BOSTON, MA--(Marketwired - Feb 4, 2015) - Harte Hanks (
Fourth quarter 2014 revenues were $146.5 million compared to $152.2 million of revenues in the same quarter last year.
- Customer Interaction revenues were $132.3 million compared to $135.8 million in the same quarter last year. Several of our revenue verticals had growth during the quarter including Financial, Technology and Select Markets. The Financial vertical increased 13.8% primarily from increased credit card solicitations. Our Technology and Select Markets verticals increased 5.7% and 23.1%, respectively, from providing clients won earlier in the year with contact center support activity. These increases were offset by a decrease in revenues in our Retail and Healthcare verticals as a result of marketing expense reduction efforts from several large retailers along with decreased Affordable Care Act implementation efforts compared to the fourth quarter of 2013.
- Trillium Software revenues were $14.2 million compared to $16.3 million in the same quarter last year. This decline was principally driven by decreased software license revenues. Maintenance and professional service revenues slightly decreased compared to the fourth quarter last year.
Operating income for the quarter was $14.7 million, an increase from $12.5 million for the same quarter last year. Fourth quarter 2014 results included $2.0 million of charges related to previously announced facility consolidations and fourth quarter 2013 results included approximately $2.6 million of charges related to a legal settlement and professional services fees.
- Operating income for Customer Interaction increased to $11.0 million compared to $9.4 million. This operating income improvement was driven by expense management as labor and selling, general and administrative costs were reduced as the company gained efficiencies across the business.
- Trillium Software operating income was $3.7 million compared to $4.4 million in the same period last year. This decrease was due primarily to the reduction and timing in software license revenues, as most of our costs in this business are fixed.
Fourth quarter 2014 diluted earnings per share from continuing operations increased to $0.16 compared to $0.11 for the same quarter in 2013. Capital expenditures for the quarter were $4.7 million compared to $3.1 million in the prior year's fourth quarter. This increase was to support real estate consolidations to utilize inefficient space in existing facilities and system implementation.
The following table presents financial highlights of the company's operations for the fourth quarter of 2014 and 2013, respectively. More detailed financial results are attached.
| RESULTS FROM CONTINUING OPERATIONS (unaudited) | ||||||||
| (In thousands, except per share amounts) | Three Months Ended Dec. 31, | |||||||
| 2014 | 2013 | % Change | ||||||
| Operating revenues | $ | 146,518 | $ | 152,178 | -3.7 | % | ||
| Operating income | 14,656 | 12,484 | 17.4 | % | ||||
| Income from continuing operations | 10,089 | 6,734 | 49.8 | % | ||||
| Diluted earnings per share from continuing operations | 0.16 |
0.11 |
45.5 |
% | ||||
| Diluted shares (weighted average common and common equivalent shares outstanding) | 62,183 |
62,822 |
-1.0 |
% | ||||
For the year, the company's revenues were $553.7 million compared to $559.6 million last year. Income from continuing operations was $24.0 million for 2014 compared to $24.4 million for 2013. These results reflect the return of stable revenues and income from continuing operations compared to prior year's results.
The following table presents financial highlights of the company's operations for 2014 and 2013, respectively.
| RESULTS FROM CONTINUING OPERATIONS (unaudited) | ||||||||
| (In thousands, except per share amounts) | Year Ended December 31, | |||||||
| 2014 | 2013 | % Change | ||||||
| Operating revenues | $ | 553,676 | $ | 559,609 | -1.1 | % | ||
| Operating income | 40,762 | 42,661 | -4.5 | % | ||||
| Income from continuing operations | 23,991 | 24,441 | -1.8 | % | ||||
| Diluted earnings per share from continuing operations | 0.38 |
0.39 |
-2.6 |
% | ||||
| Diluted shares (weighted average common and common equivalent shares outstanding) | 62,658 |
62,812 |
-0.2 |
% | ||||
Commenting on performance, Chief Executive Officer Robert Philpott said, "2014 was a transitional year for the company. At points through the year we achieved our goal of revenue growth but a weaker fourth quarter meant we ended the year just short of 2013 revenues. The significant work we undertook during the second half of 2014 to align our operating expenses with our revenues has really begun to bear fruit. Our fourth quarter operating income growth is the result of substantial reorganization within our company which has eliminated duplication and streamlined our teams. We have also tackled the long-term cost base in the business. Harte Hanks teams now have an unswerving focus on collaboration and in 2015 we will again turn our intentions to consistently delivering revenue growth."
The company will host a conference call on February 4, 2015, at 4:30 p.m. Eastern Time to discuss the results. Investors and interested parties may participate in the call by dialing (888) 713-4494 for domestic callers and +1 (913) 312-1391 for international callers and referring to Conference ID 2565188. To access an audio webcast, please go to the link within the Harte Hanks website located on the Investors section of the website, http://HarteHanks.com. A replay will be available shortly after the call through February 11, 2015 at (888) 203-1112 for domestic callers and +1 (719) 457-0820 for international callers, Conference ID 2565188.
About Harte Hanks:
Harte Hanks is one of the world's leading, insight-driven multi-channel marketing organizations, delivering impactful business results for some of the world's best-known brands. Through strategic agencies and our core marketing services, we develop integrated solutions that connect brands with prospects and customers, moving them beyond awareness to transactions and brand loyalty. Visit the Harte Hanks website at http://HarteHanks.com or call (800) 456-9748.
Cautionary Note Regarding Forward-Looking Statements:
Our press release and related earnings conference call contain "forward-looking statements" within the meaning of U.S. federal securities laws. All such statements are qualified by this cautionary note, 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. These forward-looking statements are based on current information, expectations and estimates and 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: (a) local, national and international economic and business conditions, including (i) market conditions that may adversely impact advertising expenditures and (ii) the impact of economic uncertainty in the United States and elsewhere on the financial condition, marketing expenditures and activities of our clients and prospects; (b) the demand for our services by clients and prospective clients, including (i) the willingness of existing clients to maintain or increase their spending on products and services that are or remain profitable for us, and (ii) our ability to predict changes in client needs and preferences; (c) economic and other business factors that impact the industry verticals we serve, including competition and consolidation of current and prospective clients, vendors and partners in these verticals; (d) our ability to manage and timely adjust our capacity, workforce and cost structure to effectively serve our clients; (e) our ability to improve our processes and to provide new products and services in a timely and cost-effective manner though development, license or acquisition; (f) our ability to protect our data centers against security breaches and other interruptions and to protect sensitive personal information of our clients and their customers; (g) our ability to respond to increasing concern, regulation and legal action over consumer privacy issues, including changing requirements for collection, processing and use of information; (h) the impact of other regulations, including restrictions on unsolicited marketing communications and other consumer protection laws; (i) fluctuations in fuel prices, paper prices, postal rates and postal delivery schedules; (j) the number of shares, if any, that we may repurchase in connection with our repurchase program; (k) unanticipated developments regarding litigation or other contingent liabilities; and (l) other factors discussed from time to time in our filings with the Securities and Exchange Commission, including under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013. 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. The company 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), plus goodwill and other intangibles impairment (tax-effected) less capital expenditures, all of the aforementioned are from continuing operations and (2) EBITDA, defined as net income before interest, taxes, goodwill and other intangibles impairment, depreciation, and amortization. The company 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.
As used herein, "Harte Hanks" refers to Harte Hanks, Inc. and/or its applicable operating subsidiaries, as the context may require. Harte Hanks' logo and name are trademarks of Harte Hanks.
| Harte Hanks, Inc. | ||||||||||||||||||
| Consolidated Statements of Operations (Unaudited) | ||||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| In thousands, except per share data | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Operating revenues | $ | 146,518 | $ | 152,178 | $ | 553,676 | $ | 559,609 | ||||||||||
| Operating expenses: | ||||||||||||||||||
| Labor | 71,192 | 76,323 | 279,135 | 281,924 | ||||||||||||||
| Production and distribution | 44,175 | 42,729 | 166,959 | 161,600 | ||||||||||||||
| Impairment of Goodwill and Intangibles | - | - | - | 2,750 | ||||||||||||||
| Advertising, selling, general and administrative | 12,782 | 16,695 | 51,900 | 54,937 | ||||||||||||||
| Depreciation and amortization | 3,713 | 3,947 | 14,920 | 15,737 | ||||||||||||||
| 131,862 | 139,694 | 512,914 | 516,948 | |||||||||||||||
| Operating income | 14,656 | 12,484 | 40,762 | 42,661 | ||||||||||||||
| Other expenses (income): | ||||||||||||||||||
| Interest expense | 681 | 767 | 2,834 | 3,103 | ||||||||||||||
| Interest income | (71 | ) | (29 | ) | (275 | ) | (105 | ) | ||||||||||
| Other, net | (331 | ) | 646 | 897 | 46 | |||||||||||||
| 279 | 1,384 | 3,456 | 3,044 | |||||||||||||||
| Income from continuing operations before income taxes | 14,377 | 11,100 | 37,306 | 39,617 | ||||||||||||||
| Income tax expense | 4,288 | 4,366 | 13,315 | 15,176 | ||||||||||||||
| Income from continuing operations | $ | 10,089 | $ | 6,734 | $ | 23,991 | $ | 24,441 | ||||||||||
| Gain from discontinued operations, net of income taxes | - | (167 | ) | - | (11,071 | ) | ||||||||||||
| Net Income | $ | 10,089 | $ | 6,567 | $ | 23,991 | $ | 13,370 | ||||||||||
| Basic earnings per common share | ||||||||||||||||||
| Continuing operations | $ | 0.16 | $ | 0.11 | $ | 0.38 | $ | 0.39 | ||||||||||
| Discontinued operations | - | - | - | (0.18 | ) | |||||||||||||
| Basic earnings per share | $ | 0.16 | $ | 0.11 | $ | 0.38 | $ | 0.21 | ||||||||||
| Weighted-average common shares outstanding | 61,957 | 62,556 | 62,444 | 62,503 | ||||||||||||||
| Diluted earnings per common share | ||||||||||||||||||
| Continuing operations | $ | 0.16 | $ | 0.11 | $ | 0.38 | $ | 0.39 | ||||||||||
| Discontinued operations | - | - | - | (0.18 | ) | |||||||||||||
| Diluted earnings per share | $ | 0.16 | $ | 0.11 | $ | 0.38 | $ | 0.21 | ||||||||||
| Weighted-average common and common equivalent shares outstanding | 62,183 |
62,822 |
62,658 |
62,812 |
||||||||||||||
| Balance Sheet Data (Unaudited) | December 31, | December 31, | ||||||||||||||||
| In thousands | 2014 | 2013 | ||||||||||||||||
| Cash and cash equivalents | $ | 56,749 | $ | 88,747 | ||||||||||||||
| Total debt | $ | 82,687 | $ | 98,000 | ||||||||||||||
| Harte Hanks, Inc. | ||||||||||||||||||||||||
| Business Segment Information (Unaudited) | ||||||||||||||||||||||||
| Three months ended | Twelve months ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| In thousands | 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||||
| OPERATING REVENUES: | ||||||||||||||||||||||||
| Customer Interaction | $ | 132,310 | $ | 135,831 | -2.6 | % | $ | 499,444 | $ | 503,759 | -0.9 | % | ||||||||||||
| Trillium Software | 14,208 | 16,348 | -13.1 | % | 54,232 | 55,850 | -2.9 | % | ||||||||||||||||
| Total operating revenues | $ | 146,518 | $ | 152,179 | -3.7 | % | $ | 553,676 | $ | 559,609 | -1.1 | % | ||||||||||||
| OPERATING INCOME: | ||||||||||||||||||||||||
| Customer Interaction | $ | 11,038 | $ | 9,418 | 17.2 | % | $ | 29,780 | $ | 32,021 | -7.0 | % | ||||||||||||
| Trillium Software | 3,685 | 4,429 | -16.8 | % | 13,347 | 15,396 | -13.3 | % | ||||||||||||||||
| General corporate expense | (67 | ) | (1,363 | ) | 95.1 | % | (2,365 | ) | (4,756 | ) | 50.3 | % | ||||||||||||
| Total operating income | $ | 14,656 | $ | 12,484 | 17.4 | % | $ | 40,762 | $ | 42,661 | -4.5 | % | ||||||||||||
| DEPRECIATION AND AMORTIZATION: | ||||||||||||||||||||||||
| Customer Interaction | $ | 3,251 | $ | 3,473 | -6.4 | % | $ | 12,886 | $ | 13,684 | -5.8 | % | ||||||||||||
| Trillium Software | 462 | 474 | -2.5 | % | 2,034 | 2,053 | -0.9 | % | ||||||||||||||||
| Total depreciation and amortization | $ | 3,713 | $ | 3,947 | -5.9 | % | $ | 14,920 | $ | 15,737 | -5.2 | % | ||||||||||||
| Harte Hanks, Inc. | |||||||||||
| Harte Hanks Revenue Mix (Unaudited) | |||||||||||
| Vertical Markets - Percent of Customer Interaction's Revenue | |||||||||||
| Three months ended | Twelve months ended | ||||||||||
| December 31 | December 31 | ||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||
| Retail | 28.6 | % | 32.4 | % | 27.2 | % | 30.9 | % | |||
| Financial and Insurance Services | 12.1 | % | 10.4 | % | 13.0 | % | 13.1 | % | |||
| Technology | 24.8 | % | 22.9 | % | 23.6 | % | 22.9 | % | |||
| Healthcare and Pharmaceuticals | 10.6 | % | 11.7 | % | 9.3 | % | 9.2 | % | |||
| Auto and Consumer Brands | 16.3 | % | 16.7 | % | 17.0 | % | 16.4 | % | |||
| Other Select Markets | 7.5 | % | 6.0 | % | 9.9 | % | 7.4 | % | |||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
| Vertical Markets - Percent of Trillium Software's Revenue | |||||||||||
| Three months ended | Twelve months ended | ||||||||||
| December 31 | December 31 | ||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||
| Retail | 9.0 | % | 5.0 | % | 6.8 | % | 5.6 | % | |||
| Financial and Insurance Services | 26.1 | % | 40.6 | % | 27.5 | % | 29.9 | % | |||
| Technology | 24.1 | % | 21.3 | % | 22.8 | % | 26.7 | % | |||
| Healthcare and Pharmaceuticals | 6.4 | % | 6.3 | % | 6.3 | % | 6.5 | % | |||
| Auto and Consumer Brands | 22.8 | % | 17.8 | % | 24.9 | % | 21.1 | % | |||
| Other Select Markets | 11.7 | % | 9.0 | % | 11.8 | % | 10.3 | % | |||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
| Harte Hanks, Inc. | |||||||||||||||
| Reconciliation of Net Income to Free Cash Flow (Unaudited) | |||||||||||||||
| Three months ended | Twelve months ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| In thousands | 2014 | 2013 | 2014 | 2013 | |||||||||||
| Income from continuing operations | $ | 10,089 | $ | 6,734 | $ | 23,991 | $ | 24,441 | |||||||
| Add: Intangible impairment (Note 1) | - | - | - | 2,750 | |||||||||||
| Add: After-tax stock-based compensation (Note 2) | 455 | 692 | 2,433 | 4,124 | |||||||||||
| Add: Depreciation and amortization | 3,713 | 3,947 | 14,920 | 15,737 | |||||||||||
| Less: Capital expenditures | 4,664 | 3,113 | 11,753 | 15,873 | |||||||||||
| Free cash flow from continuing operations | 9,593 | 8,260 | 29,591 | 31,179 | |||||||||||
| Income/(Loss) from discontinued operations | - | (167 | ) | - | (11,071 | ) | |||||||||
| Add: Depreciation and amortization | - | - | - | 2,592 | |||||||||||
| Less: Capital expenditures | - | - | - | 327 | |||||||||||
| Free cash flow from discontinued operations | - | (167 | ) | - | (8,806 | ) | |||||||||
| Total free cash flow | $ | 9,593 | $ | 8,093 | $ | 29,591 | $ | 22,373 | |||||||
| Note 1: Impairment of other intangibles was $2,750 with only non-cash tax impact for the twelve months ended December 31, 2013. | |||||||||||||||
| Note 2: For continuing operations pre-tax stock-based compensation expense was $758 and $1,153 for the three months ended December 31, 2014 and 2013, respectively; and was $4,055 and $6,873 for the twelve months ended December 31, 2014 and 2013, respectively. For discontinued operations, pre-tax stock-based compensation expense was $0. | |||||||||||||||
| Reconciliation of Net Income to EBITDA from Continuing Operations (Unaudited) | |||||||||||||||
| Three months ended | Twelve months ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| In thousands | 2014 | 2013 | 2014 | 2013 | |||||||||||
| Income from Continuing Operations | $ | 10,089 | $ | 6,734 | $ | 23,991 | $ | 24,441 | |||||||
| Intangible Impairment | - | - | - | 2,750 | |||||||||||
| Depreciation and amortization | 3,713 | 3,947 | 14,920 | 15,737 | |||||||||||
| Interest expense, net and non-operating, net | 279 | 1,384 | 3,456 | 3,044 | |||||||||||
| Income tax expense | 4,288 | 4,366 | 13,315 | 15,176 | |||||||||||
| EBITDA from Continuing Operations | $ | 18,369 | $ | 16,431 | $ | 55,682 | $ | 61,148 | |||||||