HRTH - Earnings call transcript Q2 2021

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Operator

Good day, everyone, and welcome to the Harte Hanks Second Quarter 2021 Earnings Conference Call.

As a reminder today's conference is being recorded. At this time, I would like to turn the conference over to [indiscernible]. Please go ahead.

Unidentified Company Representative

Thank you, Melinda, and good afternoon, everyone. us. joining for you Thank Hosting the Hanks; CEO Harte Brian today Lauri Kearnes. are; and Linscott, of call CFO.

issued is after said, Investors now on Brian the the for the related Before markets to of I because described litigation and savings contain performance regulatory those yours. financial expectations, The and economic and related information they adjustments future capital provided With as refer these the I press in uncertainties serve, various section availability and resources, of the that about and expectations in available are to during everyone hartehanks.com. not to website measures. call its at the begin statements the and business financial this acquisitions, outcomes, filings today's disposition, and would to its the I'd company's earnings like results historical like competitive of cost Brian effects call outlook company's factors, the anticipated may Linscott. the with disclosures. the refunds facts. statements forward-looking release those structure, from that implied other and cost projected materially that forecasts XX-Q such reference tell other measures Form earnings non-GAAP in The the changes, may statements tax strategy SEC Actual also for of differ to XX-K statement other close risks and including or Please of to cautionary may the over release call turn industry company's and reconciliation floor is release. statements

Brian Linscott

our look CEO The clients work our my very time forward by pleased across over lives of through had how ability they've to to proud for Hanks years. strong I'm this Harte Harte time. I the We positive employees to of the second company Hanks Hanks. Thank that of our have growth. continued daily improvement the their hard then start our X.X our business. the detailed results to improvements to progress and to operating walking momentum first quarter challenges forward want have will and resiliency all on the sincere you year-over-year quarterly and financials. impacted excel its you. to employees challenging for further with driving take I'm expressing share appreciation look segments of a we the I continues behalf Harte our the through you I past made throughout and Lauri demonstrated of as through

As we compete three large segments with shared previously that into divided in you, have company operating markets. have addressable we our

product that First sampling focused focused solutions and Services our literature BXB customer segment Marketing which on and end-to-end and which tech-enabled delivering and care are omnichannel on e-commerce focused logistics is services. and fulfillment care on services. CRM BXC fulfillment logistics people-driven; customer third is And

Our each progress. the reporting transparency financials indicators dynamics to to of into company's designed and visibility Three reflect our provide segment value the business. by is and continued

improved and third, of growth performance; collaboration and execution driving of and improved reductions to are revenue cost financial each that continue with operating quarter and improvements so; strong continued another will had our do across second, segments. we First, identification margin

quarter million positive improvement a year. positive of $X.X And row EBITDA million revenue. to an of in increase fifth the or for million for on the performance. financial quarter go we'll adjusted and revenue the with delivered quarter prior revenue QX an Now million quarter which delivered a EBITDA improved versus the in growth ago $XX.X $X.X year We over another $XX.X is the million. positive adjusted strong results. was $X.X with EBITDA. We was XX% lastly, QX a is

million through cost or structure operating reductions quarterly operating Number while that two XXXX. going deliver believe, a to hundred the that cost further $XX same from to see meaningful year. benefit will implemented up cash million to from pleased revenues to up our continue our the were free quarter improvement. last expected baseline EBITDA were is nearly we we thousand While improvement more I'm positive project reductions and we during Further period which this flow cost margin the year flow expenses second will operating believe to in year of that forward. the COVID-related be we drive are $X few durable base dollars, revenue, only for revenues

on our diligently margin focus and improvement costs continue reduction have to cost We and managing initiatives. we been

focus that We dollars XXXX. continued in improvement EBITDA are in confident of this will millions deliver

Number previously detailed, number areas. one, As footprint; charges; our in and nonrecurring labor reduction actions XXXX. three savings two, in are real taken from estate initiatives declines three, focused in these restructuring cost

And and planning and we maximize resource XXXX. $X or be of year improved year the enterprise addition, In three, revenue operating is million from $X.X implementing new began the to million year-over-year Customer by along million savings we completed savings cost of EBITDA realize each care quarter. segments. to the implementation way end in in from $X.X expect our execution finally, number prior system a increased improving associated previous next year in ERP. by the and those The should

expect tailwinds revenue the We progresses. we which COVID-related as work, do continued XXXX temper to to from experience project strong

media the and included for stream a and two wins within support business major regional sports New entertainment for growth organizations. quarter network

as year. the Logistics revenue, EBITDA. to EBITDA the from and approximately business million increased Fulfillment compared segment, next Our improved prior $X $X.X $X.X to million, And prior year and negative million

fulfillment we With City The City opportunities and include the fulfillment our with of apparel wins were and and additional company and The and XXX and in Fulfillment Marketing efficiencies million the anticipate XXXX. compared product company. tech will improved enable cloud-based growth a into Logistics focused segment, we feasible prior in a of fulfillment that not improvement operations operational capacity year continued US a our of footprint. Across facility leading order warehouse the driving prior facility, $X.X new branded complete, on by further profitability through system. product all prior implementation quarter the logistics Fortune are margin of Kansas of the and campaigns Kansas our consolidation million EBITDA for management year to to increased CPG $X.X million Services for for quarter. the revenue $X.X business to compared sampling locations,

capabilities, to clients. CRM deliver mentioned we focus new growing creating existing solutions, to progress with integrated clients a needed attracting market. large continue As made before, deeper relationships, on We've building significant and and

leadership North company, Association. retailer momentum quarter New business new revenue wins business a we for a leading and that, the have We American a turn and performing are all very conclusion, Topline it well strong increased rightsized reflects parts profitability. a the major business. we posted businesses forward. I'll over packaging our National team goods to segments those and optimistic drive to have With Sports to in that remain driving auto in Lauri. performance quarter our and In include and we seasoned continue a ability

Lauri Kearnes

We in million. adjusted The you, of revenue row the Brian. achieved quarter June first of EBITDA since a row our quarter our in fifth positive at XXXX. was second a $X.X Thank year-over-year quarter that's growth,

pandemic. and in areas, our to despite associated by vertical, be the pharmaceutical consumer uncertainty effects and where we packaged wins encouraged continue invested with have the goods business We growth new ongoing including of

we the like of needs to results encouraged business to results. the streamlining the and by meet and I'd detail. walk through in We focus on are today the continue more to market optimizing our now

across XX% the Second quarter up quarter revenue by of segments each was from $X.X sequentially or last million, $X.X grew $XX.X led the first $XX.X quarter million over the up period in and customer That's million. care. same business from in Revenue our the year. million

XX.X% several that the result expect of services wind we segment Our as up million, projects down course Care or or was XX% up year. large million $X.X the Customer was & up and Marketing year-over-year, over was million, X.X%. $X $X.X Services Fulfillment to Logistics a or of

are operations. We year We positive Services cost for & full to resulting completed our with this target achieved segment of have for efficient momentum in our our pleased increased goals our in the EBITDA Logistics more consolidation meet XXXX. million. we $X.X structure rightsized year, facility and have the QX Fulfillment

this a over quarters EBITDA past Services EBITDA expect As improvement Marketing we continued for EBITDA. result, $XXX,XXX, improvement to an in declining of grew see segment.

of new business by softness marketing spend. experienced at client we are encouraged spend client and in in we pandemic, beginning are beginning increases the the While wins improvements and see to

revenue general operating well $X.X and million. quarter. quarter. Our administrative Net Operating expenses year to in improvement efforts PPP our quarter in $X.XX selling, from share as from $XX.X sustained per expenses income million, major improvement forgiveness This net per or up for million, were attributed the growth. of posted extinguishment our ago $X.X the loans. $XX.X costs and first related efficiency restructuring million income the advertising is We quarter was loss This in also a to the $XX.X costs. operating income in as million aggressive $X.XX reduced year in the in and million We cost $XX ago of of second debt to quarter. included diluted basic primarily the is

year. adjusted $XXX,XXX our in second noted, period EBITDA. $X.X This quarter As a of EBITDA quarter to fifth is row in adjusted was positive the same compared last million

to our sheet. balance turning Now

XX, as cash June ended had a of of XXXX. to equivalents compares million cash and of balance $XX.X we This period As million. XX, cash December $XX.X XXXX, of the

debt long-term of no XX, with quarter, the As debt. we we balance your reduction operator and pleased a are million This Thank $XX.X turn improvement will I over in and short-term to With in million the $XX sheet. to to of XXXX, questions. take that, you. compared back it is the prior June have this

Operator

Kupinski you. Instructions] question [Operator Michael Markets. we'll our take NOBLE of And Capital Thank from

Your line sir. open, is

Michael Kupinski

the questions. and Thank for thanks you, taking

great labors longer, been your certainly quarter. heavy that of over coming quarter. fruits congratulations A of couple it know of are year the questions. but lot there's our First of past lifting in even through a all, on looks I a like

care extraordinary revenues. of that the there customer of was terms are growth I to in know a couple in the of things First all, that area contributing

impact other the whether would of sense be care or Can quarter? if growth large if third that kind give client your can You on a customer mentioned of us not like actually the are? particular us there. a client showing give you of of you excluding And kind into divisions COVID some continuing a sense that's of that

Brian Linscott

Nice you here. to Brian. you meet is Thank over Michael. phone the This Yes.

to customer down. cautiously of you've we've to quarters third as far revenue opportunities stepping have is got going that And have revenue. expand going as multiple continue. kind start reiterated think we're to quarter, do we project-related noted I That care, the COVID As it's of think we I kind optimistic into sequential but continue that we and

challenged care be growth. of I think to customer experienced will year-over-year revenue kind have However, continued

Michael Kupinski

And can us now? us kind And QX at give how services on is marketing a of sense can we're you the give you segment what -- on like point? sense into performing this a

Brian Linscott

Yes.

part job So as we as spent we're leadership they've our way. and momentum year Marketing on increased dollars. real well had -- of kind handle customer in some a -- Services marketing getting the around the some all of opportunities in early experiencing our a a existing and clients the some with There good spending our profitable existing servicing is that seeing change

cautiously throughout year side we're that reorganization of be the of, made future kind to That the this on said efforts in going Marketing momentum again, reflective positive will to in So some quarters. we continue part we've the think cost see I obviously think Services. beginning continued that optimistic some

Michael Kupinski

kind Fulfillment your a talk of you And on consolidation that you if QX? is Kansas us the seeing can there? whether largely us behind have bit of you're or from And expenses and now your will a in about QX, then of Logistics momentum sense you give or City side, can not in extra the that facility also then just little

Brian Linscott

I'll first question the on yes, So, the consolidation. take

the the consolidation So lion's efforts. quarter of the be should second share

so I beyond experiencing should in we what facility. QX of be is think and optimization that just And

far material as don't that top can in head. off I'm to going my anything chime I the charges City. So the any missing But momentum… forward anticipate there's Kansas of Lauri, if as as relates it

Lauri Kearnes

No.

Brian Linscott

Okay.

the with good. momentum As you. far – as Thank Okay,

Kansas momentum I Logistics and -- our and location well actually position as Fulfillment location as a in Bridgewater comfortably City we're and there as the -- East we're handling different now as racking we our capacity far where storage As think additional of that we do location. fulfillment growth. the well opportunities. investing can higher Beach for And our sure accommodate in out logistics business We're have to velocity make additional both as Deerfield

grow continue. think some room momentum so And I do still and should we see I have is nice positive there to the and

Michael Kupinski

be prospects estate the -- any might estate what selling real real Do sale of mentioned terms of the some you of have thoughts of potential you terms terms in value And that you estate? some real in in real have of estate.

Lauri Kearnes

Michael, estate. it's yeah, yes, real let – of that So a me not clarify sale

any We own We have leases. don't real estate.

to So will We've looking us further the in leases provide and exit. expense year. operating we're to some multiple we're next exit leases looking for exited reductions that

Michael Kupinski

I you maybe what allocation in your would or forward? kind expenditures in reduction, assume thoughts your looks you're Got have of you. it generating of pension guess know allocation cash for terms it's benchmarks that debt capital, And going flow. your capital point, free be can then towards and of this capital be us now to terms at give going I you nice are requirements but some like going spending reduced of contribution And I to obligation. capital

Lauri Kearnes

quarters increase of ERP see we spending system. over few in mean, next I capital some this complete I will implementation the think as Sure. we the

equipment. some. on so of So we have few a City, we've drive do of there. we'll increase over additional about we worked to on facilities Kansas production from before prior additional strategy related years, certainly But be this that racking reduced next of talked spend but But and the spend will that in capital that our have an it some we've to mentioned eliminate asset-light some as would will of CapEx bit kind will some quarters. normally Brian some

Michael Kupinski

XXXX the you XXXX? you target target do or that? have debt end any leverage see Do of like debt maybe How guys by or

Brian Linscott

you'd that do. point. Lauri, this But share to insight to of other any going at we're think kind there's or if don't like I provide input So please

Lauri Kearnes

I that our think we line continue forward. I meet mean, of we a operating and we'll No. that evaluate have to we that credit obviously is feel needs move to sufficient as

Michael Kupinski

All right. I again That’s all Congratulations guys. you. Got have.

Lauri Kearnes

Michael. Thanks,

Brian Linscott

Michael. Thanks,

Operator

back to further no for Mr. over this you we'll additional are remarks. turn there Linscott, conference or closing And any at time. questions the

Brian Linscott

this connecting Thank you, next I and quarter. and I to afternoon look forward Thanks after time you again. appreciate everyone's with

Operator

wonderful conclude And does for day. that your today's We you a Have thank do conference. participation.

Harte Hanks (HHS) 12 Aug 212021 Q2 Earnings call transcript