Harte Hanks(HHS) - 2023 Q4 - Annual Report

Revenue and Client Concentration - Harte Hanks generated 71.7% of total revenue in 2023 from its largest 25 clients, with the largest client accounting for 11.2%[37] - The largest client accounted for 11.2% of total revenues in 2023, with the top 25 clients generating approximately 71.7% of total revenue[59] - In 2023, approximately 9.6% of the company's revenues were derived from operations outside the United States, primarily in Europe and Asia[74] Financial Performance - Operating revenue for the year ended December 31, 2023, was $191.5 million, a decrease of $14.8 million or 7.2% compared to $206.3 million in 2022[132] - The net loss for the year ended December 31, 2023, was $1.57 million, a decline of 104.3% compared to a net income of $36.8 million in 2022[132] - The diluted EPS from operations for 2023 was $(0.21), a decrease of 104.5% from $4.75 in 2022[132] - Total operating revenue for 2023 was $191,492,000, a decrease of 7.5% from $206,278,000 in 2022[212] - Operating income fell to $3,359,000 in 2023, down 77.8% from $15,107,000 in the previous year[212] - Comprehensive income for 2023 was $2,642,000, down from $41,802,000 in 2022, marking a decrease of 93.7%[212] Restructuring and Cost Management - The company incurred total restructuring charges of $5.7 million in 2023, including $4.6 million for operational efficiency consulting[36] - Project Elevate is expected to yield estimated cost reductions of $16.0 million from 2024 through 2026[35] - The company has initiated Project Elevate to focus on cost-saving initiatives and restructuring efforts to transform its operational cost structure[68] - Restructuring expenses for 2023 totaled $5.7 million, including $4.6 million in consulting expenses and $0.8 million in lease impairment[136] Workforce and Employment - As of December 31, 2023, the company employed 1,709 full-time and 253 part-time employees, with around 980 employees based outside the U.S.[53] - Approximately 58% of the workforce was female as of December 31, 2023, reflecting the company's commitment to diversity and inclusion[55] Operational Challenges and Risks - The company faces intense competition, with significant risks from clients moving services in-house and emerging technologies[60] - The company faces risks related to reduced demand for its products and services due to clients' financial conditions and marketing budgets, which are discretionary and easier to cut[67] - Consumer privacy and security concerns may limit the company's ability to collect data, impacting its marketing services segment[69] - The company is exposed to cybersecurity threats, including sophisticated attacks that could compromise sensitive information and disrupt operations[91][106] Cash Flow and Liquidity - Net cash provided by operating activities was $10.5 million in 2023, down $18.3 million from $28.8 million in 2022[148] - Cash and cash equivalents increased to $18.4 million in 2023 from $10.4 million in 2022, with an additional borrowing capacity of $24.2 million under the Credit Facility[145][158] - The company experienced a net increase in cash and cash equivalents of $7,500,000 in 2023, contrasting with a decrease of $3,769,000 in 2022[216] Regulatory and Compliance - The company is subject to various domestic and international regulations affecting marketing activities, including data protection laws[47] - The company is subject to numerous laws and regulations regarding privacy and data protection, which may increase compliance costs and affect service offerings[83] - The evolving regulatory landscape surrounding AI technologies may impose significant operational costs and affect the company's ability to innovate[89] Technology and Innovation - The company leverages a proprietary DataView tool that provides a 360-degree customer view with over 1,500 attributes for predictive marketing[27] - The company is investing in artificial intelligence (AI) technologies, which are essential for maintaining a competitive advantage, but failure to execute effectively could result in revenue loss and reduced margins[87][88] - The company emphasizes the need to maintain technological competitiveness and improve processes to develop new services in a timely and cost-effective manner[64] Shareholder and Stock Information - The company has remaining authority of $4.1 million to repurchase shares under its stock repurchase program[124] - The company did not pay any dividends in 2023 or 2022, with future dividends subject to Board approval[159] - The company’s stock price has experienced significant volatility, which may affect investors' ability to resell shares at favorable prices[103]