HHS 10-K & 10-Q changes, risk factors and insider trading
Harte Hanks Inc. · Nasdaq · Services-Direct Mail Advertising Services · CIK 45919 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.”
Removed heading “If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.”
Largest changes
“If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses (i) we could fail to meet our financial reporting obligations; (ii) our reputation may be adversely affected and our business and operating results could be harmed; (iii) the market price of our stock could decline; and (iv) we could be subject to litigation and/or investigations or sanctions by the SEC, or other regulatory authorities.”see in full comparison
Marketing budgets are largely discretionary in nature, and as a consequence are easier to reduce in the short-term than other expenses. Our customers have in the past, and may in the future, respond to their own financial constraints, whether caused by weak economic conditions, weak industry performance or client-specific circumstances, by reducing their marketing spend.see in full comparisonFor instance, in light of the current inflationary environment and increased cost of capital due to rising interest rates, our customers may reduce the amount of services we provide to them, for among other reasons, to preserve liquidity.Customers may also be slow to restore their marketing budgets to prior levels during an economic recovery and may respond similarly to adverse economic conditions in the future. Our revenues are dependent on national, regional, and international economies and business conditions. A long-lasting economic recession, regardless of the cause, or anemic recovery in the markets in which we operate could have material adverse effects on our business, financial position, or operating results. Similarly, industry or company-specific factors may negatively impact our clients and prospective clients, and in turn result in reduced demand for our products and services, client insolvencies, collection difficulties or bankruptcy preference actions related to payments received from our clients. We may also experience reduced demand as a result of consolidation of clients and prospective clients in the industry verticals that we serve.
“Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting and we are also required to establish disclosure controls and procedures under applicable SEC rules. An effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and fraud. Management is required to provide an annual assessment on the effectiveness of our internal control over financial reporting. …”see in full comparison
“If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.”see in full comparison
“We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.”see in full comparison
“We are a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. We have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies and may continue to rely on such exemptions. …”see in full comparison
Full comparison: every changed paragraph (20)
A large portion of our revenue is generated from a limited number of clients. The loss of a client or significant work from one or more of our clients has adversely affected our business and could in the future adversely affect our business.
Marketing budgets are largely discretionary in nature, and as a consequence are easier to reduce in the short-term than other expenses. Our customers have in the past, and may in the future, respond to their own financial constraints, whether caused by weak economic conditions, weak industry performance or client-specific circumstances, by reducing their marketing spend. For instance, in light of the current inflationary environment and increased cost of capital due to rising interest rates, our customers may reduce the amount of services we provide to them, for among other reasons, to preserve liquidity. Customers may also be slow to restore their marketing budgets to prior levels during an economic recovery and may respond similarly to adverse economic conditions in the future. Our revenues are dependent on national, regional, and international economies and business conditions. A long-lasting economic recession, regardless of the cause, or anemic recovery in the markets in which we operate could have material adverse effects on our business, financial position, or operating results. Similarly, industry or company-specific factors may negatively impact our clients and prospective clients, and in turn result in reduced demand for our products and services, client insolvencies, collection difficulties or bankruptcy preference actions related to payments received from our clients. We may also experience reduced demand as a result of consolidation of clients and prospective clients in the industry verticals that we serve.
Our business plan and expectations for the future require that we effectively manage our cost structure, including our operating expenses and capital expenditure across our operations. In 2023, theThe program named "Project Elevate" wasinvolved createdthe optimization and changed processes in eachrationalization of our business segmentsresources toas transformwell as the operationalpartial cost structurereinvestment of savings into the companyCompany’s sales and changemarketing theteam, culture to be more agile, optimize the structure,technology, and cost justify all activities of the organization. A transformational office was established at the beginning of 2024 with the mandate to manage and measure these initiatives on a go forward basis.strategy. However, we may not be able to recognize all identified potential savings and even if we are able to recognize the identified savings, such cost savings may be insufficient to achieve our cost management objectives. To the extent that we do not successfully manage our costs our financial results may be adversely affected.
Various local, national, and international regulations, as well as industry standards, give consumers varying degrees of control as to how personal data is collected, used, and shared for marketing purposes. If, due to privacy, security, or other concerns, consumers exercise their ability to prevent or limit such data collection, use, or sharing, it may impair our ability to provide direct marketing services for those consumers and limit our clients’ demand for our services. Additionally, privacy and security concerns may limit consumers’ willingness to voluntarily provide data to our clients or marketing companies. Some of our services depend on voluntarily provided data. For instance, we believe that one of the most attractive offerings of our MarketingRevenue ServicesSolutions segment is the provision of data-analytics to our clients. However, the ability to provide such services is at least in part dependent on the ability to collect large volumes of voluntarily provided data. If there is a significant shift in consumer behavior or governmental regulations were to inhibit our ability to collect large amounts of this type of data, our ability to provide meaningful data analytics to our clients would likely be impaired.
OurMany of our operations rely on the ability of our employees to work at specially equipped facilities to perform services for our clients. Although we have some excess capacity and redundancy, we do not have sufficient excess capacity or redundancy (in equipment, facilities, or personnel) to maintain our standard service and operational levels for an extended period of time if we are unable to use one of our major facilities. Outsourcing these processes to facilities not owned by us is not a viable option. Should we lose access to a facility for any reason, includingsuch as a result of pandemics, terrorist incident or natural disaster, our service levels are likely to decline or be suspended and clients would go without service or secure replacement services from a competitor. As a consequence of such an event, we would suffer a reduction in revenues and harm to (and loss of) client relationships.
OverMany of the past few years, we have replaced manymembers of our leaderscurrent (includingleadership ourteam Chiefhave Executivelimited Officer,tenure Chiefin Financialtheir Officer,current and Chief Operating Officer), some a number of times.roles. If our new leaders fail in their new and additional roles and responsibilities (and more generally if we are unable to attract additional leaders with the necessary skills to manage our business) our business and its operating results may suffer. Further, our prospects depend in large part upon our ability to attract, train, and retain experienced technical, client services, sales, consulting, marketing, and management personnel. While the demand for personnel is also dependent on employment levels, competitive factors, and general economic conditions, our recent business performance may diminish our attractiveness as an employer. The loss or prolonged absence of the services of these individuals could have a material adverse effect on our business, financial position, or operating results.
Interest rate fluctuations in Europe and the United States may affect the amount of interest we earn on cash equivalents. Our Credit Facility bears interest based upon the Secured Overnight Financing Rate. Our results of operations, cash flows, and financial position could be materially or adversely affected by significant increaseschanges into interest rates. We also have exposure to interest rate fluctuations in the United States, specifically money market, the value of our pension obligations and overnight time deposit rates, as these affect our earnings on excess cash. Even with the offsetting increase in earnings on excess cash in the event of an interest rate increase, we cannot be assured that future interest rate increases will not have a material adverse impact on our business, financial position, or operating results. Increased interest rates have put upward pressure on pricing and purchasing power.
Inflation could have a negative impact on our financial condition and results of operations. Significant increases in inflation, particularly in wages and, to a lesser extent, goods and services, can affect our business and profitability. Rising labor costs may compress our margins as we face challenges in maintaining profitability. Additionally, as we rely on third-party providers for some of our offerings, we have already experienced margin compression due to higher service charges. While inflation appears to be stabilizing, we are actively taking steps to preserve our margins. However, these efforts may not be sufficient, and inflation could continue to adversely impact our profitability.
The widespread increase in the cost of goods and services due to inflation, supply chain disruptions, and rising interest ratesinflation has negatively impacted, and may continue to affect the discretionary spending of our customers. This, in turn, may adversely impact our results of operations. We cannot predict the extent or duration of these negative effects on our business.
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting and we are also required to establish disclosure controls and procedures under applicable SEC rules. An effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and fraud. Management is required to provide an annual assessment on the effectiveness of our internal control over financial reporting. Our testing may reveal significant deficiencies in our internal control over financial reporting that are deemed to be material weaknesses and render our internal control over financial reporting ineffective. In the past these assessments and similar reviews have led to the discovery of material weaknesses, all of which have been remediated. However, no assurance can be given that we won't discover material weaknesses in the future. We have incurred and we expect to continue to incur substantial accounting and auditing expenses and spend significant management time in complying with the requirements of Section 404.
While an effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and fraud, disclosure controls and internal control over financial reporting are generally not capable of preventing or detecting all financial reporting errors and all fraud. A control system, no matter how well-designed and operated, is designed to reduce rather than eliminate the risk of material misstatements in our consolidated financial statements. There are inherent limitations on the effectiveness of internal controls, including collusion, management override and failure in human judgment. A control system can provide only reasonable, not absolute, assurance of achieving the desired control objectives and the design of a control system must reflect the fact that resource constraints exist.
If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses (i) we could fail to meet our financial reporting obligations; (ii) our reputation may be adversely affected and our business and operating results could be harmed; (iii) the market price of our stock could decline; and (iv) we could be subject to litigation and/or investigations or sanctions by the SEC, or other regulatory authorities.
There were no changes in our internal controls over financial reporting during our most recent fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Uncertainty around, and disruption from, new and emerging technologies, including the adoption and utilization of artificial intelligence,AI, may result in risks and challenges that could impact our business.
IfWe have experienced cybersecurity incidents in the past, and if we do not prevent security breaches and other interruptions to our infrastructure, we may be exposed to lawsuits, lose customers, suffer harm to our reputation, and incur additional costs.
The services we offer involve the transmission of large amounts of sensitive and proprietary information over public communications networks, as well as the processing and storage of confidential customer information. Unauthorized access, remnant data exposure, computer viruses, denial of service attacks, accidents, employee error or malfeasance, “social engineering” and “phishing” attacks, intentional misconduct by computer “hackers” and other disruptions can occur, and infrastructure gaps, hardware and software vulnerabilities, inadequate or missing security controls, and exposed or unprotected customer data can exist that (i) interfere with the delivery of services to our customers, (ii) impede our customers' ability to do business, or (iii) compromise the security of our or our customers' systems and data, which exposes confidential information to unauthorized third parties. We are a target of cyber-attackscybersecurity incidents of varying degrees on a regular basis. Over time, the techniques used to conduct these cyber-attacks, as well as the sources and targets of these attacks, have become increasingly sophisticated and, in some cases, have been but, are often not recognized until such attacks are launched or have been in place for some time. In addition, there has been an increase in cyber-attacks conducted or sponsored by capable and well-funded “nation state” operators. The Company expects that the sophistication and techniques of cyber-threats will continue to evolve with the rapid development and increased adoption of AI and machine-learning technologies.
The covenants in the Credit Facility may limit the Company’s operating and financial flexibility.
We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
We are a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. We have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies and may continue to rely on such exemptions. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Reports on Form 10-K.
Management's Discussion & Analysis (MD&A)
New heading “Revenue Solutions:”
New heading “Pension Accounting”
Removed heading “Recent Developments”
Removed heading “Project Elevate”
Removed heading “Marketing Services:”
Largest changes
see in full comparisonGoodwill is the amount by which the cost of the acquired net assets in a business combination exceeds the fair value of the identifiable net assets on the date of purchase. Goodwill is not amortized.Goodwill is reviewed for impairment at least annually during the fourth quarter, or more frequently if events occur indicating the potential for impairment. During the goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairmenttest.test in which the fair value of the reporting unit is compared to its carrying amount. Fair value is determined through various valuation techniques and assumptions such as cash flow models, discount rates, market multiples and control premiums.. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the quantitative goodwill impairment test. We booked an impairment charge of $1.6 million for goodwill in the year ended December 31,2024,2024 , leaving a balance of $0.3 million. There was no goodwill impairment in the year ended December 31, 2025.
see in full comparisonMarketingRevenueServicesSolutions segment revenue declined$2.6$15.2 million, or4.9%,30.2%, due to customer turnover and additional client spending reductions. This segment is our most economically sensitive segment with regard to changes in our clients' marketing strategies. Operating income for the year ended December 31,20242025decreasedincreased$1.8$1.1 millionreducingimproving operating income by32.8%28.6%whenmainlycompareddue to theprior2024year. The segment results were impacted by the noncash items, $1.6 millionimpairment of goodwillimpairmentand$1.5 million ofintangibleasset impairment, in the fourth quarter associated with the write-down of the InsideOut acquisition.assets.
see in full comparisonImpairment2024 operating expenses also included impairment charges of $1.6 million and $1.5 million for goodwill and intangible assets. There were no impairment charges incurred for goodwill and intangible assetsdecreased operating incomein2024. These noncash charges related to the previous acquisition of the InsideOut in December of 2022.2025.
see in full comparisonIntangible assets consist of finite-lived intangible assets acquired through the Company’s business combinations. Such amounts are initially recorded at fair value and subsequently amortized over their useful lives using the straight-line method, which reflects the pattern of benefit, and assumes no residual value.Finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require an intangible asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that intangible asset to its carrying amount. If the carrying amount of the intangible asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. The factors that drive the estimate of useful life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparing the assets’ book value to future net undiscounted cash flows that the assets are expected to generate to determine if a write-down to the recoverable amount is appropriate. If such assets are written down, an impairment will be recognized as the amount by which the book value of the asset group exceeds the recoverable amount. During the year ended December 31, 2024, a significant amount of revenue from its original customers was lost. As a result, we booked an impairment loss of $1.5 million to our intangible assets. Theremainingnet carrying balance of intangible assets as of December 31, 2025 and December 31, 2024 was $0.4 million and $0.6million.million, respectively. There was no impairment of our intangible assets during the year ended December 31, 2025.
Full comparison: every changed paragraph (51)
Harte Hanks, Inc. is a leading global customer experience company operating in three business segments: MarketingRevenue Solutions formerly referred to as Marking Services, Customer Care, and Fulfillment & Logistics Services. Our mission is to partner with clients to provide them with robust customer-experience, or CX strategy, data-driven analytics, and actionable insights combined with seamless program execution to better understand, attract, and engage their customers. Our services include strategic planning, data strategy, performance analytics, creative development, and execution; technology enablement; marketing automation; B2B and B2C e-commerce; cross-channel customer care; and product, print, and mail fulfillment.
Recent Developments
Project Elevate
Our management team continuously reviews and adjusts our cost structure and operating footprint to optimize our operations, and invest in improved technology. During the second half of 2023, we engaged a consulting firm to help review and analyze the structure and operations of the Company. This review included greater than 200 meetings with personnel at all levels of the firm and led to the initiation of our transformation program named "Project Elevate". The program involves the optimization and rationalization of our business resources as well as the partial reinvestment of savings into the Company's sales and marketing team, technology, and strategy. A business transformation office was established at the beginning of 2024 to manage and measure these initiatives. Reorganization savings from Project Elevate executed from 2024 to 2026 are estimated to be $16 million.
Revenues of $159.6 million for the year ended December 31, 2025 decreased $25.6 million, or 13.9%, when compared to $185.2 million for the year ended December 31, 20242024. aRevenue decreasein ofthe $6.3Revenue Solutions segment declined $15.2 million, or 3.3%, when compared30.2%, to $191.5$35.1 million; for the year ended December 31, 2023. Revenue inour Fulfillment & Logistics Services declined $3.0$7.6 million, or 3.5%,9.3%, to $82.0 million; our Marketing Services segment revenue declined $2.6 million, or 4.9%, to $50.3$74.4 million; revenue in our Customer Care segment declined $0.7$2.9 million, or 1.3%,5.4%, to $52.9$50.1 million. Please see segment results below for additional information on the changes in revenue year over year.
Operating expenses of $159.2 million for the year ended December 31, 2025 decreased $24.0 million, or 13.1%, when compared to $183.1 million for the year ended December 31, 2024.
Operating expenses of $183.1 million for the year ended December 31, 2024 decreased $5.0 million, or 2.6%, when compared to $188.1 million for the year ended December 31, 2023.
Labor costs decreased by $4.2 million, or 4.3%, when compared to the year ended December 31, 2023, primarily due to the reduction in workforce in our Customer Care and Marketing Service segments as a result of Project Elevate. This benefit was partially offset by the expansion of the sales and marketing team and higher labor production activities in the Fulfillment and Logistics segment.
ProductionLabor and Distribution expensescosts decreased $2.9by $12.9 million, or 4.9%,13.8%, when compared to the year ended December 31, 2023,2024, primarily drivendue byto the reduction in salary and wages as operations were optimized to account for lower transportationrevenue. costsTermination of senior management staff also resulted in ourlower logisticsstock business.based compensation.
Advertising, Selling,Production and General and AdministrativeDistribution expenses increaseddecreased $2.1$6.7 millionmillion, or 10.2%,11.9%, when compared to the year ended December 31, 20232024, primarily duedriven toby thelower expansiontransportation ofcosts thein salesproportion andwith marketingour activities.lower revenues in our logistics business.
Advertising, Selling, and General and Administrative expenses decreased $0.6 million or 2.5%, when compared to the year ended December 31, 2024 primarily due to the lower sales expenses from lower revenue as well as lower professional expenses, which was partially offset by increased technology expenses.
Impairment2024 operating expenses also included impairment charges of $1.6 million and $1.5 million for goodwill and intangible assets. There were no impairment charges incurred for goodwill and intangible assets decreased operating income in 2024. These noncash charges related to the previous acquisition of the InsideOut in December of 2022.2025.
The total other expenses, net were $1.4 million for the year ended December 31, 2025, when compared to other expense, net of $40.0 million for the year ended December 31, 2024. This $38.6 million decrease in other expenses was mainly due to $37.5 million of pension termination charges booked in the year ended December 31, 2024.
The total other expenses, net were $40.0 million for the year ended December 31, 2024, when compared to other expense, net of $5.3 million for the year ended December 31, 2023. This $34.7 million increase in other expenses included $37.5 million in pension termination charges offset by a year over year decrease in other expenses.
Our 20242025 income tax benefit was $0.2 million for the year ended December 31, 2025, when compared to tax benefit of $7.6 million for the year ended December 31, 2024, when compared to tax benefit of $0.3 million for the year ended December 31, 2023.2024. The increasedecrease in tax benefit of $7.3$7.4 million was primarily related to the $37.5one milliontime pension termination charge booked in the year ended December 31, 2024.
The following is a discussion and analysis of the results of our reporting segments for the years ended December 31, 20242025 and 2023.2024. There are three principal financial measures reported to our Interim COOPresident (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenues, operating income and operating income plus depreciation and amortization (“EBITDA”). EBITDA is considered a non-GAAP financial measure. A reconciliation of EBITDA to operating income is included below.
Revenue Solutions:
Marketing Services:
MarketingRevenue ServicesSolutions segment revenue declined $2.6$15.2 million, or 4.9%,30.2%, due to customer turnover and additional client spending reductions. This segment is our most economically sensitive segment with regard to changes in our clients' marketing strategies. Operating income for the year ended December 31, 20242025 decreasedincreased $1.8$1.1 million reducingimproving operating income by 32.8%28.6% whenmainly compareddue to the prior2024 year. The segment results were impacted by the noncash items, $1.6 millionimpairment of goodwill impairment and $1.5 million of intangible asset impairment, in the fourth quarter associated with the write-down of the InsideOut acquisition.assets.
Customer Care segment revenue declined $0.7$2.9 million, or 1.3%5.4% when comparecompared to the prior year, which was impacted by one-time project-based engagements, temporary surges or declines in call volumes among retained customers due to specific programs and events. We also encounter fluctuations based on the geographic regions customers select for staff support. Existing customers who shift current programs to our lower cost off-shore markets can reduce revenues as the per agent cost is lower. We are leveraging our Amazon Connect cloud-based platform to test and pilot new AI tools, and are exploring how we can augment growth by providing more technical support as clients migrate to more capable contact center platforms. Operating Incomeincome for the year ended December 31, 20242025 increaseddecreased by $0.9$3.9 million to $9.9$6.0 million, aor 10.4%39.7%, improvementprimarily due to higher technology costs, tighter margins in profits when compared to the prior year, despite a slightcompetitive decreasemarketplace inand revenues.reduced The improved operational efficiency is the result of diligent work to control costs while managing service delivery to meet customer expectations.revenue.
Fulfillment & Logistics segment revenue declined $3.0$7.6 million, or 3.5%,9.3%, primarily due to lost customers and the lower revenue from existing customers not being offset by growth in new programs and customers. For the year ended December 31, 2024,2025, operating income was $4.5$4.3 million, a decrease of $3.2$0.2 million or 41.6%.3.7%. The decrease in operating income was primarily the result of lower revenue. Operating income as a percent of revenue improved with the continued focus on operational optimization.
Our cash and cash equivalent balances were $9.9$5.6 million and $18.4$9.9 million as of December 31, 2024,2025, and 2023,2024, respectively. As of December 31, 2025 and 2024, we had the ability to borrow approximately $24.3 million and $24.0 million under our Credit Facility.Facility, respectively.
Our principal sources of liquidity are cash on hand, cash provided by operating activities, and borrowings available under our Credit Facility. Our cash is primarily used for general corporate purposes, working capital requirements, and capital expenditure. At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations such as finance and operating leases and unfunded pension plan benefit payments and other needs for our operations in the short term and beyond. Although the Company believes that it will be able to meet its cash needs for the short and medium term, if unforeseen circumstances arisearise, the company may need to seek alternative sources of liquidity.
Net cash used in operating activities was $1.7 million for the year ended December 31, 2025, when compared to cash used in operating activities of $3.0 million for the year ended December 31, 2024, when compared to cash provided by operating activities of $10.5 million for the year ended December 31, 2023.2024. The $13.5$1.3 million year-over-year decrease in cash fromused in operating activities was primarily due to the $6.7 million payment to terminate the Qualified Pension Plan I during the year ended December 31, 2024, as well as the $3.6 million net decreasechanges in other assets and liabilities.
Net cash used in investing activities was $2.8 million for the year ended December 31, 2025, compared to cash used in investing activities of $3.7 million for the year ended December 31, 2024,2024. comparedThe to cash used in investing activities of $2.3$0.9 million for the year ended December 31, 2023. The $1.4 million increasedecrease was mainly duedriven to the $0.5 million of cash used and returned from escrow from acquisition activities andby $0.9 million morelower cashproperty, used in technology improvement projectsplant and routine equipment replacementpurchase in the year ended December 31, 2024,2025, whenas compared to the year ended December 31, 2023.2024.
Net cash usedprovided inby financing activities was $0.4$0.5 million for the year ended December 31, 2024,2025, compared to $3.2$0.4 million net cash used in financing activities for the year ended December 31, 2023.2024. The $2.8$0.9 million decreaseincrease in cash usedprovided inby financing activities was primarily related to the $2.4$1.1 million usedof tocash repurchasewe ourreceived commonfor stockthe recovery of short-swing profit from one shareholder in the year ended December 31, 2023.2025, which was partially offset by $0.3 million of tax liability associated with this short-swing profit.
On December 21, 2021, the Company entered into a three-year, $25.0 million asset-based revolving credit facility (the “Credit Facility”) with Texas Capital Bank ("TCB"). The Company’s obligations under the Credit Facility are guaranteed on a joint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all the assets of the Company and the Guarantors pursuant to a Pledge and Security Agreement, dated as of December 21, 2021, betweenamong the Company, TCB and the Guarantors party thereto (the “Security Agreement”). On December 31,29, 2023, the Company extended the maturity date for the Credit Facility by a period of six (6) months,months to June 30, 2025. The extension extendedwas theexecuted Credit Facility underwith substantially similar terms and conditions as originallythe executed.original Credit Facility. On June 24, 2025, the Company entered into a second amendment to the Credit Facility (the “Second Amendment”) with TCB which extended the maturity date for the Credit Facility by a period of three years to June 30, 2028. The Second Amendment also includes an accordion feature that allows the Company to seek up to a $10.0 million increase in commitments under the credit line, subject to TCB approval.
The Credit Facility provides for loans up to the lesser of (a) $25.0 million,million andor (b) the amount available under a “borrowing base” calculated primarily by reference to the Company's cash and cash equivalents and accounts receivables. The Credit Facility allows the Company to use up to $3.0 million of its borrowing capacity to issue letters of credit.
The loans under the Credit Facility accrue interest at a varying rate equal to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.25% per annum. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2025.2028.
The Company may repay and borrowreborrow all or any portion of the loans advanced under the Credit Facility at any time, without premium or penalty. The Credit Facility is subject to mandatory prepayments (i) from the net proceeds of asset dispositions not otherwise permitted under the Credit Facility; (ii) if the unpaid principal balance under the Credit Facility plus the aggregate face amount of all outstanding letters of credit exceeds the borrowing base; (iii) in an amount equal to 50% of the net proceeds of issuances of capital stock (subject to customary exceptions); or (iv) in an amount equal to the net proceeds from any issuance of debt not otherwise permitted under the Credit Facility.
The Credit Facility contains certain covenants restricting the Company's and its subsidiaries' ability to create, incur, assume or become liable for indebtedness; make certain investments; pay dividends or repurchase the Company's stock; create, incur or assume liens, consummate mergers or acquisitions, liquidate, dissolve, suspend or cease operations, or modify accounting or tax reporting methods (other than as required by U.S.accounting principles generally accepted in the United States of America (“GAAP”)).
As of December 31, 20242025 and 2023,2024, the Companywe had no borrowings outstanding under the Credit Facility. At each of December 31, 2024,2025 and 2023,2024, the Companywe had letters of credit outstanding in the amount of $1.0$0.7 million and $0.8$1.0 million outstanding,million, respectively. No amounts were drawn against these letters of credit as ofat December 31, 2024,2025 and 2023.2024. These letters of credit exist to support insurance programs relating to workers’ compensation, medical insurance, and generalreducing liabilitythe ascash wellsecurity asdeposit leaseon obligations.leased property. We had no other off-balance sheet financing arrangementsactivities as ofat December 31, 2024,2025 and 2023.2024. After the letters of credit on December 31, 2025 and 2024, we had the ability to borrow up to $24.3 million and $24.0 million, respectively, under the Credit Facility.
As of December 31, 2024, we had the ability to borrow approximately $24.0 million under the Credit Facility.
We did not pay any dividends in either 20242025 or 2023.2024. Any future dividend declaration can be made only upon, and subject to, approval of our Board of Directors, basedand will depend on itsour results of operations, financial condition, cash requirements, future business judgment.prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors.
On May 2, 2023, the Board of Directors of Harte Hanks approved a share repurchase program to maximize shareholder value with authorization to repurchase $6.5 million of the Company’s Common Stock. During 2023, 391,785 shares of common stock were repurchased for a total combined purchase price of $2.4 millionmillion. In 2025 and in 2024, no shares of common stock were repurchased.
Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”),GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our actual results could differ from these estimates under different assumptions or conditions. The areas that we believe involve the most significant management estimates and assumptions are detailed below. On an ongoing basis, management reviews its estimates and assumptions based on currently available information.
We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services based on the relevant contract.
Revenue recognition requires management to apply judgment in identifying performance obligations and determining the timing and amount of revenue recognized under customer contracts. Certain client programs provide for adjustments to billings based upon whether we achieve certain performance criteria which requires us to estimate variable consideration.
We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services based on the relevant contract. Certain client programs provide for adjustments to billings based upon whether we achieve certain performance criteria. In these circumstances, revenue is recognized when the foregoing conditions are met. We record revenue net of any taxes collected from customers and subsequently remitted to governmental authorities. Any payments received in advance of the performance of services or delivery of the product are recorded as deferred revenue until such time as the services are performed or the product is delivered. Costs incurred for search engine marketing solutions payable to the engine host and postage costs of mailings are billed to our clients and are not directly reflected in our revenue.
Revenue from agency and digital services, direct mail, logistics, fulfillment and contact center is recognized as the work is performed. Fees for these services are determined by the terms set forth in each contract. These fees are typically a set fixed price or rate by transaction occurrence, service provided, time spent, or product delivered.
For arrangements requiring the design and build out of a database, revenue is not recognized until client acceptance occurs. Up-front fees billed during the setup phase for these arrangements are deferred and direct build costs are capitalized. Pricing for these types of arrangements is typically based on a fixed price determined in the contract. Revenue from other database marketing solutions is recognized ratably over the contractual service period. Pricing for these services is typically based on a fixed price per month or per contract.
Goodwill is the amount by which the cost of the acquired net assets in a business combination exceeds the fair value of the identifiable net assets on the date of purchase. Goodwill is not amortized. Goodwill is reviewed for impairment at least annually during the fourth quarter, or more frequently if events occur indicating the potential for impairment. During the goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairment test.test in which the fair value of the reporting unit is compared to its carrying amount. Fair value is determined through various valuation techniques and assumptions such as cash flow models, discount rates, market multiples and control premiums.. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the quantitative goodwill impairment test. We booked an impairment charge of $1.6 million for goodwill in the year ended December 31, 2024,2024 , leaving a balance of $0.3 million. There was no goodwill impairment in the year ended December 31, 2025.
Intangible assets consist of finite-lived intangible assets acquired through the Company’s business combinations. Such amounts are initially recorded at fair value and subsequently amortized over their useful lives using the straight-line method, which reflects the pattern of benefit, and assumes no residual value. Finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require an intangible asset to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that intangible asset to its carrying amount. If the carrying amount of the intangible asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. The factors that drive the estimate of useful life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparing the assets’ book value to future net undiscounted cash flows that the assets are expected to generate to determine if a write-down to the recoverable amount is appropriate. If such assets are written down, an impairment will be recognized as the amount by which the book value of the asset group exceeds the recoverable amount. During the year ended December 31, 2024, a significant amount of revenue from its original customers was lost. As a result, we booked an impairment loss of $1.5 million to our intangible assets. The remainingnet carrying balance of intangible assets as of December 31, 2025 and December 31, 2024 was $0.4 million and $0.6 million.million, respectively. There was no impairment of our intangible assets during the year ended December 31, 2025.
Pension Accounting
The Company sponsors defined benefit pension plans, the obligations and related expense of which are determined using actuarial valuations. Management engages a third‑party actuary to calculate the projected benefit obligation and pension expense based on standard actuarial assumptions, including the discount rate, mortality assumptions, and expected return on plan assets.
The Company is subject to various legal proceeding and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgement.judgment. Resolution of legal matters in a manner inconsistent with management's expectations could have a material impact on the Company's financial condition and operating results.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 amends ASC 740, Income Taxes to expand income tax disclosures and requires that the Company disclose (i) the income tax rate reconciliation using both percentages and reporting currency amounts; (ii) specific categories within the income tax rate reconciliation; (iii) additional information for reconciling items that meet a quantitative threshold; (iv) the composition of state and local income taxes by jurisdiction; and (v) the amount of income taxes paid disaggregated by jurisdiction. The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. See Note I. Income Taxes for additional information.
In November 2023, FASB issued ASU 2023-07, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting periods beginning with the fiscal year ending December 15, 2024 and for interim reporting periods beginning in fiscal year 2025. The Company updated its disclosure included in its consolidated financial statements disclosure for this fiscal year.
In December 2023, FASB issued ASU 2023-09, which requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. The amendments in ASU 2023-09 are effective for the fiscal year ending after December 15, 2025. The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, which amends ASC 326-20 to provide a practical expedient (for all entities) relating to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact that this ASU will have on our consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06 to target improvements to the Accounting for Internal-Use Software, which simplifies the capitalization guidance by removing all references to software development project stages and clarifies the criteria to begin capitalizing cost. The amendment is effective for annual and interim periods beginning after December 15, 2027, though early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements.
What changed in the latest 10-Q
Risk Factors
New heading “Risks Related to the Proposed Acquisition with Star Equity”
New heading “We will be subject to business uncertainties while the merger is pending, which could adversely affect our business.”
New heading “Even if the merger is completed, the integration of Harte Hanks by Star Equity may not be as successful as anticipated.”
New heading “We expect to incur significant transaction fees and costs in connection with the merger.”
Largest changes
“Even if the merger is completed, the integration of Harte Hanks by Star Equity may not be as successful as anticipated.”see in full comparison
“We will be subject to business uncertainties while the merger is pending, which could adversely affect our business.”see in full comparison
“We expect to incur significant transaction fees and costs in connection with the merger.”see in full comparison
“If the transactions contemplated by the Merger Agreement are not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following: we may be required to pay our costs relating to the merger, such as legal, accounting, and financial advisory fees, whether or not the merger is completed; time and resources committed by our management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities; …”see in full comparison
“It is possible that certain persons with whom we have a business relationship may delay certain business decisions relating to us in connection with the pendency of the merger or they might decide to seek to terminate, change or renegotiate their relationships with us as a result of the merger, which could negatively affect our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the merger is completed. …”see in full comparison
Full comparison: every changed paragraph (13)
In addition to the other information set forth in this report,below, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2025 10-K, which could materially affect our business, financial condition, or future results. TheThese risks described in our 2025 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.
Risks Related to the Proposed Acquisition with Star Equity
The transactions contemplated by the merger agreement are subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis or at all. Failure to complete the transactions contemplated by the merger agreement, including the merger, could have material and adverse effects on us.
Completion of the merger is subject to a number of conditions, including, among other things, (i) the adoption of the merger agreement by the holders of our common stock, (ii) the absence of any law or order prohibiting the consummation of the merger, and (iii) the effectiveness of the registration statement on Form S-4 pursuant to which the shares of Star Equity’s preferred stock issuable in the merger are registered with the SEC. Such conditions, some of which are beyond our control, may not be satisfied or waived in a timely matter and therefore make the completion and timing of the completion of the merger uncertain.
If the transactions contemplated by the Merger Agreement are not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following: we may be required to pay our costs relating to the merger, such as legal, accounting, and financial advisory fees, whether or not the merger is completed; time and resources committed by our management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities; the market price of our common stock could be impacted to the extent that the current market price reflects a market assumption that the merger will be completed; and if the merger agreement is terminated and our Board of Directors seeks another business combination, our shareholders cannot be certain that we will be able to find a party willing to enter into a transaction as attractive to us as the transaction with Star Equity.
In addition, the merger agreement contains certain termination rights for both Star Equity and us, which if exercised, will also result in the transactions contemplated by the merger agreement not being consummated. If the merger agreement is terminated under certain circumstances, we could be required to pay Star Equity a termination fee.
We will be subject to business uncertainties while the merger is pending, which could adversely affect our business.
It is possible that certain persons with whom we have a business relationship may delay certain business decisions relating to us in connection with the pendency of the merger or they might decide to seek to terminate, change or renegotiate their relationships with us as a result of the merger, which could negatively affect our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the merger is completed. Also, our ability to attract, retain and motivate employees may be impaired while the merger is pending as current and prospective employees may experience uncertainty about their roles within the combined company following the merger.
In addition, under the terms of the merger agreement, we are subject to certain restrictions on the conduct of our business prior to the completion of the merger, which may adversely affect our ability to execute certain of our business strategies, including the ability in certain cases to modify or enter into certain contracts, acquire or dispose of assets, hire or terminate certain employees or take other specified actions regarding employees and compensation, or incur certain indebtedness, incur encumbrances, make capital expenditures, issue shares or settle claims. Such limitations could negatively affect our business and operations prior to the completion of the merger.
Even if the merger is completed, the integration of Harte Hanks by Star Equity may not be as successful as anticipated.
The success of the merger will depend, in part, on Star Equity’s ability to realize the anticipated benefits and cost savings from combining our and Star Equity’s businesses, and there can be no assurance that the combined company will be able to successfully realize the expected benefits of the merger, which in turn could impact the value of preferred stock of Star Equity that is issued as merger consideration.
We expect to incur significant transaction fees and costs in connection with the merger.
We have incurred and expect to continue to incur a number of non-recurring costs associated with negotiating and completing the merger. These fees and costs have been, and will continue to be substantial and, in many cases, will be borne by us whether or not the transaction is completed. A substantial majority of our non-recurring expenses will consist of transaction costs related to the merger and include, among others, fees paid to financial, legal, accounting and other advisors.
Management's Discussion & Analysis (MD&A)
New heading “Recent Development”
New heading “Operating Expenses”
New heading “Other expenses, net”
Removed heading “Credit Facility”
Largest changes
“Restructuring expense was $0.3 million in the six months ended June 30, 2026, as compared to $1.0 million in the six months ended June 20, 2025 due to lower severance expense.”see in full comparison
“Customer Care segment revenue increased $0.9 million, or 3.5%, primarily driven by the revenue from our new customers. Operating income was $1.4 million for the six months ended June 30, 2026, compared to operating Income of $3.6 million for the six months ended June 30, 2025 The decrease of $2.2 million in operating income was due to higher labor expense derived from increased headcount for new business as compared to the prior year period.”see in full comparison
Full comparison: every changed paragraph (52)
This report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements will also be included from time to time in our other public filings, press releases, our website, and oral and written presentations by management. 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. Examples include statements regarding (1) our strategies and initiatives, including actions designed to respond to market conditions and improve our performance, (2) our financial outlook for revenues, earnings (loss) per share, operating income (loss), expense related to equity-based compensation, capital resources and other financial items, if any, (3) expectations for our businesses and for the industries in which we operate, including the impact of economic conditions of the markets we serve on the marketing expenditures and activities of our clients and prospects, (4) competitive factors, (5) acquisition and development plans, (6) expectations regarding legal proceedings and other contingent liabilities, (7) the outcome of our pending merger with Star Equity Holdings Inc., and (78) other statements regarding future events, conditions, or outcomes.
The following MD&A section is intended to help the reader understand the results of operations and financial condition of Harte Hanks, Inc. including any material changes in the Company’s financial condition and results of operations since December 31, 2025, and as compared with the three and six months ended MarchJune 31,30, 2025.2026. This section is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes included herein as well as our 2025 10-K. Our 2025 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates, and contractual obligations. See Note A, Overview and Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements for further information.
Harte Hanks, Inc. is a leading global customer experience company operating in three reportable segments: Revenue Solutions formerly referred to as Marketing Services, Customer Care, and Fulfillment & Logistics Services. Our mission is to partner with clients to provide them with a robust customer-experience, or CX, strategy, data-driven analytics and actionable insights combined with seamless program execution to better understand, attract, and engage their customers. Our services include strategic planning, data strategy, performance analytics, creative development and execution; technology enablement; marketing automation; B2B and B2C e-commerce; cross-channel customer care; and product, print, and mail fulfillment.
Recent Development
On August 14th, 2026, the company entered into a merger agreement with Star Equity under which, subject to the conditions set forth in the merger agreement, Star Equity agreed to purchase all of the outstanding shares of Harte Hanks in a stock and cash transaction. The transaction is expected to close in the fourth quarter of 2026. See footnote O for further information about the pending acquisition.
Three months ended March 31, 2026 vs. Three months ended March 31, 2025
Revenues of $37.3 millionRevenue decreased $4.3$0.6 million, or 10.3%,1.7%, to $38.0 million in the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. Revenue in our Revenue Solutions segment decreased $1.1 million, or 13.2%, to $7.5 million in the three months ended June 30, 2026, compared to the three months ended June 30, 2025, and Revenue in our Fulfillment & Logistics Services segment decreased $3.3$0.5 million, or 16.6%,2.8%, to $16.5$17.6 million. Revenuemillion in ourthe Revenuethree Solutionsmonths segmentended decreasedJune $0.930, million,2026, or 9.9%,compared to $7.9the million,three andmonths revenueended June 30, 2025. Revenue in our Customer Care segment decreasedincreased $0.1$1.0 million, or 1.1%,8.5%, to $12.9 million.million in the three months ended June 30, 2026, compared to the three months ended June 30, 2025.
Operating expenses were $38.0$42.5 million in the three months ended MarchJune 31,30, 2026, aan decreaseincrease of $3.6$3.9 million, or 8.6%,10.0%, compared to $41.6$38.6 million in the three months ended MarchJune 31,30, 2025.
Production and Distribution expenses decreased $2.7 million, or 19.3%, in the three months ended March 31, 2026, primarily due to lower shipping costs due to lower logistics revenue as well as lower brokered or pass through costs associated with lower broker revenue.
Labor expenseexpenses wasincreased flat$0.5 million, or 2.3%, to $19.9 million in the three months ended MarchJune 31,30, 20262026, due to higher health benefit cost as compared to the three months ended MarchJune 31,30, 2025. The higher health insurance costincrease was partially offset by reduction in salary and wages as operations were optimized to account for lower revenue.
Advertising, Selling, GeneralProduction and AdministrativeDistribution expenses decreasedincreased $0.2$0.1 million, or 3.5%,0.7%, in the three months ended MarchJune 31,30, 2026, compared to the three months ended June 30 2025, primarily due to lowerhigher professionalbroker fees.shipping costs from higher broker revenue.
Advertising, Selling, General and Administrative expenses increased $3.2 million, or 58.6%, in the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to higher professional service and legal expenses. See footnote O for further information about the pending acquisition.
Restructuring expense was $0.2 million in the three months ended MarchJune 31,30, 2026, which is $0.6 million loweras compared to the prior year quarter of $0.8$0.1 million in three months ended June 30, 2025 due to lowerhigher severance expense.
Other expenses, net, for the three months ended MarchJune 31,30, 2026 was $0.2 million compared to $0.6 million in the prior year quarter. Thewere $0.4 million decrease in other expense, netwhich was mainly associatedconsistent with changesthe inthree foreignmonths currencyended gainJune and30, loss account.2025.
The income tax benefitexpense of $0.4$0.1 million infor the firstthree quartermonths ofended June 30, 2026 represents an increase inof income tax benefitexpense of $0.2 million when compared to the firstthree quartermonths ofended June 30, 2025. Our effective tax rate was 29.0%a negative 2.5% for the firstthree quartermonths ofended June 30, 2026, a decrease of 6.4%21.3% from the effective tax rate of 35.4%a positive 18.9% for the firstthree quartermonths ofended 2025.June 30, 2025, The effective income tax raterates differsdiffer from the federal statutory rate of 21.0%,21%, primarily due to the U.S. state income taxes and the impact of income earned in foreign jurisdictions.
Revenues
Revenue decreased $4.9 million, or 6.2%, to $75.2 million, in the six months ended June 30, 2026, compared to the six months ended June 30, 2025 due to decreased revenue in the Fulfillment & Logistics Services and Revenue Solutions segments, which was partially offset by the increase in Customer Care segment. The reduction in revenues in the six month period relates to the conclusion of programs, and the ordinary turnover of customers at a higher rate than initiation of new programs and revenues from new customers.
Operating Expenses
Operating expenses were $80.5 million in the six months ended June 30, 2026, a decrease of $0.3 million, or 0.4%, compared to $80.2 million in the six months ended June 30, 2025.
Labor expense increased $0.5 million, or 1.2%, to $39.7 million in the six months ended June 30, 2026, primarily due to higher health benefit costs which was partially offset by reduction in salary and wages as operations were optimized to account for lower revenue.
Production and Distribution expenses decreased $2.6 million, or 10.0%, in the six months ended June 30, 2026, primarily due to lower transportation costs associated with lower logistics services revenue as compared to the prior year.
Advertising, Selling, General and Administrative expenses increased $3.0 million, or 26.7%, in the six months ended June 30, 2026, primarily due to higher professional service and legal expenses. See footnote O for further information about the pending acquisition.
Restructuring expense was $0.3 million in the six months ended June 30, 2026, as compared to $1.0 million in the six months ended June 20, 2025 due to lower severance expense.
The largest components of our operating expenses are labor, transportation expenses and outsourced costs. Each of these costs is, at least in part, variable and tends to fluctuate in line with revenues and the demand for our services.
Transportation rates have increased over the last few years due to demand and supply fluctuations within the transportation industry. Future changes in transportation expenses will continue to impact our total production costs and total operating expenses, and in turn our margins. Postage costs for mailings are borne by our clients and are not directly reflected in our revenues or expenses.
Other expenses, net
Other expenses, net, for the six months ended June 30, 2026 were $0.6 million compared to $1.0 million, in the prior year period. The decrease was mainly associated with changes in foreign currency gain and loss account.
Income Taxes
The income tax benefit of $0.3 million in the six months ended June 30, 2026 is comparable to the income tax benefit of $0.3 million in the same period of 2025. Our effective tax rate was a positive 4.3% for the six months ended June 30, 2026, a decrease of 24.5% from the effective tax rate of a positive 28.7% for the same period of 2025. The effective tax rate differs from the federal statutory rate of 21.0%, primarily due to the U.S. state income taxes and income earned in foreign jurisdictions.
The following is a discussion and analysis of the results of our reportable segments for the three and six months ended MarchJune 31,30, 2026 and 2025. There are three principal financial measures reported to our President (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenue,revenue and operating income and operating income plus depreciation and amortization (“EBITDA”). For additional information, see Note N, Segment Reporting, in the Notes to Condensed Consolidated Financial Statements.
Revenue Solutions (formerly known as Marketing Services) segment revenue decreased $0.9$1.1 million, or 9.9%, from the prior year quarter13.2%, due to customer turnover and the lossdecline of customersclient andspending reducedin demandexcess fromof existingnew customers.business. Operating income for the three months ended MarchJune 31,30, 2026 decreased $37.0$0.3 thousandmillion, or 4.3%25.3% from the prior year quarter due to the reduced revenue.
Revenue Solutions segment revenue decreased $2.0 million, or 11.5%, due to customer turnover and the additional client spending reductions. This segment is our most economically sensitive segment with regard to changes in our clients' marketing strategy. Operating income for the six months ended June 30, 2026 decreased $0.3 million , or 16.3% from the prior year quarter primarily due to the reduced revenue.
Customer Care segment revenue decreasedincreased $0.1$1.0 million, or 1.1%,8.5%, primarily duedriven toby decreasedthe volumerevenue from existing customers, which was partially offset by increased volume fromour new customers. Operating Incomeincome was $0.8$0.6 million for the three months ended MarchJune 31,30, 2026, compared to operating income of $2.0$1.6 million for the three months ended MarchJune 31,30, 2025. The $1.3$0.9 million decrease in operating income was primarily due to the higher labor expenseexpenses derived from increased headcount infor beginningnew of 2026business as compared to the prior year quarter.
Customer Care segment revenue increased $0.9 million, or 3.5%, primarily driven by the revenue from our new customers. Operating income was $1.4 million for the six months ended June 30, 2026, compared to operating Income of $3.6 million for the six months ended June 30, 2025 The decrease of $2.2 million in operating income was due to higher labor expense derived from increased headcount for new business as compared to the prior year period.
Fulfillment & Logistics Services segment revenue decreased by $3.3$0.5 million, or 2.8%, primarily due to the reductionlower ofvolume anfrom the existing customer.customers not being offset by growth in new programs and customers. Operating income decreased by $0.5 million,million asprimarily adue result of theto lower revenue in the three months ended March 31, 2026 as compared to the prior year quarter.revenue.
Fulfillment & Logistics Services segment revenue decreased by $3.8 million, or 10.0%, due to lost customers and the lower volume from existing customers. Operating income decreased by $1.0 million, or 84.9% due to the lower revenue.
Our cash and cash equivalent balances were $4.5$5.2 million and $5.6 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. As of MarchJune 31,30, 2026, we had the ability to borrow an additional $24.3$21.3 million under our Credit Facility.Facility in addition to the existing letters of credit.
Net cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 was $0.6$2.6 million, compared to net cash used in operating activities of $0.8$5.7 million for the threesix months ended MarchJune 31,30, 2025. The $0.2$3.0 million year-over-year increase in cash used in operating activities was primarily due to the $0.2$7.5 million higherchange netin loss,other assets and current liabilities, which was partially offset by $1.1additional $4.9 million changenet loss in accountsthe receivablesix andmonths contractended assetsJune balances.30, 2026 as compared to the six months ended June 30, 2025.
Net cash used in investing activities was $0.3 million for the threesix months ended MarchJune 31,30, 2026, comparedwhich was comparable to $0.1the millioncash used in investing activities during the same period in 2025. The increase was primarily due to more cash used to purchase property, plant and equipment in the three months ended March 31, 2026.
Net cash provided by financing activities was $2.9 million for the six months ended June 30, 2026, as compared to $0.7 million of net cash provided by financing activities during the six months ended June 30, 2025. The $2.2 million increase in cash provided by financing activities was primarily related to the $3.0 million we borrowed under our Credit Facility during the six months ended June 30, 2026 as compared to $0.8 million of cash we received for the recovery of short-swing profit from one shareholder in the six months ended June 30, 2025.
Net cash used in financing activities was $0.1 million for the three months ended March 31, 2026, which is comparable to $0.1 million of net cash used in the three months ended March 31, 2025.
Consolidated foreign holdings of cash as of MarchJune 31,30, 2026 and December 31, 2025 were $1.8$1.7 million and $2.2 million, respectively.
Debt
Credit Facility
The loans under the Credit Facility accrue interest at a variable rate equal to the Secured Overnight Financing Rate (SOFR) plus a margin of 2.25% per annum. The latest rate was 6.03%5.99% as of MarchJune 31,30, 2026. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2028.
The Company may repay and reborrow all or any portion of the loans advanced under the Credit Facility at any time, without premium or penalty. The Credit Facility is subject to mandatory prepayments (i) from the net proceeds of asset dispositions not otherwise permitted under the Credit Facility; (ii) if the unpaid principal balance under the Credit Facility plus the aggregate face amount of all outstanding letters of credit exceeds the borrowing base; (iii) in an amount equal to 50% of the net proceeds of issuances of capital stock (subject to customary exceptions); or (iv) in an amount equal to the net proceeds from any issuance of debt not otherwise permitted under the Credit Facility. .
The Credit Facility contains certain covenants restricting the Company's and its subsidiaries' ability to create, incur, assume or become liable for indebtedness; make certain investments; pay dividends or repurchase the Company's stock; create, incur or assume liens; consummate mergers or acquisitions; liquidate, dissolve, suspend or cease operations; or modify accounting or tax reporting methods (other than as required by accountingU.S. principles generally accepted in the United States of America (“GAAP”)).
As of MarchJune 31,30, 2026 and December 31, 2025, we had $3.0 million and no borrowings outstanding under the Credit Facility.Facility, respectively. At each of MarchJune 31,30, 2026 and December 31, 2025, we had letters of credit outstanding in the amount of $0.7 million and $0.7 million, respectively. No amounts were drawn against these letters of credit at MarchJune 31,30, 2026 and December 31, 2025. These letters of credit exist to support insurance programs relating to workers’ compensation and general liability as well as lease obligations. We had no other off-balance sheet financing activities at MarchJune 31,30, 2026 and December 31, 2025.
As of MarchJune 31,30, 2026, we had the ability to borrow $24.3$21.3 million under theour Credit Facility.Facility in addition to the existing letters of credit.
We did not pay any dividends in the three and six months ended MarchJune 31,30, 2026 and 2025. Any future dividend declaration can be made only upon, and subject to, approval of our Board of Directors, and will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors.
On May 2, 2023, the Board of Directors of Harte Hanks approved a share repurchase program to maximize shareholder value with authorization to repurchase $6.5 million of the Company’s Common Stock. As of DecemberJune 31,30, 2025,2026, the share repurchase program authorization availability was $4.1 million. We didn'tdid not repurchase any stockof the Company's Common Stock during the three and six months ended MarchJune 31,30, 2026 and no shares of common stock were repurchased in 2025.
We consider such factors as total cash and cash equivalents and restricted cash, current assets, current liabilities, total debt, revenues, operating income, cash flows from operations, investing activities, and financing activities when assessing our liquidity. Our management of cash is designed to optimize returns on cash balances and to ensure that it is readily available to meet our operating, investing, and financing requirements as they arise. We believe that there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for the twelve months following the issuance of the Condensed Consolidated Financial Statements.
HHS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-02 | Fisher David Scott |
Other | 18,790 | $2.62 | $49.2K |
| 2026-06-02 | Fisher David Scott |
Shares withheld for tax | 7,876 | $2.62 | $20.6K |
| 2026-06-02 | Fisher David Scott |
Other | 18,790 | $2.62 | $49.2K |
Well-known investors holding HHS (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 21,400 | $46.2K | 0.0% | Reduced 4% |