Harte Hanks, Inc. (HHS) Annual Report (Form 10-K) for the fiscal year ended December 31, 2024
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Overview of Harte Hanks’ Financial Performance
Harte Hanks, Inc. is a leading global customer experience company operating in three business segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services. The company’s mission is to partner with clients to provide robust customer-experience strategy, data-driven analytics, and actionable insights combined with seamless program execution.
For the year ended December 31, 2024, Harte Hanks reported operating revenues of $185.2 million, a decrease of 3.3% compared to the prior year. Operating expenses decreased 2.6% to $183.1 million, resulting in operating income of $2.1 million and an operating margin of 1.1%. The company reported a net loss of $30.3 million, or $4.15 per diluted share, compared to a net loss of $1.6 million, or $0.21 per diluted share, in the prior year.
Revenue and Profit Trends
Harte Hanks’ revenue decline was driven by decreases across all three of its business segments. Fulfillment & Logistics Services revenue declined 3.5% to $82.0 million, Marketing Services revenue declined 4.9% to $50.3 million, and Customer Care revenue declined 1.3% to $52.9 million.
The decrease in operating expenses was primarily due to a $4.2 million, or 4.3%, reduction in labor costs, as well as a $2.9 million, or 4.9%, decrease in production and distribution expenses. These savings were partially offset by a $2.1 million, or 10.2%, increase in advertising, selling, and general and administrative expenses.
Harte Hanks also incurred $2.4 million in restructuring expenses and $3.1 million in impairment charges related to goodwill and intangible assets. Additionally, the company recorded $37.5 million in pension termination charges, which contributed to the significant net loss for the year.
Strengths and Weaknesses
One of Harte Hanks’ key strengths is its diversified business model, with operations across three distinct segments. This diversification helps to mitigate risk and provides the company with multiple avenues for growth. Additionally, the company’s focus on customer experience and data-driven insights positions it well to meet the evolving needs of its clients.
However, Harte Hanks’ financial performance has been challenged in recent years, as evidenced by the revenue declines and net losses. The company’s most economically sensitive segment, Marketing Services, has been particularly impacted by changes in client spending. Additionally, the company’s reliance on labor-intensive services exposes it to risks related to inflation and wage pressures.
Another weakness is the company’s significant pension obligations, which resulted in a $37.5 million charge in 2024 and have been a drag on its financial results in recent years. Harte Hanks’ efforts to terminate its pension plan may help to alleviate this burden going forward.
Outlook and Future Prospects
Harte Hanks has initiated a transformation program called “Project Elevate” to optimize its operations and invest in technology and sales and marketing capabilities. The company expects to realize $16 million in reorganization savings from this program between 2024 and 2026.
Additionally, the company has taken steps to strengthen its liquidity position, including extending the maturity of its $25 million credit facility to June 2025. As of December 31, 2024, Harte Hanks had $9.9 million in cash and cash equivalents and the ability to borrow up to $24.0 million under its credit facility.
While the company faces ongoing economic and industry challenges, management believes that Harte Hanks will be able to meet its liquidity requirements and fund its operations in the short and medium term. However, the company acknowledges that it may need to seek alternative sources of liquidity if unforeseen circumstances arise.
Overall, Harte Hanks’ financial performance in 2024 was mixed, with revenue declines and significant net losses. The company’s transformation efforts and focus on optimizing its operations may help to improve its financial position in the coming years, but it will need to navigate ongoing economic and industry headwinds. Investors and analysts will likely be closely monitoring the company’s progress in executing its strategic initiatives and its ability to return to profitability.
