Harte Hanks, Inc.

Welcome to the Hart-Hanks second quarter 2023 earnings call. At this time all participants are on a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Tom Bowman of FNK IR. Sir, the floor is yours.

Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer, and Laurie Kearns, Chief Financial Officer. Before we begin, I want to remind participants that during the call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today, and therefore, we refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. In addition, any projections as to the company's future performance represented by management include estimates as of today, August 10, 2023, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided in the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures, are available in the earnings press release that was issued shortly after the market closed. A copy of that press release and other corporate disclosure is available on the investor relations section of Hard Hanks' website at hardhanks.com. With that, I would now like to turn the call over to Kirk. Kirk, welcome to Hard Hanks.

Thank you, Tom, and good afternoon. This is my first earnings call as CEO of Hard Hanks. having joined the company just eight weeks ago. However, I have long been aware of Hard Hanks as a key player in the industry. My familiarity with the company and the findings from my due diligence completed before accepting this opportunity were largely confirmed in my first month. Hard Hanks has a world-class team, significant expertise, and valuable offerings that are well aligned with the needs of our global customers. My predecessor did an excellent job in materially improving our balance sheet. He also effectively aligned the business with its current opportunities, eliminating unprofitable business lines and rationalizing the cost structure. The business today is profitable on an EBITDA generating basis with relatively stable revenues, solid relationships, with a customer base comprised of global brands and offerings that are well positioned to grow. I come to Hart Hanks with 25 years of CEO experience in publishing and digital transformation. I've had the privilege of leading or advising C-level executives, boards, investors, and key decision makers within publicly held and private equity-backed publishing and digital media verticals. I understand the needs of a modern corporation, the areas where hard hangs can provide value in the digital world, and the pain points of our customers. I also bring significant experience in business development, M&A, and B2B and B2C revenue generating activities. Hard Hanks has a solid platform for sustainable profitability. My job is to evolve the organization so it becomes a solid platform for long-term growth while preserving and, in fact, expanding its profitability over time. For the last few years, Hard Hanks, like many companies, faced changes directly resulting from the pandemic. During the pandemic, as our customers had to change their business practices and find new digital ways to interact and engage with customers, we saw new opportunities, new opportunities which led to meaningful and incremental growth. We picked up call center projects, logistics projects, marketing services projects that all helped our customers navigate the pandemic. As my predecessor said for the last few quarters, much of the business was going to naturally run off as a new normal was defined and our customers adapted to the environment. However, that runoff occurred at a slower pace than we projected, which benefited our results over the past few years, but is now fully wound down. Over the past few quarters, we've also experienced the macro pressures that are prevalent in the market, and as a result, have seen spending slowed and program re-evaluations from existing customers who are more cognizant of their expense structures than they were in the past. The result has been modest headwinds on revenue. We haven't yet seen signals that this behavior is changing, so we believe the third and fourth quarters of 2023 will look by and large like the second quarter from a revenue standpoint. Effectively, from a revenue standpoint, we think the Q2 results we are reporting today should serve as our near-term baseline. My focus today is on accelerating the organic growth opportunities we're built for. We know demand for digital solutions is growing. Companies are looking to enhance their marketing service capabilities, especially lead generation, and companies are looking to tie fulfillment services to marketing to better engage and care for their customers. So that we can better capitalize on these opportunities, we need to market our company more effectively and improve our sales and marketing functions. Initially, we will reallocate costs from within the company for any additional investment we deem appropriate. Toward this end, we expect to name a new Senior Vice President of Sales before year end, replacing a sales leader who recently retired. This is an opportunity to tap an executive with skills and experience for our near and long-term opportunities. Specifically, we expect to hire sales leadership and sales talent with deep experience in digital solutions, cross-selling and expertise in executing land and expand strategies to take advantage of our rich client base. Simultaneously, to create more expansive customer relationships, We are cross-training our existing sales team to become enterprise-wide sellers as opposed to representing select services that we offer. We have undertaken an audit of all elements of our lead generation and go-to-market strategies. We are hyper-focused on this. As a result, we expect to have a more capital efficient go-to-market strategy that supports our growth ambitions. To augment our internal focus on growth, we are launching a partnership next week with a business development company that will facilitate opportunities for us with Fortune 1000 clientele. Think of the engagement as sales as a service designed to mirror a team of direct sales resources So this will be additive to our internal efforts. They bring an extensive strategic Rolodex and deep industry insights. In turn, we offer attractive services that they are eager to promote within their network. And speaking of sales as a service, I'd like to highlight my enthusiasm for the company inside out that we acquired late last year. Working closely with the dynamic founder of this business, we will incorporate and market this division as part of an end-to-end revenue generation solution for mid and large enterprises grappling with revenue and growth challenges. Historically, we've excelled in combining powerful data solutions with our marketing services capabilities to deliver marketing qualified needs for our customers. We'll now be featuring our ability from end to end, a full cycle offering that links leveraging data, creating demand for a product or service, and closing deals. This strikes us as a highly scalable solution. The enhancements to our sales and marketing functions will take some time, at least a couple of quarters. Absent a recession, we expect to see benefits in 2024. I believe that once these investments are in place, we can step up our growth rate and achieve more effective cross-selling, and higher revenue should result in expanded EBITDA margins. I'd now like to discuss how we're thinking about our cost structure. I am confident we can further lower costs in our business without hindering our ability to delight customers. We need to quickly evolve our culture around this aspect of our company. As I get started here, there are a couple of targeted cost-out efforts going on that are timely and important. Last quarter, we announced the convergence of our customer care and marketing services segments. We are also focused on reducing costs associated with customer churn. Also, in the normal course of business, we operate with annual budgets, and if we're behind, it's generally expected that incremental steps be taken throughout the year to bridge the gaps. That's what's happening today. As of now, We're in the early stages of thinking about how we formally assess our full potential for material improvement in our cost structure and how we organize and incentivize our teams to achieve it. We'll provide an update on these initiatives next quarter. I'll just add that maintaining our profitability is a key goal of this management team and the board of directors. Last, I'd be remiss if I didn't acknowledge that we, too, Recognize that generative artificial intelligence represents an important opportunity for our business. As a customer of companies such as Microsoft and Amazon, and there are others, we will benefit from the investment these market leaders are making through the technologies deployed with us. Of course, we need a roadmap for how we plan to incorporate and market AI capabilities as part of our services and along with other emerging technologies. So this will be a recurring theme for our discussions with you. We are focused on both short-term and long-term opportunities, and we're confident we can build a stronger company and a more profitable company. And now I will turn the call over to Lori to walk through our results.