[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company's unaudited financial statements for H1 2023 show a net loss of **$0.2 million**, reduced operating cash flow, and a decline in total assets to **$114.7 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to **$114.7 million**, total liabilities decreased to **$94.1 million**, and stockholders' equity increased to **$20.6 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2023 (unaudited) | December 31, 2022 (audited) | | :--- | :--- | :--- | | **Total current assets** | $63,950 | $66,311 | | **Total assets** | **$114,660** | **$119,984** | | **Total current liabilities** | $40,406 | $43,566 | | **Total liabilities** | **$94,110** | **$101,176** | | **Total stockholders' equity** | **$20,550** | **$18,808** | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For Q2 2023, revenue slightly decreased to **$47.8 million** and net income sharply fell to **$0.6 million**, while the six-month period saw a net loss of **$0.2 million** Q2 Financial Performance (in thousands, except per share amounts) | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Revenue | $47,762 | $48,553 | | Operating Income | $1,670 | $4,011 | | Net Income | $580 | $4,461 | | Diluted EPS | $0.08 | $0.52 | Six-Month Financial Performance (in thousands, except per share amounts) | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Operating Revenues | $94,882 | $97,615 | | Operating Income | $2,723 | $7,906 | | Net (Loss) Income | ($211) | $7,806 | | Diluted (Loss) EPS | ($0.03) | $0.91 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to **$20.6 million** by June 30, 2023, driven by comprehensive income and stock-based compensation, despite a net loss and stock repurchases - Total stockholders' equity increased by **$1.7 million** in the first six months of 2023, from **$18.8 million** to **$20.6 million**[12](index=12&type=chunk) - Key activities affecting equity in H1 2023 include a net loss of **$0.2 million**, stock repurchases of **$1.9 million**, and other comprehensive income of **$3.1 million**[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased to **$4.6 million** in H1 2023, while investing activities used **$1.3 million** and financing activities used **$2.3 million** Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,587 | $9,862 | | Net cash used in investing activities | ($1,255) | ($3,559) | | Net cash (used in) provided by financing activities | ($2,312) | $4,508 | | **Net increase in cash** | **$3,000** | **$7,700** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's accounting policies and financial items, including segment performance, lease obligations, share repurchases, and the InsideOut Solutions acquisition - The company operates three business segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services[16](index=16&type=chunk) Disaggregated Revenue by Segment - Six Months Ended June 30 (in thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Marketing Services | $22,160 | $26,374 | | Customer Care | $31,627 | $33,123 | | Fulfillment and Logistics Services | $41,095 | $38,118 | | **Total Revenues** | **$94,882** | **$97,615** | - On May 2, 2023, the Board approved a **$6.5 million** share repurchase program[63](index=63&type=chunk) - In Q2 2023, the company repurchased **0.3 million** shares for **$1.9 million**[63](index=63&type=chunk) - The company acquired Inside Out Solutions, LLC on December 1, 2022, for approximately **$7.5 million**[91](index=91&type=chunk) - This acquisition contributed **$5.1 million** in revenue for the first six months of 2023[91](index=91&type=chunk)[98](index=98&type=chunk) Segment Operating Income - Six Months Ended June 30 (in thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Marketing Services | $2,415 | $3,084 | | Customer Care | $4,227 | $5,552 | | Fulfillment and Logistics Services | $3,645 | $5,155 | | Unallocated Corporate | ($7,564) | ($5,885) | | **Total Operating Income** | **$2,723** | **$7,906** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for H1 2023, noting a **2.8%** revenue decrease and a **65.6%** drop in operating income, driven by segment-specific challenges and partially offset by acquisitions [Recent Developments](index=33&type=section&id=Recent%20Developments) Key recent developments include the appointment of a new CEO, a strategic segment combination, and the initiation of a **$6.5 million** share repurchase program - Kirk Davis was appointed as the new Chief Executive Officer, effective June 19, 2023[115](index=115&type=chunk) - The company plans to combine its Marketing Services and Customer Care segments into a new 'Customer Experience' segment by the end of 2023[116](index=116&type=chunk) - A share repurchase program for **$6.5 million** of common stock was approved on May 2, 2023, with **$1.9 million** used to repurchase shares in Q2 2023[117](index=117&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Consolidated revenues decreased by **2.8%** to **$94.9 million** in H1 2023, leading to a **65.6%** drop in operating income, primarily due to declines in Marketing Services and Customer Care Consolidated Results of Operations - Six Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $94,882 | $97,615 | (2.8)% | | Operating income | $2,723 | $7,906 | (65.6)% | | Diluted (loss) per common share | ($0.03) | $0.91 | (103.3)% | - Marketing Services revenue decreased by **$4.2 million (16.0%)** in H1 2023 due to lower direct mail volume from existing customers[123](index=123&type=chunk)[142](index=142&type=chunk) - Customer Care revenue decreased by **$1.5 million (4.5%)** in H1 2023, as non-recurring pandemic-related projects from 2022 ended, partially offset by **$5.1 million** from the InsideOut acquisition[123](index=123&type=chunk)[145](index=145&type=chunk) - Fulfillment & Logistics Services revenue increased by **$3.0 million (7.8%)** in H1 2023, but operating income decreased by **$1.5 million** due to changes in revenue mix and higher transportation costs[123](index=123&type=chunk)[148](index=148&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity, including **$13.4 million** cash and a **$24.2 million** available credit facility, is deemed sufficient to meet obligations and fund expected capital expenditures of **$3 million to $4 million** - Cash and cash equivalents stood at **$13.4 million** as of June 30, 2023[149](index=149&type=chunk) - The company has the ability to borrow an additional **$24.2 million** under its New Credit Facility, with no borrowings outstanding as of June 30, 2023[149](index=149&type=chunk)[164](index=164&type=chunk) - Capital expenditures for 2023 are expected to be between **$3 million** and **$4 million**, mainly for a new ERP system and facility expansion[150](index=150&type=chunk) - The company received a **$5.3 million** tax refund in March 2023 as a result of NOL carryback provisions in the CARES Act[150](index=150&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section on market risk disclosures is not applicable for the current reporting period - The company has indicated that this item is not applicable[172](index=172&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[174](index=174&type=chunk) - No material changes were made to internal controls over financial reporting during the second quarter of 2023[176](index=176&type=chunk) [Part II. Other Information](index=42&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings, for which management believes adequate accruals have been made, with no expectation of material loss beyond current provisions - Information regarding legal proceedings is detailed in Note M, Litigation and Contingencies[177](index=177&type=chunk) - Management believes adequate accruals for legal matters have been made and the probability of further material loss is remote[101](index=101&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's previously disclosed risk factors were reported for the current period - No material changes to risk factors were reported for the three months ended June 30, 2023, compared to those disclosed in the 2022 10-K[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell unregistered equity securities but repurchased **314,558** common shares for **$1.9 million** in Q2 2023, with **$4.6 million** remaining for future repurchases Common Stock Repurchases - Q2 2023 | Period | Total Shares Purchased | Average Price per Share | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | May 2023 | 231,922 | $5.86 | $1.36M | | June 2023 | 82,636 | $6.29 | $0.52M | | **Total Q2** | **314,558** | **-** | **$1.88M** | - As of June 30, 2023, approximately **$4.6 million** remained available for repurchase under the authorized **$6.5 million** program[179](index=179&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the CEO's employment agreement and Sarbanes-Oxley Act certifications - Filed exhibits include the employment agreement for CEO Kirk Davis and Sarbanes-Oxley Act certifications[183](index=183&type=chunk)

Harte Hanks, Inc. (NASDAQ:HHS) Q2 2023 Earnings Conference Call August 10, 2023 4:30 PM ET Company Participants Tom Baumann - Investor Relations Kirk Davis - Chief Executive Officer Lauri Kearnes - Chief Financial Officer Conference Call Participants Julio Romero - Sidoti & Company Michael Kupinski - NOBLE Capital Markets Operator Greetings and welcome to the Harte Hanks Second Quarter 2023 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference ...

Financial Performance - Revenue for the three months ended March 31, 2023, was $47,120,000, a decrease of 3.9% compared to $49,062,000 for the same period in 2022[9] - Operating income for Q1 2023 was $1,053,000, down 73.0% from $3,894,000 in Q1 2022[9] - Net loss attributable to common stockholders for Q1 2023 was $791,000, compared to net income of $2,819,000 in Q1 2022, representing a significant decline[9] - Comprehensive income for Q1 2023 was $1,829,000, compared to $3,851,000 in Q1 2022, indicating a decrease of 52.5%[9] - Basic loss per common share was $(0.11) for the three months ended March 31, 2023, compared to earnings of $0.40 per share for the same period in 2022[84] - The company reported a net loss of $791,000 for the three months ended March 31, 2023, compared to a net income of $3,345,000 for the same period in 2022[84] - Operating income fell to $1,053,000 in Q1 2023, down 73.0% from $3,894,000 in Q1 2022[9] - Total operating expenses increased to $46,067,000 in Q1 2023, up 2.0% from $45,168,000 in Q1 2022[9] Assets and Liabilities - Total current assets decreased to $62,179,000 as of March 31, 2023, from $66,311,000 at December 31, 2022, a reduction of 6.4%[8] - Total liabilities decreased to $93,918,000 as of March 31, 2023, down from $101,176,000 at December 31, 2022, a decline of 7.1%[8] - Stockholders' equity increased to $20,965,000 as of March 31, 2023, compared to $18,808,000 at December 31, 2022, an increase of 11.5%[8] - Cash and cash equivalents increased to $13,118,000 as of March 31, 2023, from $10,364,000 at December 31, 2022, an increase of 26.8%[8] - The company reported a pension liability of $17,988,000 for qualified plans as of March 31, 2023, down from $18,674,000 at December 31, 2022[8] Revenue Segments - Marketing Services revenue recognized over time was $10,420,000, down from $10,895,000 in the prior year, while revenue recognized at a point in time decreased from $2,029,000 to $819,000[34] - Customer Care segment revenue decreased from $17,742,000 in Q1 2022 to $14,416,000 in Q1 2023[34] - Fulfillment and Logistics Services revenue increased from $18,396,000 in Q1 2022 to $21,465,000 in Q1 2023, with revenue recognized over time at $18,090,000[34] - The Marketing Services segment reported revenues of $11.24 million, while the Customer Care segment reported revenues of $14.42 million for the same period[103] Cash Flow and Investments - Cash flows from operating activities for Q1 2023 were $1,704,000, compared to a cash outflow of $764,000 in Q1 2022[11] - The company had cash and cash equivalents of $14,118,000 at the end of Q1 2023, an increase from $12,211,000 at the end of Q1 2022[11] - Net cash provided by operating activities increased by $2.5 million year-over-year to $1.7 million for the three months ended March 31, 2023, primarily due to a $10.7 million decrease in accounts receivable and contract assets[135] - Net cash used in investing activities decreased by $0.8 million year-over-year to $0.6 million for the three months ended March 31, 2023, mainly due to reduced cash used for purchasing property, plant, and equipment[136] Acquisitions and Growth - The acquisition of Inside Out Solutions, LLC was completed on December 1, 2022, for an aggregate purchase price of approximately $7.5 million[87] - The acquisition is expected to enhance the company's marketing services and customer care segments, driving profitable revenue growth through demand generation and inside sales offerings[89] - For the quarter ended March 31, 2023, the InsideOut operation generated revenue of $2.8 million and net earnings of $0.5 million[93] - The company recognized $3.6 million of intangible assets and $2.4 million of goodwill associated with the InsideOut acquisition, amortizing the intangible assets over five years[93] Tax and Compliance - The effective income tax rate was 41.8% for the three months ended March 31, 2023, compared to 12.0% for the same period in 2022[78] - The effective tax rate for the first quarter of 2023 was 41.8%, an increase of 29.8% from the prior year, primarily due to changes in valuation allowance and state income taxes[124] Shareholder Actions - The company approved a share repurchase program on May 2, 2023, with authorization to repurchase $6.5 million of its Common Stock[111] - No shares were repurchased under the stock repurchase program during the three months ended March 31, 2023, with $11.4 million remaining authorization as of that date[151] Lease and Operating Costs - Operating lease costs for the three months ended March 31, 2023, were $1.456 million, a decrease from $1.581 million in the same period of 2022[56] - Total lease liabilities as of March 31, 2023, amounted to $22.018 million, slightly down from $22.322 million as of December 31, 2022[55] - The weighted average remaining lease term for operating leases was 5.7 years as of March 31, 2023, compared to 6.2 years in the previous year[56] - Total future minimum lease payments for operating leases are projected to be $23.93 million, with the remainder of 2023 accounting for $4.872 million[56]

Financial Data and Key Metrics Changes - Revenues decreased by 4% in Q1 2023 to $47.1 million, while operating income fell approximately 73% to $2.8 million compared to the previous year [30][31] - EBITDA decreased to $2.1 million from $4.5 million in the same quarter last year, with a net loss of $0.8 million or $0.11 per share compared to a net income of $3.3 million or $0.40 per share last year [31][32] - Cash and cash equivalents increased to $13.1 million as of March 31, 2023, compared to $10.4 million at the end of 2022, with no debt and a $25 million credit facility [35] Business Line Data and Key Metrics Changes - Customer Care revenue decreased by 18.8% year-over-year, with EBITDA down 41% to $2 million due to the conclusion of pandemic-related projects and lower customer interactions [48] - Marketing Services revenue decreased by 13% to $11.2 million, primarily due to the discontinuation of direct mail campaigns [50] - Fulfillment & Logistics revenue increased by approximately 16.7% to $21.6 million, with EBITDA slightly decreasing to $2.2 million [32][49] Market Data and Key Metrics Changes - The company observed a reevaluation of marketing and logistics spending by clients, particularly in financial services and B2B tech sectors, due to economic uncertainties [9][62] - The financial services segment experienced a revenue decline of over $1 million in Q1, attributed to tightening budgets among clients [62] Company Strategy and Development Direction - The company is combining its Marketing Services and Customer Care segments into a new segment called Customer Experience to enhance its go-to-market strategy and improve cost structure [11][51] - Focus on demand generation and sales strategy to engage new prospects and scale lead qualifications, leveraging capabilities from the InsideOut acquisition [12][14] - The company aims to preserve profitability by reducing discretionary spending and right-sizing the business in response to first-quarter performance [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged stronger-than-expected macroeconomic headwinds impacting revenue and expressed limited visibility beyond Q2 2023 [3][9] - Despite challenges, management remains cautiously optimistic about opportunities in the sales pipeline for the second half of the year and into 2024 [21][54] - The company is focused on evolving its offerings to provide lower-cost options, making it an attractive outsourcing option in the current economic climate [29] Other Important Information - The company received a $5.3 million federal tax refund, enhancing cash liquidity and enabling a $6.5 million share buyback program [10][23] - The InsideOut acquisition contributed $2.8 million in revenue and $0.5 million in EBITDA for the quarter, with expectations for its role in driving growth [32][73] Q&A Session Summary Question: What changed in the company's outlook regarding the economy? - Management noted a slowdown in project starts and new business opportunities, with some projects being delayed or canceled, impacting the overall tone of their comments [39] Question: How will the combined Customer Experience segment drive growth? - The integration is expected to leverage global talent and improve service efficiency, enhancing the overall customer experience and driving membership growth for clients [66] Question: What is the company's approach to share repurchase and potential acquisitions? - The company plans to be opportunistic with share buybacks while remaining open to acquisition opportunities that complement its offerings, though focus will be on the ongoing reorganization [67][74]

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-07120 HARTE HANKS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer i ...

Financial Data and Key Metrics Changes - Revenue increased by 5.4% in Q4 2022 to $54.8 million, and full-year revenue grew by 6% to $206.3 million [6][34] - Net income for Q4 was $21.8 million compared to $1.8 million in the same quarter last year, reflecting a significant improvement [12][59] - Full-year EBITDA rose to $17.8 million, a 75% increase from $10.2 million in the previous year [34] Business Segment Data and Key Metrics Changes - Fulfillment & Logistics segment revenue grew by 34.4% in Q4, driven by a large logistics client, with EBITDA increasing by 5.9% to $2.3 million [6][14] - Customer Care segment revenue declined by 12.9%, but EBITDA increased by 24.4% to $3.2 million, indicating improved operational efficiency [6][29] - Marketing Services revenue decreased by 6.8% to $13.6 million, with EBITDA down 18.4% to $2.1 million, attributed to the end of direct mail campaigns [31][33] Market Data and Key Metrics Changes - The company is aggressively marketing its services across various verticals including B2B tech, retail, pharma, and healthcare, expecting strong new client performance in 2023 [8][57] - The Customer Care pipeline remains healthy, with ongoing investments in sales and marketing to drive growth [13][57] Company Strategy and Development Direction - The company aims for high-single digit revenue and EBITDA growth in 2023, focusing on adding new clients and expanding existing relationships [5][7] - A strategic shift to an asset-light business model has been implemented, eliminating unprofitable contracts and positioning the company for sustainable operating income [22][27] - The acquisition of InsideOut is expected to enhance capabilities and drive growth, with plans for additional acquisitions in the future [10][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2023 despite a challenging first quarter comparison, citing a strong pipeline and improved operational performance [4][32] - The company anticipates a drop in year-over-year quarterly EBITDA in Q1 due to the absence of high-margin projects from the previous year [21][65] - Rising interest rates are being monitored, with expectations of further decreases in pension liabilities [36][84] Other Important Information - The company ended 2022 with over $10 million in cash and no debt, reflecting a strengthened balance sheet [25][60] - A non-recurring tax benefit of $19.8 million was recorded in Q4 due to the release of a valuation allowance, contributing to the net income increase [22][61] Q&A Session Summary Question: What drove the strong margin in Customer Care? - Management indicated that improved operational efficiencies and a favorable revenue mix contributed to the strong margin, with a shift from lower-margin pandemic-related projects [39] Question: What is the pipeline for potential M&A? - Management is considering tuck-in acquisitions similar in size to InsideOut but remains open to larger opportunities that complement existing capabilities [43] Question: What are the expectations for revenue growth in 2023? - Management expects growth across all segments, particularly in Fulfillment & Logistics, with cautious optimism for Customer Care and Marketing Services [82]

Harte Hanks, Inc. (NASDAQ:HHS) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET Company Participants Tom Baumann - Investor Relations Brian Linscott - Chief Executive Officer Lauri Kearnes - Chief Financial Officer Conference Call Participants Michael Kupinski - Noble Capital Markets Julio Romero - Sidoti & Company Operator Good afternoon, ladies and gentlemen and welcome to the Harte Hanks Third Quarter 2022 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This part presents the company's unaudited interim financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited interim financial statements for Harte Hanks, Inc. as of September 30, 2022. It includes the Condensed Consolidated Balance Sheets, Statements of Comprehensive Income, Statements of Changes in Stockholders' Deficit, and Statements of Cash Flows, along with detailed notes explaining the accounting policies and financial details [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $80,624 | $75,375 | | **Total Assets** | **$111,133** | **$107,861** | | **Total Current Liabilities** | $45,783 | $42,442 | | **Total Liabilities** | $114,199 | $122,853 | | **Total Stockholders' Deficit** | $(12,789) | $(24,715) | - Cash and cash equivalents decreased from **$11.9 million** at year-end 2021 to **$6.9 million** as of September 30, 2022[9](index=9&type=chunk) - Long-term debt was fully paid off, decreasing from **$5.0 million** at year-end 2021 to **zero** as of September 30, 2022[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines the company's financial performance, including revenues, operating income, net income, and earnings per share over specific periods Q3 Financial Performance (Three Months Ended Sep 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $53,886 | $49,597 | | Operating Income | $3,773 | $4,226 | | Net Income | $7,166 | $4,404 | | Diluted EPS | $0.83 | $0.52 | Year-to-Date Financial Performance (Nine Months Ended Sep 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Operating Revenues | $151,500 | $142,610 | | Operating Income | $11,678 | $4,776 | | Net Income | $14,972 | $13,215 | | Diluted EPS | $1.73 | $1.57 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $22,252 | $(5,938) | | Net cash used in investing activities | $(5,686) | $(2,377) | | Net cash used in financing activities | $(6,421) | $(4,845) | - The significant improvement in operating cash flow was primarily due to higher net income (excluding non-cash gains in 2021) and favorable changes in working capital, including accounts receivable and payable[14](index=14&type=chunk)[164](index=164&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, segment information, and significant financial transactions - The company operates three business segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services[18](index=18&type=chunk) Disaggregation of Revenue by Segment (Nine Months Ended Sep 30, 2022, in thousands) | Segment | Revenue | | :--- | :--- | | Marketing Services | $39,389 | | Customer Care | $50,499 | | Fulfillment and Logistics Services | $61,612 | | **Total Revenues** | **$151,500** | - On June 30, 2022, the Company entered into an agreement to repurchase all **9,926 shares** of its Series A Preferred Stock from Wipro for **$9.926 million** in cash and **100,000 shares** of common stock. The cash was placed in escrow[65](index=65&type=chunk) - The company completed its restructuring activities in 2021 and incurred **no restructuring expenses** in the first nine months of 2022, compared to **$4.9 million** in the same period of 2021[109](index=109&type=chunk)[110](index=110&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the third quarter and first nine months of 2022, comparing them to the same periods in 2021. The analysis covers consolidated and segment-level performance, highlighting a revenue increase driven by the Fulfillment & Logistics segment, alongside declines in Marketing Services and Customer Care. The discussion also covers operating expenses, liquidity, capital resources, and the new credit facility [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes the company's consolidated financial performance, including revenue, operating income, and expenses, for the reported periods Consolidated Results Summary (in thousands) | Period | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | | **Q3** | Revenues | $53,886 | $49,597 | 8.6% | | | Operating Income | $3,773 | $4,226 | (10.7)% | | **9 Months** | Revenues | $151,500 | $142,610 | 6.2% | | | Operating Income | $11,678 | $4,776 | 144.5% | - Q3 2022 revenue increased by **$4.3 million (8.6%) YoY**, driven by a **$8.4 million** increase in Fulfillment & Logistics, which offset decreases in Customer Care (**$2.4 million**) and Marketing Services (**$1.7 million**)[131](index=131&type=chunk) - Q3 2022 operating expenses increased by **$4.7 million (10.5%) YoY**, primarily due to a **$5.3 million** rise in production and distribution costs linked to higher logistics revenue and transportation costs[134](index=134&type=chunk)[135](index=135&type=chunk) - Other income for Q3 2022 was **$4.7 million**, a significant increase from **$0.6 million** in Q3 2021, mainly due to a **$2.5 million** gain from the sale of IP addresses[146](index=146&type=chunk) [Segment Results](index=39&type=section&id=Segment%20Results) This section provides a detailed breakdown of financial performance across the company's Marketing Services, Customer Care, and Fulfillment & Logistics segments Marketing Services Segment Performance (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $13,016 | $14,729 | -11.6% | | Operating Income | $1,823 | $2,655 | -31.3% | Customer Care Segment Performance (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $17,375 | $19,768 | -12.1% | | Operating Income | $2,765 | $3,819 | -27.6% | Fulfillment & Logistics Services Segment Performance (Q3 2022 vs Q3 2021) | Metric | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $23,495 | $15,100 | 55.6% | | Operating Income | $2,601 | $1,511 | 72.1% | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, credit facilities, and expected capital expenditures, outlining its ability to meet short-term and long-term obligations - Cash and cash equivalents were **$6.9 million** at September 30, 2022, down from **$11.9 million** at December 31, 2021[160](index=160&type=chunk) - The company entered a new **three-year, $25.0 million** asset-based revolving credit facility with Texas Capital Bank in December 2021. As of September 30, 2022, there were **no borrowings outstanding**, with **$24.2 million available**[168](index=168&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - The company expects to receive an additional **$7.6 million** in tax refunds in 2022 related to NOL carryback provisions from the CARES Act[161](index=161&type=chunk) - Capital expenditures for 2022 are expected to be approximately **$6 million to $7 million**, mainly for a new ERP system and the Kansas City facility expansion[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has indicated that this section is not applicable for this reporting period - The company states this item is 'Not applicable'[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2022. There were no material changes to internal controls over financial reporting during the quarter, and the shift to remote work due to COVID-19 has not had a material impact on these controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[185](index=185&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[186](index=186&type=chunk) [Part II. Other Information](index=45&type=section&id=Part%20II.%20Other%20Information) This part covers legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various claims and legal proceedings in the ordinary course of business. Management believes that appropriate and adequate accruals have been made and that the probability of a material loss beyond these accruals is remote - The company is subject to various claims and legal proceedings in the ordinary course of business. Management believes appropriate accruals have been made and the probability of material loss beyond amounts accrued is remote[105](index=105&type=chunk)[106](index=106&type=chunk)[188](index=188&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes were reported during the three months ended September 30, 2022, to the risk factors previously disclosed in the 2021 10-K[189](index=189&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not sell any unregistered equity securities during the quarter ended September 30, 2022. Additionally, no shares were repurchased under the company's stock repurchase program, which has since been terminated - The company did not sell any unregistered equity securities during the quarter ended September 30, 2022[190](index=190&type=chunk) - No shares of common stock were repurchased under the stock repurchase program during Q3 2022. This program has been terminated[178](index=178&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications (Sections 302 and 906 of the Sarbanes-Oxley Act) and Inline XBRL data files - Exhibits filed include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002, and Interactive Data Files (XBRL)[194](index=194&type=chunk)

Financial Data and Key Metrics Changes - Revenue for the second quarter was $48.6 million, a decrease of 1.4% from $49.3 million in the same period last year [41] - Operating income increased by $2.6 million to $4 million compared to $1.4 million in the year-ago quarter [44] - EBITDA more than doubled to $4.6 million from $2.1 million in the second quarter last year [21][45] - Net income for the quarter was $4.5 million, with fully diluted earnings per share of $0.52 compared to $1.27 in the second quarter last year [39][44] Business Line Data and Key Metrics Changes - Customer Care revenue decreased by 19.8% year-over-year to $15.3 million, with EBITDA down 25% to $2.5 million [22][41] - Fulfillment & Logistics revenue increased by approximately $3.9 million or 24.3% year-over-year, with EBITDA up 91.7% to $3.2 million [28][41] - Marketing Services revenue slightly decreased to $13.5 million, but EBITDA improved to $1.8 million from $1.7 million in the prior year quarter [33][41] Market Data and Key Metrics Changes - The company is experiencing healthy demand for Fulfillment & Logistics services despite larger logistics players announcing a slowdown in spending [29] - The Customer Care pipeline remains healthy with new and former customers, indicating potential for future growth [23] Company Strategy and Development Direction - The company is focused on an asset-light business model and aims to deepen existing customer relationships while expanding into new segments [8][12] - Investments in technology and partnerships are expected to enhance market opportunities and drive revenue growth [14][15] - The company plans to continue operational improvements and expand revenues and margins [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for revenue growth despite a modest decrease in the current quarter, citing new customer relationships and upcoming projects [10][11] - The company anticipates strong sequential results in the third quarter, supported by new business wins and increased staffing for upcoming projects [11][23] - Management noted that there have been no significant reductions in spending from clients due to macroeconomic pressures [71] Other Important Information - The company reached an agreement to repurchase all preferred shares held by Wipro, which will eliminate the dilutive impact to common shareholders [16][47] - The company sold unused IP address blocks for proceeds totaling $2.5 million, contributing to a one-time improvement in cash flow [17][18] Q&A Session Summary Question: What has increased confidence in year-over-year revenue growth? - Management noted a focus on cross-segment selling and new contracts contributing to revenue growth [52] Question: What went right for the Fulfillment & Logistics segment? - Strong performance was attributed to double-digit EBITDA margins and a favorable revenue mix [54] Question: Is there healthy demand for Fulfillment & Logistics despite larger players slowing down? - Management confirmed positive momentum with existing clients and new business opportunities [57] Question: Are there plans for traditional financing options now that debt is paid off? - Management clarified that a new traditional financing arrangement was closed last December [64] Question: What are the best uses of cash at this point? - Management indicated a focus on continued investment in the business and potential acquisition opportunities [76]

Harte Hanks, Inc. (HRTH) Q3 2021 Earnings Conference Call November 11, 2021 4:30 PM ET Company Participants Rob Fink - FNK, IR Brian Linscott - Chief Executive Officer Lauri Kearnes - Chief Financial Officer Conference Call Participants Michael Kupinski - Noble Capital Markets Operator Good day, ladies and gentlemen, and welcome to the Harte Hanks Third Quarter Earnings Call. At this time, all participants have been placed on the listen-only mode and the floor will be open for questions and comments after t ...