Harte Hanks
Bringing the 'Human Touch' to MarTech
Mike Hastings, SVP of Marketing Technology ServicesIn a world where consumers demand increasingly relevant and contextual communications, automation must leave behind the batch and blast mentality and enable brands to provide value to each individual—when and where they need it. This means brands need to get to know consumers deeper than ever before.
“We've been providing businesses with ways to engage their customers through technology, which drives more intimate and in-the-moment conversations. Such interactions relevant to time and context require big data crunching capabilities. That’s possible with a signal-based data platform. It allows us to bring the human back to marketing,” says Mike Hastings, SVP of Marketing Technology Services at Texas-based Harte Hanks, a global firm with more than nine decades of experience in helping clients connect more meaningfully with prospects and customers.
There are many pieces that must come together to achieve this one-to-one, in-the-moment marketing. An ecosystem of martech capabilities that shares data in real time allows us to begin to behave in the digital world just as we would in the physical one—in a more relevant, timely, personal manner.
Key to bringing this human touch to martech is a technology framework that allows you to break big data down into small signals. Harte Hanks’ next generation platform is built on Opera Solutions’ Signal Hub, which leverages artificial intelligence and machine learning to help marketers figure out customer intent—and act on it.
We’ve been enablingclients with ways to engage their customers through technology, which drives more intimate and in-the-moment conversations
Marketers are trying to get at the data that tells them who the customer is, why she is doing what she’s doing at any given moment, and what she’s going to do next. In the physical world, an associate would ask “How may I help you?” But in the digital world, marketers must discern the answer from digital clues. The raw data does not offer any value. It must be transformed to tell the marketer what to do next.
Signals make this much easier for us than it has been in the past. Signals come from all of the data a brand generates with the various pieces of their martech stack, and they can be anything—from as simple as how many times a customer has made purchases to what it is that they are likely to buy. Signal Hub captures all of them (spoken and implied) to understand the personas behind any potential customer and help generate the next best possible conversation.
“Whatever the channel is, be it SMS, email, or even a direct call, interactions can be driven by Signal Hub to deliver meaningful, contextual conversations with customers,” extols Hastings.
A signal-based platform like Signal Hub requires data to feed segmentation efforts and build and train models. Augmenting your first-party data is often needed. Harte Hanks’ Global DataViewTM (GDV) is a big data offering that carries more than 1600 multi-verified, multi-sourced variables about customers, allowing marketers to gleen additional insight into customer needs. Unlike the static, on-premise customer database, cloud-based GDV enables brands to capture, enhance, and drive real-time decision making and deliver content with utmost relevancy.
Beyond martech, Harte Hanks offers a holistic approach to making marketing human through the Five Pillars of Best-in- Class Marketing. Visit hartehanks.com to learn more.
Harte Hanks News
Harte Hanks Grows Annual Revenue, Increases Profitability and Ends 2022 with Strengthened Balance Sheet
Harte Hanks Expands East Coast Fulfillment Center
“For two decades, we’ve been deeply rooted in this community, leveraging this strategic location to efficiently serve our East Coast clientele with next-day delivery,” stated Pat O’Brien, Managing Director of Fulfillment and Logistics at Harte Hanks. “As we chart our path forward, we see East Bridgewater and our talented employees as pivotal to our expansion plans, and we extend our gratitude to Equity Industrial Partners for collaborating with us to modernize this facility to meet our evolving needs.”
The renovation project encompasses a reconfiguration of the building layout to optimize workflows, increase service capacities, and potentially generate up to 50 new employment opportunities in addition to the current workforce of approximately 150 employees.
Scheduled for completion in the first half of 2024, the enhancements include improving operational flow by connecting two primary fulfillment buildings, doubling product capacity by raising the roof of the main building, transitioning enclosed office spaces to an open-concept design, and refreshing the exterior façade of the building and adding new signage. These modifications will significantly augment production and fulfillment capabilities, with the final square footage projected to reach approximately 224,000.
Anticipating substantial growth in its fulfillment operations, Harte Hanks offers an array of services including custom kitting, print-on-demand, product recall support, trade marketing fulfillment, e-commerce product fulfillment, sampling programs, and freight optimization. Notable clients benefiting from these services include Unilever, Mass Financial, and Samsung.
By fortifying its presence in Massachusetts and investing in the expansion and modernization of its East Bridgewater facility, Harte Hanks reaffirms its commitment to delivering unparalleled customer experiences and driving sustainable growth in the region.
Harte Hanks Extends Line of Credit with Texas Capital Bank
CHELMSFORD - Harte Hanks, Inc. (NASDAQ:HHS), announced that the company has extended its $25 million secured revolving line of credit with Texas Capital Bank for an additional six (6) month term, beyond its original maturity date in December, 2024. The revised loan agreement, which now matures at the end of June, 2025, will enhance the Company's financial flexibility and provide the Company with operational stability over this extended term.
The Company intends to use the credit facility for working capital and to create growth opportunities by investing in and enhancing client offerings.
"Texas Capital continues to be an important partner for Harte Hanks, and we are gratified in their confidence to extend our line of credit," commented Kirk Davis, Harte Hanks' Chief Executive Officer. "Having launched our transformation plan, Elevate, in Q3 of 2023, this successful extension supports our growth and transformation initiatives for the future."
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Company
Harte Hanks
Management
Mike Hastings, SVP of Marketing Technology Services
Description
Harte Hanks is a global marketing firm that
specializes in helping brands win attention,
build trust and earn loyalty in an ever-changing
world
Harte Hanks CEO, Brian Linscott, commented: "This was an important year for Harte Hanks, with results that reflect the successful culmination of our restructuring and the emergence of sustainable, profitable growth based on a differentiated offering and solid relationships with our top-tier customers. Our improved financial results have enabled us to materially strengthen our balance sheet. We have streamlined our capital structure by eliminating our debt and redeeming our preferred shares, thereby eliminating the dilutive effect of preferred shares going forward. Simultaneously, our pension liability was reduced by nearly $15 million, positioning us to commence the process to transfer one of our qualified pensions to a third party."
"We have proven our operating leverage and earnings power with continued growth. Our 6% full-year revenue growth translated to a near doubling of operating income and a 75% increase in EBITDA," concluded Linscott. "Demand for our solutions continues to grow, offsetting headwinds from the culmination of pandemic-related projects. We anticipate continued revenue and EBITDA growth for the full year of 2023, even though our first quarter results will include modest revenue growth and lower EBITDA on a year-over-year basis as result of an abnormally strong comparison period in 2022 driven by revenue mix."
Fourth Quarter Financial Highlights
• Revenues increased by 5.4% to $54.8 million, compared to $52.0 million in the same period in the prior year. Revenue for the fourth quarter of 2022 included approximately $1 million in revenue from InsideOut Solutions, acquired on December 1, 2022, with no contribution in the prior-year.
• Fulfillment & Logistics Services grew 34.4%, offsetting decreases of 6.8% in Marketing Services and 12.9% in Customer Care. Customer Care decreases were largely related to the completion of pandemic-related projects.
• Operating income of $3.4 million, compared to operating income of $2.9 million in the same period in the prior year, an increase of 19.8%.
• Net income of $21.8 million, inclusive of a one-time $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability, and $1.4 million in other expenses mainly related to pension expense and foreign currency loss. This compared to net income of $1.8 million in the same period in the prior year, which included income tax expense of $271,000.
• Diluted EPS was $2.70 for the fourth quarter of 2022 vs. $0.20 for the same period in the prior year. The tax benefit accounted for approximately $2.62 of the current-period earnings per share.
• EBITDA was $4.4 million compared to $3.5 million in the same period in the prior year.[1]
[1] EBITDA is a non-GAAP financial measure. See "Supplemental Non-GAAP Financial Measures" below. EBITDA is also the Company's measure of segment profitability.
Full-Year Financial Highlights
• Revenues increased by 6.0% to $206.3 million, compared to $194.6 million in the prior year.
• Fulfillment & Logistics Services grew 35.6%, offsetting declines in Marketing Services of 6.1% and Customer Care of 10.0%.
• Operating income of $15.1 million, compared to operating income of $7.6 million last year, an increase of 97.8%.
• Net income of $36.8 million, compared to net income of $15.0 million, last year. The 2022 results included a $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability, while the 2021 results included a one-time gain of $10.0 million related to the extinguishment of the Company's PPP loan.
• Earnings per diluted share of $4.75 compared to $1.76 per diluted share last year.
• EBITDA 1was $17.8 million compared to $10.2 million last year.1
Segment Highlights
• Customer Care, $16.7 million in revenue, 30% of total - Revenue decreased by 12.9%, or $2.5 million, from the prior year quarter, and year-over-year EBITDA increased by 24.4% to $3.2 million from $2.6 million. Decrease in revenue was driven by sunsetting of pandemic-related projects, but continuous improvement in retention and reduction in labor costs drove the EBITDA increase. New business wins for the quarter included:
• A community-based health plan company selected Harte Hanks to support its members with plan related customer support. The company selected Harte Hanks to provide extended support hours for its members while maintaining its CMS 5-star rating. Harte Hanks has consistently delivered high CMS ratings for its clients through its rigorous training and certification process for employees and systems.
• A global beverage company expanded services with Harte Hanks by extending its Customer Care solution to additional markets. The expansion allows our client to benefit from our lower cost facilities in the Philippines, while improving its customer experience with faster and easier access for support.
• Fulfillment & Logistics Services, $24.5 million in revenue, 45% of total - Revenue increased by 34.4%, or $6.3 million, compared to the prior year quarter; and year-over-year EBITDA improved 5.9% to $2.3 million from $2.1 million. New business wins for the quarter included:
• A growing international investment firm with approximately $30 billion of assets under management selected Harte Hanks to provide digital print and premium item fulfillment services to its brokers. Our financial services sector experience and streamlined onboarding to support a rapid pivot from a competitor were key differentiators in the selection process.
• A leading branding company selected Harte Hanks Fulfillment to manage the production, kitting, and distribution of 250,000 makeup kits for a Fortune 200 retail partner. This partnership continues to lead to new value-added product fulfillment opportunities, unlocked by our investment in flexible, automated production lines.
• Marketing Services, $13.6 million in revenue, 25% of total - Revenue decreased by 6.8% compared to the prior year quarterand year-over-year EBITDA decreased 18.4% to $2.1 million from $2.6 million. Decrease in revenue was driven by a reduction of Direct Mail work for clients. New business wins for the quarter included:
• A leading premium brand retailer of Kitchen, Bath and Outdoor products selected Harte Hanks to design and execute a series of lead generation programs. Harte Hanks was chosen based on our extensive experience in retail strategy and ability to deliver a full suite of creative, data, analytics and campaign execution.
•A leading global technology manufacturer expanded our successful B2B demand generation program into South America by utilizing Harte Hanks Audience Finder product to identify buyers with intent.
Consolidated Fourth Quarter 2022 Results
Fourth quarter revenues were $54.8 million, up 5.4% from $52.0 million in the fourth quarter of 2021. The Company's Fulfillment & Logistics Services segment grew, more than offsetting declines in Marketing Services and Customer Care.
Fourth quarter operating income was $3.4 million, compared to operating income of $2.9 million in the fourth quarter of 2021. The improvement resulted from the elimination of restructuring expense and higher revenues.
Net income for the quarter was $21.8 million inclusive of $19.8 million tax benefit and $1.4 million in expenses related to pension and currency loss on intercompany receivables, compared to net income of $1.8 million in the fourth quarter last year. The Company recorded an income tax benefit of $19.8 million, or approximately $2.62 per diluted share, in the fourth quarter of 2022, compared to an expense of $271,000 in the fourth quarter of 2021. The tax benefit in the fourth quarter of 2022 was mainly related to the release of the majority of valuation allowances due to the improved profitability of the company. Income attributable to common stockholders for the fourth quarter was $20.4 million, or $2.81 per basic and $2.70 per diluted share (based on 7.6 million weighted average diluted shares outstanding), compared to net income attributable to common shareholders of $1.4 million, or $0.20 per basic and diluted share (based on 7.3 million weighted average diluted shares outstanding) during the prior year fourth quarter. Income attributable to common stockholders was reduced by a $1.4 million one-time loss on redemption of Preferred Stock.
Full-Year 2022 Results
Revenues for 2022 were $206.3 million, up 6.0% from $194.6 million last year. Operating income was $15.1 million, compared to operating income of $7.6 million last year. Net income for the year was $36.8 million (inclusive of a $19.8 million tax benefit due to release of valuation allowance due to the expectation of sustained profitability), compared to net income of $15.0 million (inclusive of a $10.0 million gain related to the forgiveness of the Company's PPP loan), last year. Income attributable to common stockholders for the year was $35.4 million, or $4.98 per basic share and $4.75 per fully diluted share, compared to net income attributable to common shareholders of $12.6 million, or $1.85 per basic share and $1.76 per fully diluted share.
Balance Sheet and Liquidity
Harte Hanks ended the year with $10.4 million in cash, cash equivalents and restricted cash, compared to $15.1 million at December 31, 2021. At December 31, 2022, the Company had nothing drawn on its line of credit, and $37.8 million in outstanding long-term pension liability. On December 31, 2021, the Company had no short-term debt, $5 million in long-term debt and $52.5 million in outstanding long-term pension liability.
During 2022, Harte Hanks has decreased outstanding debt by $5 million and redeemed its preferred shares for $9.9 million.
The company anticipates receiving a Federal income tax refund related to a net operating loss (NOL) carryback claim of $5.3 million which will further enhance liquidity.