Q2 2024 Harte Hanks Inc Earnings Call
Speaker Change: Greetings. Welcome to the Hart-Hanks Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
Operator: This concludes today's conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Should anyone require operator assistance during the stay call, you may press star zero on your telephone keypad. 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.
Speaker Change: Should anyone require operator assistance during today's call, you may press star zero on your telephone keypad.
Speaker Change: Please note, this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Tom Baumann of FNK-IR. You may begin.
Tom Baumann: Thank you for hosting the call today, or 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 the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Tom Baumann: Thank you. Hosting the call today are Kirk Davis, Chief Executive Officer, and David Garrison, Chief Financial Officer.
Speaker Change: 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.
Speaker Change: Management may also make additional forward-looking statements in response to your questions today.
Speaker Change: Therefore, the company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Tom Baumann: Actual results may differ from those discussed today, and therefore, we will refer you to a more detailed discussion of these risks and concerns. The company's filing is with the skiers in 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, and copies of that press release With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.
Speaker Change: 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.
Speaker Change: In addition, any projections as to the company's future performance, represented by management, may include estimates as of today, August 8, 2024.
Speaker Change: And the company assumes no obligation to update these projections in the future as market conditions change.
Speaker 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.
Speaker Change: A copy of that press release and other corporate disclosure is available on the Investor Relations section of the HARTANX website at hartanx.com.
Speaker Change: With that, I would now like to turn the call over to Kirk. Kirk, the call is yours.
Kirk Davis: Thank you, Tom, and good afternoon, everyone. Welcome to our Q2 2024 Ernie's Conference Call. Last year's Q2 Ernie's call was my first since joining Harte Hanks.
Kirk Davis: Thank you, Tom, and good afternoon, everyone. Welcome to our Q2 2024 Earnings Conference call.
Kirk Davis: Last year's Q2 earnings call was my first since joining Harte Hanks.
Kirk Davis: Although I had only been with the company for seven weeks, I seized the opportunity to outline my vision for revitalizing our business and share 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. One year ago, revenues were declining, and there was not a prevailing strategy to expect otherwise.
Kirk Davis: Although I had only been with the company for seven weeks, I seized the opportunity to outline my vision for revitalizing our business and share specific actions we needed to take.
Kirk Davis: Now, a year later, I would like to review the commitments we made and the progress we have achieved.
Kirk Davis: One year ago, revenues were declining and there was not a prevailing strategy to expect otherwise.
Kirk Davis: 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 four months remaining in 2023 to address the state of our marketing and sales organization. And I already knew 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.
Kirk Davis: All we could commit to was that we believed the revenue we reported last year in Q2 of 2023 would serve as a baseline for Q3 and Q4, which we went on to modestly outperform.
Kirk Davis: More importantly, we had four months remaining in 2023 to address the state of our marketing and sales organization.
Kirk Davis: And I knew already that the organization needed improving.
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: Further, we needed to empower that individual by centralizing oversight of our sales organization rather than having sales staff reporting into our business units.
Kirk Davis: The legacy structure resulted in a siloed approach to selling and an informal process for managing and evaluating the performance of staff.
Kirk Davis: In contrast, today's sales staff works closely with our business unit leaders, and we have developed company-wide standards for what we expect performance-wise. Additionally, today, our corporate SVTS sales staff is directly involved in helping to close new business across, Paul Tarjee. Our previous structure also lacked a central sales channel expert and Alec Wilcox.
Kirk Davis: Our structure made cross-selling more difficult.
Kirk Davis: In contrast, today our sales staff works closely with our business unit leaders and we have developed company-wide standards for what we expect performance-wise.
Kirk Davis: Additionally, today, our Corporate SVP of Sales is directly involved in helping to close new business across
Speaker Change: all of Harte Hanks.
Kirk Davis: Our previous structure also lacked essential sales channel experts.
Kirk Davis: and Rolls crucial for business development, expanding partnerships and enhancing our international sales presence.
Kirk Davis: We needed to modernize how we approached and leveraged industry conferences. Finally, our digital strategy needed to be optimized with higher quality original content. Now, one year later, we can confidently review our achievements and more accurately project their impact, rather than just discussing our plans. In New Vemper, we welcome Kelly Waller as our new corporate SPP of sales and marketing. We 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 this year.
Kirk Davis: We needed to modernize how we approached and leveraged industry conferences. Finally, our digital strategy needed optimization with higher quality original content.
Kirk Davis: Now, one year later, we can confidently review our achievements and more accurately project their impact, rather than just discussing our plans.
Kelly Waller: In November, we welcomed Kelly Waller as our new Corporate SVP of Sales and Marketing.
Kelly Waller: We spearheaded a comprehensive redesign and expansion of our sales and marketing organization.
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: In late July, we closed a significant new marketing services account that originated from this partnership.
Kirk Davis: After ten 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 your revenues exceeding 170 billion. We are extremely excited about this new opportunity. Partnerships are a key contributor to building B2B revenues, which is why we are now focusing on this channel. And again, it is why we now have a new logo opportunity with a top 50 Fortune 50 company. This recent win, which took 10 months of focus to bring to fruition. Underlines the dedication we bring to every opportunity.
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: And again, it is why we now have a new logo opportunity with a top 50 fortune company.
Kirk Davis: This recent win, which took ten months of focus to bring defourition, underscores the dedication we bring to every opportunity.
Kirk Davis: 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 in line with where it was when I arrived last year. That's a healthy indicator for an improving revenue backdrop.
Kirk Davis: Although this project exceeded our normal sales cycle,
Kirk Davis: 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.
Speaker Change: Turning to our pipeline, our sales pipeline continues to grow and is well ahead of where it was when I arrived last year.
Kirk Davis: That's a healthy indicator for an improving revenue backdrop.
Kirk Davis: In August last year, I shared my excitement about the potential of a small tuck-in acquisition, and our company completed in December 2022. However, when I joined, it was clear we were on track to experience a significant decline in our first year of ownership, 2023.
Kirk Davis: In August last year, I shared my excitement about the potential of a small tuck-in acquisition our company completed in December 2022.
Kirk Davis: When I joined, it was clear we were on track to experience a significant decline in our first year of ownership, 2023.
Kirk Davis: 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 have achieved notable growth this year. We have several pilot programs in place now and expect several will carry over into 2025.
Kirk Davis: However, through close collaboration with the former owner of the business and the strategic hiring of a new SVP of sales services last November ,
Kirk Davis: We have achieved notable growth this year. We have several pilot programs in place now and expect several will carry over into 2025.
Kirk Davis: 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 Enable 360 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.
Kirk Davis: Additionally, we recently introduced a product offering for small and medium-sized businesses called Demand Generation in a Box.
Kirk Davis: This innovative product, a blend of our existing services tailored to SMBs, was recently launched at our inaugural Harte Hanks Enable 360 conference in London.
Kirk Davis: One benefit of this product is that we can activate the buy for a customer faster than most of our other services.
Kirk Davis: 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 David Ribbon, artificial intelligence-powered solutions aimed at enhancing client experiences, driving growth, and reinforcing customer retention. Today, I am thrilled to announce that we have hired our first chief customer and data officer. I will provide more details on this exciting appointment later in the call.
Kirk Davis: Reflecting on other key developments over the past year, I am energized by our senior leadership team.
Kirk Davis: We have successfully integrated seasoned Harte Hanks executives with new leaders in corporate finance, sales, marketing, sales services, and our transformation office.
Kirk Davis: Last quarter I announced our intention to recruit a visionary executive to develop and implement data-driven
Kirk Davis: Artificial Intelligence, Howard Solutions aimed at enhancing client experiences driving growth.
Kirk Davis: in reinforcing customer retention.
Kirk Davis: Today I am thrilled to introduce that we have hired our first Chief Customer and Data Officer.
Kirk Davis: I will provide more details on this exciting appointment later in the call.
Kirk Davis: As you may remember, in November 2023, we introduced Project LV 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 re-engineering 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. We 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 Form of Program. Consequently, we have developed a comprehensive two-year roadmap to reduce costs tied directly to specific initiatives.
Kirk Davis: 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.
Kirk Davis: Lowering operating costs to fund growth was a key component, but we also envisioned re-engineering workflows, assessing resource allocation,
Kirk Davis: Establishing a culture of continuous improvement in stilling greater accountability, evaluating purchasing practices, better understanding customer profitability, and proactively investing in technology to expand our capabilities and efficiency.
Kirk Davis: Partnered with Kearney, a renowned global consultancy with which I have had significant success in the past.
Kirk Davis: A huge shout out to our executive team for their dedication to the four-month program.
Kirk Davis: Consequently, we have developed a comprehensive two-year roadmap to reduce costs tied directly to specific initiatives.
Kirk Davis: Our success in executing these cost programs is providing us with the flexibility to invest where we see opportunities and to activate 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-in-order, Technology Suit, Sweet, which will avail our company and customers many benefits as we achieve various milestones.
Kirk Davis: Our success in this executing these cost programs is providing us with the flexibility to invest where we see opportunities in activating new customers while also focusing on margin improvement.
Kirk Davis: We are also making strategic investments beyond our sales and marketing organization to facilitate growth and improve our competitiveness.
Kirk Davis: A notable example is how we have been investing in our fulfillment segment.
Kirk Davis: In the spring, we embarked on a migration to a best-in-class, warehouse-in-order,
Kirk Davis: technology suit
Kirk Davis: suite, which will avail our company and customers many benefits as we achieve various milestones.
Kirk Davis: 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 lifecycle, and revamped multi-site inventory capabilities for our e-commerce customers.
Kirk Davis: Some of the benefits include a modern
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: Enhanced client inventory visibility throughout the product life cycle. And revamped multi-site inventory capabilities for our e-commerce customers.
Kirk Davis: 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.
Kirk Davis: Finally, our cloud-based infrastructure is designed to seamlessly scale, unlocking new possibilities for both future acquisitions and organic expansion.
Kirk Davis: This flexible, rapidly deployable solution ensures that we can swiftly adapt to new locations and opportunities as they arise.
Kirk Davis: Turning to our longstanding fulfillment facility in East Bridgewater, Massachusetts, which we have utilized for 25 years.
Kirk Davis: both our customers and valued employees.
Kirk Davis: are witnessing transformative changes within the facility, laying the foundation for a new era of operational excellence.
Kirk Davis: coinciding with the extension of our lease, we repurposed approximately 50,000 square feet of previously suboptimal space. We're purchasing it for expanded production and additional storage.
Kirk Davis: Moreover, we're 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 and 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 these opportunities, ensuring that we remain a leader in delivering value and innovation to our clients.
Kirk Davis: Moreover, we are undertaking a major transformation in one of our largest production areas there.
Kirk Davis: Raising the roof to double our capacity in a portion of the facility, which affects about 30% of our entire space.
Kirk Davis: Additionally, we have launched a beta version of a standalone microsite for our fulfillment and logistics segment.
Kirk Davis: Designed to enhance our discoverability online and display our full range of capabilities and competitive advantages.
Kirk Davis: Our sales and marketing strategies for next year will be augmented to seize on these opportunities ensuring that we remain a leader and delivering value and innovation to our clients.
Kirk Davis: We are positioning our company to fully capitalize on the growth opportunities in the direct 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 commitment shared by our entire management team and board.
Kirk Davis: We are positioning our company to fully capitalize on the growth opportunities in the direct consumer segment in 2025, which as we all recognize as consumers ourselves is rapidly growing.
Kirk Davis: To sum it up, we are increasingly encouraged by the progress we are seeing to revitalize our business.
Kirk Davis: Before I conclude my opening remarks, I want to emphasize a core commitment shared by our entire management team and board.
Kirk Davis: 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. 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.
Speaker Change: For over a century, Harte Hanks has been a leader in customer service, partnering with the world's most ambitious companies.
Kirk Davis: 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.
Kirk Davis: 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.
Kirk Davis: as I have assessed our company's evolution in customer service.
Kirk Davis: 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.
Kirk Davis: It has become clear that we must transcend traditional customer service
Kirk Davis: 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.
Kirk Davis: We all understand that data, technology, and artificial intelligence are pivotal in this transformation.
Kirk Davis: Leveraging advanced analytics and artificial intelligence, we can gain deeper insights into customer behavior, preferences, and needs.
Kirk Davis: 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 4th.
Kirk Davis: This will allow us to create highly personalized and seamless experiences, forging stronger connections and fostering greater loyalty.
Kirk Davis: 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.
Kirk Davis: These ambitions require that we strengthen and embolden our customer organization.
Speaker Change: We are pleased to announce that Charona St. Car King has been named Chief Customer and Data Officer for Heart Hanks, effective September 4th.
Kirk Davis: Arona joins us from Bain and Company, where she excelled as a partner and a key member in their customer, advanced analytics, and financial service practice. With over three decades of experience in the analytics domain, Sharon 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 initiative. 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.
Speaker Change: Karona joins us from Bain & Company where she excelled as a partner and a key member in their customer advanced analytics and financial service practices.
Speaker Change: With over three 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.
Speaker Change: Sherronis, impressive career, includes executive roles at top tier agencies and data companies such as executive vice president and head of marketing science at B.B.D.O., which is now part of Omnacum.
Speaker Change: and managing partner, North American Lead for Digital Media Optimization and Advanced Analytics at MEC, which is now part of WPP.
Kirk Davis: 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. Throne 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 in General A.I. from Bane Advanced Analytics in its pursuit of certification in Gen A.
Sherronis: Her academic credentials are equally stellar, with a master's degree in applied statistics from Columbia University and a B.S. in quantitative psychology from Penn State.
Speaker Change: Thorne also holds certifications in Chief Data Officer from Carnegie Mellon University.
Speaker Change: Digital Marketing Strategies from Kellogg and Python Programming from the University of Michigan.
Speaker Change: Additionally, she has received advanced training in large language models in generative AI from Bain Advanced Analytics and is pursuing certification in Gen AI Development for Business.
Kirk Davis: 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. Thanks.
Speaker Change: 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.
Speaker Change: Our leadership is dedicated to making our customers' journey with us exciting, rewarding, and next level.
Speaker Change: 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 Garrison: Thank you, Kirk. I will now review the second quarter consolidated results, including revenues from each physics 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 Inside-Out acquisition made in 2022. 2nd quarter revenues, or 45 million dollars. Down by 5.7% compared to $47.8 million for the second quarter of 2023. Growth in the fulfillment and logistics and sales services segments was offset by declines in the other two segments.
Speaker Change: even
David Garrison: Thank you, Kirk. I will now review the second quarter consolidated results.
David Garrison: including revenues from each physics segment.
Speaker Change: As a reminder, starting in 2024, we began reporting four segments instead of three.
David Garrison: The additional segment is referred to as sales services and relates to the inside-out acquisition made in 2022.
David Garrison: 2nd quarter revenues, or $45 million.
David Garrison: down by 5.7% compared to $47.8 million for the second quarter of 2023.
David Garrison: Grouped in fulfillment and logistics and sales services segments was offset by declines in the other two segments.
David Garrison: 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 of the previous year. This was related to the timing between quarters of a surgeon bonding 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.
David Garrison: 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.
David Garrison: This was related to the timing between quarters of a surge in volume with a large customer.
David Garrison: Sales services increased to $4.4 million compared to $2.3 million in the second quarter of 2023.
David Garrison: The increase in volume from a large fintech client was the majority.
David Garrison: The marketing service 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 and 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 cuts.
David Garrison: of the increase. The marketing service segment revenue fell to $7.7 million in the second quarter of 2024. Compared to $10.9 million in the prior year.
David Garrison: Customer budget reductions in the end of specific programs account for decrease in this segment year over year.
David Garrison: A film and then logistics revenues were $20.5 million in the second quarter of 2024. Compared to $19.6 million in the prior year.
David Garrison: The increases were the result of new and expanded programs with existing customers.
David Garrison: Operating expenses in Q2 were $43.7 million, including restructuring expenses of $427,000 compared to $446.1 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.
David Garrison: Operating expenses in Q2.
David Garrison: were $43.7 million, including restructuring expenses of $4447,000, compared to $446.1 million in the same period in 2023.
David Garrison: The operating income in Q2 2024.
David Garrison: was $1.4 million.
David Garrison: compared to the operating income of $1.7 million in the second quarter of 2023.
David Garrison: When adjusting for stock compensation, severance, and restructuring expenses, the adjusted operating income in the second quarter of 2024
David Garrison: is $2.5 million compared to $3.4 million dollars in Q2 of 2023.
David Garrison: The adjusted operating margin was 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 dollars compared to 18 million dollars 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.
David Garrison: The adjusted operating margin is 5.6% in Q2 2024, compared to 7% in the same period in 2023.
David Garrison: 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.
David Garrison: 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.
David Garrison: 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.
David Garrison: 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.
David Garrison: Pension Plan 1 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 state. In June, the assets of the pension scheme were liquidated into cash in order to purchase an equivalent annuity product from an insurance company for the pension participants. This product would contractually replace the company's obligations related to the pension scheme and relieve us of 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 persistence.
David Garrison: Pension Plan 1 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.
David Garrison: 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.
David Garrison: This product would contractually replace the company's obligations related to the pension and relieve our respective liability.
David Garrison: 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.
David Garrison: The annuity provider requires 60 days to onboard the pension participants.
David Garrison: During the third quarter, the company will contribute an additional $1.3 million for the monthly pension payment and final government filings associated with the termination process. The financial impact on the second quarter income statement is dramatic. Pension Academy requires the reversal of the equity balance of the accumulated other comprehensive income associated with Pension Plan 1. This results in a pension charge of 38.2 million dollars. 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.
David Garrison: 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.
David Garrison: The financial impact to the second quarter income statement is dramatic.
David Garrison: Pension accounting requires the reversal of the equity balance of the accumulated other comprehensive income associated with Pension Plan 1. This results in a pension charge of $38.2 million.
David Garrison: This charge provides a tax benefit of $10.1 million, resulting in a net loss of $27.8 million for the quarter.
David Garrison: It is important to note that without the pension charge and tax benefit, the company would have had a net income of $300,000.
Speaker Change: Thank you for your continued support, and I'll turn the call back.
Kirk Davis: Thanks, Dave. Before we move to the Q&A session, I want to emphasize that Harte Hanks is a mid-sized and 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 LVLV 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.
Jim: Jim. Perfect.
Jim: Thanks, Dave. Before we move to the Q&A session, I want to emphasize that Harte Hanks is amid an exciting turnaround.
Jim: Our sales transformation is complete and we are embarking on a new era of growth and success.
David Garrison: 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.
Jim: The cost objective of our Elevate program is on track.
Speaker Change: Our sales pipeline well exceeds what I inherited and continues to grow.
Speaker Change: 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.
Kirk Davis: 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 by and the outdated Approach to Scaling. However, we are confident in our strategy and excited about the future. David and I are happy to answer your questions. Thank you very much.
Speaker Change: Clearly, are you here to date revenue performance? Does not mirror the promising outlook we hold for our business?
Speaker Change: It is important to recognize that we are in the final stages of overcoming the challenge, just post outdated approach to scaling, however, we are confident in our strategy and excited about the future. David and I are happy to answer your questions, thank you very much.
Operator: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask, if you're listening on speakerphone today, that you pick up your handset while asking your question to provide optimal sound quality. Once again, that'll be star one on your keypad at this time. If you wish to join the queue to ask a question, please hold a moment while we poll for questions. And the first question today is coming from Michael Kupinski from Noble Capital Markets. Michael, your line is live. Please proceed.
Speaker Change: Thank you. The floor is now open for questions.
Speaker Change: If you wish to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask that you
Speaker Change: If you're listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again that'll be star one on your keypad at this time, if you wish to join the queue to ask a question, please hold a moment while we pull hold for questions.
Speaker Change: And the first question, say, is coming from Michael Kippenski from Noble Capital Markets. Michael, your line is lies. Please proceed.
Michael Kupinski: Good afternoon, everyone. Thanks for taking my questions. Kirk, as you mentioned, you recently centralized your sales staff and reporting structure and restarted and expanded the staff. When do you think that this new structure and sales expansion will be kind of hitting its dry in terms of accelerating revenue generation and possibly improving efficiency? I was just wanting to add some more color there.
Michael Kippenski: Good afternoon, everyone. Thanks for taking my questions
Speaker Change: Kirk, as you mentioned, you recently centralized your sales staff and reporting structure and re-staffed 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 improved efficiency? I was just wondering if you can just...
Kirk Davis: 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 the prior year. We're learning a great deal about how effective our go-to-market strategy is. We continue to make tweaks.
Speaker Change: at some more color there.
Speaker Change: Sure, I'm happy to and nice to hear from you.
Speaker Change: 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.
Kirk Davis: 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 are 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 being better able to articulate the unique value we bring will be very, very helpful.
Speaker Change: 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.
Speaker Change: 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
Speaker Change: that there are avenues we could be pursuing.
Speaker Change: that will certainly enhance our prospects for closing more business.
Speaker Change: There's great interest right now in data, there's great interest in analytics, there's great interest in Gen AI.
Speaker Change: and I think being better able to articulate the unique value we bring.
Speaker Change: will be very, very helpful.
Speaker Change: So, I would say, you know, our organic lead generation efforts are an area we still want to expand more. And I'd say that we have
Speaker Change: a promising outlook as we proceed through the balance of the year and especially as we think about 2025.
Speaker Change: We're really pleased with the way the organization has come together.
Speaker Change: We've retained all of the folks we initially hired but made some selective choices to change outstaff, which is not uncommon when you build a new organization and it's very performance-based.
Kirk Davis: We definitely are focused more on generating our own leads, and so we're really deeply moving the needle on our digital presence because that's where we have the best chance 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 we want to generate more of our own leads, and that's happening.
Speaker Change: 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...
Speaker Change: Depressing, you know, our involvement or reliance on RFP processes and such.
Speaker Change: 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
Kirk Davis: 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 over the balance of the year and into next year.
Speaker Change: 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.
Speaker Change: Thanks, Kurt. And then I know that on top of everyone's mind is the economy and I was just wondering if
Speaker Change: You know, you look at this quarter, I know some of the issues affecting this quarter were kind of already on play in the quarter before, 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
Speaker Change: 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 you know in kind of more of a lackluster economic scenario that we might have.
Kirk Davis: Yeah, thanks for that. 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 I'm very attuned to that. Frankly, there's so much untapped potential here. It's not a prevailing concern of mine right now.
Speaker Change: Thanks for that. Very aware.
Speaker Change: And I fully appreciate what a slowing economy means. I've run companies during some of the most notable slumps in recent decades.
Speaker Change: I'm very attuned to that.
Speaker Change: 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.
Kirk Davis: I think we need to hustle and obviously start closing on many of the opportunities in our pipeline. We're aware of how, you know, our customers can sort of elect lower-cost alternatives if that's important to their business. You know, we've seen labor arbitrage as a factor in customer care. Clearly, companies can dial back marketing investments if they're concerned and manage earnings as such. However, that's really a good idea.
Speaker Change: we're aware of how our customers can.
Speaker Change: sort of elect lower cost alternatives if that's important to their business. We've seen labor arbitrage, you know, a factor in customer care.
Speaker Change: clearly companies can...
Speaker Change: Dialback Marketing Investments, if they're concerned and managing earnings as such.
Speaker Change: however, that's really a good idea.
Kirk Davis: 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. You know, we've talked about Project Elevate. So, you know, we are equally focused on costs that aren't going to be limiting factors in our growth programs.
Speaker Change: and in some cases maybe to fund more investments in technology. It certainly is a year for
Speaker Change: 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...
Speaker Change: positioned on both sides of the ledger. You know, we've talked about Project Elevate. So, you know, we are equally focused on costs that aren't going to be limiting factors toward our growth programs.
Kirk Davis: 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 and even kiln-drying 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 about needs.
Speaker Change: 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,
Speaker Change: We're even doing kidding projects right now for major retailers is really a back to school and almost holiday story as the stands here right now.
Speaker Change: 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.
Kirk Davis: So, and we're actually currently pursuing some attractive additional pharma opportunities. I think about all of our, you know, our high volumes of digital printing and mailings, you know, that's driven by regulatory requirements, that's a must-do work, you know, late in the second half. So overall, I feel, you know, 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, I wouldn't blame anything on the economy.
Speaker Change: and we're actually currently pursuing some attractive additional farm opportunities. I think about all of our high volumes of digital printing and mailings, you know, that's driven by regulatory requirements, that's must do work, you know, late in the second half.
Speaker Change: Um, so overall, I feel...
Speaker Change: I feel we're in an MBA's 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.
Michael Kupinski: I just have two more questions. You mentioned visibility and the second half. I was wondering if you could 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 of a 2025 situation?
Speaker Change: 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
Speaker Change: 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?
Kirk Davis: You know, the unpredictability in that is really in the sales cycle, and when we make a call on, you know, a sure instance 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're at. 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, our weakness, obviously at that stage, will be, um, the quarters, specifically, typically we have better seasonality in Q4. Right now, I would say, apart from seasonality, our new business outlook is stronger there, um, as well. So, um, we'll see, but we're quite optimistic.
Speaker Change: You know, the unpredictability in that is really in the sales cycle, and when we make a call on.
Speaker Change: you know, assurances of revenue growth in Q3 or Q4. It has to be that the stage we're in across our sales cycle.
Speaker Change: particularly, you know, the contracting and legal stage is where we have to see through. I would say at this point it's too early to make a call. We'll do another call obviously in November.
Speaker Change: And I expect our visibility, obviously, at that stage will be vastly enhanced.
Speaker Change: 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
Speaker Change: on the quarter specifically. Typically, we have better seasonality in Q4. Right now, I would say, apart from the seasonality,
Speaker Change: Our new business outlook is stronger there.
Speaker Change: as well. So we'll see, but we're quite optimistic.
Michael Kupinski: My final question is about your marketing services. Obviously, this has been your more problematic segment, and we're just wondering if you face some unique challenges there. I was wondering if you could just kind of give us your thoughts in terms of the strategy and how you're approaching, you know, kind of getting that back on a revenue growth trajectory, and then just wondering if you could just quickly talk a little bit about your expansion plans internationally as well. And that's all I have.
Speaker Change: My final question is about your marketing services. Obviously, this has been probably more problematic.
Speaker Change: and was just wondering if you had 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...
Speaker Change: quickly talk a little bit about your expansion plans internationally as well. And that's all I have.
Kirk Davis: So, green marketing services has been a weakness, and that really goes back to last spring and summer, and we did see some customers leave, and they were setbacks morale-wise and obviously economically, and we've been retooling since. But I will 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.
Speaker Change: Here.
Speaker Change: So, agree, marketing services has been a weakness.
Speaker Change: and that really originates back to last spring and summer.
Speaker Change: And we did see some customers leave, and they were setbacks morale-wise and obviously economically.
Speaker Change: and we've been retooling.
Speaker Change: But I will tell you that I am
Speaker Change: Still quite optimistic about that segment.
Speaker Change: It's going to be a major focal point in 2025.
Speaker Change: I'm very excited that SHARONA, I think, will bring a lot of value and concentration to this segment early on as well.
Kirk Davis: 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 into our marketing services business that we're hearing from customers that they have a great interest in. Those examples would be in research and data and in 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.
Speaker Change: 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.
Speaker Change: I think there are some new services that we could look at packaging and 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 in tech services.
Speaker Change: and those are not services today with the exception of data that we aggressively market. But even data isn't really...
Speaker Change: today involving us getting involved in anybody's data practice or helping them improve their data practice. It's really it's really the sale of data that we that we really leverage today.
Kirk Davis: 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, you know, 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 our resources there. We will name somebody to lead that division for us in 2025.
Speaker Change: I think when I talk about customer leadership and customer retention,
Speaker Change: We've obviously taken some of the pressure off, you know how much new business we need to generate, it's in these areas.
Speaker Change: and marketing today is becoming increasingly more marketing science-oriented.
Speaker Change: and I think you can see we're bolstering up our resources there. We will name somebody to lead that.
Kirk Davis: We've been doing some restructuring there right now. We've been analyzing the capability gaps that we have to be more competitive. Although, that notwithstanding, you know, the large customer that we just signed was in our marketing services segment, and that customer will begin in the next few weeks. So, we got it.
Speaker Change: 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.
Speaker Change: 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.
Michael Kupinski: Kurt, and then I know that on top of everyone's mind is the economy, and I was just wondering if, you know, you look at this quarter. I know some of the issues affecting his quarter were kind of already playing out in the quarter. But I was just wondering if any of what we saw in terms of weakness and some of your segments was related to the economy. And if you think, as we kind of see the weakening economy in the second half here, you can kind of give us your thoughts on how your business will fare, you know, in kind of more of a lackluster economic scenario that we might have.
Kirk Davis: It has been a weakness here. It's an area where I've had 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'll be a strong contributor in 2025. And then on the international side, you know, 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 generation work, you know, specifically in Europe.
Speaker Change: 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.
Speaker Change: So I'm very committed to the segment and I think the problems were internal and we'll have them fixed and it'll be a strong contributor in 2025.
Speaker Change: And then on the international side.
Kirk Davis: The real gap there is that we have opportunities to expand U.S.-based clients.
Speaker Change: and the Europe.
Speaker Change: We have the opportunity to do more lead gen work.
Kirk Davis: 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 are executing 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.
Speaker Change: Yeah, you know, specifically in Europe.
Speaker Change: We've got a couple of staffers there who are outstanding.
Speaker Change: but that division and the bring it way that they execute.
Kirk Davis: Warren
Kirk Davis: 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.
Speaker Change: 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.
Michael Kupinski: That's all I have. Thank you, guys. Good luck to you. Yeah. Thanks so much.
Kirk Davis: Yeah, thanks so much. I appreciate it.
Speaker Change: and that's all I have. Thank you guys. Good luck to you. Yeah, thanks so much and appreciate it.
Operator: 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.
Operator: [inaudible]
Operator: Thank you, and there are no further questions in Q 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.
Operator: [inaudible]
Operator: [inaudible]
Operator: [inaudible]
Kirk Davis: So I would say, you know, our genetically generated 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.