HRTH - Harte-Hanks Inc. (HRTH) - Here Comes The Sun

Over achieves Q2 expectations. Revenues increased a solid 18.4% to $49.3 million, beating our estimate of $44.8 million by 10%. Given tight expense controls, adjusted EBITDA was $4.4 million, an increase of over 800% from the year earlier, out performing our estimate by nearly 100%. Each operating segment contributed to the revenue and adj. EBITDA beat. Financial profile improves. The forgiveness of its $10 million PPP loan lowered debt levels to $13 million as of June 30, 2021. Notably, the company had $23 million in cash and restricted cash as of June 30 and has the flexibility to completely pay off its long term debt. Raising estimates. Our Q3 revenue estimate is revised from $40.3 million to $45.3 million and our adj. EBITDA estimate is revised upward to $3.3 million from $2.6 million. We are raising our full year 2021 revenue estimate from $170.3 million to $180.8 million and our full year 2021 adj. EBITDA estimate from $10.1 million to $13.0 million. Our 2022 revenue estimate is raised from $175.8 million to $177.3 million and our 2022 adj. EBITDA estimate is increased from $12.4 million to $15.0 million. Pension liabilities concerns diminish. With the improved fundamental outlook, the company is expected to generate free cash flow from operations estimated to be roughly $3 million in 2021 and $6 million in 2022, after pension obligations. We believe that the improved fundamentals assuage concern over its pension obligations, especially given the ability to smooth out pension payments and the likelihood of a rising interest rate environment. Reiterate Outperform rating. Near current levels, the HRTH shares trade at a modest 2.7 times Enterprise Value to our upwardly revised 2022 adj. EBITDA estimate. Factoring in its pension obligations, the shares still trade at a compelling 6.8 times. Our price target of $17 reflects a reasonable 12 multiple using the same more conservative methodology. Read More >>