HARTE HANKS INC

Previous wording

This report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements will also be included from time to time in our other public filings, press releases, our website, and oral and written presentations by management. Statements other than historical facts are forward-looking and may be identified by words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “seeks,” “could,” “intends,” or words of similar meaning. Examples include statements regarding (1) our strategies and initiatives, including actions designed to respond to market conditions and improve our performance, (2) our financial outlook for revenues, earnings (loss) per share, operating income (loss), expense related to equity-based compensation, capital resources and other financial items, if any, (3) expectations for our businesses and for the industries in which we operate, including the impact of economic conditions of the markets we serve on the marketing expenditures and activities of our clients and prospects, (4) competitive factors, (5) acquisition and development plans, (6) expectations regarding legal proceedings and other contingent liabilities, (7) other statements regarding future events, conditions, or outcomes.

Current wording

This report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements will also be included from time to time in our other public filings, press releases, our website, and oral and written presentations by management. Statements other than historical facts are forward-looking and may be identified by words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “seeks,” “could,” “intends,” or words of similar meaning. Examples include statements regarding (1) our strategies and initiatives, including actions designed to respond to market conditions and improve our performance, (2) our financial outlook for revenues, earnings (loss) per share, operating income (loss), expense related to equity-based compensation, capital resources and other financial items, if any, (3) expectations for our businesses and for the industries in which we operate, including the impact of economic conditions of the markets we serve on the marketing expenditures and activities of our clients and prospects, (4) competitive factors, (5) acquisition and development plans, (6) expectations regarding legal proceedings and other contingent liabilities, and (7) other statements regarding future events, conditions, or outcomes.

Previous wording

The following MD&A section is intended to help the reader understand the results of operations and financial condition of Harte Hanks, Inc. including any material changes in the Company’s financial condition and results of operations since December 31, 2024, and as compared with the three and nine months ended September 30, 2025. This section is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes included herein as well as our 2024 10-K. Our 2024 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates, and contractual obligations. See Note A, Overview and Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements for further information.

Current wording

The following MD&A section is intended to help the reader understand the results of operations and financial condition of Harte Hanks, including any material changes in the Company’s financial condition and results of operations since December 31, 2025, and as compared with the three months ended March 31, 2025. This section is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes included herein as well as our 2025 10-K. Our 2025 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates, and contractual obligations. See Note A, Overview and Significant Accounting Policies, in the Notes to Condensed Consolidated Financial Statements for further information.

Previous wording

Harte Hanks, Inc. is a leading global customer experience company operating in three reportable segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services. Our mission is to partner with clients to provide them with a robust customer-experience, or CX, strategy, data-driven analytics and actionable insights combined with seamless program execution to better understand, attract, and engage their customers. Our services include strategic planning, data strategy, performance analytics, creative development and execution; technology enablement; marketing automation; B2B and B2C e-commerce; cross-channel customer care; and product, print, and mail fulfillment.

Current wording

Harte Hanks, Inc. is a leading global customer experience company operating in three reportable segments: Revenue Solutions formerly referred to as Marketing Services, Customer Care, and Fulfillment & Logistics Services. Our mission is to partner with clients to provide them with a robust customer-experience, or CX, strategy, data-driven analytics and actionable insights combined with seamless program execution to better understand, attract, and engage their customers. Our services include strategic planning, data strategy, performance analytics, creative development and execution; technology enablement; marketing automation; B2B and B2C e-commerce; cross-channel customer care; and product, print, and mail fulfillment.

Previous wording

Management closely monitors inflation and wage pressure in the market and their potential impact on our business. In recent periods, the U.S. government has imposed tariffs on certain goods imported from countries including China. While tariffs will not have a direct impact on our business, they could negatively impact to our customers and increase inflation. Any adverse economic impact on our clients, could in turn, negatively impact our business.

Current wording

Management closely monitors inflation and wage pressure in the market, and the potential impact on our business. While inflation has not had a material impact on our business, it is possible a material increase in inflation could have an impact on our clients, and in turn, on our business.

Previous wording

Advertising, Selling, General and Administrative expenses decreased $0.1 million, or 2.1%, to$5.1 million primarily due to lower professional service expenses.

Current wording

Advertising, Selling, General and Administrative expenses decreased$0.2 million, or 3.5%, in thethree months ended March 31, 2026, primarily due to lower professional fees.

Previous wording

The largest components of our operating expenses are labor, transportation expenses and outsourced costs. Each of these costs is, at least in part, variable and tends to fluctuate in line with revenues and the demand for our services. Postage costs for mailings are borne by our clients and are not directly reflected in our revenues or expenses.

Current wording

The largest components of our operating expenses are labor, transportation expenses and outsourced costs. Each of these costs is, at least in part, variable and tends to fluctuate in line with revenues and the demand for our services. Transportation rates have increased over the last few years due to demand and supply fluctuations within the transportation industry. Future changes in transportation expenses will continue to impact our total production costs and total operating expenses, and in turn our margins. Postage costs for mailings are borne by our clients and are not directly reflected in our revenues or expenses.

Previous wording

Other expenses, net, for the three months ended September 30, 2025 were$0.2 million compared to$0.9 million, in the prior year quarter. The$0.7 million decrease in other expenses, net, was mainly due to the lower pension expense and changes in foreign currency gain and loss account, as compared to the prior year quarter.

Current wording

Other expenses, net, for the three months ended March 31, 2026 was $0.2 million compared to$0.6 million in the prior year quarter. The$0.4 million decrease in other expense, net was mainly associated with changes in foreign currency gain and loss account.

Previous wording

The income tax benefit of $2.6 million in the third quarter of 2025 represents an increase in income tax provision of $1.7 million when compared to the third quarter of 2024. Our effective tax rate was 816.6% for the third quarter of 2025, an increase of 730.7% when compared to the third quarter of 2024. The effective income tax rate differs from the federal statutory rate of 21%, primarily due to the U.S. state income taxes and income earned in foreign jurisdictions comparative to the level of income in total.

Current wording

The income tax benefit of$0.4 million in the first quarter of 2026 represents an increase in income tax benefit of$0.2 million when compared to the first quarter of 2025. Our effective tax rate was 29.0% for the first quarter of 2026, a decrease of 6.4% from the effective tax rate of 35.4% for the first quarter of 2025. The effective tax rate differs from the federal statutory rate of 21.0%, primarily due to the U.S. state income taxes and income earned in foreign jurisdictions.

Previous wording

The following is a discussion and analysis of the results of our reportable segments for the three and nine months ended September 30, 2025 and 2024. There are three principal financial measures reported to our President (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenue and operating income and operating income plus depreciation and amortization (“EBITDA”). For additional information, see Note O, Segment Reporting, in the Notes to Condensed Consolidated Financial Statements.

Current wording

The following is a discussion and analysis of the results of our reportable segments for the three months ended March 31, 2026 and 2025. There are three principal financial measures reported to our President (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenue, operating income and operating income plus depreciation and amortization (“EBITDA”). For additional information, see Note N, Segment Reporting, in the Notes to Condensed Consolidated Financial Statements.

Previous wording

Our cash and cash equivalent balances were $6.5 million and $9.9 million at September 30, 2025 and December 31, 2024, respectively. As of September 30, 2025, we had the ability to borrow up to $24.0 million under our Credit Facility in addition to the existing letters of credit.

Current wording

Our cash and cash equivalent balances were $4.5 million and $5.6 million at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, we had the ability to borrow an additional $24.3 million under our Credit Facility.

Previous wording

Our principal sources of liquidity are cash on hand, cash provided by operating activities, and borrowings available under our Credit Facility. Our cash is primarily used for general corporate purposes, working capital requirements, and capital expenditure. At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations such as finance and operating leases and unfunded pension plan benefit payments and other needs for our operations in the short term and beyond. Although the Company believes that it will be able to meet its cash needs for the short and medium term, if unforeseen circumstances arise the Company may need to seek alternative sources of liquidity.

Current wording

Our principal sources of liquidity are cash on hand, cash provided by operating activities, and borrowings available under our Credit Facility. Our cash is primarily used for general corporate purposes, working capital requirements, and capital expenditures. At this time, we believe that we will be able to continue to meet our liquidity requirements and fund our fixed obligations such as finance and operating leases and unfunded pension plan benefit payments and other needs for our operations in the short term and beyond. Although the Company believes that it will be able to meet its cash needs for the short and medium term, if unforeseen circumstances arise the Company may need to seek alternative sources of liquidity.

Previous wording

Net cash used in the operating activities for thenine months ended September 30, 2025 was $2.5 million, compared to net cash used in operating activities of $7.0 million for thenine months ended September 30, 2024. The $4.6 million year-over-year increase in cash used in the operating activities was primarily due to $3.5 million changes in other assets and current liabilities.

Current wording

Net cash used in operating activities for the three months ended March 31, 2026 was $0.6 million, compared to net cash used in operating activities of $0.8 million for the three months ended March 31, 2025. The $0.2 million year-over-year increase in cash used in operating activities was primarily due to the $0.2 million higher net loss, which was partially offset by $1.1 million change in accounts receivable and contract assets balances.

Previous wording

Net cash used in investing activities was $1.3 million for the nine months ended September 30, 2025, as compared to the $3.1 million used in investing activities during the same period in 2024. The $1.8 million decrease in cash used in investing activities was primarily driven by lower property, plant and equipment purchase in the nine months ended September 30, 2025.

Current wording

Net cash used in investing activities was $0.3 million for the three months ended March 31, 2026, compared to $0.1 million used in the same period in 2025. The increase was primarily due to more cash used to purchase property, plant and equipment in the three months ended March 31, 2026.

Previous wording

Consolidated foreign holdings of cash as of September 30, 2025 and December 31, 2024 were $2.2 million and $1.5 million, respectively.

Current wording

Consolidated foreign holdings of cash as of March 31, 2026 and December 31, 2025 were $1.8 million and $2.2 million, respectively.

Previous wording

On December 21, 2021, the Company entered into a three-year, $25.0 million asset-based revolving credit facility (the "Credit Facility") with Texas Capital Bank ("TCB"). The Company’s obligations under the Credit Facility are guaranteed on a joint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all of the assets of the Company and the Guarantors pursuant to a Pledge and Security Agreement, dated as of December 21, 2021, among the Company, TCB and the other Guarantors party thereto (the “Security Agreement"). On December 29, 2023, the Company extended the maturity date for the Credit Facility by a period of 6 months, to June 30, 2025. On June 24, 2025, the Company entered into a second amendment to the Credit Facility (the “Second Amendment”) with TCB which extended the maturity date for the Credit Facility by a period of three years to June 30, 2028. The Second Amendment also includes an accordion feature that allows the Company to seek up to a$10.0 million increase in commitments under the credit line, subject to TCB approval.

Current wording

On December 21, 2021, the Company entered into a three-year, $25.0 million asset-based revolving credit facility (the "Credit Facility") with Texas Capital Bank ("TCB"). The Company’s obligations under the Credit Facility are guaranteed on a joint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all of the assets of the Company and the Guarantors pursuant to a Pledge and Security Agreement, dated as of December 21, 2021, among the Company, TCB and the other Guarantors party thereto (the "Security Agreement"). On June 24, 2025, the Company entered into a second amendment to the Credit Facility (the “Second Amendment”) with TCB which extended the maturity date for the Credit Facility by a period of three years to June 30, 2028. The Second Amendment also includes an accordion feature that allows the Company to seek up to a $10.0 million increase in commitments under the credit line, subject to TCB approval.

Previous wording

The loans under the Credit Facility accrue interest at a variable rate equal to the Secured Overnight Financing Rate (SOFR) plus a margin of 2.25% per annum. The latest rate was 6.49% as of September 30, 2025. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2028.

Current wording

The loans under the Credit Facility accrue interest at a variable rate equal to the Secured Overnight Financing Rate (SOFR) plus a margin of 2.25% per annum. The latest rate was 6.03% as of March 31, 2026. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2028.

Previous wording

The Credit Facility contains certain covenants restricting the Company's and its subsidiaries' ability to create, incur, assume or become liable for indebtedness; make certain investments; pay dividends or repurchase the Company's stock; create, incur or assume liens; consummate mergers or acquisitions; liquidate, dissolve, suspend or cease operations; or modify accounting or tax reporting methods (other than as required by U.S. GAAP).

Current wording

The Credit Facility contains certain covenants restricting the Company's and its subsidiaries' ability to create, incur, assume or become liable for indebtedness; make certain investments; pay dividends or repurchase the Company's stock; create, incur or assume liens; consummate mergers or acquisitions; liquidate, dissolve, suspend or cease operations; or modify accounting or tax reporting methods (other than as required by accounting principles generally accepted in the United States of America (“GAAP”)).

Previous wording

As of September 30, 2025 and December 31, 2024, we had no borrowings outstanding under the Credit Facility. At each of September 30, 2025 and December 31, 2024, we had letters of credit outstanding in the amount of $1.0 million and $1.0 million, respectively. No amounts were drawn against these letters of credit at September 30, 2025 and December 31, 2024. These letters of credit exist to support insurance programs relating to workers’ compensation, medical insurance, and reducing cash security deposits on leased property. We had no other off-balance sheet financing activities at September 30, 2025 and December 31, 2024. After the letters of credit on September 30, 2025, we had the ability to borrow up to $24.0 million under the Credit Facility.

Current wording

As of March 31, 2026 and December 31, 2025, we had no borrowings outstanding under the Credit Facility. At each of March 31, 2026 and December 31, 2025, we had letters of credit outstanding in the amount of $0.7 million and $0.7 million, respectively. No amounts were drawn against these letters of credit at March 31, 2026 and December 31, 2025. These letters of credit exist to support insurance programs relating to workers’ compensation and general liability as well as lease obligations. We had no other off-balance sheet financing activities at March 31, 2026 and December 31, 2025.

Previous wording

We did not pay any dividends in the three months ended September 30, 2025 and 2024.

Current wording

We did not pay any dividends in the three months ended March 31, 2026 and 2025. Any future dividend declaration can be made only upon, and subject to, approval of our Board of Directors, and will depend on our results of operations, financial condition, cash requirements, future business prospects, contractual and indenture restrictions and other factors deemed relevant by our Board of Directors.

Previous wording

On May 2, 2023, the Board of Directors of Harte Hanks approved a share repurchase program to maximize shareholder value with authorization to repurchase $6.5 million of the Company’s Common Stock. As of September 30, 2025, the share repurchase program authorization availability was $4.1 million. The Company repur chased zero shares of common stock during thethree and nine months ended September 30, 2025 and 2024.

Current wording

On May 2, 2023, the Board of Directors of Harte Hanks approved a share repurchase program to maximize shareholder value with authorization to repurchase $6.5 million of the Company’s Common Stock. As of December 31, 2025, the share repurchase program authorization availability was $4.1 million. We didn't repurchase any stock during the three months ended March 31, 2026 and no shares of common stock were repurchased in 2025.

Previous wording

We consider such factors as total cash and cash equivalents and restricted cash, current assets, current liabilities, total debt, revenues, operating income, cash flows from operations, investing activities, and financing activities when assessing our liquidity. Our management of cash is designed to optimize returns on cash balances and to ensure that it is readily available to meet our operating, investing, and financing requirements as they arise. We believe that there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for the twelve months following the issuance of these Condensed Consolidated Financial Statements.

Current wording

We consider such factors as total cash and cash equivalents and restricted cash, current assets, current liabilities, total debt, revenues, operating income, cash flows from operations, investing activities, and financing activities when assessing our liquidity. Our management of cash is designed to optimize returns on cash balances and to ensure that it is readily available to meet our operating, investing, and financing requirements as they arise. We believe that there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for the twelve months following the issuance of the Consolidated Financial Statements.