David Garrison: Thank you, Kirk. I will now review the first quarter consolidated results, including revenues for each business segment. Please note that starting in 2024, we begin reporting 4 segments instead of 3. The newest segment as discussed in our 10-K will be referred to as sales services. It relates to the Inside Out acquisition made in 2022 and has been separated from the Customer Care segment. First quarter revenues were 45.4 million a decline of 3.5% compared to 47.1 million for the first quarter in 2023. Growth in the Customer Care and Sales Services segment was offset by the declines in the two other segments. Revenues in the Customer Care segment were 12.4 million in the first quarter of 2024 compared to 11.6 million in the same quarter prior year.
Sales services increased to 4.7 million, compared to 2.8 million in the first quarter of 2023. Growth in these two segments were the result of expansion with existing clients and the first quarter of a new FinTech client in sales services. The Marketing Service segment revenues fell to 8.9 million in Q1 of 2024 compared to 11.2 million in the prior year. Customer budget reductions and a program conclusion account for the decrease in this segment year-over-year. Fulfillment and logistics revenues were 19.4 million in the first quarter of 2024 compared to 21.5 million in the prior year. The decrease in revenue is related to cost compression in the logistics space as costs shrink from reductions in overall market demand. Operating expenses in Q1 were 45.1 million including restructuring expenses of 0.9 million, compared to 46.1 million in the same period of 2023.
The commencement of Project Elevate resulted in 0.9 million of restructuring expenses for this quarter. This expenditure related to staffing reductions completed in the first quarter leading to a $2.3 million annualized expense reduction that will improve EBITDA. We expect to incur additional expenses estimated at 2.5 million in executing Project Elevate during 2024. The operating income in Q1 2024 was 0.4 million compared to the operating income of 1.1 million in the first quarter of 2023. After adjusting for stock compensation, severance and restructuring expenses, the adjusted operating income in the first quarter of 2024 is 1.8 million, compared to 1.6 million in the first quarter of 2023. The adjusted operating margin is 3.9% in Q1 2024, compared to 3.4% in the same quarter in 2023.
The first quarter of 2024 had an EBITDA of 1.4 million, compared to an EBITDA of 2.1 million in 2023. When adjusting for stock compensation, severance and restructuring expenses, the adjusted EBITDA is 2.8 million for Q1 of 2024 and 2.7 million for the same period in 2023. Turning to the balance sheet. As of March 31, 2024, we had cash and cash equivalents of 11.5 million, compared to 18.4 million at the end of 2023. Our current $25 million line of credit, which was extended until June of 2025 has not been drawn against and the company has no debt. Target to terminate Pension 1 during June continues without any obstacles. As a reminder, the long-term pension liability on our balance sheet is 28.6 million as the termination funding requirement is listed as another current liability.
The pension termination contribution of 7.5 million will be made in June. Thank you for your support and I’d like to turn the call back over to Kirk.
Kirk Davis: Thank you, David. In closing, I’d like to underscore our unwavering focus on our customers and their journey. Through extensive engagement with both our customers and prospective clients, I’ve had the privilege of gaining profound insights into their needs and aspirations. Our aim is to translate these insights into tangible enhancements across our organizational framework, incentive plans and by improving the caliber of thought leadership we offer. Through in-depth dialogues with employees and clientele alike, we have identified compelling opportunities to bolster our customer acquisition endeavors and fortify our frontline teams and their mission to elevate the customer experience. It will be an exciting milestone for Harte Hanks to appoint a Chief Customer Officer, which we believe will be a strong brand differentiator.
As we progress through this transformative period, I’m inspired by the enthusiasm and dedication demonstrated by our employees. While we deeply value our century old legacy, we’re equally thrilled about forging a new chapter for Harte Hanks, one that’s responsive to the changing business environment and focused on providing outstanding customer experiences. We thank you for your ongoing support. We look forward to updating you on our progress in August. Thank you very much. And at this time, we would be happy to take your questions.
Operator: [Operator Instructions] Our first questioner is Michael Kupinski with Noble Capital Markets.
Michael Kupinski: A couple of questions. In terms of your European expansion, where are those operations located? And can you kind of give us some sense of are these is the European operations profitable at this point? Or when do you anticipate that they’ll swing towards contribution margin going forward?
Kirk Davis: So our beachhead in Europe is Portugal, and we are ramping up the team there as we speak. And I’m sorry, what was the second part of your question?
Michael Kupinski: I was just wondering if it’s profitable already or when do you anticipate that we’ll start to see contribution margin coming from your European operations?
Kirk Davis: Yes. So we are, actually, we’re extremely proud of our European operations. From a delivery perspective, we are outperforming customer expectations. It’s a profitable and growing geo for our company and we’re very proud of the team that we have there. And I would expect that in the third quarter, our additional sales efforts in Europe will start to be fruitful. We are developing a strong international pipeline at the same time we’re doing as well as we are in the United States.
