Harte Hanks, Inc.

Good afternoon, ladies and gentlemen, and welcome to Hart Hanks' fourth quarter and full year 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Rob Fink. Sir, the floor is yours.

Thank you, Operator, and thank you, everyone, for joining us today for the Hart Hanks' fourth quarter and full year 2021 earnings conference call. Hosting the call today are Brian Linscott, Hart Hanks' CEO, and Lori Kearns, Chief Financial Officer. Before we begin, I would like to remind everyone that the information provided during this call may contain forward-looking statements about the company's strategy, financial outlook, business and industry expectations, anticipated performance and outcomes, and other statements that are not based on historical facts. Actual results may differ materially from those projected or implied in these statements because of the various risks and uncertainties, including those described in the company's Form 10-K and 10-Q and other filings with the SEC and the cautionary statement that was included in today's earnings press release. The call will also reference non-GAAP financial measures. Please refer to the earnings press release that was issued after the close today for a reconciliation of these and other related disclosures. The company's earnings release is available on the investor relations section of the Hart Hanks website at harthanks.com. With that said, I'd now like to turn over the call to Brian Linscott. Brian, the call is yours.

Thank you, Rob, and good afternoon. 2021 was a significant turning point for Hart Hanks. We completed our restructuring, implemented our asset-light operating model, and with a more efficient, significantly more profitable company. we listed our shares on the NASDAQ global market. We enter 2022 with a proven profitable business model, a portfolio of loyal tier one customers, and a business built upon value added service offerings that our customers demand. We are poised for profitable long-term growth, and I want to commend and thank all of our employees for the professionalism and passion from which they serve our clients every day. It is because of them that Hart Hanks is a stronger company. Since our last earnings call, we've continued to invest in our business to maximize profitability and drive growth. These investments involve hiring the right people, expanding our tech capabilities, and cross-selling our fully integrated service offerings. In early January, we hired Don Aiklin as Senior Vice President of Sales and Marketing. Don started his career with Hart Hanks, ultimately leading our national sales organization and established a new presence in automotive and consumer durables markets. Today, Don is driving our marketing campaigns in a variety of verticals and leading our sales efforts across all three segments. We are excited for him to return to the company in the senior leadership role. In February, we announced our expanded healthcare practice. under the experienced leadership of Janelle Harris. Janelle will be charged with expanding our practice of providing world-class service for our clients in the pharmaceutical, wellness, and healthcare industries. Over the past few years, we have built a robust healthcare practice, including relationships with top-tier customers like Abbott, GSK, Pfizer, and other national and state healthcare systems. Our proven ability to provide and execute Comprehensive and fully integrated programs, including patient insights, strategy, data analytics, marketing campaigns, customer care, member support, fulfillment, and logistics make us an ideal partner for healthcare organizations to accelerate growth and best service for customers. Our expanded healthcare practice is already delivering results. We were recently awarded a multi-year contract by a national healthcare organization to provide new mothers with products including breast milk pumps and health related materials. Our customer care segment will engage with its members and address inbound inquiries and our fulfillment logistics segment will distribute the breast milk kits to program participants from our new 410,000 square foot FDA approved facility in Kansas City. This contract is connected to the component of the Affordable Care Act designed to improve newborn nutrition and wellness. In the first year alone, the program is expected to deliver over 100,000 breast milk kits and materials to new and expecting mothers covered under the program. This win is a prime example of our comprehensive, fully integrated approach to serving our customers in a cost-effective way. Gleyhart Hanks provided services within discrete business silos, today we are bringing a multidisciplinary approach to satisfy our clients' complete customer engagement mission. We were selected by this large healthcare company based on our unique ability to provide end-to-end single source solution that includes everything from customer service and member engagement to product sourcing, inventory management, fulfillment and distribution, of wellness and nutrition kits. For this same healthcare system, our marketing services segment provides strategy analytics, campaign execution for the healthcare organization in select states, helping our client grow its membership base. Overall, this project truly touches every part of our organization, taking full advantage of our differentiated capabilities. It is a model for future large-scale engagements in healthcare and other industries. To facilitate such future engagement, we are investing in technology across our organization, enabling us to work smarter and faster, improving our data and analytics capabilities. In addition, these investments will allow us to eliminate manual processes and simplify and standardize how we work. We view our data and analytics expertise as a growth catalyst for Hart Hanks. as customers increasingly look to better utilize data to grow and improve their efficiency. We have significant capabilities in B2B tech, auto, consumer products, and retail, and we are investing to expand this area of our business. Another growth catalyst for Hart Hanks is in the financial industry. We have proven ability to provide a robust CRM agency solution and campaign strategy particularly with respect to mid-market banking segments. Our office involves solutions such as campaign strategy, design, digital delivery, execution, as well as printing and digital delivering of customized financial reports to customers. This growth area leverages several areas of expertise, including data and analytics, where our proven expertise with data privacy and our ability to cleanse, enrich, and augment data to enable data analytics predictive modeling is of significant value to our customers. Now on to our results. Our three operating segments delivered solid results, particularly in terms of contribution margin in the fourth quarter. As I've described before, our three customer segments include, number one, customer care focused on delivering full-service customer care solutions that are tech-enabled and people-driven. Fulfillment logistics focused on B2B markets and literature fulfillment, B2C e-commerce and sampling, and end-to-end supply chain and logistics services. And three marketing services, which is focused on strategic planning, data-driven insights, performance analytics, creative design, technology enablement, and program execution, to drive business outcomes and optimize customers' ROI. Our segment reporting is designed to provide transparency into the company's financials and visibility into the value and dynamics of each business. To begin, we ended the year with a strong fourth quarter, with revenues increasing over 10% to $52 million. More importantly, we moved from an operating loss in the fourth quarter last year to profitability this year. EBITDA for the quarter is a positive 3.5 million, which is an improvement of 3.1 million over the prior year. Going forward, we anticipate positive EBITDA for each quarter of 2022. We continue to drive financial operational improvements in each of our segments. Customer care revenue increased by 12.7% from the previous year. and year over year EBITDA improved 2.4% to 2.6 million from 2.5 million in the prior year quarter. We continue to benefit from some COVID-related project work, albeit at a lower runway. We anticipate reductions in this COVID work as we move through the first half of 2022. As we have said, we also expect further reductions in our customer care cost structure as our leases are expiring and we benefit from the work-from-home environment. We recognize and are adapting to the wage pressures in today's labor market by our recruiting flexibility in the work-from-home environment, which is allowing us to mitigate some of the wage pressures we see. New business wins for the quarter include, number one, a regional sports network to support customer interaction for their direct-to-consumer product launch. Hart Hanks will build the self-service solution and support phone, email, chat, and text customer interactions as we leverage our streaming industry experience. A company with advanced e-commerce social cart also selected us to invite its customers into their transaction experience. Hart Hanks will assist customer interactions and digital ticket distribution as we leverage our experience handling sports and entertainment customer experiences. And third, we were hired by a consulting company's government practice, and they selected Hart Hanks to support unemployment interactions and claims processing for a state government. Hart Hanks was selected due to our top performance in the vendor network. Fulfillment and logistics revenue increased approximately 3.6 million or approximately 25% compared to the previous year. And EBITDA improved to 2.1 million from essentially break even the prior year quarter. With the consolidation of fulfillment operations in our FDA approved Kansas City facility, we anticipate continued margin improvement into 2022. And we have added approximately 100,000 square foot feet of operating capacity to serve organic client growth as well as new business. We continue to grow in spite of supply chain challenges, largely due to the critical nature of stored products in our facilities and the sales enablement materials critical to our client's success. The additional capacity in our locations also serves as growth opportunities. In addition, we have been largely successful in mitigating the impacts of higher transportation costs due to longstanding and deep relationships in the transportation and trucking industry. New business wins for the quarter included one, expanding our partnership with the healthcare and nutrition company, winning a $1 million plus program to fulfill pre-built sample kits to pediatrician offices nationwide. And two, a long-standing retail customer selected Hart Hanks to manage and deliver time-sensitive print materials on additional distribution lanes due to our on-time performance and low-cost pricing. Marketing services EBITDA rose by half a million dollars, or about 26% compared to last year. As previously stated, we have driven improved profitability from marketing services segments as we have realigned our resources, reduced our SG&A expenses, and invested in technology and infrastructure to better serve our customers. We remain aggressively focused on our marketing efforts to attract new customers within prioritized market categories, including healthcare, financial, B2B tech, and consumer products. We have made significant progress in our marketing Our product offerings, including strategy, data analytics, CRM agency services, and marketing enablement capabilities. New business wins for the quarter include one, a global multinational technology manufacturer chose Hart Hanks to implement and execute a full service omni-channel demand generation program. Hart Hanks was selected because of its wide variety of solutions and services required to execute the campaign. The program leverages analytics, creative marketing services, media buys, and outbound calling lead generation. And second, an existing client that distributes salon professional products where we provide data-driven marketing strategy to drive top line sales through a customer loyalty and B2B beauty space. We increased our existing strategy and analytics remit after we helped them achieve $1.4 billion in annual sales. In conclusion, this was a strong and productive and encouraging year, reflecting significantly improved operating efficiency and continued momentum in the business. Recent new business wins and a strong and growing pipeline of vetted near-term opportunities give us confidence that our revenue level will remain in line with 2021. More importantly, We remain optimistic in our ability to continue to drive increased profitability. We expect continued positive net income and significant year-over-year improvement in full-year EBITDA, driving higher free cash flows during 2022. With that, I turn it over to Lori.