Executive Summary

Q4 revenue declined 4.8% year over year to $47.1M, with operating loss of $1.6M and GAAP EPS of $(0.33); Adjusted EBITDA was $3.5M, down from $5.2M in Q4’23 as segment mix and cost investments weighed on margins .
Results were broadly in line with Q3 commentary calling for a “low to mid-single-digit revenue contraction” in Q4; the reported YoY revenue change was −4.8% .
One-time impairments tied to the 2022 InsideOut acquisition ($1.6M goodwill and $1.5M intangibles; $3.2M total) pressured GAAP results, while adjusted measures exclude these items; without the impairments Marketing Services EBITDA was “in equilibrium” YoY despite lower revenue .
Liquidity remains solid: $9.9M cash, zero debt, $24M undrawn revolver capacity; Pension Plan I fully terminated, with 2024 net loss largely due to pension termination charges .
Management emphasized continued cost optimization under Project Elevate and an ongoing CEO search; the next phase focuses on segment-led innovation and modernization, a potential narrative catalyst if translated into bookings and margin expansion in 2025 .

What Went Well and What Went Wrong

What Went Well

Cost actions progressed: “These initiatives have eliminated cost consistent with our expectations in 2024 and will continue to address business-critical initiatives in 2025,” underscoring multi-year margin support potential (Project Elevate) .
Liquidity de-risked: Year-end cash of $9.9M, zero debt, and $24M in credit capacity provide flexibility; pension plan termination de-risks the balance sheet and explains most of 2024’s GAAP net loss .
Business development momentum from prior quarters: New wins highlighted last quarter (financial services fulfillment, luxury auto sales services, luxury resale marketplace care) support medium-term pipeline and cross-segment opportunity .

What Went Wrong

Broad-based revenue declines vs. Q4’23 across segments: Marketing Services −12.1% revenue, Customer Care −1.5%, Fulfillment & Logistics −2.7% .
Margin pressure: Adjusted EBITDA of $3.5M fell from $5.2M in Q4’23; Customer Care lapped a high-margin short-term project, and F&L margin was hit by higher warehouse/tech costs (investment phase) .
Non-cash impairments: $1.6M goodwill and $1.5M intangibles tied to InsideOut reduced GAAP Q4 results and segment EBITDA presentation (Marketing Services), masking underlying adjusted profitability .

Financial Results

Consolidated P&L and Cash (oldest → newest)

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$49.491	$45.035	$47.630	$47.129
Operating Income (Loss) ($M)	$(2.278)	$1.373	$1.898	$(1.553)
Net Income (Loss) ($M)	$(1.977)	$(27.834)	$0.142	$(2.434)
Diluted EPS ($)	$(0.27)	$(3.84)	$0.02	$(0.33)
EBITDA ($M)	$(1.092)	$2.395	$2.937	$(0.275)
Adjusted EBITDA ($M)	$5.209	$3.561	$4.141	$3.509
Adjusted Op. Income ($M)	$4.023	$2.539	$3.102	$2.231
Adjusted Op. Margin (%)	8.1%	5.6%	6.5%	4.7%
Cash & Equivalents ($M)	$18.364	$10.974	$5.944	$9.934

Notes:

Q4’24 YoY revenue −4.8% (company-disclosed) .
2024 net loss driven primarily by pension plan termination charges .

Segment Breakdown (Q4 2024 vs Q4 2023)

Segment	Revenue Q4 2023 ($M)	Revenue Q4 2024 ($M)	EBITDA Q4 2023 ($M)	EBITDA Q4 2024 ($M)	Commentary
Marketing Services	$12.907	$11.342	$1.634	$(1.521)	2024 EBITDA reduced by $3.2M impairments; without impairment, earnings “in equilibrium” YoY despite lower revenue .
Customer Care	$15.248	$15.024	$3.477	$2.851	Lapped a Q4’23 short-term special project with unusually high margins; YoY EBITDA down 18% .
Fulfillment & Logistics	$21.336	$20.763	$1.870	$1.283	EBITDA impact from higher warehouse costs and technology investments to enable expansion .

KPIs and Balance Sheet Notes:

Credit line capacity: $24.0M undrawn .
No debt outstanding at year-end 2024 .
Pension Plan I fully terminated in 2024; pension charges impacted GAAP results .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue (YoY)	Q4 2024	“Low to mid-single-digit revenue contraction” (qualitative, from Q3 commentary)	No new quantitative guidance; actual Q4 revenue −4.8% YoY	In line with prior qualitative commentary

No formal quantitative guidance ranges for revenue, margins, OpEx, OI&E, or tax rate were provided in the Q4 press release; management emphasized ongoing cost optimization and operational modernization .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2024)	Current Period (Q4 2024)	Trend
AI/Data & CEG (Customer Excellence & Growth)	Formalized CEG; hired Chief Customer & Data Officer to leverage data and generative AI across offerings .	“Next phase of innovation” with heightened strategic ownership within segments; modernization to exceed customer expectations .	Execution focus shifting from org build to segment-led innovation.
Project Elevate (cost program)	Identified ~$6M in-year EBITDA improvement; restructuring through Q4’25; reinvesting in sales/tech .	Cost elimination consistent with 2024 expectations; additional 2025 initiatives planned .	Continued; supports medium-term margin narrative.
Fulfillment tech/infrastructure	Migrating to best-in-class warehouse/order tech; facility upgrades to expand capacity .	Q4 margin impacted by higher warehouse and tech costs; framed as enablers of expansion .	Investment phase near-term margin headwind; intended growth enabler.
Macro/Tariffs	Management not blaming results on macro; focus on internal execution/pipeline .	No new Q4 macro updates in press release .	Neutral.
Pension plan	Plan I terminated; significant accounting charges with tax benefit .	Pension termination cited as primary driver of 2024 net loss .	De-risked balance sheet; P&L noise largely behind.
Leadership	Sales/marketing transformation; new leadership hires .	CEO search ongoing; org focused on innovation/operational excellence during transition .	Leadership transition ongoing.

Management Commentary

“We continue to execute on Project Elevate to optimize our cost structure and streamline our organization... The next phase of innovation will be driven by heightened strategic ownership within our segments… and modernizing our business to exceed customers’ expectations.” — David Fisher, Interim COO .
“We are on plan for $6 million of in-year EBITDA improvement… $3M personnel optimization (Marketing Services), $2M contracts/back office, $1M warehouse ops; some savings reinvested in sales and tech improvements.” — David Garrison, CFO (Q3 call) .
“Our goal is to develop integrated data and AI capabilities that meet the increasing demand for data intelligence and technology solutions from our clients.” — Kirk Davis, CEO (Q3 call) .
“Pension Plan… termination… resulted in a pension charge of $38.2 million… tax benefit of $10.1 million.” — David Garrison, CFO (Q2 call) .

Q&A Highlights

Sales transformation cadence: Management expects conversion and cycle efficiency to improve with centralized sales, enhanced digital presence, and CDO-led data/AI articulation; 2025 viewed optimistically .
Macro sensitivity: While mindful of a slowing economy, management emphasized untapped organic potential and a strong pipeline; not attributing performance to macro backdrop .
Sequential revenue visibility: Too early (as of Q2 call) to commit to specific quarter growth given sales cycle unpredictability; seasonality typically benefits Q4 .
Marketing Services strategy: Rebuilding capabilities; plan to bolster sales support, add research/data/tech-oriented offerings; international (Europe) expansion seen as 2025 driver .

Estimates Context

S&P Global consensus for Q4 2024 EPS and Revenue was unavailable at time of analysis due to data access limits; therefore, no vs-consensus comparisons are included. Values could not be retrieved from S&P Global at this time due to an API request limit.
The company did not provide formal quantitative guidance in the Q4 press release; qualitative Q3 commentary (low- to mid-single-digit Q4 revenue contraction) was realized with a −4.8% YoY revenue print .

Key Takeaways for Investors

Underlying trend: Q4 revenue aligned with prior commentary (−4.8% YoY), with GAAP results burdened by $3.2M non-cash impairments; adjusted profitability narrowed YoY as mix and investment costs weighed .
Margin pathway: Project Elevate delivered 2024 cost reductions and continues into 2025; near-term headwinds in Fulfillment from warehouse/tech investments are positioned as capacity/growth enablers .
Balance sheet quality: Year-end cash $9.9M, zero debt, $24M revolver capacity, and completed pension plan termination support flexibility and de-risking .
Execution watch items: Conversion of the elevated pipeline and commercialization of data/AI-led offerings via CEG/Chief Customer & Data Officer to drive mix and margin improvement in 2025 .
Segment focus: Marketing Services must stabilize revenue while leveraging new data/tech offerings; Customer Care comps normalize without last year’s special project; F&L margins should improve as investments scale .
Leadership transition: CEO search ongoing; stable execution and tangible bookings progress will be important sentiment catalysts during the transition .
Event-driven view: Absent formal guidance and lacking consensus visibility, trading may hinge on signs of sales conversion, segment-led innovation wins, and margin inflection as cost actions roll through 2025 .

HARTE HANKS INC (HHS)·Q4 2024 Earnings Summary