Harte Hanks(US:HHS)2023-05-03 04:51Financial Data and Key Metrics Changes - Revenues decreased by 4% in Q1 2023 to $47.1 million, while operating income fell approximately 73% to $2.8 million compared to the previous year [30][31] - EBITDA decreased to $2.1 million from $4.5 million in the same quarter last year, with a net loss of $0.8 million or $0.11 per share compared to a net income of $3.3 million or $0.40 per share last year [31][32] - Cash and cash equivalents increased to $13.1 million as of March 31, 2023, compared to $10.4 million at the end of 2022, with no debt and a $25 million credit facility [35] Business Line Data and Key Metrics Changes - Customer Care revenue decreased by 18.8% year-over-year, with EBITDA down 41% to $2 million due to the conclusion of pandemic-related projects and lower customer interactions [48] - Marketing Services revenue decreased by 13% to $11.2 million, primarily due to the discontinuation of direct mail campaigns [50] - Fulfillment & Logistics revenue increased by approximately 16.7% to $21.6 million, with EBITDA slightly decreasing to $2.2 million [32][49] Market Data and Key Metrics Changes - The company observed a reevaluation of marketing and logistics spending by clients, particularly in financial services and B2B tech sectors, due to economic uncertainties [9][62] - The financial services segment experienced a revenue decline of over $1 million in Q1, attributed to tightening budgets among clients [62] Company Strategy and Development Direction - The company is combining its Marketing Services and Customer Care segments into a new segment called Customer Experience to enhance its go-to-market strategy and improve cost structure [11][51] - Focus on demand generation and sales strategy to engage new prospects and scale lead qualifications, leveraging capabilities from the InsideOut acquisition [12][14] - The company aims to preserve profitability by reducing discretionary spending and right-sizing the business in response to first-quarter performance [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged stronger-than-expected macroeconomic headwinds impacting revenue and expressed limited visibility beyond Q2 2023 [3][9] - Despite challenges, management remains cautiously optimistic about opportunities in the sales pipeline for the second half of the year and into 2024 [21][54] - The company is focused on evolving its offerings to provide lower-cost options, making it an attractive outsourcing option in the current economic climate [29] Other Important Information - The company received a $5.3 million federal tax refund, enhancing cash liquidity and enabling a $6.5 million share buyback program [10][23] - The InsideOut acquisition contributed $2.8 million in revenue and $0.5 million in EBITDA for the quarter, with expectations for its role in driving growth [32][73] Q&A Session Summary Question: What changed in the company's outlook regarding the economy? - Management noted a slowdown in project starts and new business opportunities, with some projects being delayed or canceled, impacting the overall tone of their comments [39] Question: How will the combined Customer Experience segment drive growth? - The integration is expected to leverage global talent and improve service efficiency, enhancing the overall customer experience and driving membership growth for clients [66] Question: What is the company's approach to share repurchase and potential acquisitions? - The company plans to be opportunistic with share buybacks while remaining open to acquisition opportunities that complement its offerings, though focus will be on the ongoing reorganization [67][74]