Harte Hanks, Inc. Q2 FY2024 earnings call

• Hired Kelly Waller as Corporate SVP of Sales and Marketing who spearheaded sales and marketing organization redesign. - Closed a significant new marketing services account with a global automotive manufacturer. - Completed termination of Pension Plan I in June 2024. - Invested in Fulfillment segment with migration to best-in-class warehouse and order technology, repurposed space, and launched beta microsite for Fulfillment & Logistics. - Appointed Sharona Sankar-King as Chief Customer and Data Officer, bringing expertise in analytics and generative AI.

Second quarter revenues were $45 million, down 5.7% from $47.8 million in Q2 2023. Customer Care segment revenues were $12.4 million in Q2 2024 vs $14.9 million in prior year. Sales Services increased to $4.4 million vs $2.3 million in Q2 2023. Marketing Services revenues fell to $7.7 million vs $10.9 million prior year. Fulfillment & Logistics revenues were $20.5 million vs $19.6 million prior year. Operating expenses in Q2 were $43.7 million vs $46.1 million in 2023. Adjusted operating income was $2.5 million vs $3.4 million in Q2 2023. EBITDA was $2.4 million vs $2.7 million in 2023. Cash and cash equivalents were $11 million as of June 30, 2024, down from $18 million at end of 2023. Pension Plan I was terminated in June 2024, resulting in a pension charge of $38.2 million and net loss of $27.8 million for the quarter.

• Sales pipeline well exceeds prior year and continues to grow. - Cost objective of Project Elevate is on track. - Successfully terminated Pension Plan 1 in June. - Confident in sales transformation and future growth prospects, with sales pipeline and new business outlook promising.

• Economic conditions could impact customer spending on marketing and other services. - Unpredictability in sales cycle timing affecting revenue projections. - Potential challenges in revitalizing the Marketing Services segment back to growth.

Q: When will the new sales structure and expansion hit its stride in accelerating revenue and efficiency?

A: Pipeline is strong, optimistic about conversion rates improving, digital presence being strengthened for lead generation, with evidence playing out balance of year and into next year.

Q: How will the business fare in a lackluster economic scenario?

A: Potential to organically attract business outweighs economic concerns, fulfillment business positioned well, pharma work and digital printing/mailings driven by necessities, confident in outlook.

Q: Anticipation of sequential quarterly revenue improvement in second half?

A: Unpredictable due to sales cycle, visibility will improve by November, but optimistic about seasonality and new business outlook in Q4.

Q: Strategy for reviving Marketing Services and international expansion?

A: Marketing Services will be focal in 2025, bolstering sales support, packaging new services; international expansion includes expanding U.S. clients into Europe and increasing lead gen work there, with strong teams in place.