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Harte-Hanks reports Q3 revenue growth first quarter since 2007

Friday, October 29, 2010

Press release from the issuing company

San Antonio, TX - Harte-Hanks, Inc. today reported third quarter 2010 diluted earnings per share of $0.22 on revenues of $216.7 million. These results compare to diluted earnings per share of $0.22 on $209.3 million in revenues for the third quarter of 2009.

The following table presents financial highlights of the company’s operations for the third quarter of 2010 and 2009, respectively. Full financial results are attached.

For the nine months ended September 30, 2010, the company’s revenues decreased 2.8% to $624.5 million and operating income increased 5.3% to $65.9 million. Diluted earnings per share for the nine months ended September 30, 2010 were $0.59 compared to $0.54 for the 2009 nine-month period.

Commenting on the third quarter performance, Chairman, President and Chief Executive Officer Larry Franklin said, “It was good to see revenue growth in the third quarter, our first quarter of growth since the first quarter of 2007. Although Shoppers revenue declined in the quarter by 4.2%, this was the lowest decline since the first quarter of 2007. Shoppers operating income reflects excellent improvement as our people continue to effectively manage through the current difficult environment. Direct Marketing revenue increased 7.3% in the quarter with operating income declining 4.0%. There was a complex one-time project for a long-standing customer during the third quarter that accounted for approximately 60% of the Direct Marketing revenue growth and will also positively affect our fourth quarter revenue by approximately the same amount. Our Direct Marketing profit reflects the investments we are making and will continue to make in the multichannel direct and digital strategy. We are also investing in the digital business in Shoppers.”

Discussing the performance of individual business segments, Doug Shepard, Executive Vice President and Chief Financial Officer, said, “Our Direct Marketing revenues reflect an increase of over 40% from our pharma/healthcare vertical compared to the third quarter of 2009. The growth in the pharma/healthcare vertical was helped by the large, one-time project which was completed early in the fourth quarter of 2010. Our retail, select and high-tech verticals experienced revenue growth rates in the single digits (as a percentage). Our financial vertical declined in the single digits (as a percentage).

Shoppers revenue decreased 4.2% in the third quarter compared to the third quarter of 2009. This is the fifth consecutive quarter of improvement in quarterly revenue comparisons to the prior year quarter. Operating income improved 58.4% to $5.3 million.”

Concluding, Franklin said, “We are pleased to have returned to revenue growth in Direct Marketing in the quarter, however we don’t expect to have the same rate of growth over the next few quarters. We are excited about the progress we are making with our digital and multichannel strategy. More importantly, we intend to continue our investments in the people, structure and products necessary to build our multichannel business, which we believe will lead to improved long-term results.

Our Shoppers revenue performance will continue to reflect the California and Florida economies which are not improving, especially California. We are continuing our investments in our Shoppers digital products, which are already showing impressive growth.

In the fourth quarter, the company expects to show slight operating income improvement compared to the 2009 fourth quarter which included a $6.9 million charge. This expectation reflects our anticipated Shoppers revenue and the investments we are making in our digital strategy in both businesses. Customer response in both businesses is confirming that our digital focus is working and will provide tremendous long term value.”

Selected Highlights:
- Harte-Hanks Direct Marketing acquired Information Arts (UK) Limited, a provider of data-driven marketing insight to business-to-business marketers across Europe. The company, based in High Wycombe in the United Kingdom, delivers data insight to improve multichannel marketing effectiveness. This insight is derived from profiling, segmentation, modeling and other analytics, and drives engagements that include marketing data management, data quality, data acquisition and data planning. Information Arts and Harte-Hanks’ other marketing offerings in Europe are being combined to deliver multichannel Demand Center solutions—integrated lead generation and lead management programs.
- Harte-Hanks Direct Marketing launched Momentium: Multichannel Insight™, a strategic assessment tool and process which measures a company’s current practices for customer engagement across communication and commerce channels against a dataset of over 120 companies compiled by our Aberdeen Group. Momentium: Multichannel Insight helps marketers understand their maturity, readiness and sophistication relative to their peers and competitive set.
- Harte-Hanks’ Trillium Software® released its latest version of the Trillium Software System®. This software platform provides a new user interface and new graphical business-level reporting which supports the data lifecycle methodology that companies engage in to "Discover, Develop, Deploy and Manage" their information quality initiatives. Designed to visualize data issues, improve business rule validation and enhance data quality monitoring, the Trillium Software System aids business decisions and outcomes through better and more accurate information.
- During the quarter, Harte-Hanks Direct Marketing released an expanded Ci Pipeline® lead generation database and service for the technology market, which now includes tracking of eight new technology initiatives being planned at more than 740,000 North American and European business locations. These new initiatives include emerging opportunities in cloud computing, desktop virtualization, messaging security, data loss prevention, electronic medical records and mobile devices/smart phones.
- Harte-Hanks Direct Marketing won a multi-year deal to support Modell’s Sporting Goods and its customer interaction strategy across multiple platforms. Harte-Hanks’ deep analytic, strategy, database, and customer relationship management marketing expertise in the retail environment were key factors in winning this new relationship. Modell’s operates more than 140 stores in 10 Northeastern and Mid-Atlantic states and the District of Columbia. Harte-Hanks will provide customer database development and insight-driven analytics to support multichannel targeted marketing.
- Harte-Hanks Direct Marketing was selected by a national retailer to provide a integrated database and analytics solution, which will be used to drive multichannel marketing campaigns also executed by Harte-Hanks. Harte-Hanks’ ability to provide additional insight into this retailer’s customers was critical to winning this engagement.
- EMC Corporation, a leading global developer and provider of information infrastructure technology and solutions, has awarded a two-year contract for the consolidation of its EMEA tele-demand center services to Harte-Hanks Direct Marketing. Harte-Hanks currently provides this service in the U.S.
- The Agency Inside Harte-Hanks was selected by a multinational pharmaceutical company to develop customer relationship management strategy and creative materials, as well as manage multichannel marketing campaigns including digital development, email and direct mail in support of a new prescription product for treatment of a skin condition. This engagement was awarded on the strength of the Agency’s work for another brand within the same organization.
- The Agency Inside Harte-Hanks was selected by another multinational pharmaceutical company to provide creative, strategy and account management in support of a new prescription product for treatment of a neurological condition. The Agency Inside will develop and execute campaigns targeted to physicians through direct and digital channels.
- Harte-Hanks Shoppers won a printing and delivery engagement from a national Mexican food quick-serve restaurant during the quarter. Shoppers also had renewals and increases from several national and regional pizza restaurants, pharmacies and a regional dental service provider.
- In August, Shoppers began selling SEM (search engine marketing) to business owners. Having weekly contact, PennySaver’s locally-focused sales force positions it well to help small businesses increase sales by adding SEM to their advertising programs.
- During the quarter, Shoppers PennySaverUSA.com began its rollout of SMS text message marketing. SMS texting is being used by businesses to push out lunch coupons in North Orange County, and for voting in select contests. More uses will be deployed as the rollout continues.




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