• Revenue: $45 million, down 5.7% from $47.8 million in Q2 2023.

• Customer Care Revenue: $12.4 million, down from $14.9 million in Q2 2023.

• Sales Services Revenue: $4.4 million, up from $2.3 million in Q2 2023.

• Marketing Services Revenue: $7.7 million, down from $10.9 million in Q2 2023.

• Fulfillment & Logistics Revenue: $20.5 million, up from $19.6 million in Q2 2023.

• Operating Expenses: $43.7 million, including $427,000 in restructuring expenses, compared to $46.1 million in Q2 2023.

• Operating Income: $1.4 million, down from $1.7 million in Q2 2023.

• Adjusted Operating Income: $2.5 million, down from $3.4 million in Q2 2023.

• Adjusted Operating Margin: 5.6%, down from 7% in Q2 2023.

• EBITDA: $2.4 million, down from $2.7 million in Q2 2023.

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

• Cash and Cash Equivalents: $11 million as of June 30, 2024, down from $18 million at the end of 2023.

• Net Loss: $27.8 million due to a pension charge, with a net income of $300,000 excluding the pension charge.

• Warning! GuruFocus has detected 2 Warning Signs with HHS.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Harte-Hanks Inc (NASDAQ:HHS) has successfully restructured its sales and marketing organization, leading to early new account wins that are expected to contribute to revenue growth.

• The company closed a significant new marketing services account with a global automotive manufacturer, highlighting the effectiveness of its partnership strategy.

• Harte-Hanks Inc (NASDAQ:HHS) has introduced a new product offering for small and medium-sized businesses, 'demand generation in a box,' which is expected to accelerate customer activation.

• The company has made strategic investments in its fulfillment segment, including a migration to a best-in-class warehouse technology suite, enhancing client inventory visibility and operational efficiency.

• Harte-Hanks Inc (NASDAQ:HHS) has hired a Chief Customer and Data Officer to drive customer-centric initiatives, leveraging advanced analytics and AI to enhance client experiences and foster loyalty.

Negative Points

• Second-quarter revenues decreased by 5.7% compared to the same period last year, with declines in customer care and marketing service segments.

• Operating income and adjusted EBITDA both declined compared to the second quarter of 2023, indicating challenges in maintaining profitability.

• The company experienced a significant pension charge of $38.2 million, resulting in a net loss of $27.8 million for the quarter.

• Cash and cash equivalents decreased from $18 million at the end of 2023 to $11 million as of June 30, 2024, reflecting a reduction in liquidity.

• The marketing services segment has faced challenges, with customer budget reductions and the end of specific programs contributing to revenue declines.

Q & A Highlights

Q: Kirk, with the recent centralization of your sales staff and restructuring, when do you expect this new setup to start accelerating revenue generation and improving efficiency? A: Kirk Davis, CEO: Our pipeline is strong compared to last year, and we're learning how effective our go-to-market strategy is. We expect improvements in conversion rates and sales cycle efficiency as we integrate our new Chief Customer and Data Officer. There's significant interest in data, analytics, and Gen AI, which we believe will enhance our prospects. We're focused on generating our own leads, and we anticipate this transformation will be game-changing, with evidence of success emerging throughout the year and into 2025.

Q: How do you think your business will fare in a potentially weakening economy in the second half of the year? A: Kirk Davis, CEO: While I'm aware of the economic slowdown, our untapped potential outweighs these concerns. We are focused on closing opportunities in our pipeline and managing costs through Project Elevate. Our fulfillment business is well-positioned for the second half, and we have good visibility into our pharma work and regulatory-driven digital printing. Overall, we're optimistic and don't currently attribute any challenges to the economy.

Q: Can you provide insights into your revenue outlook for the second half of the year? A: Kirk Davis, CEO: The unpredictability lies in the sales cycle, particularly in contracting and legal stages. It's too early to make specific revenue growth predictions for Q3 or Q4. However, we have a robust pipeline and typically experience better seasonality in Q4. Our new business outlook is stronger, and we're optimistic about the future.

Q: What are your plans to address the challenges in the marketing services segment and expand internationally? A: Kirk Davis, CEO: Marketing services faced setbacks last year, but we're optimistic about its potential in 2025. We're bolstering sales support and exploring new services like research and data. Internationally, we see opportunities to expand US-based clients into Europe and increase lead generation there. We have strong teams in Europe and believe it will be a growth driver in 2025.

Q: How do you plan to leverage your new Chief Customer and Data Officer to enhance business prospects? A: Kirk Davis, CEO: The new Chief Customer and Data Officer will play a crucial role in client conversations, focusing on data, analytics, and Gen AI. This will help us articulate our unique value proposition and enhance our prospects for closing more business. We're optimistic about the impact this role will have on our growth strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.