Note O - Segment Reporting

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note O — Segment Reporting

Harte Hanks is a leading global customer experience company. We have organized our operations into three business segments based on the types of products and services we provide: Marketing Services, Customer Care, Fulfillment & Logistics Services.

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 Fulfillment & Logistics Services 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.  Prior to the sale of our direct mail equipment in 2020, this segment also included our direct mail operations.  Outsourced direct mail is now included in our Marketing Services segment.

There are three 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, operating income (loss) and operating income (loss) plus depreciation and amortization (“EBITDA”). Operating income (loss) 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 operating segments using discrete asset information.  

The following table presents financial information by segment:

Three Months ended September 30, 2021	Marketing Services		Customer Care		Fulfillment and Logistics Services		Restructuring			Unallocated Corporate			Total
					(In thousands)
Revenues	$	14,729	$	19,768	$	15,100	$	—		$	—		$	49,597
Segment Operating Expense	$	10,937	$	15,087	$	12,695	$	—		$	5,108		$	43,827
Restructuring	$	—	$	—	$	—	$	937		$	—		$	937
Contribution margin	$	3,792	$	4,681	$	2,405	$	(937	)	$	(5,108	)	$	4,833
Overhead Allocation	$	1,020	$	667	$	712	$	—		$	(2,399	)	$	—
EBITDA	$	2,772	$	4,014	$	1,693	$	(937	)	$	(2,709	)	$	4,833
Depreciation	$	117	$	195	$	182	$	—		$	113		$	607
Operating income (loss)	$	2,655	$	3,819	$	1,511	$	(937	)	$	(2,822	)	$	4,226

Three Months ended September 30, 2020	Marketing Services		Customer Care		Fulfillment and Logistics Services		Restructuring			Unallocated Corporate			Total
					(In thousands)
Revenues	$	15,217	$	17,933	$	14,552	$	—		$	—		$	47,702
Segment Operating Expense	$	12,835	$	14,097	$	13,392	$	—		$	4,433		$	44,757
Restructuring	$	—	$	—	$	—	$	1,419		$	—		$	1,419
Contribution margin	$	2,382	$	3,836	$	1,160	$	(1,419	)	$	(4,433	)	$	1,526
Overhead Allocation	$	1,173	$	827	$	886	$	—		$	(2,886	)	$	—
EBITDA	$	1,209	$	3,009	$	274	$	(1,419	)	$	(1,547	)	$	1,526
Depreciation	$	141	$	323	$	138	$	—		$	139		$	741
Operating income (loss)	$	1,068	$	2,686	$	136	$	(1,419	)	$	(1,686	)	$	785

Nine Months ended September 30, 2021	Marketing Services		Customer Care		Fulfillment and Logistics Services (1)		Restructuring			Unallocated corporate			Total
					(In thousands)
Revenues	$	41,815	$	55,503	$	45,292	$	—		$	—		$	142,610
Segment Operating Expense	$	33,355	$	43,299	$	38,295	$	—		$	16,037		$	130,986
Restructuring	$	—	$	—	$	—	$	4,880		$	—		$	4,880
Contribution margin	$	8,460	$	12,204	$	6,997	$	(4,880	)	$	(16,037	)	$	6,744
Overhead Allocation	$	3,380	$	2,240	$	2,432	$	—		$	(8,052	)	$	—
EBITDA	$	5,080	$	9,964	$	4,565	$	(4,880	)	$	(7,985	)	$	6,744
Depreciation	$	412	$	652	$	541	$	—		$	363		$	1,968
Operating income (loss)	$	4,668	$	9,312	$	4,024	$	(4,880	)	$	(8,348	)	$	4,776

Nine Months ended September 30, 2020	Marketing Services		Customer Care		Fulfillment and Logistics Services			Restructuring			Unallocated corporate			Total
					(In thousands)
Revenues	$	41,682	$	41,640	$	46,503		$	—		$	—		$	129,825
Segment Operating Expense	$	34,406	$	34,669	$	44,984		$	—		$	15,064		$	129,123
Restructuring	$	—	$	—	$	—		$	8,005		$	—		$	8,005
Contribution margin	$	7,276	$	6,971	$	1,519		$	(8,005	)	$	(15,064	)	$	(7,303	)
Overhead Allocation	$	3,806	$	2,629	$	2,937		$	—		$	(9,372	)	$	—
EBITDA	$	3,470	$	4,342	$	(1,418	)	$	(8,005	)	$	(5,692	)	$	(7,303	)
Depreciation	$	463	$	780	$	1,185		$	—		$	477		$	2,905
Operating income (loss)	$	3,007	$	3,562	$	(2,603	)	$	(8,005	)	$	(6,169	)	$	(10,208	)

(1) Operating expense in this segment includes $0.8 million favorable litigation settlement as well as the related legal expenses.