainable profitability, and we are working to leverage our platform to create lasting shareholder value.”

First quarter revenues were $49.0 million, up 12.1% from $43.8 million in the first quarter of 2021. All three segments delivered year-over-year growth.

First quarter operating income was $3.9 million, compared to an operating loss of $0.9 million in the first quarter of 2021. The improvement resulted from the Company’s revenue increases and cost reduction efforts.

Net income for the quarter was $3.3 million, up from a net loss of $1.8 million in the first quarter last year. Income attributable to common stockholders for the first quarter was $2.8 million, or $0.40 per basic share and $0.39 per fully diluted share, compared to loss attributable to common shareholders of $1.9 million, or $(0.28) per basic and diluted share.

Harte Hanks ended the quarter with $12.2 million in cash, cash equivalents and restricted cash, compared to $15.1 million at December 31, 2021. At March 31, 2021, the Company had no short-term debt, $5 million in long-term debt and $51.3 million in outstanding long-term pension liability. On December 31, 2021, the Company had no short-term debt, $5 million in long-term debt and $52.5 million in outstanding long-term pension liability.

The company anticipates receiving a net operating loss (NOL) tax refund of $7.6 million in 2022 which will further enhance liquidity.

The Company will host a conference call and live webcast to discuss these results today at 4:30 p.m. EST. Interested parties may access the webcast at https://www.webcaster4.com/Webcast/Page/2810/45439 or may access the conference call by dialing in the United States (844) 369-8770 or internationally (862) 298-0840.

A replay of the call can also be accessed via phone through May 26, 2022, by dialing (877) 481-4010 from the U.S., or (919) 882-2331 from outside the U.S. The conference call replay passcode is 45439.

Harte Hanks (NASDAQ: HHS) is a leading global customer experience company whose mission is to partner with clients to provide them with CX strategy, data-driven analytics and actionable insights combined with seamless program execution to better understand, attract, and engage their customers.

Using its unparalleled resources and award-winning talent in the areas of Customer Care, Fulfillment and Logistics, and Marketing Services, Harte Hanks has a proven track record of driving results for some of the world's premier brands including Bank of America, GlaxoSmithKline, Unilever, Pfizer, HBOMax, Volvo, Ford, FedEx, Midea, Sony, and IBM among others. Headquartered in Chelmsford, Massachusetts, Harte Hanks has over 2,500 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.

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, which has curtailed travel to and from certain countries and geographic regions, created supply chain disruption and shortages, disrupted business operations and reduced consumer spending, (ii) market conditions that may adversely impact marketing expenditures, (iii) the impact of the Russia/Ukraine conflict on the global economy and our business, including impacts from related sanctions and export controls and (iv) 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, 2021 which was filed on March 21, 2022. 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.

The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). 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 in this press release and our related earnings conference call. 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 presents the non-GAAP financial measure “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) and depreciation expense. The most directly comparable measure for EBITDA is Net Income (Loss). We believe 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 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 use of non-GAAP measures do not serve as a substitute and should not be construed as a substitute for GAAP performance but should provide supplemental information concerning our performance that our investors and we find useful. The Company evaluates its operating performance based on several measures, including this non-GAAP financial measures. The Company believes that the presentation of this 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 this 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.

(a) Adjusted Operating Margin equals Adjusted Operating Income (loss) divided by Revenues.

	Three Months Ended March 31,
In thousands, except per share data	2022			2021
Revenues	$	49,062		$	43,754
Operating expenses
Labor		25,945			26,352
Production and distribution		13,991			11,269
Advertising, selling, general and administrative		4,633			4,121
Restructuring expense		—			2,198
Depreciation expense		599			698
Total operating expenses		45,168			44,638
Operating income (loss)		3,894			(884	)
Other income
Interest expense, net		134			268
Other (income) expense, net		(39	)		15
Total other income		95			283
Income (Loss) before income taxes		3,799			(1,167	)
Income tax expense		454			591
Net income (loss)		3,345			(1,758	)
Less: Preferred stock dividends		122			122
Less: Earnings attributable to participating securities		404			-
Income (loss) attributable to common stockholders	$	2,819		$	(1,880	)


Earnings (Loss) per common share
Basic	$	0.40		$	(0.28	)
Diluted	$	0.39		$	(0.28	)

Weighted-average common shares outstanding
Basic		6,991			6,651
Diluted		7,286			6,651

In thousands, except per share data	March 31, 2022			December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	9,652		$	11,911
Restricted cash		2,559			3,222
Accounts receivable (less allowance for doubtful accounts of $314 at March 31, 2022 and $266 at December 31, 2021)		49,034			41,051
Unbilled accounts receivable		7,067			8,134
Contract assets		908			622
Prepaid expenses		2,614			1,948
Prepaid income tax and income tax receivable		6,791			7,456
Other current assets		1,229			1,031
Total current assets		79,854			75,375

Net property, plant and equipment		8,577			7,747
Right-of-use assets		20,298			22,142
Other assets		2,385			2,597
Total assets	$	111,114		$	107,861

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	19,647		$	16,132
Accrued payroll and related expenses		4,274			7,028
Deferred revenue and customer advances		5,821			3,942
Customer postage and program deposits		6,167			6,496
Other current liabilities		2,903			2,291
Short-term lease liabilities		5,792			6,553
Total current liabilities		44,604			42,442

Long-term debt		5,000			5,000
Pensions liabilities - Qualified plans		26,476			27,359
Pension liabilities - Nonqualified plan		24,867			25,140
Long-term lease liabilities		17,728			19,215
Other long-term liabilities		3,287			3,697
Total liabilities		121,962			122,853

Preferred Stock		9,723			9,723

Stockholders’ deficit
Common stock		12,121			12,121
Additional paid-in capital		278,432			290,711
Retained earnings		814,439			811,094
Less treasury stock		(1,072,741	)		(1,085,313	)
Accumulated other comprehensive loss		(52,822	)		(53,328	)
Total stockholders’ deficit		(20,571	)		(24,715	)

Total liabilities, Preferred Stock and stockholders’ deficit	$	111,114		$	107,861

	Three Months Ended March 31,
In thousands, except per share data	2022			2021
Net Income (loss)	$	3,345		$	(1,758	)
Income tax expense		454			591
Interest expense, net		134			268
Other (income) expense, net		(39	)		15
Depreciation expense		599			698
EBITDA	$	4,493		$	(186	)



Operating income (loss)	$	3,894		$	(884	)
Restructuring expense		-			2,198
Stock-based compensation		288			222
Adjusted operating income	$	4,182		$	1,536
Adjusted operating margin (a)		8.5	%		3.5	%

Quarter ended March 31, 2022	Marketing Services		Customer Care		Fulfillment & Logistics Services		Restructuring		Unallocated Corporate			Total
	(In thousands)
2022
Revenues	$	12,924	$	17,742	$	18,396	$	—	$	—		$	49,062
Segment Operating Expense	$	10,350	$	13,560	$	15,159	$	—	$	5,500		$	44,569
Restructuring	$	—	$	—	$	—	$	—	$	—		$	—
Contribution margin (loss)	$	2,574	$	4,182	$	3,237	$	—	$	(5,500	)	$	4,493
Shared Services	$	1,113	$	718	$	851	$	—	$	(2,682	)	$	—
EBITDA	$	1,461	$	3,464	$	2,386	$	—	$	(2,818	)	$	4,493
Depreciation	$	102	$	202	$	202	$	—	$	93		$	599
Operating income (loss)	$	1,359	$	3,262	$	2,184	$	—	$	(2,911	)	$	3,894

Quarter ended March 31, 2021	Marketing Services		Customer Care		Fulfillment & Logistics Services		Restructuring			Unallocated Corporate			Total
	(In thousands)
2021
Revenues	$	12,878	$	16,544	$	14,332	$	—		$	—		$	43,754
Segment Operating Expense	$	11,041	$	13,074	$	12,174	$	—		$	5,453		$	41,742
Restructuring	$	—	$	—	$	—	$	2,198		$	—		$	2,198
Contribution margin (loss)	$	1,837	$	3,470	$	2,158	$	(2,198	)	$	(5,453	)	$	(186	)
Shared Services	$	1,255	$	870	$	941	$	—		$	(3,066	)	$	—
EBITDA	$	582	$	2,600	$	1,217	$	(2,198	)	$	(2,387	)	$	(186	)
Depreciation	$	151	$	254	$	167	$	—		$	126		$	698
Operating income (loss)	$	431	$	2,346	$	1,050	$	(2,198	)	$	(2,513	)	$	(884	)