Segment Reporting

9 Months Ended

Sep. 30, 2024

Harte Hanks is a leading global customer experience company. Beginning in 2024, we have organized our operations into four reportable segments based on the types of products and services we provide: Marketing Services, Customer Care, Sales Services and Fulfillment & Logistics Services. The Sales Service is our new reportable segment for 2024 as it has become strategically more important for our company. It was included in Customer Care segment in 2023. 2023 segment reporting has been restated to reflect this change.

Our Marketing Services segment leverages data, insight, and experience to support clients as they engage customers through digital, traditional, and emerging channels. We partner with clients to develop strategies and tactics to identify and prioritize customer audiences in B2C and B2B transactions. Our key service offerings include strategic business, brand, marketing and communications planning, data strategy, audience identification and prioritization, predictive modeling, creative development and execution across traditional and digital channels, website and app development, platform architecture, database build and management, marketing automation, and performance measurement, reporting and optimization.

Our Customer Care segment offers intelligently responsive contact center solutions, which use real-time data to effectively interact with each customer. Customer contacts are handled through phone, e-mail, social media, text messaging, chat and

digital self-service support. We provide these services utilizing our advanced technology infrastructure, human resource management skills and industry experience.

Our Sales Services segment enables customers to optimize their go-to-market function by offering a range of outsourced services including sales process optimization, sales play development, inbound lead qualification and outbound sales prospecting.

Our Fulfillment & Logistics segment consists of mail and product fulfillment and logistics services. We offer a variety of product fulfillment solutions, including printing on demand, managing product recalls, and distributing literature and promotional products to support B2B trade, drive marketing campaigns, and improve customer experience. We are also a provider of third-party logistics and freight optimization in the United States.

There are two principal financial measures reported to our CEO (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenue and operating income (loss)”). Operating income for segment reporting disclosed below, is revenues less operating costs and allocated corporate expenses. Segment operating expenses include allocations of certain centrally incurred costs such as employee benefits, occupancy, information systems, accounting services, internal legal staff, and human resources administration. These costs are allocated based on actual usage or other appropriate methods. Unallocated corporate expenses are corporate overhead expenses not attributable to the operating groups. Interest income and expense are not allocated to the segments. The Company does not allocate assets to our reportable segments for internal reporting purposes, nor does our CEO evaluate reportable segments using discrete asset information. The accounting policies of the segments are consistent with those described in the Note A, Overview and Significant Accounting Policies.

The following table presents financial information by segment for the three months ended September 30, 2024:


In thousands	Marketing Services		Customer Care		Sales Services		Fulfillment & Logistics		Restructuring		Unallocated Corporate		Total

Revenue	$	9,050	$	13,068	$	4,205	$	21,307	$	—	$	—	$	47,630
Segment operating expense	6,158		9,995		3,318		19,192		836		5,195		44,694
Contribution margin (loss)	$	2,892	$	3,073	$	887	$	2,115	$	(836)	$	(5,195)	$	2,936
Overhead allocation	792		567		189		775		—		(2,323)		—

Depreciation and amortization	167		44		198		266		—		363		1,038
Operating income (loss)	$	1,933	$	2,462	$	500	$	1,074	$	(836)	$	(3,235)	$	1,898

The following table presents financial information by segment for the three months ended September 30, 2023:


In thousands	Marketing Services		Customer Care		Sales Services		Fulfillment & Logistics		Restructuring		Unallocated Corporate		Total

Revenue	$	10,591	$	11,832	$	2,166	$	22,530	$	—	$	—	$	47,119
Segment operating expense	8,370		9,380		1,959		18,995		—		4,549		43,253
Contribution margin (loss)	$	2,221	$	2,452	$	207	$	3,535	$	—	$	(4,549)	$	3,866
Overhead allocation	706		668		—		680		—		(2,054)		—

Depreciation and amortization	71		57		196		249		—		379		952
Operating income (loss)	$	1,444	$	1,727	$	11	$	2,606	$	—	$	(2,874)	$	2,914

The following table presents financial information by segment for the nine months ended September 30, 2024:


In thousands	Marketing Services		Customer Care		Sales Services		Fulfillment & Logistics		Restructuring Expense		Unallocated Corporate		Total

Revenue	$	25,709	$	37,894	$	13,281	$	61,229	$	—	$	—	$	138,113
Segment operating expense	19,355		28,856		9,891		54,348		2,116		16,795		131,361
Contribution margin (loss)	$	6,354	$	9,038	$	3,390	$	6,881	$	(2,116)	$	(16,795)	$	6,752
Overhead allocation	2,454		1,761		587		2,403		—		(7,205)		—

Depreciation and amortization	509		160		589		757		—		1,091		3,106
Operating income (loss)	$	3,391	$	7,117	$	2,214	$	3,721	$	(2,116)	$	(10,681)	$	3,646

The following table presents financial information by segment for the nine months ended September 30, 2023:


In thousands	Marketing Services		Customer Care		Sales Services		Fulfillment & Logistics		Restructuring Expense		Unallocated Corporate		Total

Revenue	$	32,751	$	38,372	$	7,253	$	63,625	$	—	$	—	$	142,001
Segment operating expense	26,464		30,259		6,275		54,435		—		15,880		133,313
Contribution margin (loss)	$	6,287	$	8,113	$	978	$	9,190	$	—	$	(15,880)	$	8,688
Overhead allocation	2,261		2,102		—		2,203		—		(6,566)		—

Depreciation and amortization	167		438		586		736		—		1,124		3,051
Operating income (loss)	$	3,859	$	5,573	$	392	$	6,251	$	—	$	(10,438)	$	5,637

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

HARTE HANKS INC 10-Q