Harte Hanks(US:HHS)2020-08-14 03:30Financial Data and Key Metrics Changes - The second quarter revenues were $41.6 million, up over $1 million sequentially from the previous quarter, but down $13.1 million year-over-year from $54.7 million [44] - Adjusted EBITDA improved to $480,000 compared to negative $1.8 million in the same period last year, indicating successful execution of the turnaround plan [51] - Operating loss was $5.9 million for the second quarter, an improvement from the $6.6 million operating loss in the year-ago quarter [49] Business Line Data and Key Metrics Changes - The B2B vertical revenue increased by $3.1 million or 28.2% due to heightened demand for contact center services [45] - The retail segment saw a decline of $7.3 million, primarily due to COVID-19 impacts, while the transportation segment experienced over 80% decline due to a large client not renewing [45] - The company fully exited its direct mail production business, which is expected to eliminate just under $1 million in quarterly losses [46] Market Data and Key Metrics Changes - The company reported a current weighted pipeline of $10.3 million and an unweighted pipeline of $31.2 million, with $10.1 million secured towards the $13 million annual goal [26] - There is a noted increase in demand for B2B services, particularly in contact center operations, which is expected to continue generating growth [42] Company Strategy and Development Direction - The company is focused on a three-pillar strategy: optimizing the business, growing current services, and transforming the business model [13] - A significant reduction in real estate footprint is underway, including a new 300,000 square foot fulfillment facility in Kansas City [16] - The company is enhancing its IT infrastructure by moving to the cloud, which is expected to yield over $2 million in annual savings [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted EBITDA positivity for the year and being free cash flow positive in the second half of 2021 [12] - The company is adapting to the pandemic by streamlining operations and focusing on higher-margin business lines [42] - Management believes that the changes being made will position the company competitively for the long term [55] Other Important Information - The company recognized a $1.5 million one-time tax benefit related to NOL carrybacks due to the CARES Act [50] - As of June 30, 2020, the company had cash and cash equivalents of $30.1 million, an increase from $23.5 million at the end of the previous quarter [52] Q&A Session Summary Question: Congratulations on achieving positive adjusted EBITDA - Management acknowledged the achievement and noted that it was the first positive cash flow in the second quarter since at least 2017 [58] Question: Can you provide insight on revenue stabilization and client losses? - Management confirmed that they believe they have stabilized the top line and are not experiencing the same customer losses as before [61] Question: What is the timeline for the $13 million in annualized savings? - Management clarified that the $13 million is an annualized figure, with a significant portion expected to be realized in the second, third, and fourth quarters [66] Question: Can you break down the savings by quarter? - Management indicated that savings began in the second quarter and will be more pronounced in the third and fourth quarters [67] Question: What should be expected regarding employee expenses going forward? - Management noted that increases in employee expenses are related to the revenue mix, particularly in the contact center business [71]