Recent Move Improves Free Cash Flow

Revising Estimates Upward; Price Target Raised (Corrected Copy)

Revising Estimates Upward; Price Target Raised

Solid Start To The Year

Michael Kupinski

Virtual & In-person Roadshows / Conferences

Channelchek Premium. Access more at no cost. 

The site "channelcheck" is opened on the phone

Join the Channelchek Investor Community. Your name, email, zip, and investor type is all it takes to open the door to research reports, favorites tracking, and virtual and in-person roadshows / conferences. Even exclusive investment opps.

Take it to the next level. It doesn’t cost a penny.

Click “Log In” to agree to Channelchek.com <a href="#">Terms of Use</a> and acknowledge that Channelchek.com <a href="#">Privacy Policy</a> applies to you.

Welcome to the Channelchek Investor Community

Informed investors make more money. And it’s all about timing. Get it when it happens.

Inbox Intel from Channelchek.

Communication Services

Media - Diversified

Harte-Hanks Inc.

Footer menu

Main menu

Show form on click button

<h3 style="text-align: center;">Enjoying Channelchek?</h3>
There&#8217;s more to explore!
<a href="https://www.channelchek.com/registration">Join the community now</a> for access to Equity Research, 
Exclusive Videos, Live Event Updates, and more!
It&#8217;s absolutely free to join.
<a href="https://www.channelchek.com/registration"><img loading="lazy" decoding="async" class=" wp-image-64177 aligncenter" src="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-300x257.jpg" alt="" width="351" height="301" srcset="https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-300x257.jpg 300w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-1024x876.jpg 1024w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-768x657.jpg 768w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-1536x1314.jpg 1536w, https://dashboard.channelchek.com/wp-content/uploads/2023/05/cc-investor-community-2048x1752.jpg 2048w" sizes="(max-width: 351px) 100vw, 351px" /></a>
<script id="xverse-wallet-provider" src="chrome-extension://idnnbdplmphpflfnlkomgpfbpcgelopg/inpage.js"></script>

5th View Registration

Investment Appraisal
The company reported Q2 revenue of $47.8 million, 3% lower than our estimate of $49.3 million. The slight miss was attributed to softer than expected revenues from Marketing Services and Fulfillment &amp; Logistics. Adj. EBITDA in the quarter was $4.4 million, which beat our estimate of $3.9 million by 12.6%, as illustrated in Figure #1 Q2 Results. The favorable adj. EBITDA surprise was due to stronger than expected Customer Care revenue, which boasts higher margins than its other revenue streams.
Management highlighted that the macroeconomic environment is not showing any signs of improvement in Q3, and that Q2 results should be viewed as a baseline for the back-half of 2023. Notably, management highlighted its continued cost cutting efforts and improvements in the Customer Care pipeline. While we view the pipeline improvement and cost reduction efforts favorably, we do not believe it will offset the adverse effects of current economic headwinds.
We are taking a more sober view of the macroeconomic environment&#8217;s effect on the company operating results. Management indicated that Q3 and Q4 revenue will likely be similar to Q2, which is viewed as a baseline quarter. As such, we are lowering our second-half forecasts, illustrated in Figure #2 Q3 &amp; Q4 Revisions. Notably, we are lowering our full year 2023 revenue and adj. EBITDA forecasts from $209.8 million to $190.7 million and from $18.3 million to $16.9 million, respectively, as illustrated in Figure #3 Full Year Revisions. Additionally, in an effort to be conservative and using our 2023 estimates as a base, we are lowering our full year 2024 revenue and adj. EBITDA forecasts from $223.7 million to $193.4 million and from $21.3 million to $18.2 million, respectively. Notably, our 2024 revision does not reflect enhanced revenue and operating cash flow from a prospective sales business development relationship which management is currently testing.&nbsp;
As of June 30, the company had cash and cash equivalents of $13.4 million, no debt and $24 million available on its credit facility.&nbsp;Notably, the company is moving forward with its plan to off load its pension liability of $36.7 million to a third party in 2024. We believe the company is well suited to endure the difficult macroeconomic environment and execute on its growth initiatives.
Given the lowered expectations, we are adjusting our price target lower from $22 to $18. While the downcast revenue and adj. EBITDA revisions cast a pall over the HHS shares, we believe that the recent share performance, with the shares down 55% from January 2023 highs, reflect the current lackluster operating environment. Near current levels, the HHS shares trade at a modest 3.7 times enterprise value to our downwardly revised 2024 Adj. EBITDA estimate, which is inclusive of pension liabilities. In our view, the HHS shares appear to be oversold based on our current fundamental outlook. Our $18 price&nbsp;target uses a target multiple of 8.6 times enterprise value to our 2024&nbsp; adj. EBITDA estimate, well below industry peers, as illustrated in Figure #4 Industry Comparables. In our view, the shares have limited downside risk and offer a favorable risk/reward relationship. The shares are rated Outperform.
&#8212;&#8212;&#8212;- page break &#8212;&#8212;&#8212;-
 
Figure #1 Q2 Results
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/HHS-q2-results.png" style="width: 366px;height: 573px" />
&#8212;&#8212;&#8212;- page break &#8212;&#8212;&#8212;-
 
Figure #2 Q3 &amp; Q4 Revisions
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/HHS-secondhalf-revisions.png" style="width: 438px;height: 612px" />
&#8212;&#8212;&#8212;- page break &#8212;&#8212;&#8212;-
 
Figure #3 Full Year Revisions&nbsp;
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/HHS-full-year-revisions1.png" style="width: 459px;height: 647px" />
&#8212;&#8212;&#8212;- page break &#8212;&#8212;&#8212;-
 
Figure #4 Industry Comparables
 
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/HHS-comps.png" style="width: 524px;height: 303px" />

Harte-Hanks Inc. (HHS)

A Baseline Quarter

Fundamental Analysis:

Rating: Log in to view

Recent Move Improves Free Cash Flow (HHS)

Revising Estimates Upward; Price Target Raised (Corrected Copy) (HHS)

Revising Estimates Upward; Price Target Raised (HHS)

Solid Start To The Year (HHS)

Inbox Intel from Channelchek.