Harte Hanks, Inc. (NASDAQ:HHS) Q1 2024 Earnings Call Transcript

Harte Hanks, Inc. (NASDAQ:HHS) Q1 2024 Earnings Call Transcript May 9, 2024

Harte Hanks, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings. Welcome to the Harte Hanks First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Tom Baumann of FNK IR. You may begin.

Tom Baumann: Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer; Kelly Waller, Senior Vice President of Sales & Marketing; and David Garrison, Chief Financial Officer. Before we begin, I want to remind participants that during the call, management’s prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today and therefore, we will refer you to a more detailed discussion of these risks and uncertainties in the company’s filings with the SEC.

In addition, any projections as to the company’s future performance represented by management include estimates as of today, May 9, 2024, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures are available in the earnings press release that was issued shortly after the market closed. A copy of that press release and other corporate disclosure is available on the Investor Relations section of the Harte Hanks website at hartehanks.com. With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.

Kirk Davis: Thank you, Tom, and good afternoon, everyone. I appreciate you joining our Q1 2024 earnings conference call. Joining me today from our Chelmsford, Massachusetts office are Kelly Waller, our Senior Vice President of Sales & Marketing and David Garrison, our Chief Financial Officer. Kelly and David were the first two new executive appointments I made last fall. We are fortunate to have assembled an exceptionally strong leadership team. Our team comprises both seasoned executives who have been instrumental to our company for many years and new leaders we’ve recruited to lead sales, finance and our newly established transformation office led by David Fisher. Later in the call, we will delve into our first quarter performance in much greater detail.

However, I want to highlight upfront that on a same-store basis, Q1 was our company’s best revenue performance in the past 5 quarters at minus 3.5%. We are confident we are developing a durable growth engine for our company. More broadly, I’d like to review the progress we are making on our Elevate program. Launched last October, Elevate aims to propel us towards greater agility, innovation and organic growth and customer centricity ensuring that we exceed the expectations of our stakeholders. Our Elevate program continues to evolve and revolves around 4 key areas and work streams. The first is our sales and marketing transformation. While there’s no finish line in sales, we have nearly completed the restructuring and expansion of our sales and marketing organization.

See also 20 Best Universities in Asia for International Students and 25 Largest Companies in Mexico by Revenue.

Q&A Session

Under the leadership of Kelly Waller, we have centralized our sales organization, undergone significant restaffing and structural changes, expanded our sales force and established strategic channels, all of which are currently fueling strong pipeline growth year-over-year. The caliber of talent we have attracted and the quality and composition of our sales pipeline have outpaced our expectations. Today, Kelly will highlight some of the early successes we have already had. Our increased investment in marketing is also yielding positive outcomes by bolstering our digital presence and creating better and more innovative content to drive website traffic and enhance our social activity, we are effectively boosting brand awareness, traffic and generating more organic leads.

The second key area of Project Elevate is our focus on margin expansion and business optimization. We are in the early stages of a multiyear program. As we previously shared, we established a transformation office to thoughtfully execute our plans. We embarked on an effort with the Kearney organization, an acclaimed global consulting firm to catalyze our efforts in pinpointing inefficiencies and cost saving opportunities that would not jeopardize our customer delivery capabilities. This entailed exhaustive benchmarking against industry peers and best practices, coupled with a meticulous look at how technological advancements could streamline operations. As a result, we have identified an immediate opportunity to reduce costs by 6 million by year-end with a 2-year forecasted annual savings of 16 million exiting 2025.

Our third strategic focus area centers around harnessing artificial intelligence and data driven decision-making. Our foundational efforts here involve rigorous due diligence, experimentation and learning. Through this process, we have pinpointed numerous practical use cases to leverage AI to enhance customer experience, fortify our value proposition and contemplate new business models. Highlighting the pivotal role of partnerships in our evolution, a standout example is our alliance with Amazon. In 2023, as part of our ongoing efforts to modernize and transform, we made a significant investment in our partnership with Amazon Web Services. Presently, we are collaborating with AWS’s generative AI experts on initiatives aimed at revolutioning our customer care business.

These initiatives involve integrating AI and machine learning capabilities to streamline customer issue resolution. We are developing use cases focused on addressing our clients’ most intricate challenges. These endeavors will help us in provisioning new business models across different use cases. We also believe these advancements will embolden our efforts to win new business, initially for customer care, but inevitably throughout all of our services. Our fourth major initiative involves creating a more customer centric culture. In a quest to redefine our operational framework with an unwavering commitment to elevating customer experience, we are investing in a pivotal new role within our executive leadership team, a Chief Customer Officer.

This strategic appointment will signify our dedication to placing the customer at the forefront of every decision and action we undertake. As retention plays a pivotal role in our success, having a dedicated focus on enhancing our customer experience will serve to enable net growth more quickly from our sales development efforts. Additionally, emphasizing our commitment to evolving alongside our customers, understanding their journey and prioritizing the voice of the customer will undoubtedly strengthen our position during both the customer acquisition phase, but also in our ability to expand relationships. Especially Key, we expect to hire a visionary executive who excels at envisioning and implementing data driven and AI powered solutions to improve our clients’ experiences and results and drive growth.

This individual will play a pivotal role serving as the heartbeat of our organization, fostering a culture where each team member is deeply committed to delivering unparalleled service to our customers. We expect to name a Chief Customer Officer in early Q3. I would now like to introduce Kelly Waller, our Senior Vice President for Sales & Marketing. Kelly joined Harte Hanks from a 1.8 billion FinTech company where she spearheaded global sales efforts. The remarkable pace and caliber of the sales transformation she is orchestrating is truly exciting and it is energizing our entire company. In my career, I’ve seldom seen an executive have such a profound impact in such a brief span of time. Kelly will delve into the strategies she has employed and showcase some of the recent victories our team has achieved.

Kelly?

Kelly Waller: Thank you, Kirk. As you know, I’m happy to be here and quite proud of the team that we have built. Our relentless efforts have transformed our sales and marketing division from an underperforming entity into a sales force capable of driving organic growth. Through the implementation of new and pivotal go-to-market strategies, we’ve created a robust action plan aimed at realizing our growth objectives. Central to our strategy is geographic expansion with a keen focus on better penetrating the European market and venturing into the SMB segment for the first time. We’re proud to report significant strides in this direction with the establishment of a dedicated European sales team and the imminent launch of a compelling SMB product pilot beginning next month.

This product, a comprehensive suite of B2B marketing and sales services, marks a milestone in our journey towards expansion. Additionally, we have fortified our sales and marketing teams by introducing 2 new units, the partner sales team and an inside sales team to complement our existing field sales team and client services team. By augmenting our workforce and bolstering our marketing campaigns, particularly in digital channels such as SEO, Google, social media and personalized events, we have achieved strong pipeline growth over the last couple of months. Obviously, this leads to our focus on conversions in which our sales organization is highly incentivized to achieve. The growth in our pipeline is beginning to yield results, which we anticipate will scale.

We are having success in expanding our relationship with existing customers. Taken together, we believe this is the outset of our upward ascent. So I’d like to share some examples of the early successes we’re seeing in both new customer acquisition and expansion. In our Fulfillment & Logistics segment, led by Patrick O’Brien, we are progressing well as we expand our partnerships with existing clients, which is a major opportunity for us. For example, we have an established robust partnership with a prominent agency through our kitting capabilities. Our specialization in kitting, particularly for retail and e-commerce involves bundling related products into packages or kits for distribution as a unified entity. This is an exciting and expanding service we offer.