Harte Hanks(US:HHS)2021-08-12 23:32Financial Data and Key Metrics Changes - The company reported Q2 revenue of $49.3 million, an 18% increase from $41.6 million in the same quarter last year [10][21] - Adjusted EBITDA for Q2 was $4.4 million, marking the fifth consecutive quarter of positive adjusted EBITDA [10][26] - Net income for the quarter was $10.6 million, or $1.27 per diluted share, which included a $10 million debt extinguishment related to PPP loan forgiveness [26][27] Business Line Data and Key Metrics Changes - Customer Care segment revenue increased by $4 million year-over-year, with EBITDA improving to $3.4 million from $2.1 million [14][21] - Fulfillment and Logistics revenue rose by approximately $2.5 million, with EBITDA improving to $1.7 million from a loss of $1 million in the prior year [15][16] - Marketing Services segment revenue increased by $1.2 million, with EBITDA growing to $1.7 million compared to $1.2 million in the prior year [16][24] Market Data and Key Metrics Changes - The company experienced revenue growth across all business segments, with Customer Care leading the growth [21][22] - The company noted strong revenue tailwinds from COVID-related projects, although these are expected to temper as 2021 progresses [14][32] Company Strategy and Development Direction - The company is focused on cost reduction initiatives in real estate, restructuring charges, and labor savings, which are expected to drive margin improvements [12][13] - The implementation of a new ERP system is underway, expected to be completed by the end of next year, with anticipated cost savings [13][42] - The company aims to create deeper relationships with existing clients while attracting new clients, particularly in the CRM solutions market [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued performance and profitability, despite challenges in the customer care segment due to the winding down of COVID-related projects [18][32] - The company is encouraged by new business wins and growth in areas where investments have been made, particularly in pharmaceuticals and consumer packaged goods [20][21] Other Important Information - Operating expenses for Q2 were $47.8 million, a slight increase from $47.5 million in the prior year, with significant reductions in advertising and restructuring costs [25] - As of June 30, 2021, the company had cash and cash equivalents of $19.3 million and long-term debt of $13.1 million, a reduction of $14 million compared to the prior quarter [27] Q&A Session Summary Question: Insights on Customer Care revenue growth and future expectations - Management acknowledged that COVID-related project revenue will continue into Q3 but is expected to step down, making year-over-year growth challenging [32] Question: Performance of the Marketing Services segment - Management noted increased momentum in Marketing Services due to leadership changes and improved client spending [33] Question: Momentum in Fulfillment and Logistics and consolidation expenses - Management indicated that the consolidation efforts were largely completed in Q2, with expectations for optimization in Q3 and beyond [35][38] Question: Real estate lease exits and their impact - Management clarified that they are looking to exit multiple leases to reduce operating expenses, rather than selling real estate [40] Question: Capital allocation and debt reduction plans - Management indicated an increase in capital spending related to ERP implementation but emphasized a continued asset-light strategy [41][42]