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HH

HARTE HANKS INC (HHS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $41.6M, down 8.6% year over year; EBITDA was $1.0M, adjusted EBITDA $1.8M, and diluted EPS was $(0.05). Segment mix showed growth in Customer Care (+4.5% YoY) and Fulfillment & Logistics (+1.8% YoY), offset by a 35.3% decline in Marketing Services revenue .
  • Management highlighted strategic new wins across healthcare, technology, hospitality, and automotive services; the sales organization was reorganized to align with business segments, which is improving sales efficiency and deal conversion .
  • Balance sheet remains solid: $9.0M cash, $24.0M available revolver capacity, and no debt; the company reiterated an objective to deliver positive EBITDA in each quarter of 2025 .
  • Sequentially, revenue declined from Q4 2024’s $47.1M as client program expirations and reduced project work in financial services weighed on Marketing Services; adjusted EBITDA fell from $3.5M in Q4 to $1.8M in Q1 .

What Went Well and What Went Wrong

What Went Well

  • Customer Care revenue rose 4.5% YoY to $13.0M on new client wins and stabilized volumes; the segment maintained solid EBITDA despite higher technology costs .
  • Fulfillment & Logistics revenue increased 1.8% YoY to $19.8M, with segment EBITDA up 7.0% due to higher volumes of more profitable projects and the exit of a low-margin logistics client .
  • Strategic wins across healthcare (national fulfillment program; opted‑in health data licensing), enterprise IT sales enablement, and automotive logistics bolster future pipeline; management noted sales reorganization already improving conversions: “Reorganizing our sales structure... has already begun to yield positive results” .

What Went Wrong

  • Marketing Services revenue declined 35.3% YoY to $8.8M; segment EBITDA fell to $1.1M from $2.1M, driven by reduced project work in financial services and expiration of inside sales outsourcing contracts .
  • Company recorded an operating loss of $0.04M vs. operating income of $0.4M in Q1 2024, reflecting revenue pressure and restructuring expense ($0.8M) despite a 7.7% reduction in operating expenses .
  • Net loss widened to $0.4M (from $0.2M YoY), and EBITDA decreased to $1.0M (from $1.4M YoY), indicating profitability pressure as mix shifted away from higher-margin activities in Marketing Services .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$45.448 $47.129 $41.561
EBITDA ($USD Millions)$1.421 $(0.275) $1.023
Adjusted EBITDA ($USD Millions)$2.826 $3.509 $1.812
Operating Income ($USD Millions)$0.375 $(1.553) $(0.040)
Net Income ($USD Millions)$(0.171) $(2.434) $(0.392)
Diluted EPS ($USD)$(0.02) $(0.33) $(0.05)

Segment breakdown (Q1 2025 vs Q1 2024):

SegmentQ1 2024 Revenue ($USD Millions)Q1 2025 Revenue ($USD Millions)Q1 2024 EBITDA ($USD Millions)Q1 2025 EBITDA ($USD Millions)
Customer Care$12.442 $13.001 $2.453 $2.059
Fulfillment & Logistics$19.423 $19.778 $1.579 $1.690
Marketing Services$13.583 $8.782 $2.094 $1.073

KPIs and balance sheet highlights:

KPIQ4 2024Q1 2025
Cash and Cash Equivalents ($USD Millions)$9.934 $8.982
Total Operating Expenses ($USD Millions)$48.682 $41.601
Adjusted Operating Margin (%)4.7% 1.8%
Weighted Avg Shares (Basic & Diluted, Millions)7.355 7.360

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EBITDAEach quarter in 2025Not disclosed previouslyPositive EBITDA in each quarter of 2025 Introduced

Notes:

  • Q1 2025 press release did not provide quantitative ranges for revenue, margins, OpEx, OI&E, tax rate, or segment guidance .

Earnings Call Themes & Trends

Note: A Q1 2025 earnings call transcript was not available in our document set; themes below draw from company press releases across periods .

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/Data initiativesCEO introduced Customer Excellence & Growth division, leveraging “data and AI” to differentiate offerings .Focus on Project Elevate cost optimization; tech investments in fulfillment/warehouse noted .New data licensing wins (opted‑in health data); tech costs elevated in Customer Care .Building data capabilities; ongoing tech investment; near-term cost impact.
Sales organization/executionUnification of sales/customer under CEG; groundwork for 2025 .Continued streamlining amid CEO search; operations focused on innovation .Sales structure realigned to segments; improving pipeline and conversion .Execution improving after late-2024 softness.
Fulfillment & Logistics margin driversTech/facility cost increases pressured margins .Higher warehouse and tech costs; enabling expansion .Mix shift to more profitable projects; termination of low-margin account .Margins stabilizing via mix optimization despite cost inflation.
Client spending/macroCustomer program changes expected to contract Q4 revenue low-to-mid single digits .Revenues decreased across segments; impairments tied to InsideOut .Reduced project work in financial services; planned contract expirations .Demand softness in MS; pipeline rebuild underway.

Management Commentary

  • “Enhanced Leadership Revamped Sales Organization Drive Improved Sales Efficiency and Customer Retention... Despite revenue pressure in the first quarter, the Company continued to drive operational progress and secure strategic new business wins across key industries” (HHS press release, May 14, 2025) .
  • “In early 2025, Harte Hanks secured several new client engagements across key verticals, including healthcare, technology, hospitality, and automotive services” (press release, May 14, 2025) .
  • “Segment revenue for [Customer Care] increased 4.5%... the decrease in profitability is due to an increase in technology costs during the period” (press release, May 14, 2025) .
  • “The increase in [Fulfillment & Logistics] EBITDA relates to higher volumes of more profitable projects, offset slightly by the mutual agreement to terminate a low-margin Logistics client account during the quarter” (press release, May 14, 2025) .
  • Prior context: “By leveraging data and AI as key differentiators, we aim to enhance our value proposition across all product offerings... This initiative positions us strongly for 2025 and beyond” — CEO Kirk Davis (Q3 2024 press release) .
  • Prior context: “We continue to execute on Project Elevate to optimize our cost structure and streamline our organization... initiatives have eliminated cost consistent with our expectations in 2024 and will continue... in 2025.” — Interim COO David Fisher (Q4 2024 press release) .

Q&A Highlights

  • A Q1 2025 earnings call transcript was not available in our document set; therefore, Q&A highlights and any guidance clarifications are unavailable from primary sources [ListDocuments returned none].

Estimates Context

  • S&P Global consensus coverage for HHS Q1 2025 appeared unavailable for EPS and revenue in our query; thus, we cannot assess beats/misses versus Street for Q1 2025. Values retrieved from S&P Global.*
    | Metric | Q1 2025 Consensus | Q1 2025 Actual | |--------|--------------------|----------------| | Revenue ($USD Millions) | N/A* | $41.561 | | Primary EPS ($USD) | N/A* | $(0.05) |

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Segment mix resilience: Customer Care (+4.5% YoY revenue) and Fulfillment & Logistics (+1.8% YoY revenue) partially offset substantial Marketing Services weakness (-35.3%), suggesting stabilization in services tied to care/fulfillment as MS recalibrates .
  • Profitability levers: Adjusted EBITDA of $1.8M and adjusted operating margin of 1.8% reflect disciplined cost control; exiting low-margin logistics work and prioritizing profitable projects should support margin improvement as volumes grow .
  • Sales execution improving: Realignment of sales to segments and new client wins across healthcare/tech/automotive indicate a healthier pipeline and potential revenue recovery later in 2025 .
  • Strong liquidity: $9.0M cash, $24.0M revolver capacity, and zero debt provide flexibility to invest in growth and navigate demand variability; focus remains on achieving positive EBITDA each quarter in 2025 .
  • Watch Marketing Services: Financial services project reductions and contract expirations pressured MS results; monitoring pace of replacement wins and data‑driven offerings will be key to restoring segment profitability .
  • Prior quarter context: Q4 2024 impairments tied to InsideOut and elevated tech/warehouse costs underscore execution challenges; Project Elevate savings and mix optimization remain critical for 2025 .
  • Near-term trading lens: Absence of Street estimates limits beat/miss catalysts; stock narrative likely hinges on evidence of revenue reacceleration, MS recovery, and margin uplift from mix/cost actions in subsequent quarters .