Harte-Hanks, Inc. (HHS)

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Harte-Hanks Inc. (HHS)

Q1 2009 Earnings Call

May 05, 2009 11:00 AM

Executives

Larry Franklin - Chairman, President and Chief Executive Officer

Bryan Pechersky - Senior Vice President, General Counsel and Secretary

Doug Shepard - Executive Vice President

Don Aicklen - Vice President, Direct Marketing

Analysts

Alexia Quadrani - JPMorgan

Dan Leben - Robert W. Baird

Michael Kupinski - Noble Financial

Ed Atorino - Benchmark Company

Dan Salmon - Bank of Montreal

Andrew Cash - Point Clear Value Management

Presentation

Operator

Welcome and thank you for joining the First Quarter 2009 Earnings call. At this time, all participants are in a listen-only-mode. (Operator Instructions). Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the meeting over to Mr. Larry Franklin, President and Chief Executive Officer of Harte-Hanks. Sir, you may begin.

Larry Franklin

Thank you. Good morning. On the call with me today is Doug Shepard, our EVP and Chief Financial Officer, Jessica Huff, Vice President of Finance Controller, Brian Pechersky, Senior Vice President and General Counsel and before I begin my remarks, I would ask Bryan to say a few things.

Bryan Pechersky

Thanks, Larry. Our call may include forward-looking statements. Examples may include statements about our strategies, initiatives and business plans, adjustments to our cost structure, financial outlook and capital resources, competitive factors, business and industry expectations, the economic downturn in the U.S. and other economies and other statements that are historical facts.

Actual results may differ materially from those projected or implied in these statements because of various risks and uncertainties including those described in our most recent Form 10-K and other documents filed with the Securities and Exchange Commission and then in cautionary statement in today's earnings release.

Our call may also include non-GAAP financial measures. Please refer to today's earnings release for the required reconciliations and other related disclosures. Our earnings release is available on the Investor Relations section of our website at www.harte-hanks.com.

I'll now turn the call back over to Larry.

Larry Franklin

Thanks Bryan. As we mentioned in the press release, the first quarter as we expected was difficult. The economic uncertainty continues to make it difficult if not impossible to predict when the conditions will improve. And although our clients in direct marketing and shoppers are very different, they are both feeling the effects of the recession and they're carefully controlling their marketing spending as evidenced by our revenue decline.

In direct marketing, we believe our data driven marketing solutions are even more necessary and effective in this environment. But the facts are that our clients have less money to spend and that leads to reduced activity, delayed programs and some instances, these programs being eliminated.

And while there are differences in spending in the various verticals that Doug will cover, the common theme is our customers need us to help them generate revenue now at a better value.

We're not pleased with 18% revenue decline in direct marketing; it's obviously a difficult revenue environment. But there are also some good things happening, and with our existing clients and also with some new clients.

While I have said this to this group before, we have a traffic client list and in the first quarter, we expanded our relationships with several clients, building on our ability to deliver multi-channel solution.

There are two good examples of this in the highlights section of the press release. One of those is the global electronics company and the other global healthcare company and programs that we've provided for them.

In the new client category, a major retailer that we've won this quarter will be accountable for delivering fully integrated data driven solutions across multiple communications channel. We'll be providing a marketing database and data management insight and analytics, services from our direct agencies, digital marketing and direct mail.

The use of this win (ph) was the fact that we could bundle all those solutions and be responsible for their CRM story.

Additionally, our people aggressively executed against to reduce our cost initiatives that we discussed in the last quarter and the results are obvious in this quarter. To only have a 10% reduction in operating income with 18% revenues reduction I believe is terrific.

We will have to do more because we are committed to being able to deliver more value to our clients at less cost. And I really believe that the big pay off from all of this will come when this recession is over, because I'm confident that we will be stronger and more efficient company with terrific growth opportunities.

Turning to Shoppers, California and Florida remain very difficult markets, although the 16% or 16.3% same circulation decline was no worse than previous quarters, we see no signs that there will be any improvement in the near term.

Again, I could not be more proud of the leadership of our people and what they've shown in this ongoing realignment of the cost structure. The aggressive cost reductions have started in the fourth quarter last year and actually have been going on throughout last year, were also continued into the second quarter of this year.

The encouraging thing to me about our Shoppers is that we get confirmation every week that this product works for our client and that encouragement comes in the form of testimonials and also the fact that we have 14,000 plus customers that use our product each week. And in any given week, we will distribute over 19 million inserts that we delivered to the homes in California and South Florida.

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