SAN ANTONIO, TX--(Marketwire - July 29, 2010) - Harte-Hanks, Inc. (
NYSE:
HHS) today
reported second quarter 2010 diluted earnings per share of $0.21 on
revenues of $207.6 million. These results compare to diluted earnings per
share of $0.20 on $215.7 million in revenues for the second quarter of
2009.
The following table presents financial highlights of the company's
operations for the second quarter of 2010 and 2009, respectively. Full
financial results are attached.
RESULTS FROM OPERATIONS (unaudited)
(In thousands, except per share amounts) Three Months Ended June 30,
-----------------------------
2010 2009 % Change
--------- --------- ---------
Operating revenues $ 207,609 $ 215,662 -3.7
Operating income 22,573 24,932 -9.5
Net income 13,416 13,058 2.7
Diluted earnings per share $ 0.21 $ 0.20 5.0
Diluted shares (weighted average common and
common equivalent shares outstanding) 64,183 63,737 0.7
For the six months ended June 30, 2010, the company's revenues decreased
5.9% to $407.8 million and operating income increased 5.7% to $40.9
million. Diluted earnings per share for the six months ended June 30, 2010
were $0.38, compared to $0.32 for the 2009 six-month period.
Commenting on the second quarter performance, Chairman, President and Chief
Executive Officer Larry Franklin said, "Our quarterly revenue trends
continued to improve in the second quarter, and while still down, the 3.7%
decline is the lowest rate of decline we have seen since the fourth quarter
of 2007. The investments we are making in Direct Marketing to deliver
customer insight as part of all our engagements is proving to be very
beneficial for our clients as they navigate the various marketing channels
to reach customers and impact their purchasing decisions. The highlights
section reflects these actions. In Shoppers, I am pleased with the
progress we are making on all fronts as reflected in their financial
performance for the quarter. Our account penetration initiative and
digital integration efforts continue to be successful."
Discussing the performance of individual business segments, Doug Shepard,
Executive Vice President and Chief Financial Officer, said, "Direct
Marketing revenues and operating income declined 3.0% and 19.1%,
respectively. Three of our vertical markets experienced revenue percentage
rate increases in the second quarter compared to the second quarter of 2009
and two experienced revenue percentage rate declines. Financial services
and select markets verticals each increased in the mid-single digits. The
retail vertical increased in the low single digits. High-tech declined in
the mid-teens and our pharma/healthcare vertical declined in the low teens.
"Shoppers revenue decreased 5.2% in the second quarter compared to the
second quarter of 2009. This is the smallest decrease since the first
quarter of 2007. Operating income improved $2.1 million in the quarter or
66.2%."
Concluding, Franklin said, "Our customers continue to have uncertainty
about the general economy due to low consumer confidence, high unemployment
and a difficult California and Florida housing market. All of this makes
us cautious about the next few quarters although there are encouraging
signs. Our focus in Direct Marketing on multichannel direct and digital
marketing, along with account penetration and digital integration at
Shoppers is correct and we are executing against our plans. I am confident
that our people will deliver good results."
Selected Highlights:
-- Harte-Hanks enhanced its Postfuture® e-mail platform integrating its
Social CRMx offering. With its release of Postfuture v7.1, marketers
can promote products and services through the "Share With Your Network"
(SWYN) function of Postfuture's SWYNx feature. The Postfuture platform
now incorporates up to nine different social sharing sites including
Facebook, Twitter, LinkedIn and MySpace directly within email
campaigns, so marketers can leverage the power of social networking.
-- Harte-Hanks Market Intelligence expanded its flagship product, the CI
Technology Database™ (CiTDB), which now provides greater insight
into technology installations, buying potential, and business
demographics for more than four million locations and identifies over
five million IT-specific decision makers in the United States and
Canada.
-- Harte-Hanks Shoppers launched its new mobile site for
PennySaverUSA.com, and began accepting ads into its printed
publications via Twitter. Additional upgrades and functionality such
as ad sharing, ratings and reviews were added to the company's main
site, further enhancing the user experience on the site.
-- A large multi-state health insurance company expanded the scope of its
Harte-Hanks engagement to include a five-year agreement to provide
contact center and print fulfillment services to support open
enrollment programs.
-- A large international business equipment manufacturer has renewed
Harte-Hanks' multi-year engagement to provide insight into its
customers through global data management powered by Trillium
Software® and demand center solutions.
-- One of the world's largest multinational pharmaceutical companies
purchased a six-year license for Harte-Hanks Trillium Software
System® to develop better insight into its data and customers across
its global enterprise.
-- A major for-profit education and childcare company engaged Harte-Hanks
to provide a multi-year telephone and email response management program
for ongoing marketing campaigns.
-- Harte-Hanks Trillium Software System® was selected by Wales & West
Utilities, a regulated gas distribution business in the United Kingdom,
to assure the quality of data and information needs of 11 million
records across its enterprise.
-- Harte-Hanks Trillium Software System® was selected by the National
House Building Council in the United Kingdom to provide a centralized,
reliable single customer view from the millions of data records it
holds on registered homeowners, house builders and housing plots.
-- PennySaverUSA.com and its PowerSites® product recently won the First
Annual 2010 "Show Me the Money" Innovation Award from the International
Classified Media Association (ICMA) and it also won the "Best
Presentation of Retail Display Advertising" award from the Association
of Free Classifieds Papers.
-- Harte-Hanks won the first-ever "Vizee" Research Innovation Award from
Vovici, a customer and enterprise feedback solutions provider, in
recognition of how Harte-Hanks is using research in innovative ways to
improve customer acquisition and retention programs.
-- Harte-Hanks won a "2010 NICE Customer Excellence Award" from NICE
Systems, a leading provider of advanced customer contact analytics, in
recognition of excellence in its implementation of quality assurance
in managing customer service programs executed for its clients.
-- In early July, Harte-Hanks hired Charlie Simmons as executive vice
president of sales for Harte-Hanks Direct Marketing. Simmons now leads
all enterprise sales teams and provides guidance across the Direct
Marketing division. Simmons has expertise in multichannel marketing
services, information management, consulting, and print and fulfillment
services. Prior to joining Harte-Hanks Direct Marketing, Simmons was
senior vice president of sales at Experian Marketing Services, and he
previously held senior executive management positions at Standard
Register Corporation, and Dun and Bradstreet.
-- Brian Dames was promoted to the newly created position of chief
marketing officer (CMO), Harte-Hanks Direct Marketing. Since first
joining the company in 2007, Dames has been managing director in charge
of data services and data solutions for Harte-Hanks Direct Marketing.
Dames will continue to lead these groups.
-- Jeff Simpson was promoted to the new position of Senior Vice President
of Marketing Strategy & Customer Insight for Harte-Hanks Direct
Marketing. In his new position, Simpson leads a team to provide
customer insight and marketing strategy across all vertical industries.
Simpson previously led strategy within the Harte-Hanks Retail Practice,
providing customer insight and marketing strategy to retailers across
all touch points to optimize customer experience and value.
About Harte-Hanks®:
Harte-Hanks® is a worldwide direct and targeted marketing company that
provides multichannel direct and digital marketing services and shopper
advertising opportunities to a wide range of local, regional, national and
international consumer and business-to-business marketers. Harte-Hanks
Direct Marketing helps its clients obtain insight about their customers
through database and marketing analytics. Based on that insight Harte-Hanks
Direct Marketing designs, implements and executes multichannel marketing
programs on behalf of its clients using direct and digital communications.
Harte-Hanks Shoppers is North America's largest owner, operator, and
distributor of shopper products which bring buyers and sellers together at
a local level though its proven multichannel offerings, including targeted
print, digital advertising, and classifieds. Its print publications are
zoned into more than 950 separate editions and reach 11.5 million addresses
each week in California and Florida. Shoppers also provide advertisers
with PowerSites™ to help small- and medium-size businesses establish a
web presence and improve lead generation, PowerClick™ SEM services, and
mobile distribution of their ads and coupons. For consumers,
PennySaverUSA.com™ and TheFlyer.com™ offer local online and mobile
classifieds for garage sales, pets, used and new cars, real estate, as well
as thousands of coupons and business listings. Visit us at
http://www.PennySaverUSA.com, http://www.TheFlyer.com, and
http://www.PowerSites.net.
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 continuing economic uncertainty 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 continuing uncertainty in the United States and other economies
on the marketing expenditures and activities of our 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.
This document may contain trademarks that are owned or licensed by
Harte-Hanks, Inc. and its subsidiaries, including, without limitation,
Harte-Hanks® and other names and marks. All other brand names, product
names, or trademarks belong to their respective holders.
Harte-Hanks, Inc.
Consolidated Statements of Operations (Unaudited)
Three months ended Six months ended
June 30, June 30,
In thousands, except per share -------------------- --------------------
data 2010 2009 2010 2009
--------- --------- --------- ---------
Operating revenues $ 207,609 $ 215,662 $ 407,788 $ 433,336
Operating expenses:
Labor 84,893 90,004 170,535 189,246
Production and distribution 78,496 76,732 151,500 157,159
Advertising, selling, general
and administrative 15,877 16,672 33,087 32,029
Depreciation and amortization 5,770 7,322 11,777 16,212
--------- --------- --------- ---------
185,036 190,730 366,899 394,646
--------- --------- --------- ---------
Operating income 22,573 24,932 40,889 38,690
--------- --------- --------- ---------
Other expenses (income):
Interest expense 684 2,513 1,397 4,991
Interest income (41) (65) (67) (90)
Other, net (18) 1,684 (359) 1,702
--------- --------- --------- ---------
625 4,132 971 6,603
--------- --------- --------- ---------
Income before income taxes 21,948 20,800 39,918 32,087
Income tax expense 8,532 7,742 15,733 11,914
--------- --------- --------- ---------
Net income $ 13,416 $ 13,058 $ 24,185 $ 20,173
========= ========= ========= =========
Basic earnings per common share $ 0.21 $ 0.21 $ 0.38 $ 0.32
========= ========= ========= =========
Weighted-average common
shares outstanding 63,616 63,566 63,607 63,541
========= ========= ========= =========
Diluted earnings per common
share $ 0.21 $ 0.20 $ 0.38 $ 0.32
========= ========= ========= =========
Weighted-average common and
common equivalent shares
outstanding 64,183 63,737 64,141 63,665
========= ========= ========= =========
Harte-Hanks, Inc.
Balance Sheet Data (Unaudited)
June 30, December 31,
In thousands 2010 2009
--------- ---------
Cash and cash equivalents $ 83,833 $ 86,598
Total debt $ 217,563 $ 239,688
Harte-Hanks, Inc.
Business Segment Information (Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------- -------------------------
% %
In thousands 2010 2009 Change 2010 2009 Change
-------- -------- ----- -------- -------- -----
OPERATING REVENUES:
Direct Marketing $140,926 $145,341 -3.0% $275,421 $292,162 -5.7%
Shoppers 66,683 70,321 -5.2% 132,367 141,174 -6.2%
-------- -------- -------- --------
Total operating
revenues $207,609 $215,662 -3.7% $407,788 $433,336 -5.9%
-------- -------- -------- --------
OPERATING INCOME:
Direct Marketing $ 20,000 $ 24,708 -19.1% $ 36,852 $ 43,932 -16.1%
Shoppers 5,275 3,173 66.2% 9,443 688 1272.5%
General corporate
expense (2,702) (2,949) 8.4% (5,406) (5,930) 8.8%
-------- -------- -------- --------
Total operating
income $ 22,573 $ 24,932 -9.5% $ 40,889 $ 38,690 5.7%
-------- -------- -------- --------
DEPRECIATION AND
AMORTIZATION:
Direct Marketing $ 4,205 $ 5,358 -21.5% $ 8,441 $ 11,138 -24.2%
Shoppers 1,563 1,957 -20.1% 3,330 5,060 -34.2%
General corporate
expense 2 7 -71.4% 6 14 -57.1%
-------- -------- -------- --------
Total depreciation
and amortization $ 5,770 $ 7,322 -21.2% $ 11,777 $ 16,212 -27.4%
-------- -------- -------- --------
Reconciliation of Net Income to Free Cash Flow
Three months ended Six months ended
June 30, June 30,
---------------- ----------------
In thousands 2010 2009 2010 2009
------- ------- ------- -------
Net Income $13,416 $13,058 $24,185 $20,173
Add: After-tax stock-based
compensation (Note 1) 584 745 1,153 947
Add: depreciation and amortization 5,770 7,322 11,777 16,212
Less: capital expenditures 4,325 1,749 8,266 3,918
------- ------- ------- -------
Free cash flow $15,445 $19,376 $28,849 $33,414
------- ------- ------- -------
Note 1: Pre-tax compensation expense was $956 and $1,187 for the three
months ended June 30, 2010 and 2009, respectively.
Pre-tax compensation expense was $1,906 and $1,507 for the six
months ended June 30, 2010 and 2009, respectively.
Reconciliation of Net Income to EBITDA
Three months ended Six months ended
June 30, June 30,
---------------- ----------------
In thousands 2010 2009 2010 2009
------- ------- ------- -------
Net Income $13,416 $13,058 $24,185 $20,173
Add: Depreciation and amortization 5,770 7,322 11,777 16,212
Interest expense, net and
non-operating, net 625 4,132 971 6,603
Income tax expense 8,532 7,742 15,733 11,914
------- ------- ------- -------
EBITDA $28,343 $32,254 $52,666 $54,902
------- ------- ------- -------
EBITDA by Segment:
Direct Marketing $24,205 $30,066 $45,293 $55,070
Shoppers 6,838 5,130 12,773 5,748
Corporate (2,700) (2,942) (5,400) (5,916)
------- ------- ------- -------
$28,343 $32,254 $52,666 $54,902
------- ------- ------- -------
Harte-Hanks, Inc.
Direct Marketing Revenue Mix (Unaudited)
Vertical Markets - Percent of Direct Marketing Revenue
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Retail 26% 24% 24% 24%
Financial and Insurance Services 14% 13% 15% 13%
Technology 27% 30% 28% 30%
Healthcare and Pharmaceuticals 10% 11% 11% 12%
Other Select Markets 23% 22% 22% 21%
-------- -------- -------- --------
100% 100% 100% 100%
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