Form 8-K HARTE HANKS INC For: Nov 03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

November 3, 2016

Date of Report (Date of earliest event reported)

HARTE HANKS, INC.

(Exact name of registrant as specified in its charter)

9601 McAllister Freeway, Suite 610

San Antonio, Texas  78216

(210) 829-9000

(Address of principal executive offices and Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On November 3, 2016, Harte Hanks issued a press release announcing financial results for its third quarter of 2016.  The full text of the press release is furnished with this Current Report as Exhibit 99.1 and is incorporated by reference herein.

The information contained in this Item 2.02 (including Exhibit 99.1) of this Current Report is furnished pursuant to this Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, notwithstanding any general incorporation by reference language in other Harte Hanks filings.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits. The following exhibit is being furnished herewith.

99.1                      Press Release of Harte Hanks, Inc. dated November 3, 2016, announcing financial results for its third quarter of 2016

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit Index

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Exhibit 99.1

FOR IMMEDIATE RELEASE

November 3, 2016

Media Contact:

Doug Shepard

EVP/Chief Financial Officer

(210) 829-9120

[email protected]

HARTE HANKS REPORTS THIRD QUARTER RESULTS

San Antonio, TX - Harte Hanks (NYSE: HHS), a leader in customer relationships, experiences and interaction-led marketing, today announced financial results for its third quarter ended September 30, 2016.

Commenting on performance, Chief Executive Officer Karen Puckett said, “During the quarter we continued to implement our expense reduction program and are starting to see evidence of those efforts, in the face of ongoing revenue pressure.  While our revenue performance was disappointing during the third quarter, we continue to see the rate of client losses stabilize and we are beginning to see some proof points in our turnaround such as recent sales success, improving client satisfaction and stabilization of our database business. We are pleased with the success 3Q Digital and Harte Hanks Consulting are having winning larger clients as these businesses leverage our broader range of services and cross-sell into the Harte Hanks client base.  We remain focused on reducing expenses while also stabilizing revenues. During the third quarter we substantially completed our previously announced efforts to eliminate $25 million of expenses from the business.

“We announced in June our intention to explore strategic alternatives for Trillium Software.  The process is progressing, and we continue to expect to have further news by year end.”

Third quarter revenues from continuing operations were $97.4 million compared to $108.8 million in the same quarter last year.  The revenue decline on a constant currency basis was 9.7%.

During the quarter, a new entertainment client extended our engagement for multi-channel contact center support.  Several other existing clients expanded their services with us generating revenue increases.  These increases were offset by the loss of business from a pharmaceutical company and a healthcare insurer.

Trillium Software third quarter adjusted revenues combined into discontinued operations were $12.1 million compared to $13.2 million in the third quarter of 2015 driven by decreased software licenses and the related professional services and maintenance fees associated with those license sales.  SaaS revenues increased during the quarter due to continued growth in bookings as new and existing clients adopt the service.  This business continues to transition to more recurring revenue, with our SaaS bookings growing during the quarter compared to last year.

Operating loss from continuing operations for the quarter was $4.6 million compared to a loss of $209.6 million for the same quarter last year.  Adjusted operating loss from continuing operations, excluding litigation costs, severance and other compensation expenses and non-recurring database development charges, was $0.4 million compared to adjusted income of $4.1 million in the same period last year.  Labor costs declined $1.9 million after excluding severance and other expenses.  Reductions in production expenses from outsourced costs and mail supply chain expenses were offset by an increase in sales and marketing expense and a $1.6 million charge for a lawsuit.

Trillium Software adjusted operating income combined into discontinued operations was $4.0 million compared to $4.2 million in the same period last year.  The decrease was due to the decline in revenues as this business transitions more towards SaaS, offset by decreases in labor costs.

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The following table presents financial highlights of the company’s operations for the third quarter of 2016 and 2015, respectively.  More detailed financial results are attached.

RESULTS FROM CONTINUING OPERATIONS (unaudited)

(1)         See table for reconciliation of GAAP results to adjusted results; N/M — Not meaningful

The company will host a conference call with analysts to discuss the earnings release on November 3, 2016, at 10:00 a.m. Eastern Time.  The conference call number is (888) 240-9352 for domestic callers and +1 (913) 312-1462 for international callers, conference ID 8036575.  To access an audio webcast, please use the link available in the Investors section of the Harte Hanks website.  An audio replay will be available shortly after the call through December 3, 2016 at (877) 870-5176, conference ID 8036575.  The replay also will be available in the Investors section of the Harte Hanks website.

About Harte Hanks:

Harte Hanks is a global marketing services firm specializing in multi-channel marketing solutions that connect our clients with their customers in powerful ways.  Experts in defining, executing and optimizing the customer journey, Harte Hanks offers end-to-end marketing services including consulting, strategic assessment, data, analytics, digital, social, mobile, print, direct mail and contact center. From visionary thinking to tactical execution, Harte Hanks delivers smarter customer interactions for some of the world’s leading brands. Harte Hanks 5,000+ employees are located in North America, Asia-Pacific and Europe. For more information, visit Harte Hanks at www.hartehanks.com, call 800-456-9748, email us at [email protected].  Follow us on Twitter @hartehanks or Facebook at https://www.facebook.com/HarteHanks.

Cautionary Note Regarding Forward-Looking Statements:

Our press release and related earnings conference call contain “forward-looking statements” within the meaning of U.S. federal securities laws.  All such statements are qualified by this cautionary note, 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.

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These forward-looking statements are based on current information, expectations and estimates and 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:  (a) local, national and international economic and business conditions, including (i) market conditions that may adversely impact marketing expenditures and (ii) the impact of economic uncertainty in the United States and elsewhere on the financial condition, marketing expenditures and activities of our clients and prospects; (b) the demand for our products and services by clients and prospective clients, including (i) the willingness of existing clients to maintain or increase their spending on products and services that are or remain profitable for us, and (ii) our ability to predict changes in client needs and preferences; (c) economic and other business factors that impact the industry verticals we serve, including competition and consolidation of current and prospective clients, vendors and partners in these verticals; (d) our ability to manage and timely adjust our capacity, workforce and cost structure to effectively serve our clients; (e) our ability to improve our processes and to provide new products and services in a timely and cost-effective manner though development, license or acquisition; (f) our ability to protect our data centers against security breaches and other interruptions and to protect sensitive personal information of our clients and their customers; (g) our ability to respond to increasing concern, regulation and legal action over consumer privacy issues, including changing requirements for collection, processing and use of information; (h) the impact privacy and other regulations, including restrictions on unsolicited marketing communications and other consumer protection laws; (i) fluctuations in fuel prices, paper prices, postal rates and postal delivery schedules; (j) the number of shares, if any, that we may repurchase in connection with our repurchase program; (k) unanticipated developments regarding litigation or other contingent liabilities; and (l) the ability to integrate and successfully leverage newly-acquired service offerings as anticipated; and (m) our ability to complete anticipated divestitures and reorganizations; and (n) other factors discussed from time to time in our filings with the Securities and Exchange Commission, including under “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.  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 uses certain non-GAAP measures of financial performance in order to provide investors with a better understanding of operating results and underlying trends to assess the company’s performance and liquidity.  The company evaluates its operating performance based on several measures, including the non-GAAP financial measures of (1) EBITDA, defined as net income before interest, taxes, credit facility and acquisition charges, stock based compensation, non-cash defined benefit plan expense,  severance and other compensation, depreciation, and amortization, (2) adjusted revenues, defined as revenues less divestitures and foreign currency transaction losses, and (3) adjusted operating income, defined as operating income plus goodwill impairment, credit facility and acquisition charges and severance and other compensation, non-recurring database charges and legal settlements.  The company believes that EBITDA, adjusted revenues and adjusted operating income, which it uses on an overall Company basis, as well as focused solely on the Company’s Customer Interaction and Trillium businesses,  are useful supplemental financial measures of operating performance for investors because they facilitate investors’ ability to evaluate the operational strength of the company’s business.

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Adjusted revenues, adjusted operating income 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.  Quantitative reconciliations of EBITDA to net income, adjusted revenues to GAAP operating revenues and adjusted operating income to GAAP operating income are found in the tables attached to this release.

As used herein, “Harte Hanks” refers to Harte Hanks, Inc.  and/or its applicable operating subsidiaries, as the context may require.  Harte Hanks’ logo and name are trademarks of Harte Hanks.

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Harte Hanks, Inc.

Consolidated Statements of Operations (Unaudited)

Harte Hanks, Inc.

Revenue Mix (Unaudited)

Vertical Markets - Percent of Revenue

Vertical Markets - Percent of Customer Interaction’s Revenue

Vertical Markets - Percent of Trillium Software’s Revenue

Reconciliation of Non-GAAP to GAAP Financial Measures

Reconciliation of Revenue and Operating Income (Unaudited)

(N/M = Not Meaningful)