Harte Hanks (HHS) Q2 Revenue Falls 14%

Key Points

• Revenue (GAAP) fell 14.2% to $38.6 million, reflecting declines across all business segments.

• Adjusted EBITDA dropped 59.0% to $1.5 million compared to the same quarter in 2024, with adjusted operating margin shrinking to 1.0%.

• Operating income (GAAP) sharply decreased compared to Q2 2024, and management provided no forward financial guidance.

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Harte Hanks (NASDAQ:HHS), a marketing and customer experience solutions provider, released its results on August 7, 2025. The most important news from the release was a broad drop in GAAP revenues and profitability, with revenue (GAAP) and EBITDA declining sharply across all business segments. GAAP earnings per share (EPS) showed a small net loss of $0.05, a significant improvement from the $3.84 GAAP net loss per share in Q2 2024 when the company recorded large pension termination charges. The company did not provide forward-looking financial guidance, and there were no available analyst estimates for comparison. Overall, the period reflected continued revenue challenges and further margin compression, with management maintaining a debt-free balance sheet and positive cash balance.

Business Overview and Strategic Focus

Harte Hanks is a provider of data-driven marketing, customer care, and logistics solutions. It serves clients through three main segments: Customer Care (outsourced customer support), Fulfillment & Logistics Services (warehousing, shipping, and supply chain), and Marketing Services (digital and traditional marketing campaigns).

Recently, the company has focused on technological adaptation and artificial intelligence (AI) integration, with products aimed at improving its ability to manage and analyze customer data. Cost optimization remains a high priority, especially through Project Elevate, a restructuring initiative that seeks to streamline operations and reinvest savings into sales, marketing, and advanced technology. The company's ability to deliver superior, multi-channel customer experiences and diversify revenues by expanding client relationships are also key elements of its business strategy.

Quarter in Review: Financial and Segment Performance

Revenues fell 14.2% on a GAAP basis compared to the prior-year period. This decline affected all segments. Adjusted EBITDA, a measure of operating profitability that excludes certain non-cash and one-time charges, decreased by 59.0% year-over-year. The adjusted operating margin narrowed to 1.0%, down from 5.6% in Q2 2024, reflecting the impact of reduced revenues and higher relative costs.

Customer Care, covering outsourced customer support solutions, reported GAAP revenue of $11.8 million, down 4.4% year over year. EBITDA for this segment declined 30.8%, mostly due to timing fluctuations in client programs, but the company claims ongoing strength from new and existing client partnerships. Fulfillment & Logistics Services, which spans warehousing and supply chain management, brought in $18.1 million, down 11.6% from a year ago, with EBITDA also declining by 8.3%. The company attributed this drop to higher production costs and delays in certain client projects. Marketing Services saw the steepest decline, with revenue falling to $8.7 million, down 28.7%. Segment EBITDA dropped from $1.8 million to $1.4 million, driven by client attrition and reduced spending on marketing campaigns.

On the cost side, labor expenses were reduced by 14.2% compared to Q2 2024. Production and distribution costs fell by 9.3% compared to Q2 2024, while selling, general, and administrative (SG&A) expenses (GAAP) dropped slightly. However, these cuts did not fully offset the lost revenue, resulting in further margin contraction. The company recorded $0.1 million in restructuring charges related to Project Elevate, down from $0.4 million in the same quarter in 2024.

Harte Hanks ended the period with $4.8 million in cash and cash equivalents, with access to a $24.0 million credit line and no outstanding debt. Accounts receivable increased slightly. Management described this financial footing as a platform to invest in growth and transformation initiatives.

Looking Ahead: Guidance and Key Watch Areas

Management did not offer specific forward-looking revenue or earnings guidance for the next quarter or for fiscal 2025. The company repeated its long-term focus on operational efficiency, cost discipline, and advancing technology, but did not provide quantitative targets or milestones.

For investors, future developments to monitor include progress in returning the Marketing Services segment to growth, as discussed by management regarding recent performance. The effectiveness of Project Elevate in reversing current trends will likely be a central topic in quarters ahead, given the scale of ongoing declines and margin compression. HHS does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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