SAN ANTONIO, TX--(Marketwire - April 29, 2010) - Harte-Hanks, Inc. (
NYSE:
HHS) today
reported first quarter 2010 diluted earnings per share of $0.17 on revenues
of $200.2 million. These results compare to diluted earnings per share of
$0.11 on $217.7 million in revenues for the first quarter of 2009.
The following table presents financial highlights of the company's
operations for the first quarter of 2010 and 2009, respectively. Full
financial results are attached.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per share
amounts) Three Months Ended March 31,
--------------------------------------
2010 2009 % Change
------------ ------------ -----------
Operating revenues $ 200,179 $ 217,674 -8.0%
Operating income 18,316 13,758 33.1%
Net income 10,769 7,115 51.4%
Diluted earnings per share 0.17 0.11 54.5%
Diluted shares (weighted average
common and common equivalent shares
outstanding) 64,098 63,593 0.8%
------------ ------------ -----------
Commenting on the first quarter performance, Chairman, President and Chief
Executive Officer Larry Franklin said, "The first quarter was our best
revenue and operating income performance in several quarters. Our
quarterly revenue rate of decline was the least we have seen since the
third quarter of 2008. I am very pleased with the way both our businesses
performed. In Shoppers, the California and Florida economies continue to
be difficult, but we are beginning to see stability in our revenues. In
Direct Marketing, while we remain cautious, some of our customers are
expanding existing programs and adding new ones."
Discussing the performance of individual business segments, Doug Shepard,
Executive Vice President and Chief Financial Officer, said, "Direct
Marketing revenues and operating income declined 8.4% and 12.3%,
respectively. Operating income margins decreased to 12.5% versus 13.1% in
the first quarter of 2009 as Direct Marketing incurred a decrease in
operating income of $2.4 million on a $12.3 million revenue decrease.
"Although each vertical market experienced revenue declines in the first
quarter compared to the first quarter of 2009, trends were improved in all.
Our vertical revenues declined at the following rates: our financial
services vertical and select vertical each declined in the low single
digits; the retail vertical declined in the high single digits; our
high-tech vertical declined in the mid teens; and our pharma/healthcare
vertical declined in the high teens. These results reflect the effects of
reduced volumes and price reductions on our Direct Marketing business.
"Shoppers revenue decreased 7.3% in the first quarter compared to the first
quarter of 2009. Based on circulation distributed for the same time period
in the first quarters of 2010 and 2009, revenue declined 6.6%. This is the
smallest decrease since the first quarter of 2007. Operating income
improved $6.7 million in the quarter. Excluding the $3.5 million of first
quarter 2009 charges related to severance and plant consolidation,
operating income was up $3.2 million."
Concluding, Franklin said, "We are seeing signs from many of our customers
that the general economy is showing some improvement. We continue to
manage our costs and at the same time we are making investments in both
businesses to take advantage of growth opportunities as the economy
recovers. In the highlights section are a number of examples of
investments that will improve our business. In Shoppers, we are adding a
number of key people and technology to support our integrated digital
strategy where we continue to see excellent results. In Direct Marketing,
we are adding people, technology and equipment to improve our business.
Because of our people, we are well positioned to take advantage of future
opportunities."
Selected Highlights:
-- Harte-Hanks has been named Customer Response Management Agency of
Record for a leading consumer electronics organization to provide
strategy, creative, analytics, email, and database services for online
and offline channels. Multi-channel, integrated campaigns will be
developed and executed to reach key consumer segments and audiences.
-- A global healthcare leader has expanded its business by naming
Harte-Hanks as its Consumer Brand Agency of Record. We will lead the
strategic development of the global multichannel consumer communication
plan in 2010. In 2011, the plan tactics will be created and released
to individual countries for implementation.
-- Harte-Hanks has been engaged by a leading game and toy designer,
manufacturer and marketer for agency, email, analytic and database
marketing services.
-- The largest privately owned banking company in the United States
re-engaged Harte-Hanks to handle its credit card acquisition program.
-- In February, Harte-Hanks Shoppers launched a site redesign for
PennySaverUSA.com. The more significant features of the redesign
include online ad placement, improved mapping, email alerts by search
criteria, and related ads on ad detail pages. Additional upcoming
features will include ratings and reviews, localization box, and
improved taxonomy.
-- Harte-Hanks Direct Marketing announced the adoption of its new tagline
and the launch of a new website. The new tagline - insight, passion,
results - captures what clients value most in us as their partner.
Also, the tagline captures the sentiment and excitement that our
employees feel as they help clients around the world solve marketing
and business challenges.
-- Harte-Hanks Shoppers added key digital talent to its team as it works
toward growing online, mobile and social efforts on behalf of
advertising customers. These hires, each coming with strong and
uniquely beneficial backgrounds in online, mobile and social, have made
a strong impact on the direction and pace of growth in these critical
areas.
-- Harte-Hanks Direct Marketing named Alan Thompson as its Vice President
for digital marketing and solutions. He is responsible for overseeing
digital offerings, as well as the integration of traditional services
with digital, particularly Harte-Hanks' Postfuture digital
communications and email tool. He previously worked as senior director
of interactive marketing at the Allant Group and senior director of
product marketing at CheetahMail.
-- Harte-Hanks named Robert Munden as Senior Vice President, General
Counsel and Secretary. He was most recently Vice President & Corporate
Counsel of Safeguard Scientifics, Inc. (NYSE: SFE), a life sciences and
technology holding company. He also served as North America Corporate
Counsel of Taylor Nelson Sofres, now a division of WPP PLC and as Vice
President, General Counsel and Secretary of Naviant, Inc.
About Harte-Hanks:
Harte-Hanks® is a worldwide, direct and targeted marketing company that
provides direct marketing services and shopper advertising opportunities to
local, regional, national and international consumer and
business-to-business marketers. Harte-Hanks Direct Marketing helps its
clients obtain a 360-degree view of their customers with best-of-breed
tools and technologies for access and segmentation. Harte-Hanks Direct
Marketing then designs, implements and executes these integrated marketing
programs on behalf of its clients specializing in direct and digital
communications that are driven by passion, insight and results.
Harte-Hanks Shoppers is North America's largest owner, operator and
distributor of shopper publications, with shoppers that are zoned into more
than 950 separate editions with more than 11.5 million circulation each
week in California and Florida. Harte-Hanks Shoppers brings buyers and
sellers together at a local level, helping businesses and individuals get
results from targeted, local advertisements, both through Shoppers' printed
publications and online through the PennySaverUSA.com™ and
TheFlyer.com™ websites. Visit the Harte-Hanks Web site at
http://www.harte-hanks.com.
Note: The company will host a conference call to discuss the earnings
release on April 29, 2010, at 1:00 p.m. Central Time. The conference call
number is (800) 988-9498 for domestic callers and (210) 234-0029 for
international callers, passcode 121693. The conference call will also be
audio webcast. To access the audio webcast, please go to
https://e-meetings.verizonbusiness.com, conference number 7239018, passcode
121693. There will be an audio replay available shortly after the call
through May 28, 2010. To access the audio replay, please call (866)
428-3805 for domestic callers and (203) 369-0906 for international callers,
passcode 121693. The replay also will be available on the Harte-Hanks Web
site under the "Investors" section.
Cautionary Note Regarding Forward-Looking Statements:
This press release and our related earnings conference call contain
"forward-looking statements" within the meaning of the federal securities
laws. All such statements are qualified by this cautionary note, which is
provided pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Statements other than historical facts are forward-looking and may be
identified by words such as "may," "will," "expects," "believes,"
"anticipates," "plans," "estimates," "seeks," "could," "intends," or words
of similar meaning. Examples include statements regarding (1) our
strategies and initiatives, (2) adjustments to our cost structure and other
actions designed to respond to market conditions and improve our
performance, and the anticipated effectiveness and expenses associated with
these actions, (3) our financial outlook for revenues, earnings per share,
operating income, expense related to equity-based compensation, capital
resources and other financial items, (4) our expectations for our
businesses and for the industries in which we operate, including with
regard to the negative performance trends in our Shoppers business and the
adverse impact of the ongoing economic downturn in the United States and
other economies on the marketing expenditures and activities of our Direct
Marketing clients and prospects, (5) competitive factors, (6) acquisition
and development plans, (7) our stock repurchase program and (8) other
statements regarding future events, conditions or outcomes. These
forward-looking statements involve risks, uncertainties, assumptions and
other factors that are difficult to predict and that could cause actual
results to vary materially from what is expressed in or indicated by the
forward-looking statements. In that event, our business, financial
condition, results of operations or liquidity could be materially adversely
affected and investors in our securities could lose part or all of their
investments. These risks, uncertainties, assumptions and other factors
include, without limitation, (1) international, domestic, regional and
local economic and business conditions, including market conditions in
California and Florida that may continue to adversely impact local
advertising expenditures in our Shoppers publications and the adverse
impact of the ongoing economic downturn in the United States and other
economies on the marketing expenditures and activities of our Direct
Marketing clients and prospects, (2) the demand for our services by clients
and prospective clients, including the willingness of existing clients to
maintain or increase their spending and our ability to predict changes in
client preferences, (3) the financial condition and marketing budgets of
our clients, including client bankruptcies or other developments that may
result in increased bad debt expense, (4) economic and other business
factors that impact the industry verticals that we serve, including any
consolidation of clients and prospective clients in these verticals, (5)
our ability to manage and timely adjust our level of personnel and capacity
and to otherwise effectively service our clients, (6) the impact of
competition and our ability to continually improve our processes and to
develop and introduce new products and services in a timely and
cost-effective manner, (7) our ability to protect our data centers against
security breaches and other interruptions in our operations and to protect
sensitive personal information of our clients and their customers, (8)
concern over consumer privacy issues, which may lead to enactment of
legislation restricting or prohibiting the collection and use of
information that is currently legally available, (9) the impact of other
regulations, including restrictions on unsolicited marketing communications
and other consumer protection laws, (10) fluctuations in paper prices,
postal rates, and postal delivery schedules, (11) the number of options and
other equity securities that we may issue to employees, (12) market
conditions and other factors that may impact the number of shares, if any,
that we may repurchase in connection with our repurchase program, (13)
unanticipated developments regarding litigation including the actual
outcome of our proposed settlement with Shoppers' employee Frank Gattuso
and former employee Ernest Sigala, individually and on behalf of a
certified class, to settle and resolve a previously disclosed class action
lawsuit filed in 2001, or other contingent liabilities, and (14) other
factors discussed under "Item 1A. Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2009. The forward-looking
statements in this press release and our related earnings conference call
are made only as of the date hereof and we undertake no obligation to
update publicly any forward-looking statement, even if new information
becomes available or other events occur in the future.
Supplemental Non-GAAP Financial Measures:
In this press release and our related earnings conference call, the company
intends to provide investors with a better understanding of operating
results and underlying trends to assess the company's performance and
liquidity. Harte-Hanks evaluates its operating performance based on
several measures, including the non-GAAP financial measures of (1) free
cash flow, defined as net income, plus depreciation and amortization, plus
stock-based compensation (tax-effected), less capital expenditures, and (2)
EBITDA, defined as net income before interest, taxes, depreciation, and
amortization. Harte-Hanks believes that free cash flow and EBITDA are
useful supplemental financial measures for investors because they
facilitate investors' ability to evaluate the operational strength of the
company's business. Free cash flow and EBITDA, however, are not calculated
in accordance with GAAP and they should not be considered substitutes for
net income as an indicator of operating performance. A quantitative
reconciliation of free cash flow and EBITDA to net income is found in the
tables attached to this release.
Harte-Hanks, Inc.
Consolidated Statements of Operations (Unaudited)
Three months ended
March 31,
--------------------------
In thousands, except per share data 2010 2009
------------ ------------
Operating revenues $ 200,179 $ 217,674
Operating expenses:
Labor 85,642 99,242
Production and distribution 73,004 80,427
Advertising, selling, general and
administrative 17,210 15,357
Depreciation and amortization 6,007 8,890
------------ ------------
181,863 203,916
------------ ------------
Operating income 18,316 13,758
------------ ------------
Other expenses (income):
Interest expense 713 2,478
Interest income (26) (25)
Other, net (341) 18
------------ ------------
346 2,471
------------ ------------
Income before income taxes 17,970 11,287
Income tax expense 7,201 4,172
------------ ------------
Net income $ 10,769 $ 7,115
============ ============
Basic earnings per common share $ 0.17 $ 0.11
============ ============
Weighted-average common shares outstanding 63,598 63,515
============ ============
Diluted earnings per common share $ 0.17 $ 0.11
============ ============
Weighted-average common and common
equivalent shares outstanding 64,098 63,593
============ ============
Harte-Hanks, Inc.
Balance Sheet Data (Unaudited)
March 31, December 31,
In thousands 2010 2009
------------ ------------
Cash and cash equivalents $ 100,464 $ 86,598
Total debt $ 228,625 $ 239,688
Harte-Hanks, Inc.
Business Segment Information (Unaudited)
Three months ended
March 31,
-------------------------------
In thousands 2010 2009 % Change
--------- --------- ---------
OPERATING REVENUES:
Direct Marketing $ 134,495 $ 146,821 -8.4%
Shoppers 65,684 70,853 -7.3%
--------- ---------
Total operating revenues $ 200,179 $ 217,674 -8.0%
--------- ---------
OPERATING INCOME:
Direct Marketing $ 16,852 $ 19,224 -12.3%
Shoppers 4,168 (2,485) 267.7%
General corporate expense (2,704) (2,981) 9.3%
--------- ---------
Total operating income $ 18,316 $ 13,758 33.1%
--------- ---------
DEPRECIATION AND AMORTIZATION:
Direct Marketing $ 4,236 $ 5,780 -26.7%
Shoppers 1,767 3,103 -43.1%
General corporate expense 4 7 -42.9%
--------- ---------
Total depreciation and amortization $ 6,007 $ 8,890 -32.4%
--------- ---------
Reconciliation of Net Income to Free Cash
Flow
Three months ended
March 31,
--------------------
In thousands 2010 2009
--------- ---------
Net Income $ 10,769 $ 7,115
Add: After-tax stock-based compensation
(Note 1) 569 202
Add: depreciation and amortization 6,007 8,890
Less: capital expenditures 3,941 2,169
--------- ---------
Free cash flow $ 13,404 $ 14,038
--------- ---------
Note 1: Pre-tax compensation expense was $950 and $320 for the three
months ended March 31, 2010 and 2009, respectively.
Reconciliation of Net Income to EBITDA
Three months ended
March 31,
--------------------
In thousands 2010 2009
--------- ---------
Net Income $ 10,769 $ 7,115
Add: Depreciation and amortization 6,007 8,890
Interest expense, net and
non-operating, net 346 2,471
Income tax expense 7,201 4,172
--------- ---------
EBITDA $ 24,323 $ 22,648
--------- ---------
EBITDA by Segment:
Direct Marketing $ 21,088 $ 25,004
Shoppers 5,935 618
Corporate (2,700) (2,974)
--------- ---------
$ 24,323 $ 22,648
--------- ---------
Harte-Hanks, Inc.
Direct Marketing Revenue Mix (Unaudited)
Vertical Markets - Percent of Direct Marketing Revenue
Three months ended
March 31,
--------------------
2010 2009
--------- ---------
Retail 23% 23%
Financial and Insurance Services 15% 14%
Technology 29% 30%
Healthcare and Pharmaceuticals 11% 13%
Other Select Markets 22% 20%
--------- ---------
100% 100%
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