Good day, everyone, and welcome to the Harte Hanks Third Quarter 2020 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Sheila Ennis. Please go ahead.

Thank you, Christie, and good afternoon, everyone. Thank you for joining us. Hosting the call today are Andrew Benett, Executive Chairman and CEO of Harte Hanks; and Lauri Kearnes, CFO. Before I begin, I'd like to remind everyone that the information provided during this call may contain forward-looking statements, such as statements about the company's strategy, adjustments to cost structure, financial outlook, and capital resources, competitive factors, business and industry expectations, anticipated performance and outcomes, future effects of acquisitions, dispositions, litigation and regulatory changes, economic forecasts for the markets served, expectations related to cost savings measures and the availability of tax refunds and other statements that are not historical facts. Actual results may differ materially from those projected or implied in these statements because of the various risks and uncertainties, included those described in the company's Form 10-K and 10-Q and other filings with the SEC. And in the cautionary statement in today's press release. The call may also reference non-GAAP financial measures. Please refer to the earnings release that was issued after the close for reconciliation of other related disclosures. The company's earnings release is available on the Investors section of its website at hartehanks.com. With all that said, I'd now like to turn the call over to Andrew Benett. Andrew, the call is yours.

Thank you, Sheila. Before commencing our third quarter financial update, I want to take a moment to recap what we've accomplished during the first three quarters of 2020. We are laying a strong foundation from which to grow, and the results are beginning to show, both in terms of traction with existing and new customers, as well as in our financial results. This quarter was the second consecutive quarter, posting both revenue and adjusted EBITDA improvements, and we feel confident that the business is now poised for continued performance. We have implemented cost reductions across every aspect of the company, reducing overall costs in 2020 by over $20 million. We enhanced our management team, bringing in industry-leading talent and promoting internal talent. We are focused on engineering cost savings and jump-starting growth. We are encouraged by the acceleration we've seen and the uptick in new and enhanced services, among both our existing clients and new clients. I'd like to share highlights of the quarter that illustrate successful execution of our growth and turnaround strategy despite the challenges of COVID-19. First, top line revenue was $47.7 million and adjusted EBITDA this quarter was $3.2 million, up from $203,000 in the third quarter a year ago. Note this profit has delivered off lower revenue than we posted in a year ago quarter, which was $51.4 million. Lauri will cover this more in depth. However, I wanted to note how proud I am of the team and what is accomplished in such a short period of time. Through these efforts, we remain confident that we will be adjusted EBITDA positive for the year. Even in the face of continued uncertainty and with the pandemic, we had a strong new business quarter with wins, including new business from a large B2B tech firm, which…

Thank you, Andrew. First, as Andrew shared, adjusted EBITDA this quarter was $3.2 million, up from $203,000 in the year ago quarter when we posted slightly higher revenue. We've cut expenses by nearly $9 million in comparison to the year ago quarter. And our spending is down over $47 million for the first nine months of 2020 versus the same period last year. This cost cutting, coupled with the continued sequential revenue growth are key contributors to the positive and growing adjusted EBITDA. While the potential effects of the pandemic continues to be unpredictable, we are encouraged by new business wins and growth in our B2B and consumer brand verticals. We are continuing to refocus on streamlining and restructuring the business to meet the needs of the market today, and we are encouraged by the stabilization and growth in the business lines where we're investing. I'd now like to walk through the results in more detail. Third quarter revenues were $47.7 million, up over $6.1 million sequentially from last quarter. This compares to $51.4 million last year for a year-over-year revenue decline of $3.7 million. Revenues grew across our B2B and consumer brand verticals in the quarter. Our B2B vertical was up $5.8 million or 51% due to the increased demand for our customer care services, and consumer brands was up $2.9 million or 26%. A portion of the revenue in Q3 was related to short-term projects. Our operating expenses for the first quarter were $46.9 million, down from $55.9 million in the year ago quarter. We reduced our operating expenses in all areas, including labor, production and distribution, advertising and selling, general and administrative. The largest decreases were driven from reduction in transportation and facility expenses, as well as labor and production expenses related to the closure of our…

Thank you. [Operator Instructions] And we'll go to Michael Kupinski from NOBLE Capital Markets. Your line is open.

Thank you. And first of all, congratulations on your quarter. You beat my estimates, but I can't recall the last time you guys actually showed sequential quarterly improvement in revenues. It's been a while. So, congratulations on that. I was just wondering, if you could just give us a little sense about how Q4 is shaping up? Because typically, we do get some seasonality in revenues, and you indicated that you have a building pipeline. So, should we see some sort of further improvement into Q4, if you kind of give us a sense of how things are shaping up there?

Yes. I'll start and then hand it to you, Lauri. So, with regards to Q4 seasonality, one thing that we've discussed in the past is as our share – and that was driven largely by retail and the work that we did out of our print business. So, as that work has declined, there is less seasonality in the business. So, you wouldn't now see going forward any seasonality of Q4 spike due to that. With that said, and I'll let Lauri elaborate as well, the only other point that we noted was that we did have some one term project – or onetime projects within Q3 that contributed to the results.

Yes. I agree. But I think that the price in Q3, Michael, is higher than we expected due to the short-term project, but we'll continue slightly into Q4, but not at the same level that we had in Q3.

Got you. And then you outlined several cost initiatives, one being some infrastructure cost and then, of course, you have been cost-cutting quite some time. How should we look at these costs? Like when do you start cycling some of the cost initiatives and cost that you made earlier? Can you lay that out for me like by quarter, what you're expecting in fourth quarter? And then maybe what you're expecting for full year 2021?

Yes. Lauri, I think if you can elaborate on that, please.

Okay. Yes, Michael, some of the cost savings we have already started to realize those cost savings. So, of the, you know I think we've given you about $20 million of cost savings. I would say, a good chunk of that has already been recognized. We're already realizing those savings. And we still have some additional efforts to do, and we should have fully realized those savings probably by Q3 of next year.

The only other thing that I would add is, you know these were cost savings that are being implemented, in some cases, if it's IT and infrastructure driven because we're following more – we're following our asset-light strategy. And so we're realizing savings from that. And in other cases, it's labor, as I discussed. That we believe there will be continuous cost savings going into 2021 as we look at how we optimize, how the businesses work together and just how we're working within the businesses. So, we don't see that it's a kind of onetime and we're concluded within the end of this year.

Got you. And then can you just remind me, I know that there were some opportunities that have some additional funds coming through the prospect of maybe the 3Q digital sale or resale. And then maybe some available further tax refunds, are those all kind of embedded into the numbers for the third quarter?

Yes. So, the additional funds that we have come in from 3Q were already received. There's nothing left on that. And you will notice on the balance sheet that there is some receivable on the taxes, but it's all embedded into the quarter.

Okay. That’s all I have. Thank you.

Thank you.

And we have no further questions in the queue. I'll turn it back to you for any closing remarks.

Well, thank you very much for joining us, and we appreciate the time and stay safe. Thank you very much.

Thanks.

And that does conclude our call for today. Thank you for your participation. You may now disconnect.