HHS

Good afternoon. And welcome to the Harte Hanks Third Quarter 2024 Earnings Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Tom Baumann of FNK, Investor Relations. Tome, the floor is yours.

Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer; and David Garrison, Chief Financial Officer. Before we begin, I want to remind participants that during the call, management’s prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today, and therefore, we will refer you to a more detailed discussion of these risks and uncertainties in the company’s filings with the Securities and Exchange Commission. In addition, any projections as to the company’s future performance represented by management include estimates as of today, November 14, 2024, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures, are available in the earnings press release that was issued shortly after the market closed. A copy of that press release and other corporate disclosure is available on the Investor Relations section of the Harte Hanks website at hartehanks.com. With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.

Thank you, Tom. And thank you to all of our participants for joining our call. Over past year, Harte Hanks has been committed to transforming our business, building path towards sustainable growth and optimizing free cash flow. In Q3, we reported a 1.1% year-over-year revenue increase, an improvement from the negative 16.6% revenue decline on a comparable basis so adjusted for acquired revenue that we reported in Q3 2023. Moreover, we are showing improvement compared to the results of the previous six quarters, during which revenues declined by an average of negative 8.8% on a cumulative basis, also adjusted for acquired revenue. However, we want to set realistic expectations by acknowledging that our revenue turnaround won't follow a perfectly straight upward path. Instead, we anticipate some natural fluctuations and occasional declines as part of our journey to sustainable growth, we will see that in Q4 where we expect a low to mid-single digit revenue decline. Our strategy is focused on creating lasting value, which sometimes requires periods of investment and recalibration. We are proactively addressing long standing challenges that have impacted our company positioning ourselves for more resilient future. Our focus remains on growing free cash flow as the transformative changes in our sales, marketing and now, including our customer organization, continue gaining traction. As we approach 2025, and with the recent addition of our company's first Chief Customer Data Officer, we are much better positioned to seize key growth opportunities through our newly established Customer Excellence and Growth division, CEG, under our CEG vision, our customer experience and sales and marketing teams are united in creating a positive, consistent, end to end customer experience. Our team is focused on uncovering the key drivers of Harte Hanks’ customer loyalty, as well as to identify the root causes of client revenue shrinkage and attrition, devising actions to more effectively preserve our revenue base. Our CEG division will also take the lead in shaping our product strategy and development. Through this, we aim to leverage our Advanced Data Solutions unit to strengthen our value proposition, using data and AI as unique differentiators across each business segment's product offerings. Our goal is to develop integrated data and AI capabilities that meet the increasing demand for data intelligence and technology solutions from our clients. This approach is especially advantageous, as our data solutions have a shorter sales cycle, yield strong margins and offer a timely opportunity to enhance the value of all services we deliver across the company. In recent months, we have secured a number of new clients, as well as having run expansion programs from highly satisfied existing customers. I'd like to highlight a few of our recent success stories, and as well, commend our employees, companywide, for their hard work, beginning with a new customer in our fulfillment practice, we recently added a new client that operates a dynamic design marketplace that connects independent artists and designers with consumers seeking unique personalized products, including high end greeting cards. In Q4, we anticipate producing approximately 2.5 million holiday postcards on their behalf, we are well positioned for year round custom opportunities with this impressive, growing company. In Q4, we onboarded a top 15 financial services client that sought to out for outsource its fulfillment operations for the first time, this new customer is poised to spend $2 million annually handling printing and fulfillment fund related collateral for the firm, including fund sheets, prospectuses and annual supplements. We have current customers in financial services, so this represents a nice expansion in a space in which we perform well. Shifting to sales services, we landed a new client this month in the global luxury automotive industry, headquartered in England. The team we are deploying for this brand will interact with enthusiasts and clients, qualifying, scheduling and coordinating dealership test drives, event attendance, and play a key role for the brand in driving qualified prospects and revenue to dealerships. And shifting to customer care. In late October, we began providing customer care for one of the most prominent global resale marketplaces in the world for luxury goods. As a result, we have established a regional presence in Dallas to support this exciting client, which we are well positioned to expand with. I will now turn the call over to David Garrison to review our financial performance and discuss our cost reduction program, Project Elevate .

Thank you. Kirk, I will review the third quarter consolidated results, including revenues for each business segment. The revenues in the third quarter were $47.6 million, which grew by 1.1% when compared to $47.1 million for the third quarter of 2023. Growth in Customer Care and Sales Services segments were offset by declines in the other two segments. Revenues in Customer Care segment were $13.1 million in the third quarter of 2024 compared to $11.8 million in the same quarter prior year. Multiple customers in the entertainment industry expanded workloads driving the revenue increases for this quarter. Sales Services increased to $4.2 million compared to $2.2 million in the third quarter of 2023, the increase of volume from a large client was the majority of this increase. The Marketing Service segment revenues fell to $9.1 million in the third quarter of 2024 compared to $10.6 million in the prior year. Customer budget reductions and the end of certain programs account for the decrease in the segment year-over-year. Fulfillment and logistics revenues were $21.3 million in the third quarter of 2024 compared to $22.5 million in the prior year. The decrease was the result of lower logistics volume and rates not being outpaced by new and expanded programs in the fulfillment operations. Operating expenses in Q3 were $45.7 million, including restructuring expenses of $836,000. This is compared to $44.2 million in the same period of 2023. Project Elevate resulted in a cost of $836,000 of restructuring charges for the quarter. We expect to incur additional expenses in the execution of Project Elevate during the remainder of the program, ending in Q4 of 2025. These expenditures related to the operation of Project Elevate and cost associated with the termination of contracts and reductions in workforce. We are on plan for $6 million of in year EBITDA improvement, the $6 million of cost savings came from the optimization of personnel, for $3 million concentrated in the marketing services operations, streamlining contracts and back office operations yielded $2 million and improved warehouse operations for another $1 million in fulfillment and logistics. Some of these improvements in cost structure were consumed by the expansion of the sales team and non-capitalized technology improvements in our fulfillment operations. Quantify, the company has invested in the sales and marketing team by doubling the size of the sales team and spending 40% more than prior years. Management's focus with Project Elevate is to improve the profitability with these cost reductions and increase free cash flow. The operating income in Q3 2024 was $1.9 million compared to operating income of $2.9 million in third quarter of 2023, when adjusting for stock compensation, severance and restructuring charges, the adjusted operating income in the third quarter of 2024 is $3.1 million compared to $3.2 million in Q3 of 2023. The adjusted operating margin is 6.5% in Q3 of ‘24 compared to 6.9% in the same quarter of 2023. The third quarter of 2024 had an EBITDA of $2.9 million compared to an EBITDA of $3.9 million in the same period of 2023, when adjusting for stock compensation, severance and restructuring expenses, the adjusted EBITDA was $4.1 million in Q3 of 2024 and $4.2 million in the same period of 2023. Turning to the balance sheet, as of September 30, 2024, we had cash and cash equivalents of $5.9 million, compared to $13.3 million as of September 30, 2023. At October 31, ’24, our cash on hand was $9.8 million. Our current $25 million line of credit, which was extended until June of 2025 has not been drawn against, and the company has no debt. The Pension Plan was terminated during June of 2024 and as a reminder, let us walk through the timeline of this process to the termination of the pension and its impact on our financial statements. In June, the assets of the pension were liquidated into cash in order to purchase the equivalent annuity product from an insurance company for the pension participants. This product would contractually replace the company's obligations related to the pension and relieve our respective liability. For the purchase to occur, the pension assets required an additional cash contribution from the company in June of $6.1 million. This contribution allowed for the formal termination of Pension Plan 1 and its obligations as of June 30, 2024. The annuity provider required 60 days to onboard the pension participants. As a result, during the third quarter, the company contributed an additional $1.1 million for the final onboarding pension expenses and government filings associated with the termination process. Note that in December of 2023, the Pension Plan 1 liability was moved into other current liabilities on the balance sheet. That line at December 31 was $9.5 million. In June, this account balance was reduced by the $6.1 million cash contribution mentioned above, resulting in a current balance as of September, 30 of $3 million. During the second quarter, the pension accounting expense was included as a part of the $27.6 million reduction to the accumulated other comprehensible loss account in the equity section of the balance sheet. The result was a pension charge of $38.2 million in June, which is partially offset by a tax benefit of $10.1 million. On the balance sheet, the remaining qualified pension liabilities refer to the liability of Pension Plan 2, while the non- qualified pension liabilities are in reference to the restoration plan. One final note, as part of our Project Elevate initiative, and specific to our cost reduction efforts, we have made the decision to allow our research agreement with Noble Research to expire, effective immediately as an alternative Kirk and I are focused on building relationships with the goal of securing non-sponsored research coverage. We think traditional unpaid research coverage is more appropriate for where Harte Hanks is going. Thank you for all your support. I'd like to turn the call back over to Kirk.

Thanks Dave. Before we conclude, I want to thank all of you, our investors, employees and partners, for your continued support and commitment. As we look forward, we are focused on growing our free cash flow and enhancing our ability to adapt, grow and lead in our segments by prioritizing innovation and our customers evolving needs. This time, we'd be happy to take any questions.

[Operator Instructions] : :

I am not seeing anyone come into the queue just at the moment. Okay, I will now hand back over to Kirk for his closing remarks.

Thank you for joining our call. We appreciate it. We wish you a good evening, and we look forward to keeping you apprised of our company's developments as we move forward. Thanks very much.

Thank you very much everybody. This does conclude today's conference. You may disconnect your phone lines at this time. And have a wonderful rest of the day. Thank you for your participation.

Greetings. Welcome to the Harte Hanks Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Tom Baumann of FNK IR. You may begin.

Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer; and David Garrison, Chief Financial Officer. Before we begin, I want to remind participants that during the call, management’s prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today, and therefore, we will refer you to a more detailed discussion of these risks and uncertainties in the company’s filings with the Securities and Exchange Commission. In addition, any projections as to the company’s future performance represented by management may include estimates as of today, August 8, 2024, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures, are available in the earnings press release that was issued shortly after the market closed. A copy of that press release and other corporate disclosure is available on the Investor Relations section of the Harte Hanks website at hartehanks.com. With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.

Thank you, Tom and good afternoon everyone. Welcome to our Q2 2024 earnings conference call. Last year’s Q2 earnings call was my first since joining Harte Hanks. Although I had only been with the company for 7 weeks, I seized the opportunity to outline my vision for revitalizing our business and shared specific actions we needed to take. Now, a year later, I would like to review the commitments we made and the progress we have achieved. 1 year ago, revenues were declining, and there was not a prevailing strategy to expect otherwise. All we could commit to was that we believed the revenue we reported last year in Q2 2023 would serve as a baseline for Q3 and Q4, which we went on to modestly outperform. More importantly, we had 4 months remaining in 2023 to address the state of our marketing and sales organization. And I knew already that the organization needed improving. Leadership is key, and in my assessment, it was clear that we first needed to recruit a new corporate executive to lead sales and marketing. Further, we needed to empower that individual by centralizing oversight of our sales organization rather than having sales staff reporting into our business units. The legacy structure resulted in a siloed approach to selling and an informal process for managing and evaluating the performance of staff. Our structure made cross selling more difficult. In contrast, today our sales staff works closely with our business units leaders. We have developed company-wide standards for what we expect performance-wise. Additionally today, our corporate SVP of Sales is directly involved in helping to close new business across all of Harte Hanks. Our previous structure also lacked essential sales channel experts and roles crucial for business development, expanding partnerships and enhancing our international sales presence. We needed to modernize how we approached and leveraged industry conferences. Finally, our digital strategy needed optimization with higher quality original content. Now 1 year later, we can confidently review our achievements and more accurately project their impact rather than just discussing our plans. In November, we welcomed Kelly Waller as our new Corporate SVP of Sales and Marketing. She spearheaded a comprehensive redesign and expansion of our sales and marketing organization. Last quarter, we featured Kelly on this call to highlight many early new account wins that will contribute to revenue growth as the year progresses. Last August, I discussed our engagement with a business development company I had previously collaborated with to initiate opportunity discussions for us, targeting both Fortune 500 firms and well-funded startups. In late July, we closed a significant new marketing services account that originated from this partnership. After 10 months of collaborating with this prospective client to formalize our relationship, we have done so successfully. We will begin work later this month for one of the world’s leading global automotive manufacturers with annual revenues exceeding $170 billion. We are extremely excited about this new opportunity. Partnerships are a key contributor in building B2B revenues, which is why we now focus on this channel. And again, it is why we now have a new logo opportunity with a Top 50 Fortune company. This recent win, which took 10 months of focus to bring to fruition, underscores the dedication we bring to every opportunity. Although this project exceeded our normal sales cycle, it is an example of why some new clients have extended sales cycles. The complexity we can encounter in navigating compliance and legal hurdles, when applicable, is counterbalanced by the more turnkey opportunities we create with existing customers. Turning to our pipeline. Our sales pipeline continues to grow and is well ahead of where it was when I arrived last year. That’s a healthy indicator for an improving revenue backdrop. In August last year, I shared my excitement about the potential of a small tuck-in acquisition our company completed in December 2022. When I joined, it was clear we were on track to experience a significant decline in our first year ownership, 2023. However, through close collaboration with the former owner of the business and the strategic hiring of a new SVP of Sales Services last November, we achieved notable growth this year. We have several pilot programs in place now and expect several will carry over into 2025. Additionally, we recently introduced a product offering for small and medium sized businesses called Demand Generation in a Box. This innovative product, a blend of our existing services tailored to SMBs, was recently launched at our inaugural Harte Hanks ENABLE360 conference in London. One benefit of this product is that we can activate the buy for a customer faster than most of our other services. Reflecting on other key developments over the past year, I am energized by our senior leadership team. We have successfully integrated seasoned Harte Hanks executives with new leaders in corporate finance, sales marketing, sales services and our transformation office. Last quarter, I announced our intention to recruit a visionary executive to develop and implement data-driven, artificial intelligence-powered solutions aimed at enhancing client experiences, driving growth and reinforcing customer retention. Today, I am thrilled to introduce that we have hired our first Chief Customer and Data Officer. I will provide more details on this exciting appointment later in the call. As you may remember, in November 2023, we introduced Project Elevate to our employees and investors, highlighting a company-wide initiative we were undertaking to achieve many objectives. Lowering operating costs to fund growth was a key component, but we also envisioned reengineering workflows, assessing resource allocation, establishing a culture of continuous improvement, instilling greater accountability, evaluating purchasing practices, better understanding customer profitability and proactively investing in technology to expand our capabilities and efficiency. Partnered with Kearney, a renowned global consultancy with which I have had significant success in the past, a huge shout out to our executive team for their dedication to the 4-month program. Consequently, we have developed a comprehensive 2-year road map to reduce costs tied directly to specific initiatives. Our success in executing these cost programs is providing us with the flexibility to invest where we see opportunities and in activating new customers while also focusing on margin improvement. We are also making strategic investments beyond our sales and marketing organization to facilitate growth and improve our competitiveness. A notable example is how we have been investing in our Fulfillment segment. In the spring, we embarked on a migration to a best-in-class warehouse and order technology suit – suite, which will avail our company and customers of many benefits as we achieve various milestones. Some of the benefits include a modern modular infrastructure that empowers us to streamline and expedite integrations with our clients, thereby reducing the implementation cycle and accelerating the time to market for their products. Continuing our tradition of exceeding customer expectations, our technology improvements will enable us to deliver an array of options, including flexible order management and storefront feature sets as an a la carte scaled offering, as well as custom development and consultation for unique requirements. Enhanced client inventory visibility throughout the product life cycle and revamped multi-site inventory capabilities for our e-commerce customers. Finally, our cloud-based infrastructure is designed to seamlessly scale, unlocking new possibilities for both future acquisitions and organic expansion. This flexible, rapidly deployable solution ensures that we can swiftly adapt to new locations and opportunities as they arise. Turning to our longstanding fulfillment facility in East Bridgewater, Massachusetts, which we have utilized for 25 years, both our customers and valued employees are witnessing transformative changes within the facility, laying the foundation for a new era of operational excellence. Coinciding with the extension of our lease, we repurposed approximately 50,000 square feet of previously suboptimal space, repurposing it for expanded production and additional storage. Moreover, we are undertaking a major transformation in one of our largest production areas there, raising the roof to double our capacity in a portion of the facility, which affects about 30% of our entire space. Additionally, we have launched a beta version of a standalone microsite for our Fulfillment & Logistics segment, designed to enhance our discoverability online and display our full range of capabilities and competitive advantages. Our sales and marketing strategies for next year will be augmented to seize on these opportunities, ensuring that we remain a leader in delivering value and innovation to our clients. We are positioning our company to fully capitalize on the growth opportunities in the direct-to-consumer segment in 2025, which as we all recognize as consumers ourselves, is rapidly growing. To sum it up, we are increasingly encouraged by the progress we are seeing to revitalize our business. Before I conclude my opening remarks, I want to emphasize a core commitment shared by our entire management team and Board. For over a century, Harte Hanks has been a leader in customer service, partnering with the world’s most ambitious companies. As we continue to prioritize our customers and drive their success in an ever-evolving marketplace, we are confidently setting the stage for the next decade of growth and achievement. This commitment led us to hire our first Chief Customer and Data Officer, taking a significant step towards revitalizing and realizing our vision for the future. As I have assessed our company’s evolution in customer service, it has become clear that we must transcend traditional customer service and strive to embody true customer-centric leadership. This means not just meeting the needs of our customers, but anticipating them, guiding them through their journey and setting new standards for customer experience. We all understand that data, technology and artificial intelligence are pivotal in this transformation. Leveraging advanced analytics and artificial intelligence, we can gain deeper insights into customer behavior, preferences and needs. This will allow us to create highly personalized and seamless experiences, forging stronger connections and fostering greater loyalty. By harnessing the power of these innovative technologies, we can stay ahead of the curve, continuously improving and innovating to lead our customers into the future. These ambitions require that we strengthen and embolden our customer organization. We are pleased to announce that Sharona Sankar-King has been named Chief Customer and Data Officer for Harte Hanks effective September 4. The Sharona joins us from Bain & Company, where she excelled as a partner and a key member in their customer, advanced analytics and financial service practices. With over 3 decades of experience in the analytics domain, Sharona is a renowned expert in customer value optimization and generative AI value creation. Her deep knowledge and strategic acumen will be pivotal in advancing our customer-centric initiatives. Sharona’s impressive career includes executive roles at top tier agencies and data companies, such as Executive Vice President and Head of Marketing Science at BBDO, which is now part of Omnicom, and Managing Partner, North American lead for digital media optimization and advanced analytics at MEC, which is now part of WPP. Her academic credentials are equally stellar with a master’s degree in applied statistics from Columbia University and a BS in quantitative psychology from Penn State. Sharona also holds certifications in chief data officer from Carnegie Mellon University, digital marketing strategies from Kellogg, and Python programming from the University of Michigan. Additionally, she has received advanced training in large language models and generative AI from Bain Advanced Analytics and is pursuing certification and gen AI development for business. We are excited about Sharona’s appointment and confident her expertise will propel our company and our customers toward enhanced business insights and outcomes through the power of generative AI, data and analytics. Our leadership is dedicated to making our customers’ journey with us exciting, rewarding and next level. I would now like to turn the call over to David Garrison, our Chief Financial Officer. Thereafter, I have some closing remarks, and then David and I will be happy to take your questions. David?

Thank you, Kirk. I will now review the second quarter consolidated results, including revenues from each business segment. As a reminder, starting in 2024, we began reporting four segments instead of three. The additional segment is referred to as Sales Services and relates to the InsideOut acquisition made in 2022. Second quarter revenues were $45 million down by 5.7% compared to $47.8 million for the second quarter of 2023. Growth in Fulfillment & Logistics and Sales Services segments was offset by declines in the other two segments. Revenues in the Customer Care segment were $12.4 million in the second quarter of 2024 compared to $14.9 million in the same quarter prior year. This was related to the timing between quarters of a surge in volume with a large customer. Sales Services increased to $4.4 million compared to $2.3 million in the second quarter of 2023. The increase in volume from a large fintech client was the majority of the increase. The Marketing Services segment revenues fell to $7.7 million in the second quarter of 2024 compared to $10.9 million in the prior year. Customer budget reductions and the end of specific programs account for the decrease in this segment year-over-year. Fulfillment & Logistics revenues were $20.5 million in the second quarter of 2024 compared to $19.6 million in the prior year. The increases were the result of new and expanded programs with existing customers. Operating expenses in Q2 were $43.7 million, including restructuring expenses of $427,000 compared to $46.1 million in the same period in 2023. The operating income in Q2 2024 was $1.4 million compared to the operating income of $1.7 million in the second quarter of 2023. When adjusting for stock compensation, severance and restructuring expenses, the adjusted operating income in the second quarter of 2024 is $2.5 million compared to $3.4 million in Q2 of 2023. The adjusted operating margin is 5.6% in Q2 2024 compared to 7% in the same period in 2023. The second quarter of 2024 had an EBITDA of $2.4 million compared to an EBITDA of $2.7 million in the same period in 2023. When adjusting for stock compensation, severance and restructuring expenses the adjusted EBITDA is $3.6 million for 2024 and $4.4 million for the same period in 2023. Turning to the balance sheet. As of June 30, 2024, we had cash and cash equivalents of $11 million compared to $18 million at the end of 2023. Our current $25 million line of credit, which was extended until June of 2025, has not been drawn against and the company has no debt. Pension Plan I was terminated as planned during June of 2024. Let’s walk through the timeline of the progress to terminate the pension and its impact on our financial statements. In June, the assets of the pension were liquidated into cash in order to purchase the equivalent annuity product from an insurance company for the pension participants. This product would contractually replace the company’s obligations related to the pension and relieve our respective liability. For the purchase to occur, the pension assets required an additional cash contribution from the company of $6.1 million. This contribution allowed for the formal termination of the pension and its obligations as of June 30, 2024. The annuity provider requires 60 days to onboard the pension participants. During the third quarter, the company will contribute an additional $1.3 million for the monthly pension payments and final government filings associated with the termination process. The financial impact to the second quarter income statement is dramatic. Pension accounting requires the reversal of the equity balance of the accumulated other comprehensive income associated with Pension Plan I. This results in a pension charge of $38.2 million. This charge provides a tax benefit of $10.1 million, resulting in a net loss of $27.8 million for the quarter. It is important to note that without the pension charge and tax benefit the company would have had a net income of $300,000. Thank you for your continued support. And I’ll turn the call back to Kirk.

Thanks, Dave. Before we move to the Q&A session, I want to emphasize that Harte Hanks is amid an exciting turnaround. Our sales transformation is complete, and we are embarking on a new era of growth and success. With the recent appointment of our Chief Customer and Data Officer, our senior management team is now fully assembled and committed to driving shareholder value. The cost objective of our Elevate program is on track. Our sales pipeline well exceeds what I inherited and continues to grow. Additionally, we successfully terminated Pension Plan 1 in June, fulfilling our commitments in this area, as David outlined. We closed the quarter with $11 million in cash and cash equivalents, and again, we have no debt. Clearly, our year-to-date revenue performance does not mirror the promising outlook we hold for our business. It is important to recognize that we are in the final stages of overcoming the challenges posed with an outdated approach to scaling. However, we are confident in our strategy and excited about the future. Dave and I are happy to answer your questions. Thank you very much.

Thank you. [Operator Instructions] And the first question today is coming from Michael Kupinski from NOBLE Capital Markets. Michael, your line is live. Please proceed.

Good afternoon, everyone. Thanks for taking my questions. Kirk, as you mentioned, you recently centralized your sales staff and reporting structure and restaffed and expanded the staff. When do you think that this new structure and sales expansion will be kind of hitting its stride in terms of accelerating revenue generation and possibly improve efficiency? I was just wondering if you can just add some more color there.

Sure, I’m happy to. And nice to hear from you. I think at this point, our pipeline is at a really strong level compared to prior year. We’re learning a great deal and how effective our go-to-market strategy is. We continue to make tweaks. We’re optimistic as we go through the balance of the year that we’ll continue to see improvements in our conversion rates, and we’ll see more efficiency in our sales cycle. We’re anxious to integrate the role of our new Chief Customer and Data Officer into conversations that we’re having with clients, because it’s becoming increasingly apparent to us that there are avenues we could be pursuing that will certainly enhance our prospects for closing more business. There’s great interest right now in data. There’s great interest in analytics. There’s great interest in gen AI. And I think better – being better able to articulate the unique value we bring will be very, very helpful. So I would say our organic lead generation efforts are an area we still want to expand more. And I’d say that we have a promising outlook as we proceed through the balance of the year and especially as we think about 2025. So we’re really pleased with the way the organization has come together. We’ve retained all of the folks we initially hired but made some selective choices to change out staff, which is not uncommon when you build a new organization, and it’s very performance based. We definitely are focused more on generating our own leads. And so we’re really deeply moving the needle in our digital presence because that’s where we have the best chances for conversion. And I say that with respect to depressing our involvement or reliance on RFP processes and such. We have such a good value proposition, which I see only getting stronger, and that we want to generate more of our own leads and that’s happening. And so I think this is going to prove to be a game-changing transformation that we’ve accomplished here. And I think the evidence of that will be playing out the balance of the year and into next year.

Thanks, Kirk. And then I know that on top of everyone’s mind is the economy. And I was just wondering if you look at this quarter, I know some of the issues affecting this quarter were kind of already in play in the quarter. But I was just wondering if any of what we saw in terms of weakness in some of your segments were related to the economy. And if you think, as we kind of see the weakening economy in the second half here, was wondering if you can kind of give us your thoughts on how your business will fare in kind of more of a lackluster economic scenario that we might have.

Yes. Thanks for that. I’m very aware. And I fully appreciate what a slowing economy means. I’ve run companies during some of the most notable slumps in recent decades. So very attuned to that. Frankly, there’s so much untapped potential here. It’s not a prevailing concern of mine right now. I think we need to hustle and obviously start closing on many of the opportunities in our pipeline. We’re aware of how our customers can sort of elect lower cost alternatives, if that’s important to their business. We’ve seen labor arbitrage a factor in customer care. Clearly, companies can dial back marketing investments if they’re concerned and managing earnings as such. However, that’s rarely a good idea. And in some cases, maybe to fund more investments in technology. It certainly is a year for that. But at this moment, honestly, I believe our potential to organically attract business far outweighs any economic concerns at the present time. We’re really positioned on both sides of the ledger. We’ve talked about Project Elevate. So we are equally focused on costs that aren’t going to be limiting factors toward our growth programs. We think our fulfillment business is positioned exceedingly well as we head into the second half of the year. Much of that work, whether it’s for back-to-school, even doing kitting projects right now for major retailers is really a back-to-school and almost holiday story as it stands here right now. So that’s not to say that 2025 can’t hold surprises, but we have good visibility into the second half of the year. When I think about the pharma work that we do in the company, it’s primarily necessities related. And we’re actually currently pursuing some attractive additional pharma opportunities. I think about all of our high volumes of digital printing and mailings, that’s driven by regulatory requirements. That’s must-do work late in the second half. So overall, I feel we’re in an envious position to be as clear as a company can be on what we need to do and get done. And we’re still feeling positive about the outlook, and at this moment, wouldn’t blame anything on the economy.

Kirk, I just have two more questions. You mentioned about the visibility into the second half. I was wondering if you can kind of give us your thoughts. And certainly, we know that customers can cancel or postpone campaigns and things like that. But do you anticipate that you’ll see sequential quarterly improvement in revenues in the second half? Or do you think that that’s more 2025 situation?

The unpredictability in that is really in the sales cycle. And when we make a call on assurances of revenue growth in Q3 or Q4, it has to be that the stage we’re in across our sales cycle, particularly the contracting and legal stage, is where we have the see-through. I would say at this point, it’s too early to make a call. We’ll do another call obviously in November. And I expect our visibility obviously at that stage will be vastly enhanced. So we have a lot of activity, and we have a very robust pipeline, but I would want to stop short right now of making a call on the quarter specifically. Typically, we have better seasonality in Q4. Right now, I would say apart from the seasonality, our new business outlook is stronger there as well. So we’ll see, but we’re quite optimistic.

My final question is about your marketing services. Obviously, this has been probably your more problematic segment. I was just wondering, you had – you faced some unique challenges there. I was wondering if you can just kind of give us your thoughts in terms of the strategy and how you’re approaching kind of getting that back on a revenue growth trajectory. And then just was wondering if you can just quickly talk a little bit about your expansion plans internationally as well. And that’s all I have.

Sure. So agree. Marketing services has been a weakness. And that really originates back to last spring and summer. And we did see some customers leave, and that – and they were setbacks morale-wise and obviously economically. And we’ve been retooling since. But I would tell you that I am still quite optimistic about that segment. It’s going to be a major focal point in 2025. I’m very excited that Sharona, I think, will bring a lot of value and concentration to this segment early on as well. I think we’re going to bolster our sales support for marketing services in 2025, and we’ll onboard one or two more resources for that in late Q3. I think there are some new services that we could look at packaging in our marketing services business that we’re hearing from customers that they have a great interest in. Those examples would be in research, in data and tech services. And those are not services today, with the exception of data, that we aggressively market. But even data isn’t really today involving us getting involved in anybody’s data practice or helping them improve their data practice. It’s really the sale of data that we really leverage today. So I think when I talk about customer leadership and customer retention, which obviously takes some of the pressure off how much new business we need to generate, it’s in these areas. And marketing today is becoming increasingly more marketing science oriented. And I think you can see we’re bolstering up our resources there. We will name somebody to lead that division for us in 2025. We’ve been doing some restructuring in there right now. We’ve been analyzing the capability gaps that we have to be more competitive. Although that notwithstanding, the large customer that we just signed was in our Marketing Services segment, and that customer will begin in the next few weeks. So, got it. It has been a weakness here. It’s an area where I’ve had a deep experience myself in my career building digital agencies and such. So I’m very committed to the segment. And I think the problems were internal, and we’ll have them fixed and it will be a strong contributor in 2025. And then on the international side, the real gap there is that we have opportunities to expand U.S.-based clients into Europe. We have the opportunity to do more lead gen work specifically in Europe. We’ve got a couple of staffers there who are outstanding. But that division and the brilliant way that they execute warrants more sales pressure because we execute exceedingly well in Europe right now. We have great teams. Obviously, it’s a smaller part of our company than our domestic operations, but we think we can be very, very successful there. We have a strong team. We’ve started building really strong leads. And so stay tuned. But I think Europe specifically will be a growth driver for us in 2025.

That’s all I have. Thank you, guys. Good luck to you.

Yes. Thanks so much. I appreciate it.

Thank you. And there are no further questions in queue at this time. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Greetings. Welcome to the Harte Hanks First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Tom Baumann of FNK IR. You may begin.

Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer; Kelly Waller, Senior Vice President of Sales & Marketing; and David Garrison, Chief Financial Officer. Before we begin, I want to remind participants that during the call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may also make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today and therefore, we will refer you to a more detailed discussion of these risks and uncertainties in the company's filings with the SEC. In addition, any projections as to the company's future performance represented by management include estimates as of today, May 9, 2024, and the company assumes no obligation to update these projections in the future as market conditions change. This webcast and certain financial information provided on the call, including reconciliations of non-GAAP financial measures to comparable GAAP financial measures, are available in the earnings press release that was issued shortly after the market closed. A copy of that press release and other corporate disclosure is available on the Investor Relations section of the Harte Hanks website at hartehanks.com. With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.

Thank you, Tom, and good afternoon, everyone. I appreciate you joining our Q1 2024 earnings conference call. Joining me today from our Chelmsford, Massachusetts office are Kelly Waller, our Senior Vice President of Sales & Marketing; and David Garrison, our Chief Financial Officer. Kelly and David were the first 2 new executive appointments I made last fall. We are fortunate to have assembled an exceptionally strong leadership team. Our team comprises both seasoned executives who have been instrumental to our company for many years and new leaders we've recruited to lead sales, finance and our newly established transformation office led by David Fisher. Later in the call, we will delve into our first quarter performance in much greater detail. However, I want to highlight upfront that on a same-store basis, Q1 was our company's best revenue performance in the past 5 quarters at minus 3.5%. We are confident we are developing a durable growth engine for our company. More broadly, I'd like to review the progress we are making on our Elevate program. Launched last October, Elevate aims to propel us towards greater agility, innovation and organic growth and customer centricity ensuring that we exceed the expectations of our stakeholders. Our Elevate program continues to evolve and revolves around 4 key areas and work streams. The first is our sales and marketing transformation. While there's no finish line in sales, we have nearly completed the restructuring and expansion of our sales and marketing organization. Under the leadership of Kelly Waller, we have centralized our sales organization, undergone significant restaffing and structural changes, expanded our sales force and established strategic channels; all of which are currently fueling strong pipeline growth year-over-year. The caliber of talent we have attracted and the quality and composition of our sales pipeline have outpaced our expectations. Today, Kelly will highlight some of the early successes we have already had. Our increased investment in marketing is also yielding positive outcomes by bolstering our digital presence and creating better and more innovative content to drive website traffic and enhance our social activity, we are effectively boosting brand awareness, traffic and generating more organic leads. The second key area of Project Elevate is our focus on margin expansion and business optimization. We are in the early stages of a multiyear program. As we previously shared, we established a transformation office to thoughtfully execute our plans. We embarked on an effort with the Kearney organization, an acclaimed global consulting firm to catalyze our efforts in pinpointing inefficiencies and cost saving opportunities that would not jeopardize our customer delivery capabilities. This entailed exhaustive benchmarking against industry peers and best practices coupled with a meticulous look at how technological advancements could streamline operations. As a result, we have identified an immediate opportunity to reduce costs by $6 million by year-end with a 2-year forecasted annual savings of $16 million exiting 2025. Our third strategic focus area centers around harnessing artificial intelligence and data driven decision-making. Our foundational efforts here involve rigorous due diligence, experimentation and learning. Through this process, we have pinpointed numerous practical use cases to leverage AI to enhance customer experience, fortify our value proposition and contemplate new business models. Highlighting the pivotal role of partnerships in our evolution, a standout example is our alliance with Amazon. In 2023, as part of our ongoing efforts to modernize and transform, we made a significant investment in our partnership with Amazon Web Services. Presently, we are collaborating with AWS' generative AI experts on initiatives aimed at revolutioning our Customer Care business. These initiatives involve integrating AI and machine learning capabilities to streamline customer issue resolution. We are developing use cases focused on addressing our clients' most intricate challenges. These endeavors will help us in provisioning new business models across different use cases. We also believe these advancements will embolden our efforts to win new business initially for Customer Care, but inevitably throughout all of our services. Our fourth major initiative involves creating a more customer centric culture. In a quest to redefine our operational framework with an unwavering commitment to elevating customer experience, we are investing in a pivotal new role within our executive leadership team, a Chief Customer Officer. This strategic appointment will signify our dedication to placing the customer at the forefront of every decision and action we undertake. As retention plays a pivotal role in our success, having a dedicated focus on enhancing our customer experience will serve to enable net growth more quickly from our sales development efforts. Additionally, emphasizing our commitment to evolving alongside our customers, understanding their journey and prioritizing the voice of the customer will undoubtedly strengthen our position during both the customer acquisition phase, but also in our ability to expand relationships. Especially key, we expect to hire a visionary executive who excels at envisioning and implementing data driven and AI powered solutions to improve our clients' experiences and results and drive growth. This individual will play a pivotal role serving as the heartbeat of our organization, fostering a culture where each team member is deeply committed to delivering unparalleled service to our customers. We expect to name a Chief Customer Officer in early Q3. I would now like to introduce Kelly Waller, our Senior Vice President for Sales & Marketing. Kelly joined Harte Hanks from a $1.8 billion FinTech company where she spearheaded global sales efforts. The remarkable pace and caliber of the sales transformation she is orchestrating is truly exciting and it is energizing our entire company. In my career, I've seldom seen an executive have such a profound impact in such a brief span of time. Kelly will delve into the strategies she has employed and showcase some of the recent victories our team has achieved. Kelly?

Thank you, Kirk. As you know, I'm happy to be here and quite proud of the team that we have built. Our relentless efforts have transformed our sales and marketing division from an underperforming entity into a sales force capable of driving organic growth. Through the implementation of new and pivotal go-to-market strategies, we've created a robust action plan aimed at realizing our growth objectives. Central to our strategy is geographic expansion with a keen focus on better penetrating the European market and venturing into the SMB segment for the first time. We're proud to report significant strides in this direction with the establishment of a dedicated European sales team and the imminent launch of a compelling SMB product pilot beginning next month. This product, a comprehensive suite of B2B marketing and sales services, marks a milestone in our journey towards expansion. Additionally, we have fortified our sales and marketing teams by introducing 2 new units, the partner sales team and an inside sales team, to complement our existing field sales team and client services team. By augmenting our workforce and bolstering our marketing campaigns, particularly in digital channels such as SEO, Google, social media and personalized events, we have achieved strong pipeline growth over the last couple of months. Obviously this leads to our focus on conversions in which our sales organization is highly incentivized to achieve. The growth in our pipeline is beginning to yield results, which we anticipate will scale. We are having success in expanding our relationship with existing customers. Taken together, we believe this is the outset of our upward ascent. So I'd like to share some examples of the early successes we're seeing in both new customer acquisition and expansion. In our Fulfillment & Logistics segment led by Patrick O'Brien, we are progressing well as we expand our partnerships with existing clients, which is a major opportunity for us. For example, we have an established robust partnership with a prominent agency through our kitting capabilities. Our specialization in kitting, particularly for retail and e-commerce, involves bundling related products into packages or kits for distribution as a unified entity. This is an exciting and expanding service we offer. Our kitting capability is in demand and we expect continued growth especially in the second half of the year. The growth should compound nicely. Also within our Fulfillment & Logistics segment, we have secured a new client through our established partnership with a prominent procurement and creative production firm. This partnership has connected us with 1 of the world's most innovative pharmaceutical companies entrusting us with the delivery of B2B and B2C literature and samples as well as providing kitting services. These services are set to commence, which bodes well for the second half of the year. Additionally, another opportunity arose from our longstanding quarter century partnership with a leading medical device and health care company. This partnership has presented an opportunity for us to step into the fulfillment arena with the client effectively serving as its e-commerce hub. Our onboarding process is underway and we will be fully operational by Q3. Shifting focus to Logistics. As a preferred logistics partner for a rapidly expanding printing company in the Midwest, we are privileged to partner alongside them as they expand. Alongside them, we recently onboarded a national grocery client. Our intensified digital marketing efforts have yielded many leads and results already in our Customer Care segment, which is led by Ben Chacko. We have attracted a reputable managed health care system client from California seeking assistance during the open enrollment period. This opportunity has proved beneficial in Q2 and presents additional growth opportunities. Furthermore, our Customer Care segment has successfully secured a new client that specializes in technology driven vehicle safety devices. Under this collaboration, customers seeking support for the product will be direct to our dedicated Harte Hanks Customer Care team. This new addition to our client portfolio is set to commence operations with Harte Hanks soon transitioning from a self-managed team to our specialized Customer Care services. In Marketing Services, 1 of our existing clients, a global leader in the beauty industry has engaged us to expand marketing support to include a well-established moisturizer brand within its consumer products division. Also in Marketing Services, with a tie-in with our Sales Services division, we are thrilled to be expanding our relationship with a leading international travel agency who has entrusted our team to help them engage property owners and consumers with their platform and is now expanding utilization of our services for a new division focused on reactivating their B2B database and intensifying new prospects in the U.S. The project is expected to roll out in the coming months. Lastly, I want to highlight a client testimonial we received that opens new opportunities for Harte Hanks. Recently our strategy team played a pivotal role in aiding a health insurance client to chart a strategy to overcome longstanding perceptions about its offering and brand. The response we received from the client following the conclusion of the initial engagement inspired everybody involved. The client wrote, we are destined to do something great with this. Thank you all for your dedication to this process. What we produce here will inspire thousands of employees and nearly a million members. Powerful stuff. As a result, we are now expanding our work with this client. I'm sure you can appreciate how this type of feedback motivates us all. There are additional wins of course, but we are anticipating much more new business as the year progresses. I'd like to conclude my remarks by sharing some personal reflections on my journey with our company thus far. What's truly thrilling to me is the remarkable transformation we have accomplished in standing up a reimagined and expanded sales and marketing organization. We successfully revitalized and expanded our team, welcoming many talented individuals in key sales, marketing, partnership and training roles. We're launching our first Harte Hanks Global Marketing and Sales Services Conference Enable 360 in late June in London. It's truly an exciting time to be part of the organization and thank you. I'll pass the call back to Kirk.

Thank you, Kelly. In addition to strategies Kelly outlined, we also have reinvigorated another sales channel in our company to cultivate new clients. In December 2022, our company acquired a premium sales enablement agency, which brought us experience and capabilities to enable clients to pilot outbound sales programs to forge new customer relationships among other services. In late 2023, we made additional strategic investments in this business that spanned leadership, expanding our sales team and adding training resources. This commitment coincided with the onboarding of a new global FinTech client. Presently, we are deeply immersed in training our sales force on the client's offerings, pricing structures and packaging options. Our collaborative efforts aim to ensure a successful pilot with the client. Reflecting on our first quarter, we are excited about our progress. And I want to reiterate in Q1, we had our best same-store comparison to prior year that we have reported in the past 5 quarters. I joined Harte Hanks in late June of last year. During my first conference call in August, I related that our revenue in Q3 and Q4 of 2023 would approximate what we reported in Q2. Taken together, Q3 and Q4 revenue surpassed that expectation, which was gratifying only from the perspective that we understood our trend and risk factors at the time. We had not yet hired Kelly so the transformative changes we knew were needed were not yet in scope. We understood the transformation of our sales and marketing organization would require some time. We wanted to do it right and we have. Fast forward we have now progressed to where we are nurturing a notably stronger pipeline, already negotiating some deals and anticipating momentum will continue building as we progress through the remainder of 2024. I would now like to turn the call over to David Garrison, our CFO. Thereafter, I have some closing remarks. And then David and I will be happy to take your questions. David?

Thank you, Kirk. I will now review the first quarter consolidated results, including revenues for each business segment. Please note that starting in 2024, we begin reporting 4 segments instead of 3. The newest segment, as discussed in our 10-K, will be referred to as Sales Services. It relates to the Inside Out acquisition made in 2022 and has been separated from the Customer Care segment. First quarter revenues were $45.4 million a decline of 3.5% compared to $47.1 million for the first quarter in 2023. Growth in the Customer Care and Sales Services segment was offset by the declines in the 2 other segments. Revenues in the Customer Care segment were $12.4 million in the first quarter of 2024 compared to $11.6 million in the same quarter prior year. Sales Services increased to $4.7 million compared to $2.8 million in the first quarter of 2023. Growth in these 2 segments were the result of expansion with existing clients and the first quarter of a new FinTech client in Sales Services. The Marketing Service segment revenues fell to $8.9 million in Q1 of 2024 compared to $11.2 million in the prior year. Customer budget reductions and a program conclusion account for the decrease in this segment year-over-year. Fulfillment & Logistics revenues were $19.4 million in the first quarter of 2024 compared to $21.5 million in the prior year. The decrease in revenue is related to cost compression in the logistics space as costs shrink from reductions in overall market demand. Operating expenses in Q1 were $45.1 million including restructuring expenses of $0.9 million compared to $46.1 million in the same period of 2023. The commencement of Project Elevate resulted in $0.9 million of restructuring expenses for this quarter. This expenditure related to staffing reductions completed in the first quarter leading to a $2.3 million annualized expense reduction that will improve EBITDA. We expect to incur additional expenses estimated at $2.5 million in executing Project Elevate during 2024. The operating income in Q1 2024 was $0.4 million compared to the operating income of $1.1 million in the first quarter of 2023. After adjusting for stock compensation, severance and restructuring expenses; the adjusted operating income in the first quarter of 2024 is $1.8 million compared to $1.6 million in the first quarter of 2023. The adjusted operating margin is 3.9% in Q1 2024 compared to 3.4% in the same quarter in 2023. The first quarter of 2024 had an EBITDA of $1.4 million compared to an EBITDA of $2.1 million in 2023. When adjusting for stock compensation, severance and restructuring expenses, the adjusted EBITDA is $2.8 million for Q1 of 2024 and $2.7 million for the same period in 2023. Turning to the balance sheet. As of March 31, 2024 we had cash and cash equivalents of $11.5 million compared to $18.4 million at the end of 2023. Our current $25 million line of credit, which was extended until June of 2025, has not been drawn against and the company has no debt. Target to terminate Pension 1 during June continues without any obstacles. As a reminder, the long-term pension liability on our balance sheet is $28.6 million as the termination funding requirement is listed as another current liability. The pension termination contribution of $7.5 million will be made in June. Thank you for your support. And I'd like to turn the call back over to Kirk.

Thank you, David. In closing, I'd like to underscore our unwavering focus on our customers in their journey. Through extensive engagement with both our customers and prospective clients, I've had the privilege of gaining profound insights into their needs and aspirations. Our aim is to translate these insights into tangible enhancements across our organizational framework, incentive plans and by improving the caliber of thought leadership we offer. Through in-depth dialogs with employees and clientele alike, we have identified compelling opportunities to bolster our customer acquisition endeavors and fortify our frontline teams in their mission to elevate the customer experience. It will be an exciting milestone for Harte Hanks to appoint a Chief Customer Officer, which we believe will be a strong brand differentiator. As we progress through this transformative period, I'm inspired by the enthusiasm and dedication demonstrated by our employees. While we deeply value our century old legacy, we're equally thrilled about forging a new chapter for Harte Hanks, one that's responsive to the changing business environment and focused on providing outstanding customer experiences. We thank you for your ongoing support. We look forward to updating you on our progress in August. Thank you very much. And at this time, we would be happy to take your questions.

[Operator Instructions] Our first questioner is Michael Kupinski with NOBLE Capital Markets.

Congratulations on getting this company on track. Couple of questions. In terms of your European expansion, where are those operations located and can you kind of give us some sense of is the European operations profitable at this point or when do you anticipate that they'll swing towards contribution margin going forward?

So our beachhead in Europe is Portugal and we are ramping up the team there as we speak. And I'm sorry, what was the second part of your question?

I was just wondering if it's profitable already or when do you anticipate that we'll start to see contribution margin coming from your European operations?

Yes. So actually we're extremely proud of our European operations. From a delivery perspective, we are outperforming customer expectations. It's a profitable and growing geo for our company and we're very proud of the team that we have there. And I would expect that in the third quarter our additional sales efforts in Europe will start to be fruitful. We are developing a strong international pipeline at the same time we're doing as well as we are in the United States.

And then thanks for breaking out the Inside Out acquisition into your Sales Service segment. Can you kind of give us a sense of what you anticipate this segment in terms of the growth potential? What type of revenues that you can expect we should look for here in terms of revenue growth and then also margin potential?

Sure. So I think this will be a margin business that will be around 30% to 35%. What we're doing right now is focusing intensely on onboarding and coming up the curve for a large client that we're very, very proud to have. It's a client profile that if we do an exceptional job has the capacity to invest more with us in the years to come. So it's a thrilling opportunity. I would also say that Kelly and Ron Lee, our lead in our inside sales or Sales Services business, have done some great work on a go-to-market strategy that is really going to be targeting the B2B marketplace in software and tech in particular, which is an area that we feel we can excel in delivery through our Sales Services division. So we actually will be launching this program in the next few weeks and I believe in August, we can give an update. But it's a business that we think out over the next couple of years could certainly translate to $9 million of new growth and that's apart from our regular pipeline sales efforts, which our Sales Services division is very much poised to benefit from. In fact right now when we think about our pipeline, there's a very good distribution between Marketing Services, Customer Care, Sales Services and Fulfillment & Logistics. So it's just as we would want to see it because as we bring in new business, it's nice that it's evenly distributed across the company because it emboldens our execution ability as opposed to if we had a super large new business buildup in 1 division or another and facing a backlog challenge. So so far, we're really very pleased with how Sales Services is doing and the new leadership there that Ron brings, but just also how well positioned we are to onboard and effectively deliver across all 4 segments.

That's terrific. And in the Logistics division and pardon me if I got this incorrect, but I thought you meant you were getting a grocery store distribution. And I know that if I recall, you were seeking FDA approval to be able to provide services for food items in your distribution. Is that what you were talking about there or if you can just kind of add some color on that?

Yes. We have that capability already in our Fulfillment business, which is located in Kansas City. The reference that we made to the grocer comes with an emerging and fabulous relationship we have with a successful printing company that we've developed a good partnership with. And so as they secure large new printing clients where there's logistics arm for them and make sure that product gets delivered to many different destinations.

Got you. And so in terms of your distribution for food items, have you been able to capitalize on that yet?

I just want to be clear. So, we definitely are capitalizing on distribution of products across the pharmaceutical complex. We're not doing a great deal in grocery right now, but we do have an FDA approved facility in Kansas City. I'm not sure what the capabilities are for how many different product lines it could handle, but for example we've handled baby formula efficiently out of that complex. So I could follow up with you on that. But I think right now it is well suited and outfitted to do food product distribution. We don't have a great deal of it right now, but we're growing in numerous other areas in that complex.

Got you. One final question. You indicated in the past you were seeking partnerships and I know you spent a lot of time talking about how you've improved upon your sales strategy and your go-to-market products and so forth. I was just wondering in terms of partnerships that you highlighted in your last call in terms of improving your go-to-market product suite. Can you kind of give us an update on how those are performing? I know that you spend a little time on some of those, but I was just wondering specifically if you can point to specific partnerships that you developed that might be start to contribute as we go into the Q2 and Q3?

Yes. I think in August we'll be able to share some outcomes with our partnership strategy. In fact we just had a very, very deep dive this past week in our senior leadership team meeting where our Head of Partnerships walked us through at least a dozen. But one that I'm particularly excited about that looks like it's getting out of the gate well is our relationship with a company that does an exceedingly large amount of work in helping companies find good companies to handle customer care. And so this is an organization that does a strong business in that regard and we've been working with them for 3 or 4 months to obviously prove our abilities and capabilities and the geos that we can service effectively. And just this week we got our first opportunity with that company, but we expect that to be a very strong pipeline builder for us. And I'll also harken back to the very first partnership we established within my first 2 months here, which is with a business development company that enables us to be in front of Fortune 1000 type companies on a 2x to 3x a month basis and we've now developed a number of new customers through that pipeline. But we are looking at other partnerships particularly in the care area and I do believe we'll have some positive news to share on our next call in that respect. And really just to be completely transparent here, we have over a dozen conversations in scope right now to build this network and once we accomplish that, that will serve as a multiplier effect for us in addition to our team's acquisition efforts. So it's an important channel. I've commented previously that B2B companies can typically see 30% of their revenue coming from this source. It's de minimis for us today, but we are poised to make that a strong contributor over the next 6 months.

[Operator Instructions] We have reached the end of our question-and-answer session today and with it, the conclusion of today's conference call. You may disconnect your lines at any time and thank you for your participation.