Harte Hanks(HHS) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements Presents Harte Hanks, Inc.'s unaudited condensed consolidated financial statements for Q1 2022, with comparative data and accounting notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $79,854 | $75,375 | | Total Assets | $111,114 | $107,861 | | Total Current Liabilities | $44,604 | $42,442 | | Total Liabilities | $121,962 | $122,853 | | Total Stockholders' Deficit | $(20,571) | $(24,715) | Condensed Consolidated Statements of Comprehensive Income (Loss) Statement of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Revenue | $49,062 | $43,754 | | Operating Income (Loss) | $3,894 | $(884) | | Net Income (Loss) | $3,345 | $(1,758) | | Diluted Earnings (Loss) per Share | $0.39 | $(0.28) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(764) | $(5,675) | | Net cash used in investing activities | $(1,372) | $(735) | | Net cash used in financing activities | $(282) | $(199) | | Net decrease in cash | $(2,922) | $(7,067) | | Cash at end of period | $12,211 | $26,495 | Notes to Condensed Consolidated Financial Statements - The company operates in three business segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services. The CEO reviews performance based on revenue, operating income, and EBITDA[17] - In December 2021, the company entered into a new three-year, $25.0 million asset-based revolving credit facility with Texas Capital Bank, replacing the old facility. As of March 31, 2022, $5.0 million was outstanding[72][67] - The company completed its restructuring activities in 2021 and expects no further related expenses in 2022. Restructuring charges in Q1 2021 were $2.2 million, compared to $0 in Q1 2022[100][101] Revenue by Segment (in thousands) | Segment | Q1 2022 Revenue | Q1 2021 Revenue | | :--- | :--- | :--- | | Marketing Services | $12,924 | $12,878 | | Customer Care | $17,742 | $16,544 | | Fulfillment and Logistics Services | $18,396 | $14,332 | | Total Revenues | $49,062 | $43,754 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2022 financial performance, highlighting revenue growth, operating income improvement, liquidity, and capital resources Results of Operations Consolidated Operating Results (in thousands) | Metric | Three Months Ended Mar 31, 2022 | Three Months Ended Mar 31, 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $49,062 | $43,754 | 12.1% | | Operating Income (Loss) | $3,894 | $(884) | 540.5% | | Operating Margin | 7.9% | (2.0)% | N/A | - Revenue increased by $5.3 million (12.1%) YoY, driven by a $4.1 million increase in Fulfillment & Logistics Services and a $1.2 million increase in Customer Care[123] - Operating expenses decreased by 1.3% despite the revenue growth, primarily due to the absence of $2.2 million in restructuring expenses that were incurred in Q1 2021[124][126] Segment Results - Marketing Services: Revenue was flat at $12.9 million, but operating income increased by $0.9 million to $1.4 million due to cost reduction efforts[133][134] - Customer Care: Revenue grew 7.2% to $17.7 million, and operating income improved by $1.0 million to $3.3 million, driven by new customers and increased volume from existing clients[135] - Fulfillment & Logistics Services: Revenue increased 28.4% to $18.4 million, with operating income improving by $1.1 million to $2.2 million, driven by new customers and cost reductions[136] Liquidity and Capital Resources - Cash and cash equivalents decreased from $11.9 million at year-end 2021 to $9.7 million at March 31, 2022[137] - The company expects to receive an additional $7.6 million in tax refunds in 2022 related to NOL carryback provisions under the CARES Act[138] - Capital expenditures for 2022 are expected to be approximately $4 million to $5 million, mainly for a new ERP system and facility expansion[139] - As of March 31, 2022, the company had $5.0 million of borrowings outstanding and the ability to borrow an additional $18.9 million under its new credit facility[154] Quantitative and Qualitative Disclosures About Market Risk The company states this item is not applicable for the current reporting period - Not applicable[161] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[164] - There were no changes in internal controls over financial reporting during the first quarter of 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[165] Part II. Other Information Legal Proceedings Legal proceedings information is incorporated from Note L, with management believing accruals are adequate and material loss is remote - Information regarding legal proceedings is incorporated by reference from Note L in the Notes to Condensed Consolidated Financial Statements[167] - Management believes adequate accruals for legal matters have been made and the probability of a material loss beyond the amounts accrued is remote[97] Risk Factors The company refers to its 2021 10-K for risk factors, confirming no material changes during Q1 2022 - There have been no material changes during the three months ended March 31, 2022 to the risk factors previously disclosed in the 2021 10-K[168] Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered equity securities during the quarter ended March 31, 2022 - The company did not sell any unregistered equity securities during the quarter ended March 31, 2022[169] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data - The report includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002, as well as XBRL-related documents[173]