Harte Hanks(HHS) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a revenue decline of 10% in Q4 2020, with revenues at $47.1 million compared to $52.3 million in the same quarter last year [21] - For the full year 2020, revenues were $176.9 million, down 18.7% from $217.6 million in 2019 [23] - Adjusted EBITDA for Q4 was $1.9 million, a decrease from $3 million in the same period last year, marking the third consecutive quarter of positive adjusted EBITDA [22][25] - The net loss for 2020 was $1.7 million, significantly improved from a net loss of $26.3 million in 2019 [26] Business Line Data and Key Metrics Changes - Customer Care segment revenue grew by 44.5% in Q4, driven by project work and increased volumes from existing clients [7][18] - Marketing Services revenue decreased by 6.3% due to clients' reduced marketing budgets amid COVID-19 [18] - Fulfillment & Logistics revenue declined by 39.3%, impacted by the closure of the mail production facility and COVID-19 effects [18] Market Data and Key Metrics Changes - The company anticipates an additional $7.5 million from an income tax refund by year-end 2021, contributing to a strengthened financial position [6][26] - The weighted pipeline for new business is reported at $14.8 million, with an unweighted pipeline of $41 million, indicating strong prospects heading into 2021 [20] Company Strategy and Development Direction - The company has restructured into three operating segments: Marketing Services, Customer Care, and Fulfillment & Logistics, to better align with market needs [5][18] - There is a focus on transforming the Customer Care business into a tech-first offering, integrating cross-channel interactions and leveraging CRM capabilities [7][9] - The company aims to capitalize on the e-commerce growth trend accelerated by the pandemic, positioning itself as an omnichannel customer experience provider [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for growth in 2021, citing strong client relationships in high-growth categories such as Financial Services, CPG, Healthcare, and B2B tech [14][15] - The company is focused on cost reduction efforts, having cut over $20 million in costs in 2020, which contributed to improved financial results [10][25] - Management believes the transformation and restructuring efforts will continue to yield positive results and stabilize revenue [21][35] Other Important Information - The company has made significant executive hires to drive growth, including a new Chief Commercial Officer and Managing Director for Fulfillment & Logistics [11][12] - The operating expenses for the full year 2020 decreased by 21.6% to $187.5 million, reflecting successful cost-cutting measures [24] Q&A Session Summary Question: Can you discuss revenue sources for each operating segment? - Management explained that Marketing Services operates as a CRM agency, while Fulfillment & Logistics includes product fulfillment and trade marketing fulfillment, with a noted decline in literature fulfillment [32] Question: How much of the Customer Care revenue is recurring versus one-time? - Management indicated that 10% to 20% of the revenue is from project work, with opportunities for longer-term projects [34] Question: How are the segments performing in the first quarter? - Management noted that they see stabilization in top-line revenue and are focused on improving EBITDA across all segments [35] Question: What are the expected annualized cost savings for 2021? - Management mentioned ongoing restructuring efforts and the implementation of a new cloud-based ERP system aimed at driving further efficiencies [37] Question: What is the status of third-party vendor costs? - Management confirmed that they have made significant progress in reducing reliance on third-party vendors and are moving towards an asset-light model [38] Question: How should the business pipeline translate into future revenue? - Management emphasized the importance of both the quality and quantity of the pipeline, with a focus on higher-margin, higher-ticket items [40]