Harte Hanks(US:HHS)2023-03-08 01:30Financial 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]