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U.S.UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ý ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
2023
or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to          
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-07120

HARTE HANKS, INC.
(Exact name of registrant as specified in its charter)

Delaware74-167728474-16772841 Executive Drive, Chelmsford, MA 01824
(State or other jurisdiction of(I.R.S. Employer(Address of principal executive offices,
incorporation or organization)Identification Number)(I.R.S. Employer Identification No.)including zip code)

9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216
(Address of principal executive offices, including zipcode)
(210) 829-9000
(Registrant’sRegistrant's telephone number, including area code)

are code (512) 434-1100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classEach ClassTrading Symbol(s)Name of each exchange on which registered
Common StockHHSNew York Stock ExchangeNASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ýx
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ýx

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ýx No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ýx No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o     Accelerated filer o Non-accelerated filer x    Smaller reporting company x    Emerging growth company o
Large accelerated fileroAccelerated filerý
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting companyo
Emerging growth companyo

ifIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). o
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ýx

TheAs of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference towas approximately $33,654,017 based on the closing price ($10.30) ason the NASDAQ on such date. Solely for purposes of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2017), was approximately $50,200,128.

The number of shares outstanding of each of the registrant’s classes of common stock as of January 31, 2018 was 6,217,586this disclosure, shares of common stock allheld by executive officers and directors of one class.the registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.

As of March 15, 2024, 7,240,905 shares of common stock, $1.00 par value per share of the registrant were issued and outstanding.
Documents incorporated by reference:

Portions of the Proxy Statement to be filed forin relation to the company’s 2018Company’s 2024 Annual Meeting of Stockholders are incorporated herein by reference into Part III of this Form 10-K.


THIS ANNUAL REPORT ON FORM 10-K IS BEING DISTRIBUTED TO STOCKHOLDERS IN LIEU OF A SEPARATE ANNUAL REPORT PURSUANT TO RULE 14a-3(b) OF THE ACT AND SECTION 203.01 OF THE NEW YORK STOCK EXCHANGE LISTED COMPANY MANUAL.

Table of Contents


Harte Hanks, Inc. and Subsidiaries
Table of Contents
Form 10-K Report
December 31, 2017
2023
Page
PartPART I
3
10
Risk Factors
8
Item 1B.
1719
19
1720
21
Legal Proceedings
17
Item 4.
1821
PART II
Item 5.
1922
2122
2123
2829
2829
2829
2829
30
3230
PART III
Item 10.
3330
30
Executive Compensation
33
Item 12.
3330
3430
3430
PART IV
Item 15.
3531
35
36

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 common stock, equity, share,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 per share, amounts have been retroactively adjustedoperating income, expense related to reflect a one-for-ten reverse stock splitequity-based compensation, capital resources and other financial items, if any, (3) expectations for our businesses and for the industries in which was effective January 31, 2018.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.

These forward-looking statements are based on current information, expectations, and estimates and involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from what is expressed in or indicated by the forward-looking statements. In that event, our business, financial condition, results of operations, or liquidity could be materially adversely affected, and investors in our securities could lose part or all of their investments. Some of these risks, uncertainties, assumptions, and other factors can be found in our filings with the SEC, including the factors discussed below in this Item 1A, “Risk Factors” of this Annual Report, and any updates thereto in our Forms 10-Q and 8-K. The forward-looking statements included in this report and those included in our other public filings, press releases, our website, and oral and written presentations by management are made only as of the respective dates thereof, and we undertake no obligation to update publicly any forward-looking statement in this report or in other documents, our website, or oral statements for any reason, even if new information becomes available or other events occur in the future, except as required by law.
PART I

ITEM 1.    BUSINESS
INTRODUCTION

Harte Hanks, Inc. (", together with its subsidiaries (“Harte Hanks," "we, "our,"” “Company,” “we,” “our,” or "us"“us”) partners with clients to deliver relevant, connected,is a leading global customer experience company. With offices in North America, Asia-Pacific and quality customer interactions. Our approach starts with discovery and learning, which leads to customer journey mapping, creative and content development, analytics, and data management, and continues with execution and support in a variety of digital and traditional channels. We produce engaging and memorable customer interactions to drive business results for our clients, develop better customer relationships, experiences, and defining interaction-led marketing.

Virtually all organizations rely on marketing to generate revenues and publicity. Many businesses have a chief-level executive responsible for marketing who is charged with combining data, technology, channels, and resources to demonstrate a return on marketing investment. This has led many businesses to use direct and targeted marketing, which offer accountability and measurability of marketing programs, allowing customer insight to be leveraged to create and accelerate value.Europe, Harte Hanks is a leader in highly targeted, multichannel marketing.works with some of the world’s most respected brands.

We are the successor to a newspaper business started by Houston Harte and Bernard Hanks in Texas in the early 1920s. We were incorporated in Delaware on October 1, 1970.1970. In 1972, Harte Hanks went public and was listed on the New York Stock Exchange ("NYSE"(“NYSE”). We became a private company in a leveraged buyout in 1984, and in 1993 we again went public and listed our common stock on the NYSE. On July 13, 2020, we began trading on the OTCQX® Best Market (the “OTCQX”). On December 1, 2021, our stock was uplisted to be traded on the Nasdaq Global Market® (“Nasdaq”), where it continues to trade today.

We provide public access to allAll reports filed with the Securities and Exchange Commission ("SEC"(“SEC”) under the Securities Exchange Act of 1934, as amended (the "1934 Act"“Exchange Act”). are publicly available. These documents may be accessed free of charge on our website at www.hartehanks.com. There is not any information from this website incorporated by reference herein.http://www.hartehanks.com. These documents are provided as soon as practical after they are filed with the SEC and may also be found at the SEC’s website at www.sec.gov.www.sec.gov. Additionally, we have adopted and posted on our website a code of ethics that applies to our principalchief executive officer, principalchief financial officer and principal accounting officer.general counsel which is posted on our website. Our website also includes our corporate governance guidelines and the charters for each of our audit, compensation, and nominating and corporate governance committees, and wecommittees. We will provide a printed copy of any of these documents to any requesting stockholder.stockholder by following the instructions on our website. These website addresses are intended to be for inactive textual references only. None of the information on, or accessible through, these websites are part of this Form 10-K or is incorporated by reference herein.

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OUR BUSINESS
Harte Hanks is a leading customer and brand experience company operating in six service categories - data, marketing, sales, customer care, fulfillment and logistics. In and across these service categories, we address today's biggest growth and customer experience challenges for B2B and B2C businesses across the world in the new era of intelligence and Artificial Intelligence ("AI"), by being a modern journey enabler. The challenges we solve include:
•Grappling with data, AI and technology in the cookie-less world
•Growing awareness, demand and sales for products
•Storing, fulfilling and delivering samples, kits, materials and products direct to the door of consumers, influencers or businesses
•Delivering better customer experience and support across multiple channels
•Delivering effectively with tighter budgets and talent shortages
Our clients need help enabling their journey to growth, to transformation, to customer centricity, to product success and to AI powered approaches and solutions to marketing, sales, fulfillment and customer care. At the core of how we address this is a concentration on our client's key audiences - prospects, customers, patients, members, partners, employees and influencers - and how we help align our client's brands and products to these different audiences along journeys. This includes the product journey e.g. product innovation, build, strategy, launch, sell, deliver, support and recall and the customer journey e.g. how customers become aware of their needs, how they buy, making the purchase, using the product or service, advocacy and renewal. We are laser focused on helping our clients better understand, engage, acquire, deliver to, service, support and retain these audiences. We start by understanding and architecting the journey in focus, and then enable, deliver and manage some or all aspects along this journey. Our alignment of customers and products on behalf of brands along the entire lifecycle distinguishes us from most other agencies and competitors in our service categories.
We offer a wide varietyuniquely diverse range of integrated,services and solutions in and across our service categories to businesses in the following industries:
•B2B Technology & Services including cloud, SaaS, hardware, software, semiconductors, health technology, fintech, electronics, distributors and telecommunications
•Healthcare, Pharmaceuticals & Health Insurance
•Consumer Products including health, well-being and beauty; consumer tech/electronics; domestic appliances
•Travel, Hospitality, Streaming & Entertainment
•QSRs (Quick Service Restaurants)
•Financial Services and Fintech
•Automotive
•Retail
We partner with our clients to provide them with: data-driven analytics and actionable insights from research; robust customer-experience ("CX"), marketing or sales strategies; and the data, content & technology to enable delivery. We then combine these insights with seamless program execution, fulfillment, service and delivery on a project or ongoing service basis to meet our client's goals. In essence we offer services along the customer & product lifecycle - from Data to Demand, to Deal, to Delivery, and everything in between.
Operationally, starting in 2024, our services are organized into four business units that span the end to end customer and product lifecycles:
•Data, marketing, demand generation and managed marketing services
•Sales Services
•Fulfillment & Logistics
•Customer Care
Data, Marketing, Demand Generation and Managed Marketing Services
Harte Hanks helps our clients determine, detect and activate their audiences through traditional, digital, and emerging channels. We leverage data, insights, technology, and award-winning creative solutions to meet and exceed our clients’ business objectives and optimize our client’s return on investment. We provide full service multi-channel data-driven solutionsmarketing from strategy to campaign execution.
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Data, Marketing, Demand Generation and Managed Marketing Services (continued)
Our key offerings include:
•Data & Analytics – In-depth data and analytics including audience identification, profiling, segmentation and prioritization, predictive modeling and data strategy. We provide data hygiene and cleansing to ensure the best possible results. We access broad first-party and third-party data sources, search and social media, and research through syndicated, primary and secondary sources, and we leverage our proprietary DataView tool, a comprehensive, aggregate data mart for top brands around the globe.B2C (USA) and B2B (Global) that provides a 360-degree customer view, with over 1,500 attributes enabling accurate predictive marketing to our clients. We also offer a unique intent data solution called Audience Finder for detecting in-market prospects.
•Research - Primary and secondary research to help our clients gain insight intounderstand their customers’ behaviors from theircustomers, category, competitors and capabilities, either as a standalone deliverable or to inform the development of strategies for campaigns and programs
•Strategy – Provide strategic guidance to help clients efficiently and effectively plan and execute omnichannel marketing, demand generation and customer experience programs that deliver business results. We leverage data and useinsights to enhance our clients’ understanding of their consumers, competitors and category dynamics, then apply those insights to develop the strategies for programs designed to drive activities like customer acquisition, engagement, purchase behavior, loyalty and advocacy. Types of strategies include: targeting, Go-To-Market, commercial, product launch, customer experience, campaign, content, ABM and demand strategy.
•Creative & Content - Full-service creative and content design, development and execution spanning traditional and digital channels, including creative concepts, messaging and content assets for print, broadcast, direct mail, website, app, display, social, mobile, search engine marketing, and voice.
•Marketing Technology – Website and app development, e-commerce development and enablement, database building and management, platform architecture creation, and marketing automation to serve as the foundation for digital and multi-channel marketing execution.
•Digital and Multi-channel Marketing Execution - Orchestration and execution of programs and campaigns across multiple channels, territories and audiences, using data, strategies, content and Marketing technology or MarTech provided either by Harte Hanks or by our clients.
•Demand Generation and ABM (Account Based Marketing) - Providing intelligence-based B2B solutions that insightunderstand audiences and their behaviors, and then inspire and drive action to deliver results. These solutions help companies understand which accounts, sectors and persons to target, and then generate marketing qualified leads (“MQLs”) and pipelines for their marketing and sales team, through combining data, strategy, content, MarTech and digital/multi-channel execution.
•Managed Marketing Services - also referred to as "Marketing as a Service". A flexible outsourcing marketing operations solution, that works as a highly integrated extension of a client’s own marketing function by blending the best of agency and business outsourcing processes and capabilities. Marketing as a service operationalizes, manages and delivers some or all of: data operations, marketing technology, analytics, demand generation, and staff augmentation.
Sales Services
Harte Hanks supports our customers' sales teams in their continued pursuit of excellence, delivering specialized outsourcing, optimization, lead nurturing and messaging development services to global and national partners, since our acquisition and integration of InsideOut Solutions, LLC in late 2022.
Leveraging our unique initiatives, we help organizations drive their sales operations toward uplifted conversion rates, superior team performance and heightened win rates. Our designed approach delivers revenue predictability, control and confidence for partners. Equipped with our proprietary insights and performance metrics, clients can achieve a more purposeful view of their operational rhythm, enabling them to recognize, meet and improve benchmarks quarter over quarter. This offering is often sold in combination with our Marketing Services capabilities, specifically with Demand Generation and Data Services. Our global team provides this through three key service capabilities:
•Inside Sales Outsourcing - combining best-in-class analytics, accomplished sales professionals and full-cycle experimentation we provide B2B enterprises, and Small to Midsized Businesses with a fully outsourced sales service, that can work alongside or in lieu of an internal inside sales function.
•Lead Generation – combining data, lead generation resources and technology we provide turnkey lead generation and development that converts interested or good fit prospects into leads for sales to qualify, nurture and sell to.
•Sales Play Development - design of sales plays and cadences to enable sales teams to find, plan, engage, nurture and convert prospects into sales opportunities.
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Fulfillment & Logistics Services
Harte Hanks fulfillment unlocks critical sales enablement, value-added product fulfillment, and eCommerce channels for our clients. Harte Hanks logistics supports the supply chain needs of our clients in everything from time-sensitive deliveries to full scale supply chain management.
•Product, Print-On-Demand, and Mail Fulfillment: Our varied product and mail fulfillment solutions include printing on demand, managing product recalls, and distributing literature and promotional products to support B2B trade, drive marketing campaigns, and improve customer experience. Our event, curated kitting, and influencer programs provide custom solutions to engage audiences, target customers, support conferences, and appreciate employees. Spanning the United States, our fulfillment locations are temperature-controlled, FDA-registered, and geographically convenient, thereby allowing us to optimize print and product fulfillment to maximize customer shipping efficiency while minimizing transportation costs. Our Kansas City location is fully licensed for nutritional supplements, medical foods, baby formula and junior food products, chocolates, coffee and tea, edible nuts and seeds, snack foods, pet foods, pet treats, and pet nutritional supplements. We leverage our proprietary order management platform to facilitate customer orders, and we work with a variety of data sources and users to initiate the fulfillment order process. Furthermore, our global fulfillment capabilities extend to Europe and are augmented by a network of regional partners.
•Logistics: We provide third-party logistics and freight optimization services across the United States. We ship millions of time-sensitive materials annually through our access to a certified fleet of over 15,000 trucks and a proprietary rate-shopping logistical system called Allink®360 designed to ensure customer products are delivered on-time and on-budget.
Customer Care
Our customer care services are tailored to serve our partners’ customer bases, helping them to win new buyers and turn existing patrons into loyal brand advocates. We serve our clients to support their end customers’ urgent needs, navigate an increasingly-complex technology landscape, and enable artificial intelligence technology and automation — with a fierce devotion to reducing customer effort, for the benefit of both business and buyer. This approach to “effortless customer experience” drives better service results and lowers operational costs.
Our global, omnichannel delivery model is focused on providing our clients three key services:
•Customer Service Outsourcing - Our accomplished customer care associates interact and resolve consumer queries and complaints across hardware and software platforms, healthcare benefit plans, recalls or a myriad of other customer service issues. by leveraging technology to help reduce customer effort while providing a human touch to increase customer satisfaction.
•Customer Care Technology and AI Transformation – Our solution services teams configure different CRM solutions (e.g., Salesforce, Zendesk) and channel /AI technology including Amazon Connect to create meaningful customer interactions by connecting content between agent, AI-driven interfaces and web-based self-help tools and community forums.
•Self-Service Technology - Providing and maintaining self service solutions through Interactive Voice Response ("IVR"), Help Centers, online, via apps and via channel technology.
We also analyze a significant amount of aggregated data obtained from customer interactions on behalf of our clients. We leverage information gained from this analysis and end customer-driven feedback to drive efficiencies, provide insights on predictive behaviors that lead to lower customer churn and help our clients innovate their core product offerings and develop innovative multi-channel marketing programsproduct features.
Client Relationships
We are known for helping clients build deep customer relationships, create connected customer experiences, and optimize each and every customer touch point in order to deliver a return on marketing investment. We believedesired business outcomes. Realizing our clients’ success is determined notthe only by how good their toolsvalid measure of our own success, we ensure all our efforts are but how well we help them use the toolsaligned with our clients’ business objectives and measured against defined performance metrics. It is this commitment to gain insight and analyze their consumers. This results in a strong and enduring relationship between our clients and their customers which is keybusinesses that allows us to being leaders in customer interaction.build deep and meaningful relationships with them. Our client engagements may consist of one or a few of our service offerings – with a goal toward continuously expanding our client relationships. We offer a full complementprovide cross-service client management along with continuous business reviews to ensure our clients get value from our partnerships.
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Use of subcontractors
Certain segments of our business rely on subcontractors and resourcesother third parties to provide a broad rangeportion of marketingour overall services in mediacertain engagements. Over the years we have established strong relationships with subcontractors that translate into high level service and favorable prices for our customers.
Restructuring Activities
Our management team continuously reviews and adjusts our cost structure and operating footprint to optimize our operations, and invest in improved technology. During the second half of 2023, we engaged a consulting firm to help review and analyze the structure and operations of the Company. This review included greater than 200 meetings with personnel at all levels of the firm and led to the initiation of our transformation program named "Project Elevate". The program involves the optimization and rationalization of our business resources as well as the partial reinvestment of savings into the company's sales and marketing team, technology, and strategy. A business transformation office was established at the beginning of 2024 to manage and measure these initiatives. Reorganization cost reductions from direct mailProject Elevate during 2024 through 2026 are estimated to email, including:be $16.0 million.

Agency & Digital Services. Our agency services are full-service, customer engagement agencies specializingIn connection with our cost-saving and restructuring initiatives in direct2023, we incurred total restructuring charges of $5.7 million including $4.6 million of operational efficiency consulting, $0.9 million in real estate consolidation, and digital communications for both consumer and business-to-business markets. With strategy, creative, and implementation services, we help marketers within targeted industries understand, identify, and engage prospects and customers in their channel of choice. Our digital solutions integrate online services within the marketing mix and include: search engine management, display, digital analytics, website development and design, digital strategy, social media, email, e-commerce, and interactive relationship management and a host$0.2 million of other services that support our core businesses.

Database Marketing Solutions and Business-to-Business Lead Generation. We have successfully delivered marketing database solutions across various industries. Our solutions are built around centralized marketing databases with three core offerings: insight and analytics; customer data integration; and marketing communications tools. Our solutions enable organizations to build and manage customer communication strategies that drive new customer acquisition and retention and maximize the value of existing customer relationships. Through insight, we help clients identify models of their most profitable customer relationships and then apply these models to increase the value of existing customers while also winning profitable new customers. Through customer data integration, data from multiple sources comes together to provide a single customer view of client prospects and customers. Then we help clients apply their data and insights to the entire customer life cycle, to help clients sustain and grow their business, gain deeper customer insights, and continuously refine their customer resource management strategies and tactics.


Direct Mail, Logistics, and Fulfillment. As a full-service direct marketing provider and a substantial mailing partner of the U.S. Postal Service ("USPS"), our operational mandate is to ensure creativity and quality, provide an understanding of the options available in technologies and segmentation strategies and capitalize on economies of scale with our variety of execution options. Our services include: digital printing, print on demand, advanced mail optimization, logistics and transportation optimization, tracking (including our proprietary prEtrak solution), commingling, shrink wrapping, and specialized mailings. We also maintain fulfillment centers where we provide custom kitting services, print on demand, product recalls, and freight optimization allowing our customers to distribute literature and other marketing materials.

Contact Centers. We operate teleservice workstations around the globe providing advanced contact center solutions such as: speech, voice and video chat, integrated voice response, analytics, social cloud monitoring, and web self-service. We provide both inbound and outbound contact center services and support many languages with our strategically placed global locations for both consumer and business-to-business markets.

Many of our client relationships start with an offering from the list above on an individual solution basis or a combination of our offerings from across our service offerings.

In 2017, 2016, and 2015, Harte Hanks had revenues from continuing operations of $383.9 million, $404.4 million, and $444.2 million, respectively. 

Recent Developments

On January 9, 2018, we entered into an amendment (the "First Amendment") to our credit agreement with Texas Capital Bank, N.A. The First Amendment increases the availability under our revolving credit facility from $20 million to $22 million and extended term of the credit facility to April 17, 2020. See Note C, Long-Term Debt, in the Notes to Consolidated Financial Statements for further discussion.

On January 23, 2018, we entered into a Securities Purchase Agreement with Wipro, LLC ("Wipro"), under which Wipro paid $9.9 million for shares of our Series A Convertible Preferred Stock which are convertible into 16.0% of our common stock. The proceeds are being used for general corporate purposes, including to finance working capital. See Note P, Subsequent Events, in the Notes to Consolidated Financial Statements for further discussion.

On January 31, 2018, we executed a reverse stock split of shares of our common stock whereby every ten pre-split shares were exchanged for one post-split share of Harte Hanks' common stock (the "Reverse Stock Split"). No fractional shares were issued in connection with the Reverse Stock Split; stockholders who would otherwise have held a fractional share of the Common Stock received a cash payment in lieu thereof. In addition, our authorized common stock was reduced from 250 million to 25 million shares. The number of authorized shares of preferred stock remains unchanged at one million shares. See Note P, Subsequent Events, in the Notes to Consolidated Financial Statements for further discussion.

On February 28, 2018, we sold our 3Q Digital, Inc. subsidiary to an entity owned by certain former owners of the 3Q Digital business. Consideration for the sale included $5.0 million in cash proceeds and assignment of a $35 million contingent consideration obligation of the company (related to our purchase of 3Q Digital in 2015) to the buyer, therefore relieving the company of such obligation. See Note P, Subsequent Events, in the Notes to Consolidated Financial Statements for further discussion.

related costs.
Customers

Our services are marketed to specific industries or markets with servicesclients include large multinational enterprises, small and software products tailored to each industry or market. We believe that we are generally able to provide services to new industriesmedium-sized businesses and markets by modifying our existing services and applications. We currently provide services primarily to the retail, B2B, financial services, consumer, and healthcare vertical markets, in addition to a range of other select markets.government organizations. Our largest client (measured in revenue) comprised 9%terms of revenue generated 11.2% of total revenues in 2017.2023. Our largest 25 clients in terms of revenue comprised 59%generated 71.7% of total revenuesrevenue in 2017.

2023. Our clients span a wide range of industries including but not limited to retail, travel, streaming, healthcare, financial services, and technology, which insulates the company from adverse conditions in any one sector. We generally enter into long-term contracts with our clients ranging in duration from one to three years. Most of our contracts do not require our customers to purchase a minimum amount of services from us. In general, our contracts with our customers are terminable on short notice with little or no penalty payable on termination.
Sales and Marketing

Our enterpriseHarte Hanks operates a modern sales force sellsand marketing growth engine to generate awareness, create demand and convert this demand into new business, as well as support existing client growth and retention. As a variety of solutions andB2B services to address client’s targetedcompany we practice the marketing needs. We maintain solution-specific sales forces and sales groupsmethodology and tactics we offer to sell our individual productsclients, including ABM, demand generation, content marketing, inside sales and solutions. Our direct sales forces, with industry-specific knowledgeenterprise sales. We also leverage partnerships to extend our reach and experience, emphasize the cross-sellingbroaden our solutions.
For marketing we leverage a combination of a full range of directcorporate marketing resources, marketing services resources and are supported by employees in each service area assigneda modern MarTech stack including CRM, content management, SEO/digital advertising tools to specific clients with industry specific expertise. Wesupport targeting, account based marketing, demand creation and awareness.
For sales we rely on our enterprise and solution sellers, combined with an internal sales team, to primarily sell our products and services to new clients and task our employees supporting existing clients to expand our client relationship through additional solutions and products. We have expanded our sales team coverage internationally to support our global client and prospect network. Our sales force sells a variety of solutions and services to address our clients’ cross-selling targeted marketing needs. We also maintain solution-specific experts in our sales force and sales groups to sell our individual products and solutions, with expertise by target industries including B2B, Health and B2C.


Facilities

Our services are provided at the following facilities, allWe had14 employees in our corporate sales and marketing function as of which are leased:
Domestic Offices
Austin, TexasMaitland, Florida
Bellaire, TexasNew York, New York
Burlington, VermontOakland, California
Chelmsford, MassachusettsRaleigh, North Carolina
Chicago, IllinoisSan Antonio, Texas
Deerfield Beach, FloridaSan Diego, California
Denver, ColoradoSan Francisco, California
East Bridgewater, MassachusettsSan Mateo, California
Fullerton, CaliforniaShawnee, Kansas
Grand Prairie, TexasTrevose, Pennsylvania
Jacksonville, FloridaTexarkana, Texas
Langhorne, PennsylvaniaWilkes-Barre, Pennsylvania
International Offices
Bristol, United KingdomManila, Philippines
Hasselt, BelgiumUxbridge, United Kingdom
Iasi, Romania

December 31, 2023.
Competition

Our business faces significant competition in all of its offerings and within each of its vertical markets. Direct marketing is a dynamic business, subject to rapid technological change, high turnover of client personnel who make buying decisions, client consolidations, changing client needs and preferences, continual development of competing products and services, and an evolving competitive landscape. Our competition comes from numerous local, national, and international direct marketing, and advertising, customer care, print fulfillment, smaller 3PL, logistics companies, and internal client internal resources, against whom we compete for individual projects, entire client relationships, and marketing expenditures. CompetitiveThe principal competitive factors in our industry includeare the breadth, depth and quality and scope of services,service offerings, technical and strategic expertise, the perceived value of the services provided, reputation, pricing, and brand recognition. We also compete against internet (social,social, mobile, web-based, and email),email, print, broadcast, and other
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forms of advertising for marketing and advertising dollars in general. FailureDuring 2023, we continued to continually improvesee an increase in the in sourcing of capabilities among our current processes, advance and upgrade our technology applications, and to develop new products and servicesclients, which resulted in a timely and cost-effective manner, coulddecrease in revenues from these customers.
Furthermore, competition may begin to emerge as a result inof the lossavailability of in-house information technology solutions that can replicate some of our clients or prospectiveservices. We expect our clients to current or future competitors. In addition, failurecontinue to gain market acceptance of new productsimprove their information technology systems and offerings and, in some circumstances, move the services could adversely affect our growth. Although we believe that our capabilities and breadth of services, combined with our U.S. and international production capability, industry focus, and ability to offer a broad range of integrated services, enable us to compete effectively, our business results may be adversely impacted by competition. Please refer to Item 1A, “Risk Factors”, for additional information regarding risks related to competition.

provide in-house.
Seasonality

OurSome of our revenues tend to be higher in the fourth quarter than in other quarters during a given year. This increased revenue is a result of overall increased marketing activity prior to and during the holiday season primarily related to ourin the retail vertical.

Discontinued Operations

Previously, Harte Hanks also provided data quality solutions through Trillium Software, Inc. (“Trillium US”). On December 23, 2016, (i) Harte Hanks completed the sale of Trillium US to Syncsort Incorporated (“US Buyer”), (ii) Harte-Hanks UK Limited (“UK Seller”) completed the sale of Harte-Hanks Trillium UK Limited (“Trillium UK”) to Syncsort Limited (“UK Buyer”),vertical, and (iii) Harte-Hanks GmbH (“German Seller” and together with Harte Hanks and UK Seller, the “Sellers”) completed the sale of Harte-Hanks Trillium Software Germany GmbH (“Trillium Germany” and together with Trillium US and Trillium UK, “Trillium”) to Syncsort GmbH (“German Buyer” and together with US Buyer and UK Buyer, the “Syncsort Buyers”), in each case pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) entered into on November 29, 2016 by and among the Sellers, the Syncsort Buyers, Trillium, and Harte Hanks, in its capacity as representative of the Sellers (such transaction, the “Trillium Sale”). The aggregate consideration received by the Sellers in respect of Trillium from the Syncsort Buyers was approximately $112.0 million in cash, less estimated purchase price adjustments, pursuantdue to the terms of the Purchase Agreement. A portion of the cash consideration was deposited into escrow for post-closing purchase price adjustments and the Sellers’ indemnification obligations.

The decision to sell Trillium largely derived from the desire to prioritize investments to support our other services that more directly serve chief marketing officers by optimizing our clients' customer journey across an omni-channel delivery platform. Because the Trillium business required continuing investment and development, and because the competitive and other market dynamics of software businesses were so distinct from our other services, we thought a sale of the business would be best for both the rest of our business as well as Trillium itself. The proceeds from the sale were used to repay in full, and allow the termination of, our 2016 secured credit facility with Wells Fargo Bank, N.A. See Liquidity and Capital Resourcesopen enrollment period in the Management's Discussion and Analysis for further discussion.

This transaction resulted in an after-tax loss of $39.9 million. Because Trillium represented a distinct business unit with operations and cash flows that can clearly be distinguished, both operationally and for financial purposes, from the rest of Harte Hanks, the results of operations, financial position, and cash flows for Trillium are reported separately as discontinued operations for all periods presented. Results of the remaining Harte Hanks business are reported as continuing operations.
healthcare vertical.
GOVERNMENT REGULATION
As a company conducting varied business activities for clients across diverse industries around the world, we are subject to a variety of domestic and international legal and regulatory requirements that impact our business, including, for example, regulations governing consumer protection, and unfair business practices, contracts, e-commerce, intellectual property, labor, and employment (especially wage and hour laws), securities, tax, and other laws that are generally applicable to commercial activities.
We do not expect to need to make material capital expenditures to maintain compliance with government regulations.
We are also subject to, or affected by, numerous local, national, and international laws, regulations, and industry standards that regulate direct marketing activities, including those that address privacy, data security, and unsolicited marketing communications. Examples of someThe most material of these laws and regulations that may be applied to, or affect, our business or the businesses of our clients include the following:

•The Federal Trade Commission’s positions regarding the processing of personal information and protecting consumersconsumer protection as expressed through its Protecting Consumer Privacy in an Era of Rapid Change, Data Brokers, Big Data and Cross-Device Tracking reports (each of which seek to address consumer privacy, data protection, and technological advancements related to the collection or use of personal information for marketing purposes).
•Data protection laws in the United States (“U.S.”) (which are generally state specific) and in the European Union ("EU"(“EU”), including the General Data Protection Regulation (EU(“EU Regulation 679/2016)2016”), each of which imposes a number of obligations with respect to the processing of personal data, and with respect to EU Regulation 679/2016 also imposes prohibitions related to the transfer of personal information from the EU to other countries, including the U.S.,United States, that do not provide data subjects with an “adequate” level of privacy or security.security, and applies to all of our products in the EU.
•The Financial Services Modernization Act of 1999, oralso known as the Gramm-Leach-Bliley Act ("GLB"(“GLB”), which, among other things, regulates the use for marketing purposes of non-public personal financial information of consumers that is held by financial institutions. Although Harte Hanks is not considered a financial institution, many of our clients are subject to the GLB. The GLB also includes rules relating to the physical, administrative, and technological protection of non-public personal financial information.
•The Health Insurance Portability and Accountability Act of 1996 ("HIPAA"(“HIPAA”), which regulates the use of protected health information for marketing purposes and requires reasonable safeguards designed to prevent intentional or unintentional use or disclosure of protected health information.
•The Fair Credit Reporting Act (“FCRA”), which governs, among other things, the sharing of consumer report information, access to credit scores, and requirements for users of consumer report information.
•The Fair and Accurate Credit Transactions Act of 2003 ("(“FACT Act"Act”), which amended the FCRA and requires, among other things, consumer credit report notice requirementsnotices for creditors that use consumer credit report information in connection with risk-based credit pricing actions and also prohibits a business that receives consumer information from an affiliate from using that information for marketing purposes unless the consumer is first provided a notice and an opportunity to directrequest the business not to use the information for such marketing purposes, subject to certain exceptions.
The Fair Credit Reporting Act ("FCRA"), which governs, among other things, the sharing of consumer report information, access to credit scores, and requirements for users of consumer report information.
•Federal and state laws governing the use of the email for marketing purposes, including the U.S. Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ("CAN-SPAM"(“CAN-SPAM”), Canada’s Anti-Spam Legislation ("CASL"(“CASL”) and similar e-Privacy laws in Europe (in support of Directive 2002/58/EC).
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•Federal and state laws governing the use of telephones for unsolicited marketing purposes, including the Federal Trade Commission’s Telemarketing Sales Rule ("TSR"(“TSR”), the Federal Communications Commission’s Telephone Consumer Protection Act ("TCPA"(“TCPA”), various U.S. state do-not-call laws, Canada’s National Do Not Call laws and rules (“Telecommunications Act”) and similar e-Privacy laws in Europe (in support of Directive 2002/58/EC).

•Federal and state laws governing the collection and use of personal data online and via mobile devices, including but not limited to the Federal Trade Commission Act and the Children'sChildren’s Online Privacy Protection Act, which seek to address consumer privacy and protection.
•Federal and state laws in the U.S., Canada, and Europe specific to data security and breach notification, which include required standards for data security and generally require timely notifications to affected persons in the event of data security breaches or other unauthorized access to certain types of protected personal data.

There are additional consumer protection, privacy, and data security regulations in locations where we or our clients do business. These laws regulate the collection, use, disclosure, and retention of personal data and may require consent from consumers and grant consumers other rights, such as the ability to access their personal data and to correct information in the possession of data controllers. We and many of our clients also belong to trade associations that impose guidelines that regulate direct marketing activities, such as the Direct Marketing Association’s Commitment to Consumer Choice.
As a result of increasing public awareness and interest in individual privacy rights, data protection, information security, and environmental and other concerns regarding marketing communications, federal, state, and foreign governmental and industry organizations continue to consider new legislative and regulatory proposals that would impose additional restrictions on direct marketing services and products. Examples include data encryption standards, data breach notification requirements, consumer choice and consent restrictions, and increased penalties against offending parties, among others.
In addition, our business, in general, and the way we do business in particular, may be affected by the impact of these restrictions on our clients and their marketing activities. These additional regulations could increase compliance requirements and restrict or prevent the collection, management, aggregation, transfer, use, or dissemination of information or data that is currently legally available. Additional regulations may also restrict or prevent current practices regarding unsolicited marketing communications. For example, many states have considered implementing "do-not-mail" legislation that could impact our business and the businesses of our clients and customers. In addition, continuedContinued public interest in individual privacy rights and data security may result in the adoption of further voluntary industry guidelines that could impact our direct marketing activities and business practices.

We cannot predict the scope of any new legislation, regulations, or industry guidelines or how courts may interpret existing and new laws. Additionally, enforcement priorities by governmental authorities may change and also impact our business either directly or through requiring our customers to alter their practices. Compliance with regulations is costly and time-consuming for us and our clients, and we may encounter difficulties, delays, or significant expenses in connection with our compliance. We may also be exposed to significant penalties, liabilities, reputational harm, and loss of business in the event that we fail to comply with applicable regulations. There could be a material adverse impact on our business due to the enactment or enforcement of legislation or industry regulations, the issuance of judicial or governmental interpretations, enforcement priorities of governmental agencies, or a change in customs arising from public concern over consumer privacy and data security issues.

INTELLECTUAL PROPERTY RIGHTS

Our intellectual property assets include trademarks and service marks that identify our companyCompany and our services, know-how, software, and other technology that we develop for our internal use and for license to clients and data and intellectual property licensed from third parties, such as commercial software and data providers. We generally seek to protect our intellectual property through a combination of license agreements and trademark, service mark, copyright, patent and trade secret laws andas well as through domain name registrations and enforcement procedures. We also enter into confidentiality agreements with many of our employees, vendors, and clients and seek to limit access to and distribution of intellectual property and other proprietary information. We pursue the protection of our trademarks and other intellectual property in the U.S. and internationally. Although we from time to time evaluate inventions for patentability,their possibility of being awarded a patent, we do not own any patents, and patents are not core to our intellectual property strategy (other than as may be incidental to commercially available technology or software we license).

We have developed proprietary software including NexTOUCH and Allink®360, each of which are integral to our business. NexTOUCH is key to the success of our print and product fulfillment business while Allink®360 ensures customers' products are delivered on-time and on-budget.
EMPLOYEESHUMAN CAPITAL RESOURCES

As of December 31, 2017,2023, Harte Hanks employed 5,3921,709 full-time employees and 243253 part-time employees, of which approximately 2,805 are980 are based outside of the U.S., primarily in the Philippines. A portion of our workforce is provided to us through staffing companies. None of our workforce is represented by labor unions. We consider our relations with our employees to be good.

We believe that our employees are the key to our success. Our human capital strategy focuses on:

Training and Talent Development: Harte Hanks is committed to the education of its employees and has committed to provide its employees with a variety of learning opportunities, including, but not limited to, technical skill development, soft skills development, workplace conduct guidance, and IT security training.
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Diversity, Equity and Inclusion: Harte Hanks recognizes the value of diversity, equity and inclusion within its organization and strives to ensure that its workplace reflects the diverse communities in which it operates in order to promote collaboration, innovation, creativity and belonging. Harte Hanks is proud of its diverse workforce and cross-cultural competency and, as of December 31, 2023, employed individuals from 6 different countries. As of December 31, 2023, 58% of Harte Hanks’ workforce was female. Harte Hanks is committed to recruiting and employing qualified candidates regardless of their gender or cultural background.
Employee Benefits: Harte Hanks believes in the importance of offering its employees competitive salaries and wages, together with comprehensive insurance options. Harte Hanks recognizes the importance of comprehensive healthcare benefits, including medical, prescription drug, vision and dental, and employees and their family members are provided with tools and resources to assist in adopting and maintaining a healthy lifestyle. Harte Hanks pays the cost of basic life insurance, accidental death and dismemberment insurance, and short-term and long-term disability for its employees. Additionally, employees may purchase supplemental life and dependent life insurance. We also sponsored a 401(k) retirement plan in which we matched a portion of employees’ voluntary before-tax contributions prior to 2018. Under this plan, both employee and matching contributions vest immediately. We stopped this 401(k) match program in 2018 and resumed it in 2023.
ITEM 1A.    RISK FACTORS
Cautionary Note Regarding Forward-Looking Statements

This report, includingsection discusses 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 (the "1933 Act") and Section 21E of the 1934 Act. Forward-looking statements may also be included inmost significant factors that could affect 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, (2) adjustments to our cost structure and other actions designed to respond to market conditions and improve our performance, and the anticipated effectiveness and expenses associated with these actions, (3) our financial outlook for revenues, earnings per share, operating income, expense related to equity-based compensation, capital resources and other financial items, (4) 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, (5) competitive factors, (6) acquisition and development plans, (7) our stock repurchase program, (8) expectations regarding legal proceedings and other contingent liabilities, (9) the impact of recent tax reform legislation on ourbusiness, results of operations and (10) other statements regarding future events, conditions, or outcomes.

These forward-looking statements are based on current information, expectations, and estimates and involvefinancial condition, including the price of our common stock. You should carefully consider the following risks, uncertainties, assumptions, and otherwhich represent the material risk factors that affect the Company and are difficultknown to predictthe Company at this time, as well as the other information contained in this Annual Report on Form 10-K in evaluating our company and our common stock. The risks described below are not the only ones we face. Additional risks not presently known to us or that could cause actual results to vary materially from what is expressed in or indicated by the forward-looking statements. In that event,we currently deem immaterial may also adversely affect our business, financial condition, results of operations, or liquidity could be materially adversely affected, and investors in our securities could lose part or all of their investments. Some offinancial condition.
We have grouped these risks, uncertainties, assumptions, and otherrisk factors can be found in our filings with the SEC, including the factors discussed below in this Item 1A, “Risk Factors”, and any updates thereto in our Forms 10-Q. The forward-looking statements included in this report and those included in our other public filings, press releases, our website, and oral and written presentations by management are made only as of the respective dates thereof, and we undertake no obligation to update publicly any forward-looking statement in this report or in other documents, our website, or oral statements for any reason, even if new information becomes available or other events occur in the future, except as required by law.into three categories:

In addition to the information set forth elsewhere in this report, including in the MD&A section, the factors described below should be considered carefully in making any investment decisions with respect•Risks related to our securities.business and how we operate;

•Risks related to cybersecurity and technology;
•Risks related to our capital structure and common stock.
Risks Related to our Business and How we Operate
Most of our client engagements are cancelablecancellable on short notice.

The marketing services we offer, and in particular for direct mail and contact center services, are generally terminable upon short notice by our clients, even if the term of the agreement (and the expected duration of services) is several or many years. Many of our customer agreements do not have minimum volume, or revenue requirements or exclusivity arrangements, so clients may (and do) vary their actual orders from us over time based on their own business needs, their satisfaction with the quality and pricing of our services, and a variety of other competitive factors. In addition, the timing of particular jobs or types of jobs at particular times of year (such as mail programs supporting the holiday shopping season or contact center programs supporting a specific event) may cause significant fluctuations in the operating results of our operations in any given quarter. We depend to some extent on sales to certain industries, such as the consumer retail industries, technology, and financial services. To the extent these industries experience downturns, the results of our operations may be adversely affected.

A large portion of our revenue is generated from a limited number of clients, with concentration in the consumer retail industry.clients. The loss of a client or significant work from one or more of our clients could adversely affect our business.

Our ten largest clients collectivelyclient (measured in revenue) generated 11.2% of total revenues in 2023 and represented 43.2%11.2% of total accounts receivable as of December 31, 2023. Approximately 71.7% of our revenuesrevenue for 2017. Furthermore, traditional consumer retail (which is experiencing significant business model and financial challenges) represented 24.9% of2023 was generated by our 2017 revenues.25 largest clients. While we typically have multiple projects with our largest customers which would not all terminate at the same time, the loss of one or more of the projectsour larger clients or contractseven a single project or contract with one of our largest clients could adversely affect our business, results of operations, and financial condition if the lost revenues wereare not replaced with profitable revenues from that client or other clients.

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Our industry is subject to intense competition and dynamic changes in business model, which in turn could cause our operations to suffer.
We rely on business partners as an essential element of our go-to-market strategy,The B2B services industry is highly competitive, highly fragmented, and we depend on one business partner, which is also a significant equity holder, for a large number of critical services.

We have determined that for some services, and most technology, we are best served by partnering with other companies, engaging them as vendors either on a standing or as-needed basis.subject to rapid change. We believe the principal competitive factors in this approach reducesmarket are breadth, depth, and quality of service offerings, ability to tailor specific solutions to the investment neededneeds of clients and their customers, the ability to accessattract, train, and retain qualified staff, cybersecurity infrastructure, compliance rigor, global delivery capabilities, pricing, and marketing and sales capabilities. We compete for business with a variety of companies, as well as in-house operations of existing and potential clients. If our clients place more focus on in-house marketing or utilize new or emerging technologies to internalize these operations, the size of the market for third-party service providers like us could reduce significantly. Similarly, if competitors offer their services and technologiesat lower prices to gain market share or provide services that gain greater market acceptance than the services we offer or develop, the demand for our services may decrease.
Specialized providers or new entrants can enter our markets by developing new systems or services that could impact our business. The opportunity for new entrants in our industry may expand as digital engagement and offerings increase in importance. New competitors, new strategies by existing competitors or clients, and provides greater flexibilityconsolidation among clients or competitors could result in how we structure solutions for clients and adapt tosignificant market changes. However, because we do not own or control the service or technology partners, we are subject to the potential failure of those partners financially or commercially. We may not be able to anticipate any such problems, and failure or weakness of one or more ofshare gain by our key business partnerscompetitors, which could have a materialan adverse effect on our revenue.
Some emerging technologies, such as AI, Robotic Process Automation, Machine Learning, Voice of the Customer, Interactive Voice Response, and Internet of Things, may cause an adverse shift in the way certain of our existing business operations are conducted, including by replacing human contacts with automated or self-service options, or by decreasing the size of the available market. We also expect our competitors to continue to improve their technology infrastructure, including with the use of AI and machine learning solutions, to interact with clients and prospects, automate their services, process and analyze large amounts of data and grow their customer base. Our ability to deliver services toinnovate our clients,own technology infrastructure and in turn harmappropriately grow our financial performance. Furthermore, our business partners may have different or conflicting interests, and although we seek to negotiate appropriate commercial terms, we may be unable to secure or enforce those terms in order to protect our client and employee relationships. Should our partners undermine our client or employee relations, our financial performanceCX solutions offerings using these tools (and predicting the next generation of such tools) will be harmed.

In particular, Wipro, LLC provides a wide array of services for us and for our clients, including database and software development, database support and analytics, IT infrastructure support and digital campaign management. Because of the nature of these services, it would be difficult and disruptive to our business to replace Wipro if doing so was necessary or desirable. Wipro is our largest equity holder, having recently invested $9.9 million in us through the purchase of our Series A Convertible Preferred Stock. Subject to certain conditions, Wipro, LLC is entitles to appoint a non-voting board observer or a board member to our board of directors.

We face significant competition for individual projects, entire client relationships and advertising dollars in general.

Our business faces significant competition within each of our vertical markets and for all of our offerings. We offer our marketing services within a dynamic business environment characterized by rapid technological change, high turnover of client personnel who make buying decisions, client consolidations, changing client needs and preferences, continual development of competing products and services, and an evolving competitive landscape. This competition comes from numerous local, national, and international direct marketing and advertising companies, and client internal resources, against whom we compete for individual projects, entire client relationships, and marketing expenditures by clients and prospective clients. We also compete against internet (social, mobile, web-based, and email), print, broadcast, and other forms of advertising for marketing and advertising dollars in general. In addition,affect our ability to attractcompete. We may be unsuccessful at anticipating or responding to new clientsdevelopments on a timely and to retain existing clientscost-effective basis, and our use of technology may differ from accepted practices in some cases, be limited by clients’ policies on or perceptions of conflicts of interest which may prevent us from performing similar services for competitors. Somethe marketplace. Certain of our clients have also soughtsolutions may require lengthy and complex implementations that can be subject to reduce the number of marketing vendorschanging client preferences and continuing changes in technology, which can increase costs or use third-party procurement organizations, all of which increases pricing pressure, and may disadvantage us relative to our competitors. Our failure to improve our current processes or to develop new products and services could result in the loss of our clients to current or future competitors. In addition, failure to gain market acceptance of new products and services could adversely affect our growth and financial condition.

business.
Current and future competitors may have significantly greater financial and other resources than we do, and they may sell competing services at lower prices or at lower profit margins, resulting in pressures on our prices and margins.

The sizessize of our competitors varyvaries widely across vertical markets and service lines. Therefore, someSome of our competitors may have significantly greater financial, technical, marketing, orand other resources than we do in any one or moreall of our market segments, or overall.segments. As a result, our competitors may be in a position to respond more quickly than we can to new or emerging technologies, methodologies, and changes in customer requirements, or may devote greater resources than we can to the development, promotion, sale, and support of innovative products and services. Moreover, new competitors or alliances among our competitors may emerge and potentially reduce our market share, revenue, or margins. Some of our competitors also may choose to sell products or services competitive tothat compete with ours at lower prices by accepting lower margins and profitability,profits or may be able to sell products or services competitive tothat compete with ours at lower prices given proprietary ownership of data, technical superiority, a broader or deeper product or experience set, greater capital resources or economies of scale. Price reductions or pricing pressure by our competitors could negatively impact our margins and results of operations and could also harm our ability to retain clients or obtain new customers on favorable terms. Competitive pricing pressures tend to increase in difficult or uncertain economic environments, due to reduced marketing expenditures of many of our clients and prospects, and the resultingin turn negatively impact on the competitive business environment for marketing service providers such as our company.

We must maintain technological competitiveness, continually improve our processes, and develop and introduce new services in a timely and cost-effective manner.

We believe that our success depends on, among other things, maintaining technological competitiveness in our products, processing functionality, and software systems and services. Technology changes rapidly as makers of computer hardware, network systems, programming tools, computer and data architectures, operating systems, database technology, and mobile devices continually improve their offerings. Advances in information technology may result in changing client preferences for products and product

delivery channels in our industry. The increasingly sophisticated requirements of our clients require us to continually improve our processes and provide new products and services in a timely and cost-effective manner (whether through development, license, or acquisition). For example, in 2017 we invested in a new database offering and marketing data platform. Our direct mail operations are increasingly pressured by larger-scale competitors who have adopted technologies allowing them to more effectively and efficiently customize mailed marketing materials. We may be unable to successfully identify, develop, and
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bring new and enhanced services and products to market in a timely and cost-effective manner, such services and products may not be commercially successful, and services, products, and technologies developed by others may render our services and products noncompetitive or obsolete.

Our success depends on our ability to consistently and effectively deliver our services to our clients.

Our success depends on our ability to effectively and consistently staff and execute client engagements within the agreed upon time frame and budget. Depending on the needs of our clients, our engagements may require customization, integration, and coordination of a number of complex product and service offerings and execution across many facilities. Moreover, in some of our engagements, we rely on subcontractors and other third parties to provide some of the services to our clients, and we cannot guarantee that these third parties will effectively deliver their services, that we will be able to easily suspend work with contractors that are not performing adequately, or that we will have adequate recourse against these third parties in the event they fail to effectively deliver their services.services as we are generally responsible for the work of these sub-contractors. Other contingencies and events outside of our control may also impact our ability to provide our products and services.services, such as pandemics or other national or global health crisis or severe weather events that could disrupt our delivery networks. Our failure to effectively and timely staff, coordinate, and execute our client engagements may adversely impact existing client relationships, the amount or timing of payments from our clients and our reputation in the marketplace andas well as our ability to secure additional business and our resulting financial performance. In addition, our contractual arrangements with our clients and other customers may not provide us with sufficient protections against claims for lost profits or other claims for damages.

We have recently experienced, and may experience in the future, reduced demand for our products and services due to the financial condition and marketing budgets of our clients and other factors that may impact the industry verticals that we serve.

Marketing budgets are largely discretionary in nature, and as a consequence are easier to reduce in the short-term than other expenses. Our customers have in the past, and may in the future, respondedrespond to their own financial constraints, (whetherwhether caused by weak economic conditions, weak industry performance or client-specific issues)circumstances, by reducing their marketing spending.spend. For instance, in light of the current inflationary environment and increased cost of capital due to rising interest rates, our customers may reduce the amount of services we provide to them, for among other reasons, to preserve liquidity. Customers may also be slow to restore their marketing budgets to prior levels during aan economic recovery and may respond similarly to adverse economic conditions in the future. Our revenues are dependent on national, regional, and international economies and business conditions. A lastinglong-lasting economic recession, regardless of the cause, or anemic recovery in the markets in which we operate could have material adverse effects on our business, financial position, or operating results. Similarly, industry or company-specific factors may negatively impact our clients and prospective clients, and in turn result in reduced demand for our products and services, client insolvencies, collection difficulties or bankruptcy preference actions related to payments received from our clients. We may also experience reduced demand as a result of consolidation of clients and prospective clients in the industry verticals that we serve.

We must effectively manage our costs to be successful. If we do not achieve our cost management objectives, our financial results could be adversely affected.

Our business plan and expectations for the future require that we effectively manage our cost structure, including our operating expenses and capital expenditures across our operations. In 2023, our management team formed a project team focused on cost-saving initiatives and other restructuring efforts. The program named Project Elevate created and changed processes in each of our business segments to transform the operational cost structure of the company and change the culture to be more agile, optimize the structure, and cost justify all activities of the organization. A transformational office was established at the beginning of 2024 with the mandate to manage and measure these initiatives on a go forward basis. However, we may not be able to recognize all identified potential savings and even if we are able to recognize the identified savings, such cost savings may be insufficient to achieve our cost management objectives. To the extent that we do not accurately anticipate and effectivelysuccessfully manage our costs as our business evolves, our financial results may be adversely affected.

Consumer perceptions regarding the privacy and security of their data may prevent or impair our ability to offer our products and services.
Our financial performanceVarious local, national, and failureinternational regulations, as well as industry standards, give consumers varying degrees of control as to timely file periodic reports with the SEC has harmed our commercial reputationhow personal data is collected, used, and relationship with customers, vendors, andshared for marketing purposes. If, due to privacy, security, or other commercial parties, andconcerns, consumers exercise their ability to prevent or limit such data collection, use, or sharing, it may impair our ability to attract, retainprovide direct marketing services for those consumers and motivate employees.limit our clients’ demand for our services. Additionally,

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privacy and security concerns may limit consumers’ willingness to voluntarily provide data to our clients or marketing companies. Some of our services depend on voluntarily provided data. For instance, we believe that one of the most attractive offerings of our Marketing Services segment is the provision of data-analytics to our clients. However, the ability to provide such services is at least in part dependent on the ability to collect large volumes of voluntarily provided data. If there is a significant shift in consumer behavior or governmental regulations were to inhibit our ability to collect large amounts of this type of data, our ability to provide meaningful data analytics to our clients would likely be impaired.
If our facilities are damaged, or if we are unable to access and use our facilities, our business and results of operations will be adversely affected.
Our declining financial performanceoperations rely on the ability of our employees to work at specially equipped facilities to perform services for our clients. Although we have some excess capacity and failureredundancy, we do not have sufficient excess capacity or redundancy (in equipment, facilities, or personnel) to timely file periodic reports with the SEC has caused customersmaintain our standard service and vendors to increase scrutiny on payment and performance terms in our agreements, which may impose additional costs (or result in reduced profitability) in our operations. Clients, vendors, and partners (and prospective clients, vendors, and partners) may also decline to do business with us due to their concerns regarding our financial condition. Additionally, due to our liquidity constraints,operational levels for an extended period of time if we may beare unable to aggressively priceuse one of our major facilities. Outsourcing these processes to facilities not owned by us is not a viable option. Should we lose access to a facility for any reason, including as a result of pandemics, terrorist incident or natural disaster, our service levels are likely to decline or be suspended and clients would go without service or secure replacement services to win workfrom a competitor. As a consequence of such an event, we would suffer a reduction in competitive bid situations. These impediments to working with clients, vendors and partners may reduce both our overall revenues and profitability,harm to (and loss of) client relationships.
If our new leaders are unsuccessful, or if we continue to lose key management and consequentlyare unable to attract and retain the valuetalent required for our business, our operating results could suffer.
Over the past few years, we have replaced many of our common stock.

Likewise,leaders (including our declining financial performanceChief Executive Officer, and failure to timely file periodic reports with the SEC has negatively affected employee moraleChief Financial Officer), some a number of times. If our new leaders fail in their new and compensation. Due to financial constraints, we may have difficulty providing compensation that is sufficient to attract, retainadditional roles and motivate employees, especially skilled professionals for whom sizeable bonus payouts are a key element of market-driven cash compensation. Furthermore, the decline in the price of our common stock has eroded the value of our equity-based

incentive programs. Ifresponsibilities (and more generally if we are unable to attract retainadditional leaders with the necessary skills to manage our business) our business and motivate employees despiteits operating results may suffer. Further, our financial performance and within the resource constraints, it will impairprospects depend in large part upon our ability to effectively serveattract, train, and retain experienced technical, client services, sales, consulting, marketing, and management personnel. While the demand for personnel is also dependent on employment levels, competitive factors, and general economic conditions, our clients, whichrecent business performance may diminish our attractiveness as an employer. The loss or prolonged absence of the services of these individuals could have a material adverse effect on our business, financial position, or operating results.
Interestrate increases could affect our results of operations, cash flows and financial position.
Interest rate fluctuations in turn is likelyEurope and the United States may affect the amount of interest we earn on cash equivalents. Our Credit Facility bears interest based upon the Secured Overnight Financing Rate. Our results of operations, cash flows, and financial position could be materially or adversely affected by significant increases in interest rates. We also have exposure to reduce both our overall revenues and profitability, and consequentlyinterest rate fluctuations in the United States, specifically money market, the value of our common stock.pension obligations and overnight time deposit rates, as these affect our earnings on excess cash. Even with the offsetting increase in earnings on excess cash in the event of an interest rate increase, we cannot be assured that future interest rate increases will not have a material adverse impact on our business, financial position, or operating results. Increased interest rates have put upward pressure on pricing and purchasing power. Pricing pressure has led to some wage inflation which could adversely affect our margins and profitability if it persisted for a long time or wage pressure increased.

We are subject to risks associated with operations outside the United States
Harte Hanks conducts business outside of the United States. During 2023, approximately 9.6% of our revenues were derived from operations outside the United States, primarily in Europe and Asia. We may expand our international operations in the future as part of our growth strategy. Accordingly, our future operating results could be negatively affected by a variety of factors, some of which are beyond our control, including:
•changes in local, national, and international legal requirements or policies resulting in burdensome government controls, tariffs, restrictions, embargoes, or export license requirements;
•higher rates of inflation;
•the potential for nationalization of enterprises;
•less favorable labor laws that may increase employment costs and decrease workforce flexibility;
•potentially adverse tax treatment;
•less favorable foreign intellectual property laws that would make it more difficult to protect our intellectual property from misappropriation;
•more onerous or differing data privacy and security requirements or other marketing regulations;
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•longer payment cycles;
•social, economic, and political instability;
•regional armed conflicts, as well as any additional economic sanctions adopted in response to such actions;
•the differing costs and difficulties of managing international operations;
•modifications to international trade policy or the imposition of increased or new tariffs, quotas or trade barriers on key commodities; and
•geopolitical risk and adverse market conditions caused by changes in national or regional economic or political conditions (which may impact relative interest rates and the availability, cost, and terms of mortgage funds).
In addition, exchange rate fluctuations may have an impact on our future costs or on future cash flows from foreign investments. We have not entered into any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. The various risks that are inherent in doing business in the United States are also generally applicable to doing business anywhere else and may be exacerbated by the difficulty of doing business in numerous sovereign jurisdictions due to differences in culture, laws, and regulations.
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain internal control over financial reporting and we are also required to establish disclosure controls and procedures under applicable SEC rules. An effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and fraud. Management is required to provide an annual assessment on the effectiveness of our internal control over financial reporting. Our inabilitytesting may reveal significant deficiencies in our internal control over financial reporting that are deemed to be material weaknesses and render our internal control over financial reporting ineffective. In the past these assessments and similar reviews have led to the discovery of material weaknesses, all of which have been remediated. However, no assurance can be given that we won't discover material weaknesses in the future. We have incurred and we expect to continue to incur substantial accounting and auditing expenses and expend significant management time in complying with the requirements of Section 404.
While an effective internal control environment is necessary to enable us to produce reliable financial reports and is an important component of our efforts to prevent and detect financial reporting errors and fraud, disclosure controls and internal control over financial reporting are generally not capable of preventing or detecting all financial reporting errors and all fraud. A control system, no matter how well-designed and operated, is designed to reduce rather than eliminate the risk of material misstatements in our consolidated financial statements. There are inherent limitations on the effectiveness of internal controls, including collusion, management override and failure in human judgment. A control system can provide only reasonable, not absolute, assurance of achieving the desired control objectives and the design of a control system must reflect the fact that resource constraints exist.
If we are not able to comply with the listing requirements of the New York Stock Exchange could resultSection 404, or if we or our independent registered public accounting firm identify deficiencies in our common stock being delisted, whichinternal control over financial reporting that are deemed to be material weaknesses (i) we could affectfail to meet our common stock’s market pricefinancial reporting obligations; (ii) our reputation may be adversely affected and liquidityour business and reduce our ability to raise capital.

During 2017, we received several notices from the NYSE indicating that the average closing price of our common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE under Rule 802.01C of the NYSE Listed Company Manual. This compelled us to effect a 1-for-10 reverse stock split on January 31, 2018.

Although the NYSE has notified us that we have cured the average closing price requirement, other NYSE continued listing requirements include that we maintain an average market capitalization of over $50 million (measured over a consecutive 30 trading-day periods) when our stockholders' equity is less than $50 million, as it recently has been. Our common stockoperating results could be delisted if we are not in compliance with this (or any other such) requirement and are unable to regain compliance during any applicable cure or grace period. A delisting of our common stock could negatively impact us by, among other things, reducingharmed; (iii) the liquidity and market price of our common stock could decline; and reducing(iv) we could be subject to litigation and/or investigations or sanctions by the number of investors willingSEC, or other regulatory authorities.
There were no changes in our internal controls over financial reporting during our most recent fiscal year that have materially affected, or are reasonably likely to hold or acquirematerially affect, our common stock.internal control over financial reporting.

Risks Related to Cybersecurity and Technology
Privacy, information security and other regulatory requirements may prevent or impair our ability to offer our products and services.

We are subject to and affected by numerous laws, regulations, and industry standards that regulate direct marketing activities, including those that address privacy, data protection, processing personal information, information security, and marketing communications. Please refer to the section above entitled “Government Regulation” for additional information regarding some
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As a result of increasing public awareness and interest in privacy rights, data protection, and access,the fair use of personal information, consumer protection, information security, environmental protection, and other concerns,similar matters, national and local governments and industry organizations regularly consider and adopt new laws, rules, regulations, and guidelines that impact, restrict, and regulate our business products and services. Whether already in place or regulatescheduled to become effective in the future, comprehensive data protection, privacy, and marketing communications, services,laws apply across the jurisdictions in which we operate as well as in the locations where any such personal information originates, including Europe, the Philippines, and products. Examples includemost states throughout the United States. These regulations apply when processing personal data encryptionfor business and marketing purposes and broadly impact all marketing activities, including legitimate activities associated with profiling consumer behaviors, drawing inferences from personal information, making automated decisions about individuals using personal information, transferring personal information between parties and jurisdictions, communicating with existing and prospective customers, and to other similar activities. Additionally, we are subject to operational obligations when processing and storing personal information, including, but not limited to, adopting and upholding a governance framework to protect this information, registering with relevant regulators, implementing secure infrastructure and data security standards and strategies, data breach notification requirements, registration/licensing requirements (oftendetection and response solutions, conducting audits to identify security risks as well as carrying out additional procedures to demonstrate accountability and compliance with fees), consumer choice,national and local privacy and data protection regulations. Other relevant compliance considerations in support of these mandates include establishing solutions in support of broad privacy and data protection rights, including those designed to offer notice to individuals, capture prior consent, grant access to personal information, offer choices regarding the decision to share one’s personal information and consent restrictions and penalties for infractions, among others. In addition, the new European General Data Protection Regulation (GDPR) will take effect in May 2018 and will apply to all of our products and services that provide service in Europe. The GDPR will include operational requirements for companies that receive or process personal data of residents of the European Union that are different than those currently in place in the European Union. For example, we mayhow such information can be required to implement measures to change or limit (by age, use or geography) our service offerings. We may also be required to obtain consent and/or offer newused, as well as related controls to existinghonor choices expressed related to if and new users in Europe before processing datahow personal information can be processed or licensed for certain aspects of our services. In addition, the GDPR will include significant penalties for non-compliance. marketing purposes.
We anticipate that additional restrictions andnew regulations will continue to be proposed and adopted in the future. The Philippines hasfuture in the jurisdictions in which we operate and/or generate revenue. We also adoptedexpect any new regulations will reflect the Data Privacy Actgrowing trends common to current privacy, data protection and marketing laws requiring companies to bear the burden of 2012 (Republic Act 10173) which mirrors most important aspects of the GDPR,proving compliance efforts through demonstrable records, and is likelymay subject companies to have a similar effect onsignificant fines and penalties should they violate any substantive or technical requirement. We may implement additional safeguards, controls and measures in response to these changes and trends; and may be required to change or limit our operations in and involving the Philippines.

service offerings.
Our business may also be affected by the impact of these restrictionsrules and regulations on our clientsclients’ business and their marketing activities. In addition, as we acquire new capabilities and deploy new technologies to execute our strategy, we may be exposed to additional types or layers of regulation. Current and future restrictions and regulations could increase compliance requirements and costs, and restrict or prevent the collection, management, aggregation, transfer, use or dissemination of information (especially with respect to personal information),information or change the requirements therefore so as to require other changes to our business or that of our clients.clients' businesses, practices and tolerance for risk. Additional restrictions and regulations may limit or prohibit current practices regarding marketing communications and information quality solutions. For example, manymultiple states and countries have considered implementing "do not contact"implemented opt out legislation thatfor telephone marketing, requiring the creation of statewide do-not call registries. Such legislation could impact our business and the businesses of our clients and of their customers. In addition, continued public interest in privacy rights, data protection and access, and information security may result in the adoption of furtheradditional industry guidelines that could impact our direct marketing activities and business practices.

We cannot predict the scope of any new laws, rules, regulations, or industry guidelines or how courts or agencies may interpret current ones.existing rules, regulations or guidelines. Additionally, enforcement priorities by governmental authorities will change over time, which may impact our business. Understanding the laws, rules, regulations, and guidelines applicable to specific client multichannel engagements and across many jurisdictions poses a significant challenge, as such laws, rules, regulations, and guidelines are often inconsistent or conflicting, and are sometimes at odds with client objectives. Our failure to properly comply with these regulatory requirements and client needs may materially and adversely affect our business. General compliance with privacy, data protection, and information security obligations is costly and time-consuming, and we may encounter difficulties, delays, or significant expenses in connection with our compliance, or because of our clients’ need to comply. We may be exposed to significant penalties, liabilities, reputational

harm, and loss of business in the event that we fail to comply. We could suffer a material adverse impact on our business due to the enactment or enforcement of legislation or industry regulations affecting us and/or our clients, the issuance of judicial or governmental interpretations, changed enforcement priorities of governmental agencies, or a change in behavior arising from public concern over privacy, data protection, and information security issues.

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Consumer perceptions regardingUncertainty around, and disruption from, new and emerging technologies, including the privacyadoption and securityutilization of their dataartificial intelligence, may prevent or impairresult in risks and challenges that could impact our business.
We utilize new and emerging technologies, including AI, in our solutions and services. As with many innovations, AI presents risks and challenges that could significantly disrupt our business model. If we do not execute on AI effectively, this could result in loss of revenue and reduced margins.
Our success depends, in part, on our ability to offercontinue to acquire, develop, and implement solutions that meet the evolving needs of our productsclients. The rapid evolution of AI will require us to expend resources to develop, test, and services.

Various local, national,implement solutions that utilize AI effectively, which may lead us to incur significant expense to maintain a competitive advantage within the industry. We will also be required to attract, motivate, and international regulations,retain top professionals with the skills necessary to execute our strategy relating to AI, machine learning and other emerging technologies. If we do not employ new technologies, including AI, as wellquickly or efficiently as industry standards, give consumers varying degrees of control as to how certain data regarding them is collected, used, and shared for marketing purposes. If, due to privacy, security,our competitors, or other concerns, consumers exercise their ability to preventif our competitors develop more cost-effective or limit such data collection, use, or sharing,client-preferred technologies, it may impaircould have a material adverse effect on our ability to provide marketingwin and retain business from clients, which would adversely affect our business.
The regulatory landscape surrounding AI and generative AI technologies is also evolving, and the ways in which these technologies will be regulated by governmental authorities, self-regulatory institutions, or other regulatory authorities remains uncertain. Such regulations may result in significant operational costs or constrain our ability to those consumersdevelop, deploy, or maintain these technologies.
Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business and limitresults of operations.
Our business is heavily dependent on data centers and telecommunications infrastructures, which are essential to both our call center services and our database services (which require that we efficiently and effectively create, access, manipulate and maintain large and complex databases). In addition to the third-party data centers we use, we also operate several of our own operations centers to support both our own and our clients’ demand forneeds. Our ability to protect our services. Additionally, privacyoperations against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure, or other disasters and security concerns may limit consumers’ willingness to voluntarily provide dataevents beyond our control is critical to our customerscontinued success. Likewise, as we increase our use of third-party data centers, it is critical that these vendors adequately protect their data centers from the same risks we do. Our services are dependent on regional and international networking and telecommunication providers. We believe we have taken reasonable precautions to protect our data centers and telecommunication infrastructure from events that could interrupt our operations. Any damage to the data centers we use or marketing companies. Someany failure of our telecommunications links could materially adversely affect our ability to continue to provide services depend on voluntarily provided datato our clients, which could result in loss of revenues, profitability and thereforeclient confidence, and may be impaired without such data.

adversely impact our ability to attract new clients and force us to expend significant company resources to repair the damage.
If we do not prevent security breaches and other interruptions to our infrastructure, we may be exposed to lawsuits, lose customers, suffer harm to our reputation, and incur additional costs.

The services we offer involve the transmission of large amounts of sensitive and proprietary information over public communications networks, as well as the processing and storage of confidential customer information. Unauthorized access, remnant data exposure, computer viruses, denial of service attacks, accidents, employee error or malfeasance, “social engineering” and “phishing” attacks, intentional misconduct by computer “hackers” and other disruptions can occur, and infrastructure gaps, hardware and software vulnerabilities, inadequate or missing security controls, and exposed or unprotected customer data can exist that (i) interfere with the delivery of services to our customers, (ii) impede our customers' ability to do business, or (iii) compromise the security of our or our customers' systems and data, which exposes confidential information to unauthorized third parties. We are a target of cyber-attacks of varying degrees on a regular basis. Although we maintain insurance which may respondOver time, the techniques used to coverconduct these cyber-attacks, as well as the sources and targets of these attacks, have become increasingly sophisticated and, in some typescases, have been but, are often not recognized until such attacks are launched or have been in place for some time. In addition, there has been an increase in cyber-attacks conducted or sponsored by capable and well-funded “nation state” operators. The Company expects that the sophistication and techniques of damages incurred by damagecyber-threats will continue to breachesevolve with the rapid development and increased adoption of or problems with, our informationAI and telecommunications systems, such insurance is limited and expensive, and may not respond or be sufficient to offset the costsmachine-learning technologies.
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Our reputation and business results may be adversely impacted if we, or subcontractors upon whom we rely, do not effectively protect sensitive personal information of our clients and our clients’ customers.

Current privacy and data security laws and industry standards impact the manner in which we capture, handle, analyze, and disseminate customer and prospect data as part of our client engagements. In many instances, our client contracts also mandate privacy and security practices. If we fail to effectively protect and control information, especially sensitive personal information (such as personal health information, social security numbers, or credit card numbers) of our clients and their customers or prospects in accordance with these requirements, we may incur significant expense, suffer reputational harm, and loss of business, and, in certain cases, be subjected to regulatory or governmental sanctions or litigation. These risks may be increased due to our reliance on subcontractors and other third parties in providing a portion of our overall services in certain engagements. We cannot guarantee that these third parties will effectively protect and handle sensitive personal information or other confidential information, or that we will have adequate recourse against these third parties in that event.

If our facilities are damaged, or if we are unablethe event such third parties fail to access and use our facilities, our business and results of operations will be adversely affected.

Our operations rely on the ability of our employees to work at specially-equipped facilities to perform services for our clients. Although we have some excess capacity and redundancy, we do not have sufficient excess capacity or redundancy (in equipment, facilities, or personnel) to maintain service and operational levels for extended periods if we are unable to use one of our major facilities. Should we lose access to a facility for any reason, our service levels are likely to decline or be suspended, clients would go without service or secure replacement services from a competitor. As consequence of such an event, we would suffer a reduction in revenues and harm to (and loss of) client relationships.


Significant system disruptions, loss of data center capacity or interruption of telecommunication links could adversely affect our business and results of operations.

Our business is heavily dependent upon data centers and telecommunications infrastructures, which are essential to both our call center services and our database services (which require that we efficiently and effectively create, access, manipulate, and maintain large and complex databases). In addition to the third-party data centers we use, we also operate several data centers to support both our own and our clients' needs in this regard, as well as those of some of our clients. Our ability to protect our operations against damage or interruption from fire, flood, tornadoes, power loss, telecommunications or equipment failure, or other disasters and events beyond our control is critical to our continued success. Likewise, as we increase our use of third-party data centers, it is critical that the vendors providing that service adequately protect their data centers from the same risks. Our services are very dependent on links to telecommunication providers. We believe we have taken reasonable precautions to protect our data centers and telecommunication links from events that could interrupt our operations. Any damage to the data centers we usehandle such sensitive or any failure of our telecommunications links could materially adversely affect our ability to continue services to our clients, which could result in loss of revenues, profitability and client confidence, and may adversely impact our ability to attract new clients and force us to expend significant company resources to repair the damage. 

We may need to obtain additional funding to continue as a going concern; if we are unable to meet our needs for additional funding in the future, we will be required to limit, scale back, or cease operations.

Our consolidated financial statements for the year ended December 31, 2017 have been prepared assuming we will continue to operate as a going concern. Because we continue to experience net operating losses, our ability to continue as a going concern is subject to our ability to successfully raise sufficient additional capital as needed, through future financings or other strategic arrangements. Additional funds may not be available when needed, or if available, we may not be able to obtain such funds on terms acceptable to us. If adequate funds are unavailable when needed, we may not be able to continue as a going concern. We may be required to scale down or sell certain businesses, or cease operations.

If our new leaders are unsuccessful, or if we continue to lose key management and are unable to attract and retain the talent required for our business, our operating results could suffer.

Over the past three years we have replaced many of our leaders (including our Chief Executive Officer, Chief Marketing Officer, and Chief Financial Officer) and we have eliminated or consolidated several leadership positions (including Chief Operating Officer, Chief Technology Officer, and Executive Vice President of Sales), resulting in a much smaller leadership team. If our new leaders fail in their new and additional roles and responsibilities (and more generally if we are unable to attract new leaders with the necessary skills to manage our business) our business and its operating results may suffer. Further, our prospects depend in large part upon our ability to attract, train, and retain experienced technical, client services, sales, consulting, marketing, and management personnel. While the demand for personnel is dependent on employment levels, competitive factors, and general economic conditions, our recent business performance may diminish our attractiveness as an employer. The loss or prolonged absence of the services of these individuals could have a material adverse effect on our business, financial position, or operating results.

confidential information.
We could fail to adequately protect our intellectual property rights and may face claims for intellectual property infringement.

Our ability to compete effectively depends in part on the protection of our technology, products, services, and brands through intellectual property right protections, including copyrights, database rights, trade secrets, trademarks, andas well as through domain name registrations, and enforcement procedures. The extent to which such rights can be protected and enforced varies by jurisdiction, and capabilities we procure through acquisitions may have less protection than would be desirable for the use or scale we intend or need. Litigation involving patents and other intellectual property rights has become far more common and expensive in recent years, and we face the risk of additional litigation relating to our use or future use of intellectual property rights of third parties.

Despite our efforts to protect our intellectual property, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary information and technology. Monitoring unauthorized use of our intellectual property is difficult, and unauthorized use of our intellectual property may occur. We cannot be certain that trademark registrations will be issued, nor can we be certain that any issued trademark registrations will give us adequate protection from competing products. For example, others may develop competing technologies or databases on their own. Moreover, there is no assurance that our confidentiality agreements with our employees or third parties will be sufficient to protect our intellectual property and proprietary information.
Third-party infringement claims and any related litigation against us could subject us to liability for damages, significantly increase our costs, restrict us from using and providing our technologies, products or services or operating our business generally, or require changes to be made to our technologies, products, and services. We may also be subject to such infringement claims against us by third parties and may incur substantial costs and devote significant management resources in responding to such claims, as

we have in the recent past.claims. We have been, and continue to be, obligated under some agreements to indemnify our clients as a result of claims that we infringe on the proprietary rights of third parties. These costs and distractions could cause our business to suffer. In addition, if any party asserts an infringement claim, we may need to obtain licenses to the disputed intellectual property. We cannot assure you,provide assurance, however, that we will be able to obtain these licenses on commercially reasonable terms or that we will be able to obtain any licenses at all. The failure to obtain necessary licenses or other rights may have an adverse effect on our ability to provide our products and services.

Breaches of security, or the perception that e-commerce is not secure, could severely harm our business and reputation.

Business-to-business and business-to-consumer electronic commerce requires the secure transmission of confidential information over public networks. Some of our products and services are accessed through, or are otherwise dependent on the internet. Security breaches in connection with the delivery of our products and services, or well-publicized security breaches that may affect us or our industry (such as database intrusion) could be severely detrimental to our business, operating results, and financial condition. We cannot be certain that advances in criminal capabilities, cryptography, or other fields will not compromise or breach the technology protecting the information systems that deliver our products, services, and proprietary database information.

Datasuppliers could withdraw data that we rely on for our products and services.

We purchase or license much of the data we use for ourselves and for our clients. Our ability to provide our customers with data is somewhat dependent on the ability to obtain this data. There could be a material adverse impact on our
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business if owners of the data we use were to curtail access to the data or materially restrict the authorized uses of their data. Data providers could withdraw their data for a number of reasons, including but not limited to, if there is a competitive reason to do so, if there is pressure from the consumer community, or if additional regulations are adopted restricting the use of the data. We also rely upon data from other external sources to maintain our proprietary and non-proprietary databases, including data received from customers and various government and public record sources.records. If a substantial number of data providers or other key data sources were to withdraw or restrict their data, if we were to lose access to data due to government regulation or if the collection of data becomes uneconomical, our ability to provide products and services to our clients could be materially and adversely affected, which could result in decreased revenues, net income and earnings per share.

Risks Related to our Capital Structure and Common Stock
We may be unable to make dispositions of assets on favorable terms, or at all.

In 2018, we sold our 3Q Digital business (which we purchased in 2015 for $30 million in cash plus an earn-out of up to $35 million) for $5 million in cash and assignment of the earn-out obligation. In 2016 we sold our Trillium business resulting in a pre-tax loss of $44.5 million. In 2015 we sold our B2B research business resulting in a pre-tax loss of $9.5 million. In the future, we may determine to divest certain assets or businesses consistent with our corporate strategy. The price we obtain for such assets or businesses will be driven by performance of those businesses and the current market demand for such assets, and we may not be able to realize a profit upon sale. If we are unable to make dispositions in a timely manner or at profitable price, our business, net income, and earnings per share could be materially and adversely affected.

We are vulnerable to increases in postal rates and disruptions in postal services.

Our services depend on the USPS and other commercial delivery services to deliver products. Standard postage rates have increased in recent years (most recently in January 2018) and may continue to do so at frequent and unpredictable intervals. Postage rates influence the demand for our services even though the cost of mailings is typically borne by our clients (and is not directly reflected in our revenues or expenses) because clients tend to reduce other elements of marketing spending to offset increased postage costs. Accordingly, future postal increases or disruptionscovenants in the operations ofCredit Facility may limit the USPS may have an adverse impact on us.

In addition, the USPS has had significantCompany’s operating and financial and operational challenges recently. In reaction, the USPS has proposed many changes in its services, such as delivery frequency and facility access. These changes, together with others that may be adopted, individually or in combination with other market factors, could materially and negatively affect our costs and ability to meet our clients’ expectations.

We are vulnerable to increases in paper prices.

Prices of print materials are subject to fluctuations. Increased paper costs could cause our customers to reduce spending on other marketing programs, or to shift to formats, sizes, or media which may be less profitable for us, in each case potentially materially affecting our revenues and profits.


We could face additional income tax obligations based on tax reform.

flexibility.
The U.S. Tax Cuts and Jobs Act (the "Tax Reform Act”) was signed into law on December 22, 2017. The new law made numerous changes to federal corporate tax law that we expect will significantly affect our effective tax rate in future periods. The changes included in the Tax Reform Act are broad and complex. The final transition impacts of the Tax Reform Act may differ from our current estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Reform Act, any legislative action to address questions that arise because of the Tax Reform Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act, or any updates or changes to estimates that we have utilized to calculate the transition impacts.

Our indebtedness may adversely impact our ability to react to changes in our business or changes in general economic conditions.

On April 17, 2017, we entered into a credit agreement with Texas Capital Bank, N.A. The agreement consists of a two-year $20.0 million credit facility, which we amended on January 9, 2018 to increase the availability under the revolving credit facility from $22.0 million and extended the term of the credit facility by one year to April 17, 2020. See Note C, Long-Term Debt, in the Notes to Consolidated Financial Statements for further discussion.

We may incur additional indebtedness in the future and the terms of future arrangements may be less favorable to the company than our previous or current facilities. Our ability to incur indebtedness is also impacted by the the terms of our Series A Convertible Preferred Stock, which limits out indebtedness to the greater of $40.0 million or four times our trailing 12 month EBITDA (measured at the time such indebtedness is incurred). Any failure to obtain new financing arrangements on favorable terms could have a material adverse impact on our liquidity position.

The amount of our indebtednessCredit Facility and the terms under which we borrow money under any future credit facilities or other agreements could have significant consequences for our business. Borrowings may includeThe Credit Facility includes covenants requiring that we maintaincurrently restricting or potentially restricting the Company’s and its subsidiaries’ ability to create, incur, assume or become liable for indebtedness; make certain financial measures and ratios. 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 the generally accepted accounting principles in the United States of America).
Covenant and ratio requirements may limit the manner in which we can conduct our business, and we may be unable to engage in favorable business activities or finance future operations and capital needs. A failure to comply with these restrictions or to maintain the financial measures and ratios contained in the debt agreements could lead to an event of default that could result in an acceleration of indebtedness. In addition,Specifically, the amount and terms of any futurethe Company’s indebtedness could:

•limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate, including limiting our ability to invest in our strategic initiatives, and consequently, place us at a competitive disadvantage;
•reduce the availability of our cash flows that would otherwise be available to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; and
•result in higher interest expense in the event of increases in interest rates, as discussed below under the Risk Factor “Interest rate increases could affect our results of operations, cash flows, and financial position.”

We are unlikelyIn addition, a failure to declare cash dividendscomply with these restrictions or repurchase our shares.

Although our board of directors hasto maintain the financial measures and ratios contained in the past authorized the paymentCredit Facility or future debt instruments could lead to an event of quarterly cash dividends ondefault that could result in an acceleration of debt repayment obligations, and refinancing existing letters of credit.
Risks related to our common stock, we announced in 2016 that we did not plan to declare any further dividends. In addition, althoughpension benefit plans may adversely impact our board has authorized stock purchase programs (and we repurchased shares as recently as 2015), we are unlikely to make any repurchases in the near term. Decisions to pay dividends on our common stock or to repurchase our common stock will be based upon periodic determinations by our board that such dividends or repurchases are both in compliance with all applicable laws and agreements and in the best interest of our stockholders after considering our financial condition and results of operations and cash flows.
Pension benefits represent significant financial obligations. As of December 31, 2023, we had approximately $37.7 million of unfunded pension liabilities. Because of the priceuncertainties involved in estimating the timing and amount of future payments and asset returns, significant estimates are required to calculate pension expense and liabilities related to our common stock, credit conditions,plans. We utilize the services of independent actuaries, whose models are used to facilitate these calculations. Several key assumptions are used in the actuarial models to calculate pension expense and such other factors asliability amounts recorded in the consolidated financial statements. In particular, significant changes in actual investment returns on pension assets, discount rates, or legislative or regulatory changes could impact future results of operations and required pension contributions. Differences between actual pension expenses and liability amounts from these estimated expense and liabilities may adversely impact our results of operations and cash flows.
Our operations are deemed relevant bylocated on leasehold property, and our board. The failureinability to pay a cash dividendrenew our leases on commercially acceptable terms or repurchase stock couldat all may adversely affect the market price of our common stock.

Interestrate increases could affect our results of operations, cash flows and financial position.operations.

Interest rate fluctuations in Europe and the U.S. can affect the amount of interest we pay related to our debt and the amount we earnOur sites operate on cash equivalents. Borrowings under our Texas Capital Bank credit facility bear interest at variable rates based upon the prime rate or LIBOR.leasehold property. Our results of operations, cash flows, and financial position could be materially or adversely affected by significant increases in interest rates. We also have exposure to interest rate fluctuations in the U.S., specifically money market, commercial paper, and overnight time deposit rates, as these affect our earnings on excess cash. Even with the offsetting increase in earnings on excess cash in the event of an interest rate increase, we cannot be assured that future interest rate increases will not have a material adverse impact on our business, financial position, or operating results.


Weleases are subject to risks associated with operations outside the U.S.

Harte Hanks conducts business outside of the U.S. During 2017, approximately 13.8%renewal and we may be unable to renew such leases on commercially acceptable terms or at all. Our inability to renew our leases, or a renewal of our revenues were derived from operations outsideleases with a rental rate higher than the U.S., primarily Europe and Asia. Weprevailing rate under the applicable lease prior to expiration, may expand our international operationscause an increase in the future as part of our growth strategy. Accordingly, our future operating results could be negatively affected by a variety of factors, some of which are beyond our control, including:

changes in local, national, and international legal requirements or policies resulting in burdensome government controls, tariffs, restrictions, embargoes, or export license requirements;
higher rates of inflation;
the potential for nationalization of enterprises;
less favorable labor laws that may increase employment costs and decrease workforce flexibility;
potentially adverse tax treatment;
less favorable foreign intellectual property laws that would make it more difficult to protect our intellectual property from misappropriation;
more onerous or differing data privacy and security requirements or other marketing regulations;
longer payment cycles;
social, economic, and political instability; and
the differing costs and difficulties of managing international operations.

In addition, exchange rate fluctuations may have an impact on our future costs, or on future cash flows from foreign investments. We have not entered into any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. The various risks that are inherent in doing business in the U.S. are also generally applicable to doing business anywhere else, and may be exacerbated by the difficulty of doing business in numerous sovereign jurisdictionscause additional cost due to differences in culture, laws, and regulations.relocation.

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We have identified material weaknesses in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements. In addition, current and potential stockholders could lose confidence in our financial reporting, which could cause our stock price to decline.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We identified control deficiencies in our financial reporting process that constitute material weaknesses; as of December 31, 2017, many of those material weaknesses were not yet remediated.

As discussed in Part II, Item 9A, we identified material weaknesses in the following areas at December 31, 2017; (i) each of five components of internal control as defined by COSO (control environment, risk assessment, control activities, information and communication, and monitoring), and (ii) the effectiveness of internal controls over the completeness and accuracy of data used to recognize and record revenue and related accounts such as accounts receivable, accrued revenue and deferred revenue, the precision of management’s review of controls over revenue, and the identification of relevant systems used to process revenue transactions. As a result of these material weaknesses management has determined that our disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2017.

In light of the material weaknesses identified, we performed additional analyses and procedures to ensure that our consolidated financial statements were prepared in accordance with GAAP and fairly reflected our financial position and results of operations as of and for the year ended December 31, 2017. Prior to our December 31, 2016 fiscal year end, we began taking a number of actions in order to remediate the material weaknesses described above, including developing a plan to redesign processes and controls, and in 2017 we engaged specialists to assist in the comprehensive review, design, and implementation of new internal controls. Improvements in the design and operating effectiveness of internal controls over financial reporting that we have affected to date have led to the successful remediation of several previously disclosed material weaknesses including contingent consideration, recoverability of deferred tax assets, and financial close and reporting. Our remediation efforts will continue into the fiscal year ending December 31, 2018. We expect to incur additional costs remediating these material weaknesses.

Although we believe we are taking appropriate actions to remediate the control deficiencies identified and to strengthen our internal control over financial reporting, we may need to take additional measures to fully mitigate the material weaknesses discussed above. Measures to improve our internal controls may not be sufficient to ensure that our internal controls are effective or that the

identified material weaknesses will not result in a material misstatement of our annual or interim consolidated financial statements. In addition, other material weaknesses or deficiencies may be identified in the future. If we are unable to correct material weaknesses in internal controls in a timely manner, our ability to record, process, summarize, and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and adversely impact our business and financial condition.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Implementation of new technology related to the control system may result in misstatements due to errors that are not detected and corrected during testing. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Fluctuation in ourrevenueand operating results and other factors may impact the volatility of our stock price.

The price at which our common stock has traded in recent years has fluctuated greatly and has declined significantly. Our common stock price may continue to be volatile due to a number ofseveral factors including the following (some of which are beyond our control):

•variations in our operating results from period to period and variations between our actual operating results and the expectations of securities analysts, investors, and the financial community;
•the development and sustainability of an active trading market for our common stock;
•unanticipated developments with client engagements or client demand, such as variations in the size, budget, or progress toward the completion of engagements, variability in the market demand for our services, client consolidations, and the unanticipated termination of several major client engagements;
•announcements of developments affecting our businesses;
•competition and the operating results of our competitors;
•the overall strength of the economies of the markets we serve and general market volatility; and
•other factors discussed elsewhere in this Item 1A, “Risk Factors.”

As a resultBecause of these and other factors, investors in our common stock may not be able to resell their shares at or above their original purchase price.

Our certificate of incorporation and bylaws contain anti-takeover protections that may discourage or prevent strategic transactions, including a takeover of our company, even if such a transaction would be beneficial to our stockholders

stockholders.
Provisions contained in our certificate of incorporation and bylaws, in conjunction with provisions of the Delaware General Corporation Law, could delay or prevent a third party from entering into a strategic transaction with us, even if such a transaction would benefit our stockholders. For example, our certificate of incorporation and bylaws provide for a staggered board of directors, do not allow written consents by stockholders and have strict advance notice and disclosure requirements for nominees and stockholder proposals.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 1C.    CYBERSECURITY
We rely on our technology infrastructure and information systems to interact with our clients, our employees, to sell our services, to utilize our data, to support and grow our client base, and to bill, collect, and make payments. Our technology infrastructure and information systems also support and form the foundation for our accounting and finance systems and form an integral part of our disclosure and accounting control environment. Our internally developed system and processes, as well as those systems and processes provided by third-party vendors that we contract with, may be susceptible to damage or interruption from cybersecurity threats, which include any unauthorized access to our information systems, and which may result in adverse effects on the confidentiality, integrity, or availability of such systems or the related information. Potential cybersecurity threats include terrorist or hacker attacks, the introduction of malicious computer viruses, ransomware, falsification of banking and other information, insider risk, or other security breaches. Such attacks have become more and more sophisticated over time, especially as threat actors have become increasingly well-funded by, or themselves include, governmental actors or other actors with significant means. We expect that sophistication of cyber-threats will continue to evolve as threat actors increase their use of AI and machine-learning technologies.
We have implemented robust processes to assess, identify, and manage cybersecurity risks, including potentially material risks, related to our internal information systems and our products. Our Board of Directors, our internal Risk Steering Committee, in conjunction with our Chief Security Officer ("CSO"), have direct oversight of our management of cybersecurity risks.
Our CSO and the Risk Steering Committee ("RSC") oversees our enterprise risk management process. Under the direction and supervision of our CSO, we conduct an annual comprehensive enterprise risk assessment, which includes details of our management of enterprise-wide risk topics, such as those related to cybersecurity risks.The Board of Directors receives the full results of the annual enterprise risk assessment, including an evaluation of cybersecurity risks presented, a detailed description of the actions we have taken to mitigate these risks, and an analysis of cybersecurity threats and incidents
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across the industry. The CSO and RSC reviews the results of the enterprise risk assessment in detail with management on a regular basis and reports its findings, as needed, to the Board of Directors.
Our CSO, reporting to our Chief Technology Officer, and in conjunction with our IT Department, has principal responsibility for assessing and managing cybersecurity risks and threats, implementing the systems necessary to address such risks and threats and preparing updates for the Board of Directors. Our CSO has 3 decades of information technology and cybersecurity experience with the last 6 years leading the cybersecurity activities at Harte Hanks, as well as participating in numerous cyber readiness exercises with US Government agencies, and has specialized training in cybersecurity risk management, cloud security and holds a CISSP certification offered by ISC2. Our CSO is also responsible for the operation of our cybersecurity program, and management of our cybersecurity incident response team.
As mentioned above, in response to the increasing threats presented by cyber incidents, in 2020 we established the RSC, which meets regularly. This committee is comprised of our Chief Technology Officer, our General Counsel / Privacy Officer, our Head of Human Resources, each Director of Operations of each of our business units, our Chief Financial Officer and our Chief Executive Officer, as well as other key leaders. The RSC (in conjunction with the CSO), oversees activities related to the monitoring, prevention, detection, mitigation and remediation of cybersecurity risks. The RSC, along with our CSO, develops and implements cybersecurity risk mitigation strategies and activities throughout the year, including the management of comprehensive incident response plans, oversees the cybersecurity risks posed by third-party vendors, and receives regular updates on cybersecurity-related matters.
We have adopted the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework to continually evaluate and enhance our cybersecurity procedures. Activities include mandatory yearly online training for all employees, technical security controls, enhanced data protection, the maintenance of backup and protective systems, policy review and implementation, the evaluation and retention of cybersecurity insurance, periodic assessments of third-party service providers to assess cyber preparedness of key vendors, and running simulated cybersecurity drills, including vulnerability scanning, penetration testing and disaster recovery exercises, throughout the organization. These cybersecurity drills are performed both in-house and by third-party service providers. We use automated tools that monitor, detect, and prevent cybersecurity risks and have a security operations center that operates 24 hours a day to alert us to any potential cybersecurity threats. As noted above, our RSC also has effected comprehensive incident response plans that outline the appropriate communication flow and response for certain categories of potential cybersecurity incidents. The RSC escalates events, including to the Chief Executive Officer and Board of Directors, as relevant, according to pre-defined criteria.
ITEM 2.    PROPERTIES
Our headquarters is located in Chelmsford, MA. We lease office and fulfillment facilities around the world, primarily in the United States, Europe and Asia.
OurAs of December 31, 2023, we operated the following types of facilities in the following locations:
Domestic OfficesInternational OfficesOperational Warehouses
Chelmsford, MassachusettsHasselt, BelgiumEast Bridgewater, Massachusetts
St. Petersburg, FloridaIasi, RomaniaKansas City, Kansas
Deerfield Beach, FloridaManila, PhilippinesLenexa, Kansas
Uxbridge, United KingdomHasselt, Belgium
As of December 31, 2023, our operational facilities were for the following use and square footage by segment:
Description of UseUnited StatesInternationalTotal
Office space24,313 60,650 84,963 
Fulfillment facilities736,845 35,725 772,570 
Total761,158 96,375 857,533 
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SegmentLeased Sq Ft
Customer Care54,964 
Fulfillment & Logistics772,570 
Marketing Services23,748 
851,282 
Corporate office6,251 
Total857,533 
We believe our facilities to be adequate for our business is conducted in facilities worldwide containing aggregate space of approximately 1.3 million square feet.  All facilities are held under leases, which expire at dates through 2025.and operations as currently administered.

ITEM 3.    LEGAL PROCEEDINGS

Information regardingIn the ordinary course of its business, the Company is involved in various legal proceedings is set forth in Note I, Commitments and Contingencies,involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the “Notes to Consolidated Financial Statements” and is incorporated herein by reference.Company’s financial position or results of operations.


ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Common Stock

Our common stock is listed for trading on the NYSE (symbol: HHS)NASDAQ under the symbol "HHS". As of January 31, 2024, there were approximately 743 common stockholders of record.The reportedfollowing tables set forth for the periods indicated, the high and low quarterly closing stock price ranges for 2017 and 2016 were as follows:
  2017 2016
  High Low High Low
First Quarter $16.40
 $13.50
 $37.20
 $25.30
Second Quarter 14.70
 9.70
 27.40
 8.50
Third Quarter 10.70
 7.60
 19.30
 14.20
Fourth Quarter 10.70
 8.50
 18.30
 12.80
The stocksale prices reflected above reflect the retroactive effectper share of the Reverse Stock Split for all periods presented. See Note A, Significant Accounting Policies, incommon stock as quoted by the Notes to Consolidated Financial Statements for further information.NASDAQ.

Year Ended December 31, 2023HighLow
1st Quarter$14.24$8.70
2nd Quarter$9.50$5.00
3rd Quarter$6.70$5.01
4th Quarter$7.72$5.39
We paid a dividend of 85 cents per share in the first quarter of 2016, as adjusted to reflect the Reverse Stock Split. We did
Year Ended December 31, 2022HighLow
1st Quarter8.196.34
2nd Quarter12.897.15
3rd Quarter17.8810.02
4th Quarter12.849.81
Dividend Policy
The Company currently does not pay any dividends on our common stock in 2017 and currently intend to retain any future earnings and do not expect to pay dividends on our common stock. Any future dividend declaration can be made only upon, and subject to, approvalpayment is at the discretion of ourthe Board based on its business judgment.

As of January 31, 2018, there are approximately 1,800 common stockholders of record.

All common stock, equity, share and per share amounts have been retroactively adjusted to reflect a one-for-ten reverse stock split which was effective January 31, 2018.

Directors.
Issuer Purchases of Equity Securities

The following table contains information about our purchases of equity securities during the fourth quarter of 2017:2023:
PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of a publicly announced plan
Maximum dollar amount that may yet be purchased under the program(1) (in thousands)
October 1 - 31, 2023—$— —$4,131 
November 1 - 30, 2023—$— —$4,131 
December 1 - 31, 2023—$— —$4,131 
Total—$— —
Period Total Number of
Shares
Purchased (1)		 Average
Price Paid
per Share		 Total Number of
Shares Purchased
as Part of a Publicly
Announced Plan (2)		 Maximum Dollar
Amount that May
Yet Be Spent
Under the Plan
October 1 - 31, 2017 140
 $10.11
 —
 $11,437,544
November 1 - 30, 2017 —
 $—
 —
 $11,437,544
December 1 - 31, 2017 —
 $—
 —
 $11,437,544
Total 140
 $10.11
 —
  

(1)Total number of shares purchased includes shares, if any, (i) purchased as part of our publicly announced stock repurchase program, and (ii) pursuant to our 2013 Omnibus Incentive Plan and applicable inducement award agreements with certain executives, withheld to pay withholding taxes upon the vesting of shares.

(2) During the fourth quarter of 2017,2023, we did not purchase any shares of our common stock through our stock repurchase program that was publicly announced in August 2014.on May 2, 2023. Under this program, from which shares can be purchased in the open market, our Board hashad authorized us to spend up to $20.0$6.5 million to repurchase shares of our outstanding common stock. As of December 31, 2017,After giving effect to these repurchases, we have repurchased 150,667remaining authority of $4.1 million to repurchase shares and spent $8.6 millionremaining under this authorization. Through December 31, 2017, we had repurchased a total of 6,788,798 shares at an average price of $181.02 per share under this program and previously announced programs.the program.
Comparison of Stockholder Returns
The following graph compares the cumulative total return of our common stock during the period December 31, 2012 to December 31, 2017 with the Standard & Poor’s 500 Stock Index ("S&P 500 Index") and with our peer group.

Our current peer group includes: Acxiom Corporation, Advisory Board Company (through acquisition by Optuminsight in November 2017), CMTSU Liquidation, Inc., Forrester Research, Inc., Hackett Group, Inc., HubSpot, Inc., Information Services Group, Inc.,
MDC Partners, Inc., National CineMedia, Inc., NCI, Inc. (through acquisition by HIG Capital LLC in August 2017), NeuStar, Inc. (through acquisition by Golden Gate Private Equity in August 2017), Rocket Fuel, Inc. (through acquisition by Sizmek in September 2017), Sykes Enterprises, Inc., and TeleTech Holdings, Inc.
The S&P Index includes 500 U.S. companies in the industrial, transportation, utilities, and financial sectors and is weighted by market capitalization. The peer groups are also weighted by market capitalization.
The graph depicts the results of investing $100 in our common stock, the S&P 500 Index and the peer groups at closing prices on December 31, 2012 and assumes the reinvestment of dividends.
  
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017
Harte Hanks, Inc. 36.62 3.88
 (55.17) (52.11) (37.17)
S&P 500 Index 32.39 13.69
 1.38
 11.96
 21.83
Peer Group 42.11 (26.98) 4.74
 (5.61) 21.54


ITEM 6.    SELECTED FINANCIAL DATA
The following table sets forth our summary historical financial information for the periods ended and as of the dates indicated. You should read the following historical financial information along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this Form 10-K. The statement of comprehensive income data for the years ended December 31, 2014 and 2013, and the Balance sheet data as of December 31, 2015, 2014, and 2013 were derived from audited consolidated financial statements that are not included in this annual form 10-K. All financial information presented below excludes amounts related to our discontinued Trillium operations.Not applicable.
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In thousands, except per share amounts 2017 2016 2015 2014 2013
Statement of Comprehensive Income Data  
  
  
  
  
Revenues $383,906
 $404,412
 $444,166
 $499,444
 $503,760
Operating income (loss) from continuing operations (40,865) (53,837) (197,953) 28,319
 31,656
Income (loss) from continuing operations $(41,860) $(89,778) $(181,066) $13,754
 $11,637
           
Earnings (loss) from continuing operations per common share—diluted $(6.76) $(14.60) $(29.37) $2.20
 $1.86
Weighted-average common and common equivalent shares outstanding—diluted 6,192
 6,149
 6,164
 6,265
 6,280
           
Cash dividends per share $—
 $0.85
 $3.40
 $3.40
 $2.55
           
Balance sheet data (at end of period)  
  
  
  
  
Total assets 130,812
 213,437
 414,413
 643,613
 684,613
Total debt —
 —
 77,105
 82,123
 97,079
Total stockholders’ equity (deficit) (34,635) 2,656
 140,316
 326,676
 349,054

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note About Forward-Looking Statements

This report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("(“MD&A"&A”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by the cautionary note included under Item 1A“Forward-Looking Statements” above, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, Actas amended and Section 21E of the Securities Exchange Act of 1934, Act.as amended. Actual results may vary materially from what is expressed in or indicated by the forward-looking statements.statements, for the reasons described in this MD&A, in the Risk Factors in Item 1A above or elsewhere in this Annual Report on Form 10-K.

Overview

The following MD&A section is intended to help the reader understand the results of operations and financial condition of Harte Hanks. This section is provided as a supplement to, and should be read in conjunction with, our consolidated financial statementsConsolidated Financial Statements and the accompanying notes to the consolidated financial statements.

included herein.
Harte Hanks, partnersInc. is a leading global customer experience company operating in three business segments: Marketing Services, Customer Care, and Fulfillment & Logistics Services. Our mission is to partner with clients to deliver relevant, connected, and quality customer interactions. Our approach startsprovide them with discovery and learning, which leads to customer journey mapping, creative and content development,a robust customer-experience, or CX strategy, data-driven analytics, and data management,actionable insights combined with seamless program execution to better understand, attract, and ends with execution and support in a variety of digital and traditional channels. We do something powerful: we produce engaging and memorable customer interactions to drive business results for our clients, which is why Harte Hanks is known for developing better customer relationships and experiences and defining interaction-led marketing.

engage their customers. Our services offer a wide variety of integrated, multi-channel, data-driven solutions for top brands around the globe. We help our clients gain insight into their customers’ behaviors from theirinclude strategic planning, data strategy, performance analytics, creative development, and use that insight to create innovative multi-channelexecution; technology enablement; marketing programs to deliver a return on marketing investment. We believe our clients’ success is determined not only by how good their tools are, but how well we help them use the tools to gain insightautomation; B2B and analyze their consumers. This results in a strongB2C e-commerce; cross-channel customer care; and enduring relationship between our clientsproduct, print, and their customers. We offer a full complement of capabilities and resources to provide a broad range of marketing services, in media from direct mail to social media, including:

agency and digital services;
database marketing solutions and business-to-business lead generation;

direct mail, logistics, and fulfillment; and
contact centers.

Previously, Harte Hanks also provided data quality solutions through Trillium Software, Inc. and its subsidiaries (collectively "Trillium"). On December 23, 2016, we sold the equity interests of our Trillium operations for gross proceeds of $112.0 million. This transaction resulted in an after-tax loss of $39.9 million. Because Trillium represented a distinct business unit with operations and cash flows that can clearly be distinguished, both operationally and for financial purposes, from the rest of Harte Hanks, the results of the Trillium operations are reported as discontinued operations for all periods presented. Results of the remaining Harte Hanks business are reported as continuing operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations gives retroactive effect to the Reverse Stock Split for all periods presented, unless otherwise noted. See Note A, Significant Accounting Policies, in the Notes to Consolidated Financial Statements for further information.

fulfillment.
We are affected by the general, national, and international economic and business conditions in the markets where we and our customers operate. Marketing budgets are largely discretionary in nature and, as a consequence, are easier for our clients to reduce in the short-term than other expenses. Our revenues are also affected by the economic fundamentals of each industry that we serve, various market factors, including the demand for services by our clients, and the financial condition of and budgets available to specificour clients, and regulatory factors, among other factors. Due to the recent increases in inflation and interest rates throughout the globe, and other geopolitical uncertainties, including but not limited to the ongoing armed conflicts in multiple regions, there is continued uncertainty and significant volatility and disruption in the global economy and financial markets. We remain committed to making the investments necessary to execute our multichannel strategy while also continuing to adjust our cost structure to reduce costsappropriately reflect our operations and outlook.
Management is closely monitoring inflation and wage pressure in the partsmarket, 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.
Recent Developments
Project Elevate
Our management team continuously reviews and adjusts our cost structure and operating footprint to optimize our operations, and invest in improved technology. During the second half of 2023, we engaged a consulting firm to help review and analyze the structure and operations of the business that are not growing as fast.

We continuedCompany. This review included greater than 200 meetings with personnel at all levels of the firm and led to face a challenging competitive environment in 2017. The sale of Trillium in 2016, the sale of 3Q Digital in 2018, and our recent preferred stock financing from Wipro, LLC are all partsinitiation of our effortstransformation program named "Project Elevate". The program involves the optimization and rationalization of our business resources as well as the partial reinvestment of savings into the company's sales and marketing team, technology, and strategy. A business transformation office was established at the beginning of 2024 to prioritize our investmentsmanage and focus on our core businessmeasure these initiatives. Reorganization savings from Project Elevate executed from 2024 to 2026 are estimated to be $16 million.
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Results of Continuing Operations

As discussed in Note N, Discontinued Operations, of the Notes to Consolidated Financial Statements we sold the equity interests of our Trillium operations on December 23, 2016. Therefore, the operating results of Trillium, including the loss on the sale, is reported as discontinued operations in the Consolidated Financial Statements, and are excluded from Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

Operating results from our continuing operations were as follows:
 Year Ended December 31,
In thousands, except per share amounts2023% Change2022
Operating revenue$191,492 -7.2%$206,278 
Operating expenses188,133 -1.6%191,171 
Operating income$3,359 -77.8%$15,107 
Operating margin1.8 %-76.0%7.3 %
Other expense (income), net5,278 -225.5%(4,206)
Income tax benefit(349)-98.0%(17,463)
Net (loss) income$(1,570)-104.3%$36,776 
Diluted EPS from operations$(0.21)-104.5%$4.75 
  Year Ended December 31,
In thousands, except per share amounts 2017 % Change 2016 % Change 2015
Revenues $383,906
 -5.1 % $404,412
 -9.0 % $444,166
Operating expenses 424,771
 -7.3 % 458,249
 -28.6 % 642,119
Operating loss $(40,865) 24.1 % $(53,837) 72.8 % $(197,953)
           
Operating margin (10.6)%   (13.3)%   (44.6)%
           
Loss from continuing operations $(41,860) 53.4 % $(89,778) 50.4 % $(181,066)
           
Diluted EPS from continuing operations $(6.76) 53.7 % $(14.60) 50.3 % $(29.37)


Year endedEnded December 31, 20172023 vs. Year endedEnded December 31, 20162022

Consolidated Results
Revenues

Revenues from continuing operations were $383.9of $191.5 million infor the year ended December 31, 2017,2023 decreased $14.8 million, or 7.2%, when compared to $404.4$206.3 million infor the year ended December 31, 2016. Revenues declined2022. Revenue in our retail, healthcare, and B2B and retail verticals by $14.5Marketing Services declined $9.8 million, or 13.2%18.4%, $6.1to $43.2 million, revenue in our Customer Care segment declined $3.9 million, or 20.8%5.8%, to $63.3 million and $3.8revenue in our Fulfillment & Logistics Services declined $1.1 million, or 4.3%1.3%, respectively, primarily asto $85.0 million.
Operating Expenses
Operating expenses of $188.1 million for the result of reduced mail volumes. These decreases were offset by an increase in our financial vertical of $3.1year ended December 31, 2023 decreased $3.0 million, or 5.4%1.6%, when compared to $191.2 million for the year ended December 31, 2022.
Labor costs decreased by $6.7 million, or 6.4%, when compared to the year ended December 31, 20162022, primarily due to increased agency services with a large commercial bank.

Among other factors,the reduction in workforce in our revenue performance will depend on general economic conditions in the markets we serveCustomer Care and how successful we are at maintaining and growing business with existing clients, acquiring new clients, and meeting our clients' demands. We believe that, in the long-term, an increasing portion of overall marketing and advertising expenditures will be moved from other advertising media to targeted media, and that our business will benefitMarketing Service segment as a result. Targeted media advertising results can be more effectively tracked, enabling measurementresult of the return on marketing investment.lower revenue which was partially offset by higher severance expenses.

Operating Expenses

OperatingProduction and Distribution expenses from continuing operations were $424.8decreased $2.4 million, inor 3.8%, when compared to the year ended December 31, 2017, compared to $458.2 million in 2016. This $33.5 million year-over-year decline was the result of a lower goodwill impairment recorded in 2017 compared to 2016. Labor costs decreased by $15.0 million, or 6.1%, primarily due to reduced headcount. Additionally, in 2017 we experienced a decrease in production and distribution costs of $8.0 million, or 6.9%,2022, primarily driven by lower brokered cost, or outsourced costs due to the lower brokered revenue.
Advertising, Selling and freight costs resulting from lower direct mail volumes. Selling, generalGeneral and administrative costsAdministrative expenses decreased $4.4$1.2 million as a result of decreased employee travel and recruiting expenses. Goodwill impairment recorded in 2017 was $4.2 million loweror 5.6%, when compared to 2016.the year ended December 31, 2022 primarily due to the reduced professional service expense.

Depreciation expense increased $1.5 million, or 55.3%, when compared to the year ended December 31, 2022, primarily due to the addition of our new ERP system.
OurRestructuring expenses were $5.7 million for the year ended December 31, 2023. The restructuring expenses included $4.6 million of consulting expenses, $0.8 million in lease impairment expense, $0.2 million of severance charges, and $0.1 million of facility related and other expenses.
The largest cost components of our operating expenses are labor, transportation expenses and outsourced costs, and mail transportation expenses.costs. Each of these costs is, somewhatat least in part, variable and tends to fluctuate in line with revenues and the demand for our services. Mail transportationTransportation rates have increased over the last few years due to demand and supply fluctuations within the transportation industry. Future changes in mail transportation expenses will continue to impact our total production costs and total operating expenses and in turn our margins, which may have an impact on future demand for our supply chain management services.

Postage costs of mailings are borne by our clients and are not directly reflected in our revenues or expenses.

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Operating LossOther Expense (Income), net

Operating loss from continuing operations was $40.9 million inInterest income, net, for the year ended December 31, 2017,2023 was $135 thousand as compared to $53.8 million inthe interest expense, net of $438 thousand for the year ended December 31, 2016.2022. The $13.0$573 thousand improvement was primarily contributed by the interest income we received from our tax refund claims during the first quarter of 2023.
Total other expense, net was $5.4 million decrease in operating loss reflects the impact of a decrease in revenue of $20.5 million, offset by a larger $33.5 million decrease in operating expenses.

Year ended December 31, 2016 vs. Year ended December 31, 2015

Revenues

Revenues from continuing operations were $404.4 million infor the year ended December 31, 2016,2023, when compared to $444.2other income, net of $4.6 million infor the year ended December 31, 2015. Revenue2022. This $10.0 million increase in other expense was primarily attributable to a $8.9 million change in foreign currency revaluation gain as well as $2.5 million gain from the sale of unused IP addresses which were no longer useful to the Company in 2022. We do not expect the sale of IP addresses, in the future, if any, to generate a significant amount of other income.
Income Tax Benefit
Our 2023 income tax benefit was $0.3 million for the year ended December 31, 2023, when compared to tax benefit of $17.5 million for the year ended December 31, 2022. The decrease in benefit of $17.1 million was primarily related to the removal of the majority of the U.S. valuation allowance for the year ended December 31, 2022.
Segment Results
The following is a discussion and analysis of the results of our healthcarereporting segments for the years ended December 31, 2023 and retail verticals decreased $15.62022. There are three principal financial measures reported to our CEO (the chief operating decision maker) for use in assessing segment performance and allocating resources. Those measures are revenues, operating income and operating income plus depreciation and amortization (“EBITDA”).
Marketing Services:
Year Ended December 31,
In thousands2023% Change2022
Operating revenues$43,204 -18.4%$52,975 
EBITDA5,425 -26.1%7,344 
Operating Income5,113 -26.8%6,982 
Operating Income % of Revenue11.8 %-10.2%13.2 %
Marketing Services segment revenue declined $9.8 million, or 34.8%18.4%, due to the decline of marketing spend and $9.3the loss of a customer. Operating income for the year ended December 31, 2023 decreased $1.9 million due to the reduction in contribution margin from the revenue decrease, which was partially offset by reductions in operating expense associated with lower revenue.
Customer Care:
Year Ended December 31,
In thousands2023% Change2022
Operating revenues$63,327 -5.8%$67,205 
EBITDA10,702 -12.0%12,167 
Operating Income9,422 -16.5%11,283 
Operating Income % of Revenue14.9 %-11.4%16.8 %
Customer Care segment revenue declined $3.9 million, or 7.8%5.8%, respectively, asprimarily due to the resultdecrease in both non-recurring pandemic-related projects and a large non-recurring recall project in 2022 which was partially offset by $9.7 million revenue from InsideOut. Operating Income for the year ended December 31, 2023 was $9.4 million, a decrease of lost clients and clients reducing their marketing spend (in particular, reducing mail volumes). Our consumer vertical decreased $6.9$1.9 million or 7.3%,when compared to the prior year due to lower revenue which was partially offset by lower operating expense driven by improved operational efficiency.
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Fulfillment & Logistics:
 Year Ended December 31,
In thousands2023% Change2022
Operating revenues$84,961 -1.3%$86,098 
EBITDA8,857 -16.4%10,593 
Operating Income7,714 -21.0%9,769 
Operating Income % of Revenue9.1 %-20.0%11.3 %
Fulfillment & Logistics Services segment revenue declined $1.1 million, or 1.3%, primarily due to the lower revenue from the reduction of call center work supporting streaming enrollment services for an entertainment client. Revenue from our B2B vertical declined $5.6 million, or 6.1%, primarily driven by the loss of an electronic company client. Our financial services vertical decreased $4.3 million, or 7.1%, compared toexisting customers. For the year ended December 31, 2015, due to reduced mail volumes. These decreases are slightly offset by an increase in our transportation vertical2023 operating income was $7.7 million, a decrease of $2.0$2.1 million, or 6.5%, when compared to the prior year ended December 31, 2015.

Operating Expenses

Operating expenses from continuing operations were $458.2 million in the year ended December 31, 2016, compared to $642.1 million in 2015. This $183.9 million year over year decrease is primarily a result of a goodwill impairment loss of $209.9 million recorded in 2015 versus an impairment loss of $38.7 million in 2016. In addition, we experienced a decrease in production and distribution costs of $24.8 million, or 17.5%, primarily driven by lower fuel and freight costs, as well as decreased outsourced costs resulting from lower mail volumes. The decrease was partially offset by increased labor costs of $12.0 million, or 5.1%, primarily due to increased severance costs and non-recurring database development labor expense. 

Operating Loss

Operating loss from continuing operations was $53.8 million in the year ended December 31, 2016, compared to $198.0 million in the year ended December 31, 2015. The $144.1 million decrease in operating loss reflects the impact of a decrease in revenue of $39.8 million, offset by a $183.9 million decrease in operating expenses.

Other Expense

Year ended December 31, 2017 vs. Year ended December 31, 2016

Total other expense was $10.9 million in the year ended December 31, 2017, compared to $15.3 million in 2016. This $4.4 million decline was primarily the result of $7.0 million in expense for an adjustment to the fair value of the contingent consideration in 2016. Interest expense increased $1.4 million, or 39.7%, in 2017 compared to 2016 primarily due to the reclassification of interest expense for the 2016 Secured Credit Facility to discontinued operations in accordance with ASC 205-20-45-6 in 2016.

Year ended December 31, 2016 vs. Year ended December 31, 2015

Total other expense was $15.3 million in the year ended December 31, 2016, compared to $20.5 million in 2015. This decrease is primarily the result of a $9.5 million loss on sale of our B2B research business in 2015, partially offset by $7.0 million in expense for an adjustment to the fair value of the contingent consideration. Interest expense decreased $1.6 million, or 31.1%, in 2016 compared to 2015 primarily due to the reclassification of interest expense for the 2016 Secured Credit Facility to discontinued operations in accordance with ASC 205-20-45-6. These decreases were offset by foreign currency losses of $1.0 million in the year ended December 31, 2016.

Income Taxes

Year ended December 31, 2017 vs. Year ended December 31, 2016

Our 2017 income tax benefit of $9.9 million resulted in an effective income tax rate of 19.1%. Unfavorably impacting our benefit was nondeductible goodwill associated with our impairment loss and the change in valuation allowance due to realization of deferred tax assets for current year operations, the impact of which were $6.0 millionrevenue mix and $2.3 million, respectively. Favorably impacting our benefit was the enactment of the U.S. Tax Cuts and Jobs Act (the "Tax Reform Act”), the impact of which was a $3.4 million credit. This was the result of remeasurement of our deferred tax balances for the reduction in the corporate tax rate from 35% to 21%, and remeasurement of the valuation allowance for application of provisions in the Tax Reform Act. This compares to our 2016 income tax expense of $20.6 million that resulted in a negative effective income tax rate of 29.9%. Unfavorably impacting our 2016 expense was nondeductible goodwill associated with our impairment loss and the recognition of a deferred tax valuation allowance, the impact of which were $6.3 million and $34.5 million, respectively.higher transportation costs.

Year ended December 31, 2016 vs. Year ended December 31, 2015

Our 2016 income tax expense of $20.6 million resulted in a negative effective income tax rate of 29.9%. Unfavorably impacting our expense was nondeductible goodwill associated with our impairment loss and the recognition of a deferred tax valuation allowance, the impact of which were $6.3 million and $34.5 million, respectively. This compares to our 2015 income tax benefit of $37.4 million that resulted in an effective income tax rate of 17.1%. Benefiting our 2015 rate was having a greater proportion of our income in jurisdictions outside the United States having tax rates below 35%.

Loss Per Share from Continuing Operations

Year ended December 31, 2017 vs. Year ended December 31, 2016

We recorded a loss from continuing operations of $41.9 million and diluted loss per share from continuing operations of $6.76. These results compare to a loss from continuing operations of $89.8 million and diluted loss per share from continuing operations of $14.60 in 2016. The decrease in loss from continuing operations is primarily the result of a $38.7 million impairment loss related to goodwill recorded in 2016 versus a $34.5 million impairment loss in 2017.

Year ended December 31, 2016 vs. Year ended December 31, 2015

We recorded a loss from continuing operations of $89.8 million and diluted loss per share from continuing operations of $14.60 in 2016. These results compare to a loss from continuing operations of $181.1 million and diluted loss per share from continuing

operations of $29.37 in 2015. The decrease in loss from continuing operations is primarily the result of a $209.9 million impairment loss related to goodwill recorded in 2015 versus a $38.7 million impairment loss in 2016.

Liquidity and Capital Resources

Sources and Uses of Cash

Our cash and cash equivalent balances were $8.4 million, $46.0$18.4 million and $16.6$10.4 million as of December 31, 2017, 2016,2023, and 2015,2022, respectively. As of December 31, 2023, we had the ability to borrow an additional $24.2 million under our Credit Facility. The money deposited in an escrow account to satisfy the contingent payment obligations for the acquisition of InsideOut is not included in our cash and cash equivalent balances as of December 31, 2023.
We received $2.5 million in tax refund in 2022 and received an additional tax refund of $5.3 million in March 2023, as a result of the change to the tax NOL carryback provisions included in the CARES Act.
Our principal sources of liquidity are cash on hand, cash provided by operating activities, and borrowings.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.
Operating Activities

Net cash used forprovided by operating activities was $30.8$10.5 million for the year ended December 31, 2017. This compares2023, when compared to cash provided by operating activities of $14.6$28.8 million and $33.3 million for the years endingyear ended December 31, 2016 and 2015, respectively.2022. The $45.4$18.3 million year-over-year decrease in net cash provided by operating activities in 2017 was primarily due to the result$38.3 millionlower net income which was partially offset by absorption of the paymentdeferred taxes of income taxes associated with the sale of the Trillium business unit. The $18.7 million decrease in net cash provided by operating activities in 2016 was primarily the result of a decrease of $51.3$18.4 million in cash provided by discontinued operations.

the year ended December 31, 2023, and smaller year over year changes in current assets and liabilities.
Investing Activities
Net cash used in investing activities was $5.7$2.3 million for the year ended December 31, 2017. This compares2023, compared to cash provided by investing activities of $99.7 million for the year ending December 31, 2016 and cash used in investing activities of $36.1$11.5 million for the year endingended December 31, 2015.2022. The $105.4$9.2 million decrease in netwas mainly due to the $6.3 million of cash provided by investingused and returned from escrow from acquisition activities in 2017 was primarily the result the sale of Trillium in for gross proceeds of $112.0and $3.0 million reflected less cash used to purchase property, plant and equipment in the cash provided by investing activities within discontinued operations in 2016. The gross proceeds of $112.0 million received in the sale of Trillium is reflected in the $135.8 million increase in cash provided by investing activities in 2016year ended December 31, 2023, when compared to 2015. The increase is also the result of the favorable impact of lower acquisition expenditures, as we purchased Aleutian Consulting for $3.5 million in 2016 but spent $29.9 million to purchase 3Q Digital in 2015.

year ended December 31, 2022.
Financing Activities

Net cash used in financing activities was $3.2 million for the year ended December 31, 2023, compared to $15.8 million net cash used in financing activities for the year ended December 31, 2022. The $12.6 million decrease in cash used in financing activities was $1.5primarily due to the $10.0 million $85.3 million, and $31.9 million used for the yearsrepurchase of preferred stock and the $5.0 million repayment of the borrowings under our Credit Facility in the year ended December 31, 2017, 2016,2022, as compared to the $2.4 million used for the repurchase of common stock in the year ended December 31, 2023.
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Foreign Holdings of Cash
Consolidated foreign holdings of cash as of December 31, 2023, and 2015,2022 were $5.4 million and $3.4 million, respectively. The $83.8 million decrease inCompany will repatriate foreign cash outflows in 2017 comparedholdings when and if it is financially efficient to 2016 was driven by the repayment of debt with the proceeds of the Trillium sale in late 2016. The primary cause of the $53.4 million increase in cash outflows in 2016 compared to 2015 was due to the Trillium sale in 2016 along with the of the suspension of dividend payments in 2016.do so.

Credit Facilities

Long Term Debt
On March 10, 2016, weDecember 21, 2021, the Company entered into a secured credit facility with Wells Fargo Bank, N.A. as Administrative Agent. This facility consisted of a maximum $65.0three-year, $25.0 million asset-based revolving credit facility and a $45.0 million term loan (collectively, the "2016 Secured Credit Facility"(the “Credit Facility”). A portion of the proceeds from the 2016 Secured Credit Facility was used to pay off previous debt. The 2016 Secured Credit Facility was repaid in full using the proceeds of the Trillium sale and the 2016 Secured Credit Facility was terminated.

On April 17, 2017, we entered the Texas Capital Credit Facility with Texas Capital Bank N.A.("TCB"). The Texas CapitalCompany’s obligations under the Credit Facility consisted ofare guaranteed on a two-year $20 million revolving credit facilityjoint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all of ourthe assets and guaranteed by HHS Guaranty, LLC, an entity formed by certain members of the Shelton family, descendantsCompany and the Guarantors pursuant to a Pledge and Security Agreement, dated as of one ofDecember 21, 2021, between the company's founders. The credit facility adds additional financial flexibility toCompany, TCB and the company and is used for working capital and general corporate purposes.

Guarantors (the “Security Agreement”). On January 9, 2018, we entered an amendment (the "First Amendment") toDecember 31, 2023, the Texas Capital Credit Facility. The First Amendment (i) increases the availability under the revolving credit facility from $20 million to $22 million and (ii)Company extended the Texas Capitalmaturity date for the Credit Facility one yearby a period of six (6) months, up to April 17, 2020. June 30, 2025. The extension extended the Credit Facility under substantially similar terms and conditions as originally executed.
The Credit Facility remains securedprovides for loans up to the lesser of (a) $25.0 million, and (b) the amount available under a “borrowing base” calculated primarily by substantiallyreference to the Company's cash and cash equivalents and accounts receivables. The Credit Facility allows the Company to use up to $3.0 million of its borrowing capacity to issue letters of credit.
The loans under the Credit Facility accrue interest at a varying rate equal to the Secured Overnight Financing Rate (SOFR) plus a margin of 2.25% per annum. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2025.
The Company may repay and reborrow all or any portion of our assets. Our feethe loans advanced under the Credit Facility at any time, without premium or penalty. The Credit Facility is subject to mandatory prepayments (i) from the net proceeds of asset dispositions not otherwise permitted under the Credit Facility; (ii) if the unpaid principal balance under the Credit Facility plus the aggregate face amount of all outstanding letters of credit exceeds the borrowing base; (iii) in an amount equal to 50% of the net proceeds of issuances of capital stock (subject to customary exceptions); or (iv) in an amount equal to the net proceeds from any issuance of debt not otherwise permitted under the Credit Facility.
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 collateral providedCompany'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 HHS Guaranty, LLC was also changed from an annual feeU.S. GAAP).
As of $0.5 million to 0.5% of collateral actually pledged. We expect that the fees payable to HHS Guaranty will be substantially similar in amount. See Note C, Long-Term Debt, in the Notes to Consolidated Financial Statements for further discussion.


Contractual Obligations

Contractual obligations at December 31, 2017 are as follows:
In thousands Total 2018 2019 2020 2021 2022 Thereafter
Debt $—
 $—
 $—
 $—
 $—
 $—
 $—
Interest on debt 115
 87
 28
 —
 —
 —
 —
Operating lease obligations 31,476
 8,753
 8,500
 6,495
 3,889
 2,016
 1,823
Capital lease obligations 992
 506
 453
 32
 1
 —
 —
Unfunded pension plan benefit payments 17,511
 1,685
 1,674
 1,703
 1,731
 1,775
 8,943
Total contractual cash obligations $50,094
 $11,031
 $10,655
 $8,230
 $5,621
 $3,791
 $10,766

2023 and 2022, the Company had no borrowings outstanding under the Credit Facility. At each of December 31, 2017, we2023, and 2022, the Company had total letters of credit in the amount of $2.8$0.8 million outstanding. No amounts were drawn against these letters of credit atas of December 31, 2017.2023, and 2022. These letters of credit renew annually and exist to support insurance programs relating to workers’ compensation, automobile, and general liability insurance.liability. We had no other off-balance sheet financing arrangements atas of December 31, 2017.2023, and 2022.

As of December 31, 2023, we had the ability to borrow an additional $24.2 million under the Credit Facility.
Dividends

We paid a quarterly dividend of 85 cents per share in the first quarter of 2016 and did not pay any dividends in 2017. We currently intend to retain any future earnings and do not expect to pay dividends on our common stock.either 2023 or 2022. Any future dividend declaration can be made only upon, and subject to, approval of our Board of Directors, based on its business judgment.

Share Repurchase

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. During 2017,2023, we did not repurchase any repurchased 0.4 million shares of our common stock under our current stock repurchase program that was publicly announced in August 2014. Under our current program we are authorized to spend up to $20.0for a total combined purchase price of $2.4 million to repurchase shares.
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Outlook

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 not anyno conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for the 12twelve months following the issuance of the financial statements.Consolidated Financial Statements.

Critical Accounting PoliciesEstimates

CriticalOur Consolidated Financial Statements are prepared in accordance with accounting policiesprinciples generally accepted in the United States of America (“U.S. GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are defined as those that, in our judgment, are most important toreasonable under the portrayal of our company’s financial condition andcircumstances. Our actual results of operations and which require complexcould differ from these estimates under different assumptions or subjective judgments or estimates.conditions. The areas that we believe involve the most significant management estimates and assumptions are detailed below. Actual results could differ materially from thoseOn an ongoing basis, management reviews its estimates under differentand assumptions and conditions.based on currently available information.

Our Significant Accounting policies are described inSee Note A, Significant Accounting Policies, inB of the Notes to Consolidated Financial Statement.

Revenue Recognition

ApplicationStatements included in Item 8 of variousthis Annual Report on Form 10-K for a summary of significant accounting principles in U.S. GAAP related to measurement and recognition of revenue requires us to make significant judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may require significant contract interpretation to determine appropriate accounting.

We recognize revenue when evidence of an arrangement exists, the price is fixed or determinable, the collectability is reasonably assured,policies and the delivery of service has occurred. Certain client programs provide for adjustments to billings based upon whether we achieve certain performance criteria. In these circumstances, revenue is recognized when the foregoing conditions are met. We record revenue net of any taxes collected from customers and subsequently remitted to governmental authorities. Any payments

received in advance of the performance of services or delivery of the product are recorded as deferred revenue until such time as the services are performed or the product is delivered. Costs incurred for search engine marketing solutions and postage costs of mailings are billed to our clients and are not directly reflected in our revenue.

We are currently evaluating the impact of the new revenue recognition standardeffect on our consolidated financial statements. For additional information please refer to Note A, Significant Accounting Policies, is the Notes to Consolidated Financial Statements.

Goodwill and Other Intangible Assets

We test goodwill for impairment annually or more frequently if events or circumstances indicate that it is more likely than not that goodwill might be impaired. Such events could include changes in the business climate in which we operate, attrition of key personnel, the current volatility in the capital markets, the company’s market capitalization compared to our book value, our recent operating performance, and financial projections.

For the fiscal 2017 test performed as of November 30, we prepared the analysis using a one-step approach as we have early adopted ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The projected cash flows declined in the analysis, which corresponds to the continued decline in the business. As a result of the declining performance, we determined that the carrying value exceeded the fair value and the full carrying value of goodwill should be written-off, resulting in an impairment charge of $34.5 million.

Our determination of estimated fair value is based on the enterprise value approach. These methods contain uncertainties as they require management to make significant assumptions and judgments. Significant assumptions and judgments used in estimating fair value include:

an estimated discount rate such as the cost of equity or the weighted average cost of capital ("WACC"),
management's assumptions of future performance and historical operating results, and
the economic outlook as of the valuation date.

Income Taxes

We are subject to income taxes in the United States and numerous other jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

We record a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. For additional information on theA material valuation allowance see Note D, Income Taxes, in the Notes to Consolidated Financial Statements.
is recorded for foreign and specific state jurisdictions.
We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results. The provision for income taxes includes the effects of any reserves that we believe are appropriate, as well as the related net interest and penalties.

Legal and Other Contingencies
The Company is subject to various legal proceeding and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgement. Resolution of legal matters in a manner inconsistent with management's expectations could have a material impact on the Company's financial condition and operating results.
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Recent Accounting Pronouncements

See Note A, SignificantIn October 2021, the Financial Accounting Policies, of the Notes to Consolidated Financial Statements for a discussion of certainStandards Board (FASB) issued accounting standards update ("ASU") 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The Company adopted this standard on January 1, 2023, on a prospective basis and did not have a material impact on the Company's financial statements.
In December 2019, the Financial Accounting Standards Board (the “FASB”) issued new guidance that wesimplified the accounting for income taxes. This standard became effective for the Company in fiscal year 2022 and did not have a material impact on the consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting periods beginning with the fiscal year ending November 30, 2025 and for interim reporting periods beginning in fiscal year 2026. Early adoption is permitted. The Company is currently evaluating the impact that this update will have on its consolidated financial statements disclosure.
In December 2023, the FASB issued ASU 2023-09, which requires enhanced income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. The amendments in ASU 2023-09 are effective for the fiscal year ending after November 30, 2026. The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements.
No other new accounting pronouncements recently adopted and certain accounting standards that weor issued had or are expected to have not yet been required to adopt and may be applicable to our futurea material impact on the consolidated financial condition and results of operations.statements.


ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.

Not applicable.
Market risk includes the risk of loss arising from adverse changes in market rates and prices. We face market risks related to interest rate variations and to foreign exchange rate variations. From time to time, we may utilize derivative financial instruments to manage our exposure to such risks.

The interest rate on the Texas Capital Credit Facility is variable based upon the prime rate or LIBOR and, therefore, is affected by changes in market interest rates. We estimate that a 100 basis point increase in market interest rates on the actual borrowings in 2017 would have an immaterial impact on our interest expense. At December 31, 2017, the company did not have any outstanding debt. The nature and amount of our borrowings can be expected to fluctuate as a result of business requirements, market conditions, and other factors. Due to our overall debt level and cash balance at December 31, 2017, anticipated cash flows from operations, and the various financial alternatives available to us, we do not believe that we currently have significant exposure to market risks associated with an adverse change in interest rates. At this time, we have not entered into any interest rate swap or other derivative instruments to hedge the effects of adverse fluctuations in interest rates.

Our earnings are also affected by fluctuations in foreign currency exchange rates as a result of our operations in foreign countries. Our primary exchange rate exposure is to the Euro, British Pound Sterling, and Philippine Peso. We monitor these risks throughout the normal course of business. The majority of the transactions of our U.S. and foreign operations are denominated in the respective local currencies. Changes in exchange rates related to these types of transactions are reflected in the applicable line items making up operating income in our Consolidated Statements of Comprehensive Income (Loss). Due to the current level of operations conducted in foreign currencies, we do not believe that the impact of fluctuations in foreign currency exchange rates on these types of transactions is significant to our overall annual earnings. A smaller portion of our transactions are denominated in currencies other than the respective local currencies. For example, intercompany transactions that are expected to be settled in the near-term are denominated in U.S. Dollars. Since the accounting records of our foreign operations are kept in the respective local currency, any transactions denominated in other currencies are accounted for in the respective local currency at the time of the transaction. Any foreign currency gain or loss from these transactions, whether realized or unrealized, results in an adjustment to income, which is recorded in “Other, net” in our Consolidated Statements of Comprehensive Income (Loss). Transactions such as these amounted to $0.4 million and $1.0 million in pre-tax currency transaction losses in 2017 and 2016 , respectively. At this time, we are not party to any foreign currency forward exchange contracts or other derivative instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

We do not enter into derivative instruments for any purpose other than cash flow hedging. We do not speculate using derivative instruments.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required to be presented under Item 8 are presented in the Consolidated Financial Statements and the notes thereto beginning at page 3835 of this Form 10-K (Financial Statements).

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange“Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our CEO (CEO), CFO (CFO),Chief Executive Officer (“CEO”) and Corporate ControllerChief Financial Officer (“CFO”) as appropriate to allow timely decisions regarding required disclosure.


Our management, including our CEO CFO, and Corporate ControllerCFO, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2017, the end of the period covered by this Annual Report on form 10-K.2023. Based upon such evaluation, our CEO CFO, and Corporate ControllerCFO concluded that ourthe design and operation of these disclosure controls and procedures were not effective, dueat the “reasonable assurance” level, to the material weaknesses in our internal controls over financial reporting that are described below.

Notwithstanding the material weaknesses described below, based on the additional analysis and other post-closing procedures performed, we believe the consolidated financial statements included in this Annual Report on Form 10-K are fairly presented in all material respects, in conformity with accounting principles generally acceptedensure information required to be disclosed by us in the United Statesreports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
29

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our internal control over financial reporting is a process designed by, or under the supervision of our CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company'sCompany’s financial statements for external purposes in accordance with U.S. GAAP.

Management evaluated, under the supervision of our CEO CFO, and Corporate Controller,CFO, the design and effectiveness of the Company'sCompany’s internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organization of the Treadway Commission ("COSO"(“COSO”). Based on this assessment, management concluded that internal control over financial reporting was not effective because material weaknesses existed at December 31, 2017 as described below.

A material weakness, as defined in the Exchange Act Rule 12b-2, is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. We identified material weaknesses in each of the following areas.

Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring

We identified deficiencies in aggregate that consitute material weaknesses in each of the five components of internal control as defined by COSO (control environment, risk assessment, control activities, information and communication and monitoring). In particular, controls related to the following were not effectively designed:

Control Environment

We did not properly staff (in amount and with appropriate levels of experience and training) for the company’s accounting and reporting requirements, which has also affected our evaluation process to identify the impact to our consolidated financial statements of adopting ASU No. 2014-09, Revenue from Contracts with Customers. The Company is required to adopt the new standard effective January 1, 2018. Without having substantially completed the impact assessment of the new standard on our consolidated financial statements, there is more than a remote likelihood that a material misstatement and/or disclosure omission will not be prevented or detected in our interim or annual financial statements with periods beginning January 1, 2018.
We did not sufficiently establish directives, guidance, and controls to enable management and other personnel to understand and carry out their internal control responsibilities.
Risk Assessment

We did not design and maintain internal controls that were effective in identifying, assessing and addressing risks that significantly affect our financial statements or the effectiveness of the internal controls over financial reporting. Specifically, we did not modify our controls to sufficiently address changes in risks of material misstatement as a result of changes in our operations, organizational structure and operating environment.

Information and Communication

We did not design and maintain effective controls to obtain, generate and communicate relevant and accurate information to support the function of internal control over financial reporting. Specifically, we did not identify all relevant information systems in support of our accounting and financial reporting processes.
We did not use an adequate level of precision in our review of information used in certain controls.


Monitoring

We did not design and maintain effective monitoring of compliance with established accounting policies, procedures and controls. This weakness included our failure to design and operate effective procedures and controls whose purpose is to evaluate and monitor the effectiveness of our individual control activities.

These deficiencies are pervasive in nature and create a reasonable possibility that a material misstatement of the annual or interim financial statements would not have been prevented or detected on a timely basis. Further, the above material weaknesses contributed to the following material weakness at the control-activity level:

Revenue Recognition

Management did not design and maintain effective controls over the completeness and accuracy of data used to recognize and record revenue and related accounts such as accounts receivable, accrued revenue and deferred revenue, the precision of management’s review of controls over revenue, and the identification of relevant systems used to process revenue transactions.

Deloitte & Touche LLP, our independent registered public accounting firm, has issued an audit report on the effectiveness of the company’s internal control over financial reporting as of December 31, 2017.

effective.
Changes in Internal Control over Financial Reporting

Improvements in the design and operating effectiveness of internal controls over financial reporting that we have affected to date have led to the successful remediation of several previously disclosed material weaknesses including contingent consideration, recoverability of deferred tax assets, and financial close and reporting. Other than the material weaknesses discussed above, and the successful remediation of previously disclosed material weaknesses related to contingent consideration, recoverability of deferred tax assets and financial close and reporting, there have beenThere were no changes in our internal controls over financial reporting during theour most recent fiscal quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

Remediation Plan for Material Weaknesses in Internal Control over Financial Reporting

Management has been actively engaged in remediation efforts to address the material weaknesses throughout fiscal year 2017 and these efforts will continue into fiscal year 2018. We made enhancements to our control environment by improving guidance, communication of expectations and importance of internal controls. In addition, we made improvements to the level of detail in our risk assessment and clarity of the linkage between risks and internal controls. We will continue to improve upon our risk assessment procedures and the timeliness of those procedures in 2018. We have made progress towards addressing the weaknesses in information and communication beginning the process to better identify, document, and assess systems and information used when performing internal controls and will continue this effort in 2018. We implemented enhanced monitoring procedures to allow for more effective monitoring of compliance with established accounting policies, procedures and controls. We have recently hired both an experienced CFO and an Accounting Director, who have provided us with additional capacity and expertise to enhance our accounting and reporting review procedures. We also made changes to roles and responsibilities to enhance controls and compliance within our accounting team.

We continue to work with the third-party specialists we engaged to review, document, and (as needed) supplement our controls, with the goal of designing and implementing controls that not only better address both the accuracy and precision of management's review, but also enhance our ability to manage our business as it has evolved. While we have made improvements to our control environment, risk assessment procedures, and many of our control activities, management may determine that additional steps may be necessary to remediate the material weaknesses.

While we intend to resolve all of the material control deficiencies discussed above, we cannot provide any assurance that these remediation efforts will be successful, will be completed quickly, or that our internal control over financial reporting will be effective as a result of these efforts by any particular date.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and Board of Directors of Harte Hanks, Inc.

Opinion on Internal Control over Financial Reporting

reporting. We have audited thenot experienced any material impact to our internal controlcontrols over financial reporting even though most of Harte Hanks, Inc.our employees have work remotely. We are continually monitoring and subsidiaries (the “Company”) asassessing the impact of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated March 15, 2018 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting basedthis remote working arrangement on our audit. We are a public accounting firm registered withinternal controls to minimize the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating theimpact on their design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.effectiveness.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified material weaknesses in the Company’s overall control environment due to the aggregate effect of multiple deficiencies in internal controls, which affected each of the five components of internal control as defined by COSO (control environment, risk assessment, control activities, information and communication, and monitoring). These material weaknesses contributed to the material weaknesses management identified over revenue: management did not design and maintain effective controls over the completeness and accuracy of data used to recognize and record revenue and related accounts such as accounts receivable, accrued revenue and deferred revenue; the precision of management’s review of controls over revenue; and the identification of relevant systems used to process revenue transactions.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2017, of the Company, and this report does not affect our report on such financial statements.



/s/ DELOITTE & TOUCHE LLP

San Antonio, TX
March 15, 2018

ITEM 9B.    OTHER INFORMATION
None.


ITEM 9C.    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Section 16(a) Beneficial Ownership Reporting Compliance

The information to appear in our 2018 Proxy Statement under the caption "General Information - Section 16(a) Beneficial Ownership Reporting Compliance" is incorporate herein by reference.

Directors and Executive Officers

The information required by this item regarding our directors and executive officers will be set forth in our 2018 Proxy Statement under the caption “Directors and Executive Officers” which information is incorporated herein by reference.

Code of Ethics and Other Governance Information

The information required by this item regardingreference as a definitive proxy statement to be filed with the Supplemental Code of Ethics for our Senior Financial Officers (Code of Ethics), audit committee financial experts, audit committee members and procedures for stockholder recommendations of nominees to our Board of Directors will be set forth in our 2018 Proxy Statement under the caption “Corporate Governance” which information is incorporated herein by reference. 

Our Code of Ethics may be found on our website at www.hartehanks.com “Corporate Governance” sectionSEC within 120 days of the “Investors” tab, and a printed copy of our Code of Ethics will be furnished without charge, upon written request to Harte Hanks, Inc., Attn: Corporate Secretary, 9601 McAllister Freeway, Suite 610, San Antonio, Texas 78216. In accordance with the rules of the NYSE and the SEC, we currently intend to disclose any future amendments to our Code of Ethics, or waivers from our Code of Ethics for our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, by posting such information on our website (www.HarteHanks.com) within the time period required by applicable SEC and NYSE rules.fiscal year ended December 31, 2023.

Management Certifications

In accordance with the Sarbanes-Oxley Act of 2002 and SEC rules thereunder, our CEO and CFO have signed certifications under Sarbanes-Oxley Section 302, which are filed as exhibits to this Form 10-K. In addition, our CEO most recently submitted an annual certification to the NYSE under Section 303A.12(a) of the NYSE listing standards on September 18, 2017.

ITEM 11.    EXECUTIVE COMPENSATION

The informationInformation required by this item regarding the compensation of our “named executive officers” and directors and other required information will be set forthincluded in our 2018 Proxy Statement under the captions “Executive Compensation,” and “Director Compensation,” which information is incorporated herein by reference. In accordance with the rules of the SEC, informationan amendment hereto or a definitive proxy statement to be contained in the 2018 Proxy Statement under the caption “Compensation Committee Report” is not deemed to be “filed”filed with the SEC or subject to the liabilitieswithin 120 days of the 1934 Act.fiscal year ended December 31, 2023.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information at Year-End 2017

The information required by this item regarding securities authorized for issuance under equity compensation plans will be set forthincluded in our 2018 Proxy Statement underan amendment hereto or a definitive proxy statement to be filed with the caption “Executive Compensation - Equity Compensation Plan Information at Year-End2015,” which information is incorporated herein by reference.SEC within 120 days of the fiscal year ended December 31, 2023.

Beneficial Ownership

The information required by this item regarding security ownership of certain beneficial owners, management and directors will be set forth in our 2018 Proxy Statement under the caption “Security Ownership of Management and Principal Stockholders,” which information is incorporated herein by reference.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Independence of Directors

The informationInformation required by this item regarding director independence will be set forthincluded in our 2018 Proxy Statement under the caption “Corporate Governance—Independence of Directors,” which information is incorporated herein by reference.

Certain Relationships and Related Transactions

The information required by this item regarding transactions with related persons, including our policies and procedures for the review, approvalan amendment hereto or ratification of related person transactions that are requireda definitive proxy statement to be disclosed underfiled with the SEC’s rules and regulations, will be set forth in our 2018 Proxy Statement underSEC within 120 days of the caption “Corporate Governance—Certain Relationships and Related Transactions,” which information is incorporated herein by reference.fiscal year ended December 31, 2023.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The informationInformation required by this item regarding the audit committee’s pre-approval policies and procedures and the disclosures of fees billed by our principal independent auditor will be set forthincluded in our 2018 Proxy Statement underan amendment hereto or a definitive proxy statement to be filed with the caption “Audit Committee and Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.SEC within 120 days of the fiscal year ended December 31, 2023.

30

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
15(a)(1)Financial Statements
The financial statements filed as part of this report and referenced in Item 8 are presented in the Consolidated Financial Statements and the notes thereto beginning at page 3835 of this Form 10-K (Financial Statements).
15(a)(2)Financial Statement Schedules
All schedules for which provision is made in the applicable rules and regulations of the SEC have been omitted as the schedules are not required under the related instructions, are not applicable, or the information required thereby is set forth in the Consolidated Financial Statements or notes thereto.
15(a)(3)Exhibits
15(a)(3)Exhibits
The Exhibit Index following the Notes to Consolidated Financial Statements in this Form 10-K lists the exhibits that are filed or furnished, as applicable, as part of this Form 10-K.

31

Table of Contents
INDEX TO EXHIBITS
We are incorporating certain exhibits listed below by reference to other Harte Hanks filings with the Securities and Exchange Commission, which we have identified in parentheses after each applicable exhibit.
Exhibit
No.		Description of Exhibit
*3.1
Amended and Restated Certificate of Incorporation as amended through May 5, 1998.
*3.2
Certificate of Amendment of Incorporation dated January 31, 2018.
3.3
*3.4
Fifth Amended and Restated Bylaws.
3.5
*10.01
Loan Agreement, dated December 21, 2021, among Harte Hanks, Inc. the subsidiary guarantors party thereto and Texas Capital Bank, National Association.
*10.02
Security Agreement, dated December 21, 2021, between Harte Hanks, Inc. and Texas Capital Bank, National Association.
10.03
Harte Hanks, Inc. Restoration Pension Plan (As Amended and Restated Effective January 1, 2008) (filed as Exhibit 10.1 to the Company’s Form 8-K dated June 27, 2008).
10.04
First Amendment to the Harte Hanks, Inc. Amended & Restated Restoration Pension Plan, dated October 11, 2016 (filed as Exhibit 10.1 to the Company's Form 8-K dated October 14, 2016).
10.05
10.06
*10.07
10.08
Employment Agreement between the Company and Brian Linscott, effective as of June 23, 2021 (filed as Exhibit 10.2 to the company's Form 8-K, dated June 23, 2021).
10.09
Employment Agreement between the Company and Kirk Davis, effective as of June 19, 2023 (filed as Exhibit 10.1 to the company's Form 8-K, dated June 20, 2023).
*10.10
10.11
10.12
10.13
*21.1
*23.1
*31.1
*31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1
Furnished Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2
Furnished Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*97
Harte Hanks Clawback Policy.
*Filed or furnished herewith, as applicable
32
Table of Contents
INDEX TO EXHIBITS (continued)
Exhibit
No.		Description of Exhibit
*101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL Document.
*101.SCHInline XBRL Taxonomy Extension Schema Document.
*101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LABInline XBRL Taxonomy Extension Labels Linkbase Document.
*101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
*101.DEFInline XBRL Definition Linkbase Document.
*104Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).
*Filed or furnished herewith, as applicable
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Harte Hanks, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HARTE HANKS, INC.
By:/s/ Karen A. PuckettKirk Davis
Kirk DavisKaren A. Puckett
President and Chief Executive Officer
Date:March 15, 2018April 1, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Karen A. PuckettKirk Davis/s/ Jon C. BiroDavid Garrison
Karen A. PuckettKirk DavisJon C. BiroDavid Garrison
Director, President and Chief Executive OfficerExecutive Vice President and Chief Financial Officer
Date: March 15, 2018April 1, 2024Date: March 15, 2018April 1, 2024
/s/ John H. Griffin, Jr./s/ Genevieve C. Combes
/s/ Carlos M. Alvarado John H. Griffin Jr., Director/s/ Christopher M. Harte
Carlos M. AlvaradoChristopher M. Harte, Chairman
Vice President, Finance and Corporate ControllerDate: March 15, 2018Genevieve C. Combes, Director
Date: March 15, 2018April 1, 2024Date: April 1, 2024
/s/ David L. Copeland/s/ Scott C. KeyRadoff, Bradley L
David L. Copeland, DirectorScott C. Key,Bradley L. Radoff, Director
Date: March 15, 2018April 1, 2024Date: March 15, 2018April 1, 2024
/s/ William F. FarleyLiz Ross/s/ Judy C. Odom
William F. Farley,Liz Ross, DirectorJudy C. Odom, Director
Date: March 15, 2018April 1, 2024Date: March 15, 2018
/s/ Melvin L. Keating/s/ Alfred V. Tobia, Jr.
Melvin L. Keating, DirectorAlfred V. Tobia, Jr., Director
Date: March 15, 2018Date: March 15, 2018

34
Harte Hanks, Inc. and Subsidiaries
Index to Consolidated Financial Statements
3836
4038
4139
40
4241
44
Notes to Consolidated Financial Statements
4542

All schedules for which provision is made in the applicable rules and regulations of the SEC have been omitted as the schedules are not required under the related instructions, are not applicable, or the information required thereby is set forth in the consolidated financial statements or notes thereto.

35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the stockholdersshareholders and the Boardboard of Directorsdirectors of Harte Hanks, Inc. and Subsidiaries:


Opinion on the Financial Statements


We have audited the accompanying consolidated balance sheets of Harte Hanks, Inc. and subsidiariesSubsidiaries (the "Company") as of December 31, 20172023 and 2016, and2022, the related consolidated statements of comprehensive income, (loss), changes in stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2017,2023, and the related notes (collectively referred to as the “financial statements”"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2018 expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.


Basis for Opinion


These consolidated financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOBPublic Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.


Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.



36
Revenue from Contract with Customers

As described in Note C to the consolidated financial statements, the Company has three key revenue streams which consists of marketing services, customer care services, and fulfillment and logistics services. The nature of the services offered by each revenue stream is different, and the Company’s process for revenue recognition differs between each of the discrete revenue streams. Additionally, each revenue stream has a high volume of transactions where each contract has disparate pricing, including fixed price and variable, and performance obligations.

We identified revenue from contracts with customers as a critical audit matter. Obtaining an understanding of the complex process and accounting used in the Company’s revenue recognition and evaluating the processes for multiple revenue streams required significant auditor effort. Additionally, determining the nature and extent of our audit procedures and evaluating the overall sufficiency of the audit evidence required subjective auditor judgment.

Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures include, among others:
a.We tested a sample of revenue transactions and compared the amount of revenue recorded with underlying supporting documentation, including third party source documents.
b.We obtained and read the customer contracts and evaluated the completeness of the performance obligations identified by management.
c.We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.
d.We evaluated the Company’s contracts and determined that management applied the appropriate accounting for each, including the identification of variable consideration, where applicable.
/s/ DELOITTE & TOUCHEBaker Tilly US, LLP

San Antonio, Texas
March 15, 2018

We have served as the Company’s auditor since 2016.2019.

Tewksbury, Massachusetts

April 1, 2024

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders
Harte Hanks, Inc.:

We have audited the accompanying consolidated balance sheet of Harte Hanks, Inc. and subsidiaries as of December 31, 2015, and the related consolidated statements of comprehensive income (loss), changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Harte Hanks, Inc. and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

San Antonio, Texas
March 14, 2016 except for the restatement of discontinued operations in the consolidated balance sheet, statements of comprehensive income (loss), statements of cash flows and Notes A, D, E, H, K, and N, as to which the date is June 16, 2017.


Harte Hanks, Inc. and Subsidiaries Consolidated Balance Sheets
  December 31,
In thousands, except per share and share amounts 2017 2016
ASSETS  
  
Current assets  
  
Cash and cash equivalents $8,397
 $46,005
Accounts receivable (less allowance for doubtful accounts of $697 at December 31, 2017 and $1,028 at December 31, 2016) 81,397
 88,813
Inventory 587
 838
Prepaid expenses 5,039
 5,944
Prepaid income tax 3,886
 2,895
Other current assets 3,900
 4,934
Total current assets 103,206
 149,429
Property, plant and equipment  
  
Buildings and improvements 16,821
 18,673
Software 52,967
 53,672
Equipment and furniture 84,747
 92,367
Software development and equipment installations in progress 4,005
 600
Gross property, plant and equipment 158,540
 165,312
Less accumulated depreciation and amortization (136,753) (141,388)
Net property, plant and equipment 21,787
 23,924
Goodwill —
 34,510
Other intangible assets (less accumulated amortization of $2,184 at December 31, 2017 and $1,471 at December 31, 2016) 2,589
 3,302
Other assets 3,230
 2,272
Total assets $130,812
 $213,437
     
LIABILITIES AND STOCKHOLDERS’ EQUITY  
  
Current liabilities  
  
Accounts payable 36,130
 45,563
Accrued payroll and related expenses 10,601
 9,990
Deferred revenue and customer advances 5,342
 6,505
Income taxes payable —
 30,436
Customer postage and program deposits 11,443
 7,985
Other current liabilities 3,732
 4,188
Total current liabilities 67,248
 104,667
Pensions 59,338
 60,836
Contingent consideration 33,887
 29,725
Deferred tax liability, net 773
 11,044
Other long-term liabilities 4,201
 4,509
Total liabilities 165,447
 210,781
     
Stockholders’ equity  
  
Common stock, $1 par value, 25,000,000 shares authorized 12,074,661 shares issued at December 31, 2017 and 12,043,673 shares issued at December 31, 2016 12,075
 12,044
Additional paid-in capital 457,186
 458,638
Retained earnings 794,583
 837,316
Less treasury stock, 5,864,641 shares at cost at December 31, 2017 and 5,879,163 shares at cost at December 31, 2016 (1,254,176) (1,259,164)
Accumulated other comprehensive loss (44,303) (46,178)
Total stockholders’ equity (deficit) (34,635) 2,656
Total liabilities and stockholders’ equity $130,812
 $213,437
See Accompanying Notes to Consolidated Financial Statements.
Harte Hanks, Inc. and Subsidiaries Consolidated Balance SheetsDecember 31,
In thousands, except per share and share amounts20232022
ASSETS
Current assets
Cash and cash equivalents$18,364 $10,364 
Accounts receivable (less allowance of $474 and $163 at December 31, 2023 and 2022)34,313 39,700 
Contract assets and unbilled accounts receivable7,935 8,202 
Prepaid expenses1,915 2,176 
Prepaid income tax and income tax receivable1,758 4,262 
Other current assets928 1,607 
Total current assets65,213 66,311 
Net property, plant and equipment                                                        8,855 10,523 
Right-of-use assets25,417 19,169 
Other assets
Intangible assets, net2,820 3,540 
Goodwill1,926 2,398 
Deferred tax assets, net17,268 16,306 
Other long-term assets1,258 1,737 
Total other assets23,272 23,981 
Total assets$122,757 $119,984 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$23,176 $22,465 
Accrued payroll and related expenses5,615 6,679 
Deferred revenue and customer advances3,195 4,590 
Customer postage and program deposits1,815 1,223 
Other current liabilities9,495 2,862 
Short-term lease liabilities4,815 5,747 
Total current liabilities48,111 43,566 
Pension liabilities - Qualified plans10,540 18,674 
Pension liabilities - Nonqualified plan18,630 19,098 
Long-term lease liabilities23,691 16,575 
Other long-term liabilities1,928 3,263 
Total liabilities102,900 101,176 
Stockholders’ equity
Common stock, $1 par value, 25,000,000 shares authorized,12,221,484 shares issued, 7,224,718 and 7,402,614 shares outstanding at December 31, 2023 and 2022, respectively12,221 12,221 
Additional paid-in capital157,889 218,411 
Retained earnings844,920 846,490 
Less treasury stock, 4,996,766 shares at cost at December 31, 2023 and 4,818,870 shares at cost at December 31, 2022(951,083)(1,010,012)
Accumulated other comprehensive loss(44,090)(48,302)
Total stockholders’ equity19,857 18,808 
Total liabilities and stockholders’ equity$122,757 $119,984 
See Accompanying Notes to Consolidated Financial Statements.

38
Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss)
  Year Ended December 31,
In thousands, except per share amounts 2017 2016 2015
Operating revenues $383,906
 $404,412
 $444,166
Operating expenses  
  
  
Labor 230,280
 245,298
 233,304
Production and distribution 109,090
 117,126
 141,920
Advertising, selling, general and administrative 40,384
 44,804
 44,579
Impairment of goodwill 34,510
 38,669
 209,938
Depreciation, software and intangible asset amortization 10,507
 12,352
 12,378
Total operating expenses 424,771
 458,249
 642,119
Operating income (loss) (40,865) (53,837) (197,953)
Other expenses  
  
  
Interest expense, net 4,826
 3,454
 5,016
Loss on sale —
 —
 9,501
Other, net 6,063
 11,857
 5,956
Total other expenses 10,889
 15,311
 20,473
Income (loss) from continuing operations before income taxes (51,754) (69,148) (218,426)
Income tax expense (benefit) (9,894) 20,630
 (37,360)
Income (loss) from continuing operations $(41,860) $(89,778) $(181,066)
       
Income (loss) from discontinued operations, net of income taxes (including loss on disposal of $44,529 at December 31, 2016) $—
 $(41,159) $10,138
       
Net income (loss) $(41,860) $(130,937) $(170,928)
       
Basic earnings (loss) per common share  
  
  
Continuing operations $(6.76) $(14.60) $(29.37)
Discontinued operations —
 (6.69) 1.64
Basic earnings (loss) per common share (6.76) $(21.29) $(27.73)
       
Weighted-average common shares outstanding 6,192
 6,149
 6,164
       
Diluted earnings (loss) per common share  
  
  
Continuing operations $(6.76) $(14.60) $(29.37)
Discontinued operations —
 (6.69) 1.64
Diluted earnings (loss) per common share $(6.76) $(21.29) $(27.73)
       
Weighted-average common and common equivalent shares outstanding 6,192
 6,149
 6,164
       
Net income (loss) $(41,860) $(130,937) $(170,928)
       
Declared dividends per share $—
 $0.85
 $3.40
       
Other comprehensive income (loss), net of tax  
  
  
Adjustment to pension liability $1,559
 $(3,062) $5,645
Foreign currency translation adjustments 316
 444
 (1,976)
Total other comprehensive income (loss), net of tax 1,875
 (2,618) 3,669
Comprehensive income (loss) $(39,985) $(133,555) $(167,259)
Year Ended December 31,
In thousands, except per share amounts20232022
Operating revenue$191,492 $206,278 
Operating expenses
Labor97,968 104,620 
Production and distribution59,568 61,930 
Advertising, selling, general and administrative20,673 21,893 
Restructuring expense5,687 — 
Depreciation and amortization expense4,237 2,728 
Total operating expenses188,133 191,171 
Operating income3,359 15,107 
Other expense (income), net
Interest (income) expense, net(135)438 
Other expense (income), net5,413 (4,644)
Total other expense (income), net5,278 (4,206)
(Loss) income before income taxes(1,919)19,313 
Income tax benefit(349)(17,463)
Net (loss) income$(1,570)$36,776 
Less: Loss from redemption of Preferred stock— 1,380 
Less: Preferred stock dividends— — 
Less: Earnings attributable to participating securities— — 
(Loss) income attributable to common stockholders$(1,570)$35,396 
(Loss) earnings per common share
Basic$(0.21)$4.98 
Diluted$(0.21)$4.75 
Weighted-average shares used to compute income per share attributable to common shares
Basic7,3107,101
Diluted7,3107,457
Comprehensive income, net of tax
Net (loss) income$(1,570)$36,776 
Adjustment to pension liability1,664 10,274 
Foreign currency translation adjustments2,548 (5,248)
Total other comprehensive income, net of tax4,212 5,026 
Comprehensive income$2,642 $41,802 
See Accompanying Notes to Consolidated Financial Statements.

39

Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
In thousandsPreferred
Stock		Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
(loss) income		Total
Stockholders’
Equity
(Deficit)
Balance at December 31, 2021$9,723 $12,121 $290,711 $811,094 $(1,085,313)$(53,328)$(24,715)
Redemption of preferred stock(9,723)— — (1,380)— — (1,380)
Issuance of common stock in connection with redemption of preferred stock— 100 977 — — — 1,077 
Stock-based compensation— — 2,493 — — — 2,493 
Vesting of RSU's and issuance of Treasury stocks in connection with acquisition (see Note L)— — (75,770)— 75,301 — (469)
Net income— — — 36,776 — — 36,776 
Other comprehensive income5,026 5,026 
Balance at December 31, 2022$— $12,221 $218,411 $846,490 $(1,010,012)$(48,302)$18,808 
Stock-based compensation— — 1,418 — — — 1,418 
Vesting of RSU's and issuance of Treasury stocks in connection with acquisition (see Note L)— — (61,940)— 61,299 — (641)
Repurchase of common stock— — — — (2,370)— (2,370)
Net loss— — — (1,570)— — (1,570)
Other comprehensive income— — — — — 4,212 4,212 
Balance at December 31, 2023$— $12,221 $157,889 $844,920 $(951,083)$(44,090)$19,857 
See Accompanying Notes to Consolidated Financial Statements.
40
Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Cash Flows
  Year Ended December 31,
In thousands 2017 2016 2015
Cash Flows from Operating Activities  
  
  
Net loss $(41,860) $(130,937) $(170,928)
Adjustments to reconcile net loss to net cash provided by operating activities  
  
  
(Income) loss from discontinued operations, net of tax —
 41,159
 (10,138)
Loss on sale —
 —
 9,501
Impairment of goodwill 34,510
 38,669
 209,938
Depreciation and software amortization 9,791
 11,531
 11,719
Intangible asset amortization 713
 821
 659
Stock-based compensation 2,662
 2,673
 5,442
Net pension cost (payments) 1,100
 385
 (257)
Interest accretion on contingent consideration 4,162
 2,430
 2,337
Adjustments to fair value of contingent consideration —
 7,018
 —
Amortization of debt issuance costs —
 208
 356
Deferred income taxes (10,959) 26,290
 (41,569)
Other, net (27) (246) 319
Changes in assets and liabilities, net of acquisitions:      
Decrease (increase) in accounts receivable 7,416
 14,945
 7,238
Decrease (increase) in inventory 251
 125
 272
Decrease (increase) in prepaid expenses and other current assets 710
 2,723
 954
Increase (decrease) in accounts payable (10,398) 9,126
 1,888
Increase (decrease) in other accrued expenses and liabilities (28,871) 23,045
 (10,390)
Net cash provided by (used in) continuing operations (30,800) 49,965
 17,341
Net cash provided by (used in) discontinued operations —
 (35,375) 15,945
Net cash provided by (used in) operating activities (30,800) 14,590
 33,286
       
Cash Flows from Investing Activities      
Acquisitions, net of cash acquired —
 (3,500) (29,862)
Dispositions, net of cash transferred —
 —
 4,974
Purchases of property, plant and equipment (5,684) (6,691) (7,907)
Proceeds from the sale of property, plant and equipment 18
 755
 (76)
Net cash used in investing activities within continuing operations (5,666) (9,436) (32,871)
Net cash provided by (used in) investing activities within discontinued operations —
 109,139
 (3,269)
Net cash provided by (used in) investing activities (5,666) 99,703
 (36,140)
       
Cash Flows from Financing Activities      
Borrowings 30,000
 276,302
 13,000
Repayment of borrowings (30,211) (353,614) (18,375)
Debt financing costs (635) (2,484) —
Issuance of common stock (111) (233) (909)
Payment of capital leases (501) (168) —
Excess tax benefits from stock-based compensation —
 —
 14
Purchase of treasury stock —
 —
 (4,619)
Issuance of treasury stock —
 186
 193
Dividends paid —
 (5,285) (21,241)
Net cash used in financing activities (1,458) (85,296) (31,937)
       
Effect of exchange rate changes on cash and cash equivalents 316
 444
 (1,976)
Net increase (decrease) in cash and cash equivalents (37,608) 29,441
 (36,767)
Cash and cash equivalents at beginning of year 46,005
 16,564
 53,331
Cash and cash equivalents at end of year $8,397
 $46,005
 $16,564
Year Ended December 31,
In thousands20232022
Cash Flows from Operating Activities
Net (loss) income$(1,570)$36,776 
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Depreciation and amortization expense4,237 2,728 
Restructuring expense861 — 
Stock-based compensation1,418 2,355 
Net pension payment70 (1,009)
Deferred income taxes(1,474)(19,843)
Changes in assets and liabilities, net of dispositions:
Accounts receivable, net and contract assets5,654 3,843 
Prepaid expenses, income tax receivable and other current assets3,440 2,779 
Accounts payable and accrued expense844 6,200 
Deferred revenue and customer advances(1,395)383 
Customer postage and program deposits592 (5,273)
Other accrued expenses and liabilities(2,200)(147)
Net cash provided by operating activities10,477 28,792 
Cash Flows from Investing Activities
Purchases of property, plant and equipment(2,812)(5,800)
Proceeds from the sale of property, plant and equipment3 57 
Acquisition of InsideOut500 (5,750)
Net cash used in investing activities(2,309)(11,493)
Cash Flows from Financing Activities
Repayment of borrowings— (5,000)
Debt financing costs(45)(131)
Payment of finance leases(160)(194)
Redemption of preferred stock— (10,026)
Repurchase common stock(2,370)— 
Treasury stock activities(641)(469)
Net cash used in financing activities(3,216)(15,820)
Effect of exchange rate changes on cash, cash equivalents and restricted cash2,548 (5,248)
Net increase (decrease) in cash and cash equivalents and restricted cash7,500 (3,769)
Cash and cash equivalents and restricted cash at beginning of year11,364 15,133 
Cash and cash equivalents and restricted cash at end of year$18,864 (1)$11,364 
(1) This amount is comprised of the below balances:
Cash and cash equivalents$18,364 $10,364 
Cash held in Escrow account included in other assets (see Note L)500 1,000 
$18,864 $11,364 
Supplemental disclosures   
Cash paid for interest$244  $273 
Cash received for income taxes, net$(2,899) $(1,391)
Non-cash investing and financing activities   
Purchases of property, plant and equipment included in accounts payable and accrued expense$1,997  $2,048 
Issuance of common stock$—  $(1,077)
See Accompanying Notes to Consolidated Financial Statements

Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Continued)
41
  Year Ended December 31,
In thousands 2017 2016 2015
Supplemental disclosures      
Cash paid for interest $292
 $5,672
 $1,679
Cash paid for income taxes, net of refunds $32,914
 $2,592
 $10,069
Non-cash investing and financing activities      
Purchases of property, plant and equipment included in accounts payable $1,434
 $298
 $315
New capital lease obligations $57
 $1,259
 $177
See Accompanying Notes to Consolidated Financial Statements

Harte Hanks, Inc. and Subsidiaries Consolidated StatementsTable of Changes in EquityContents
In thousands, except per share amounts 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income(loss)
 
Total
Stockholders’
Equity
Balance at December 31, 2014 $11,961
 $453,885
 $1,165,707
 $(1,257,648) $(47,229) $326,676
Exercise of stock options and release of unvested shares 54
 157
 —
 (1,120) —
 (909)
Net tax effect of stock options exercised and release of unvested shares —
 1,742
 —
 —
 —
 1,742
Stock-based compensation —
 5,733
 —
 —
 —
 5,733
Dividends paid ($3.40 per share) —
 —
 (21,241) —
 —
 (21,241)
Treasury stock issued —
 (335) —
 528
 —
 193
Purchase of treasury stock —
 —
 —
 (4,619) —
 (4,619)
Net income —
 —
 (170,928) —
 —
 (170,928)
Other comprehensive loss —
 —
 —
 —
 3,669
 3,669
Balance at December 31, 2015 $12,015
 $461,182
 $973,538
 $(1,262,859) $(43,560) $140,316
Exercise of stock options and release of unvested shares 29
 (29) —
 (233) —
 (233)
Net tax effect of stock options exercised and release of unvested shares —
 (1,259) —
 —
 —
 (1,259)
Stock-based compensation —
 2,486
 —
 —
 —
 2,486
Dividends paid ($0.85 per share) —
 —
 (5,285) —
 —
 (5,285)
Treasury stock issued —
 (3,742) —
 3,928
 —
 186
Net loss —
 —
 (130,937) —
 —
 (130,937)
Other comprehensive income —
 —
 —
 —
 (2,618) (2,618)
Balance at December 31, 2016 $12,044
 $458,638
 $837,316
 $(1,259,164) $(46,178) $2,656
Cumulative effect of accounting change —
 1,050
 (873) —
 —
 177
Exercise of stock options and release of unvested shares 31
 (30) —
 (112) —
 (111)
Stock-based compensation —
 2,457
 —
 —
 —
 2,457
Treasury stock issued —
 (4,929) —
 5,100
 —
 171
Net loss —
 —
 (41,860) —
 —
 (41,860)
Other comprehensive loss —
 —
 —
 —
 1,875
 1,875
Balance at December 31, 2017 $12,075
 $457,186
 $794,583
 $(1,254,176) $(44,303) $(34,635)
See Accompanying Notes to Consolidated Financial Statements.


Harte Hanks, Inc. and Subsidiaries Notes to Consolidated Financial Statements

Note A — Significant Accounting PoliciesBackground and Basis of Presentation

Background
Harte Hanks, Inc. together with its subsidiaries (“Harte Hanks,” “Company,” “we,” “our,” or “us”) is a leading global customer experience company. With offices in North America, Asia-Pacific and Europe, Harte Hanks works with some of the world’s most respected brands.
Basis of Presentation (including principles of consolidation)
Consolidation
The accompanying audited consolidated financial statements and accompanying notes are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP").

Consolidation

The accompanying consolidated financial statements presentinclude the financial position and the results of operations and cash flowsaccounts of Harte Hanks, Inc., and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

As used in this report, the terms “Harte Hanks,” “the Company,” “we,” “us,” or “our” may refer to Harte Hanks, Inc., one or more of ourits consolidated subsidiaries, or all of them taken as a whole.whole, as the context may require.

Reclassifications
Discontinued Operations

As discussed in Note N, Discontinued Operations, we sold our Trillium reporting unit as of December 23, 2016. As such, the results of operations, financial position, and cash flows for Trillium are reported separately as discontinued operations for all periods presentedCertain amounts in the Consolidated Financial Statements. Results of the remaining Harte Hanks business are reported as continuing operations.

Debt under the 2016 Secured Credit Facility, as defined within Note C, Long-Term Debt, was required to be repaid as a result of the Trillium transaction. In accordance with the provisions of ASC 205-20-45-6, Allocation of Interest to Discontinued Operations, we have reclassified interest expense for the 2016 Secured Credit Facility to discontinued operations for December 31, 2016 in the Consolidated Financial Statements.

Reverse Stock Split

On January 31, 2018, we executed a 1-for-10 reverse stock split (the "Reverse Stock Split"). Pursuantconsolidated financial statements related to the Reverse Stock Split, every 10 pre-split shares were exchanged for one post-split share of the Company's Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise have held a fractional share of the Common Stock received a cash payment in lieu thereof. In addition, our authorized Common Stock was reduced from 250 million to 25 million shares. The number of authorized shares of preferred stock remains unchanged at one million shares. See Note P, Subsequent Events, for additional information.

The Consolidated Financial Statements and Accompanying Notes to Consolidated Financial Statements give retroactive effect to the Reverse Stock Split for all periods presented, unless otherwise noted. The calculation of basic and diluted earnings (loss) per share have been determined based on a retroactive adjustment of weighted average shares outstanding for all periods presented. The reflect to the reverse stock split on shareholders' equity, an amount equal to the par value of the reduced shares from the common stock par value account was reclassified to additional paid in capital resulting in no net impact to shareholders' equity on the Consolidated Balance Sheets.

Reclassification of Prior Year Amounts

Certain prior year amountsyears have been reclassified to conform to the current yearyear’s presentation. This includes amounts related to discontinued operations, which have been reclassified for comparative purposes in all periods presented. This also includes the retrospective adoption of ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the
Operating Expense Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, resulted in the reclassification of pension expense previously recorded in Labor as of December 31, 2016 to Other, net in the Consolidated Statements of Comprehensive Loss.

Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes could differ from those estimates and assumptions. Such estimates include, but are not limited to, estimates related to pension accounting; fair value for purposes of assessing goodwill, long-lived assets, and intangible assets for impairment; income taxes; and contingencies. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.

Operating Expense Presentation in Consolidated Statements of Comprehensive Income (Loss)

The “Labor” line in the Consolidated Statements of Comprehensive Income (Loss) includes all employee payroll and benefits costs, including stock-based compensation along withand temporary labor costs. The “Production and distribution” and “Advertising, selling, general and administrative” lines do not include labor, depreciation, or amortization.amortization expense.

Note B — Significant Accounting Policies
Use of Estimates
Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from those estimates due to uncertainties. Such estimates include, but are not limited to, estimates related to lease accounting; pension accounting; fair value for purposes of assessing long-lived assets for impairment; revenue recognition; income taxes; stock-based compensation and contingencies. On an ongoing basis, management reviews its estimates and assumptions based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.
Segment Reporting
The Company operates three business segments: Marketing Services; Customer Care; and Fulfillment & Logistics Services. Our Chief Executive Officer (“CEO”) is considered to be our chief operating decision maker. Our CEO reviews our operating results on an aggregate basis for purposes of allocating resources and evaluating financial performance by using the three financial measures: revenue, operating income and operating income plus depreciation and amortization (EBITDA).
Cash Equivalents
All highly liquid investments with an original maturity of 90 days or less at the time of purchase are considered to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.
42
Restricted Cash
In our normal business operation, we receive cash from our customers for certain customer program service funding. As these programs impose legal restrictions on the commingling of funds, we present this cash as restricted cash.
Accounts Receivable and Allowance for Credit Losses
Accounts receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We make estimates of expected credit and collectability trends for the allowance for credit losses based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current and future economic conditions that may affect the Company's expectation of the collectability in determining the allowance for credit losses. Expected credit losses are recorded in the “Advertising, selling, general, and administrative” line of our Consolidated Statements of Comprehensive Income. As of December 31, 2023 and 2022, our accounts receivables, net, was $34.3 million and $39.7 million, respectively. The Company classifies unbilled receivables as Accounts receivable. The changes in the allowance for credit losses accounts consisted of the following:
Year Ended December 31,
In thousands20232022
Balance at beginning of year$163 $266 
Net charges to expense321 (92)
Amounts recovered against the allowance(10)(11)
Balance at end of year$474 $163 
Unbilled receivables
For the majority of service contracts, the Company performs the services prior to billing the client, and this amount is captured as an unbilled receivable included in accounts receivable, net on the consolidated balance sheet. Billing usually occurs in the month after the Company performs the services or in accordance with the specific contractual provisions.
Geographic Concentrations
Depending on the needs of our clients, our services are provided through an integrated approach through eleven facilities worldwide, of which four are located outside of the U.S.
The following table provides information about the operations in different geographic area for the periods indicated:
Revenue(1)
Year Ended December 31,
In thousands20232022
United States$173,162 $183,470 
Other countries18,330 22,808 
Total revenue$191,492 $206,278 
(1)Geographic revenues are based on the location of the service being performed.
Property, plant and equipment, net(2)
December 31,
In thousands20232022
United States$8,005 $10,219 
Other countries850 304 
Total property, plant and equipment$8,855 $10,523 
(2)Property, plant and equipment are based on physical location.
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Credit Risk and Concentration
Accounts receivable are typically unsecured and are derived from revenue earned from customers across different industries and countries. We perform ongoing credit evaluation of our customers and generally do not require collateral. We maintain an allowance for estimated credit losses and bad debt expense on these losses was not material during the years ended December 31, 2023 and 2022. In the event that accounts receivable collection cycle deteriorates, our operating results and financial position could be adversely affected.
Our top customer represented 11.2% and 13.0% of total accounts receivable as of December 31, 2023 and 2022, respectively.
Revenue by Top Customers
The table below sets forth the percentage of our total revenue derived from our largest customers:
 Year Ended December 31,
20232022
Top ten customers48.5 %50.6 %
Top twenty-five customers71.7 %72.5 %
Our top customer represented 11.2% and 12.2% of total revenue for the year ended December 31, 2023 and 2022, respectively.
Related Party Transactions
From 2016 until October 2020, we conducted business with Wipro, LLC (“Wipro”), whereby Wipro provided us with a variety of technology-related services. We have since terminated all service agreements with Wipro. Effective January 30, 2018, Wipro became a related party when it purchased 9,926 shares of our Series A Preferred Stock, for aggregate consideration of $9.9 million. On December 2, 2022, we completed the repurchase of all of our outstanding Preferred Stock from Wipro and as of said date Wipro is no longer a related party.
Revenue Recognition

We recognize revenue when allupon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services based on the relevant contract. We apply the following five-step revenue recognition model:
•Identification of the following criteria are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) the service has been performed or the product has been delivered. In order to recognize revenue, we require either a purchase order, a statement of work signed by the client, a written contract, or some other formcontracts, with a customer
•Identification of written authorization from the client. Revenue thatperformance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when (or as) we satisfy the performance obligation
Certain client programs provide for adjustments to billings based upon whether we achieve certain performance criteria. In these circumstances, revenue is not recognized at the time of sale becausewhen the foregoing conditions are not met are recognized when those conditions are subsequently met. Revenue is recognizedWe record revenue net of any taxes collected from customers and subsequently remitted to governmental authorities. Any payments received in advance of the performance of services or delivery of the product are recorded as deferred revenue until such time as the services are performed or the product is delivered.

Costs incurred for search engine marketing solutions payable to the engine host and postage costs of mailings are billed to our clients and are not directly reflected in our revenue.
Revenue from agency and digital services, direct mail, logistics, fulfillment and contact center is recognized as the work is performed. Fees for these services are determined by the terms set forth in the contact with the client.each contract. These fees are typically a set at a fixed price or rate by transaction occurrence, service provided, time spent, or product delivered.

For arrangements requiring the design and build out of a database, revenue is not recognized until client acceptance occurs. Up-front fees billed during the setup phase for these arrangements are deferred and direct build costs are capitalized. Pricing for these types of arrangements areis typically based on a fixed price determined in the contract. Revenue from other database marketing solutions is recognized ratably over the contractual service period. Pricing for these services areis typically based on a fixed price per month or per contract.

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Cash EquivalentsFair Value of Financial Instruments

All highly liquid investments withFinancial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 820, Fair Value Measurements and Disclosures, ("ASC 820") defines fair value as the price that would be received to sell an original maturity of 90 daysasset or lesspaid to transfer a liability in an orderly transaction between market participants at the timemeasurement date. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into three levels:
Level 1Quoted prices in active markets for identical assets or liabilities.
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of purchasethe assets or liabilities.
Level 3Unobservable inputs that are consideredsupported by little or no market activity and that are significant to bethe fair value of the assets or liabilities.
Because of their maturities and/or variable interest rates, certain financial instruments have fair values approximating their carrying values. These instruments include cash equivalents. Cashand cash equivalents are carried at cost, which approximates fair value.

Allowance for Doubtful Accounts

We maintain our allowance for doubtful accounts adequate to reduceand restricted cash, accounts receivable, to the amount of cash expected to be collected.trade payables, and long-term debt. The methodology used to determine the minimum allowance is based on our prior collection experience and is generally related to the accounts receivable balance in various aging categories. The balance is also influenced by specific clients’ financial strength and circumstance. Accounts that are determined to be uncollectible are written off in the period in which they are determined to be uncollectible. Periodic changes to the allowance balance are recorded as increases or decreases to bad debt expense, which is included in the “Advertising, selling, general, and administrative” line of our Consolidated Statements of Comprehensive Income (Loss). The changes in the allowance for doubtful accounts consistedfair value of the following:
  Year Ended December 31,
In thousands 2017 2016 2015
Balance at beginning of year $1,028
 $974
 $878
Net charges to expense 192
 711
 685
Amounts recovered against the allowance (523) (657) (589)
Balance at end of year $697
 $1,028
 $974

Inventory

Inventory, consisting primarily of print materials and operating supplies,assets in our funded pension plan is stated at the lower of cost (first-in, first-out method) or market.


disclosed in Note H, Employee Benefit Plans.
Property, Plant and Equipment

Property, plant and equipment, net consist of the following:
Year Ended December 31,
In thousands20232022
Property, plant and equipment
Buildings and improvements$4,635 $4,387 
Equipment and furniture20,881 20,478 
Software18,030 20,724 
Software development and equipment installations in progress1,842 8,947 
Gross property, plant and equipment45,388 54,536 
Less accumulated depreciation(36,533)(44,013)
Net property, plant and equipment$8,855 $10,523 
Property, plant and equipment are stated on the basis of cost.at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The general ranges of estimated useful lives are:
Years
Buildings and improvements3to40 years
Software2to10 years
Equipment and furniture3to20 years

For the year ended December 31, 2023, the Company recorded $3.4 million of depreciation expense compared to $2.5 million for the year ended December 31, 2022.
Long-lived assets such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We did not record an recorded $0.1 million and $0.2 million of impairment of long-lived assets in 2017, 2016, or 2015.2023 and 2022, respectively.

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CapitalLeases
We determine if an arrangement is a lease assetsat its inception. Operating and finance leases are included in property, plantthe lease right-of-use (“ROU”) assets and equipment. Capitalin the current portion and long-term portion of lease liabilities on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at December 31, 2017commencement date of each lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date of each lease to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and 2016 consisted of:exclude lease incentives. Our lease terms may include options to extend or terminate the lease, which are included in the lease ROU assets when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. For certain real estate leases, we account for the lease and non-lease components as a single lease component.
Capitalization of Software Development Costs
  December 31,
In thousands 2017 2016
Equipment and furniture $1,774
 $2,357
Less accumulated depreciation (687) (903)
Net book value $1,087
 $1,454

Capitalized software costs for internally developed software and implementation of third-party software are amortized over a period of three to five years. On an ongoing basis, management reviews the valuation of these software costs to determine if there has been impairment to the carrying value of these assets and adjusts this value accordingly.
Goodwill and Other Intangible Assets

Goodwill is recorded to the extent thatamount by which the purchase pricecost of an acquisitionthe acquired net assets in a business combination exceeds the fair value of the identifiable net assets acquired andon the date of purchase. Goodwill is testednot amortized. Goodwill is reviewed for impairment on an annual basis. We have established November 30 asat least annually during the date for our annual test for impairment of goodwill. Interim testing is performedfourth quarter, or more frequently if events or circumstances indicate that itoccur indicating the potential for impairment.
The Company has three reporting segments, but the current goodwill balance is “more likely than not” that goodwill might be impaired. Such events could include changesbooked in the business climate in which we operate, attrition of key personnel,Customer Care segment. During its goodwill impairment review, the current volatility in the capital markets, the company’s market capitalization compared to our book value, our recent operating performance, and financial projections.

Goodwill is tested for impairment by assessingCompany may assess qualitative factors to determine whether the existence of events or circumstances leads to a determination thatit is more likely than not that the fair value of theits reporting unit is less than its carrying amount.amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of events or circumstances, or based on management's judgment, we determinethese qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, anthen no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairment testtest. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the quantitative goodwill impairment test. There is performed using a one-step approach. Theno goodwill impairment as of December 31, 2023.
Intangible Assets
Intangible assets consist of finite-lived intangible assets acquired through the Company’s business combinations. Such amounts are initially recorded at fair value of the reporting unit,and subsequently amortized over their useful lives using the discounted cash flowstraight-line method, is compared to its carrying amount. Ifwhich reflects the carrying amount is greater than the fair value, an impairment loss is recognized in an amount equal to the excess.pattern of benefit, and assumes no residual value.

Our acquired intangible assets are amortized on a straight-line basis over their estimated useful lives, which generally range from two to 10 years. Our acquired intangible assets do not have indefinite lives. Intangible assetsFinite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require an intangible asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that intangible asset to its carrying amount. If the carrying amount of the intangible asset may not be recoverable. The carrying amount of an intangible asset is not recoverable if iton an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.
The factors that drive the sumestimate of useful life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparing the assets’ book value to future net undiscounted cash flows that the assets are expected to result fromgenerate to determine if a write-down to the use and eventual disposition of the asset.recoverable amount is appropriate. If it is determined thatsuch assets are written down, an impairment loss has occurred, the loss is measuredwill be recognized as the amount by which the carrying amountbook value of the asset group exceeds the recoverable amount. There is no impairment of our intangible asset exceeds its fair value.assets as of December 31, 2023.

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Income Taxes

Income tax expense includes U.S. and international income taxes accounted for under the asset and liability method. Certain income and expenses are not reported in tax returns and financial statements in the same year. Such temporary differences are reported as deferred tax. Deferred tax assets are reported net of valuation allowances where we have assessed that it is more likely than not that a tax benefit will not be realized.

Earnings Per Share

Basic earnings per common share areis based upon the weighted-average number of common shares outstanding during the period. Diluted earnings per common share areis based upon the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents are calculated based on the assumed exercise of stock options and vesting of unvested shares using the treasury stock method.


Stock-Based Compensation

All share-based awards are recognized as operating expense in the “Labor” line of the Consolidated Statements of Comprehensive Income (Loss).Income. Calculated expense is based on the fair values of the awards on the date of grant and is recognized over the requisite service period or performance period of the awards.

Reserve for Healthcare, Workers’ Compensation, Automobile and General Liability

We are self-insured for the majority of our healthcare insurance. We pay actual medical claims up to a stop loss limit of $0.3 million. In the fourth quarter of 2016, we moved toOur workers’ compensation programs are a guaranteed cost program for our workers' compensation and automobile programs. Prior to the change, our deductible for workers’ compensation was $0.5 million. Our deductible for general liability is $0.3 million.

program. The reserve is estimated using current claims activity, historical experience, and claims incurred but not reported. We use loss development factors that consider both industry norms and company specific information. Our liability is recorded at the estimate of the ultimate cost of claims at the balance sheet date. AtOn December 31, 20172023 and 2016,2022, our reserve for healthcare, workers’ compensation, net, automobile, and general liability was $3.5$1.1 million, for the year ended December 31, 2023 and $4.6 million,2022, respectively. Periodic changes to the reserve for workers’ compensation, automobile and general liability are recorded as increases or decreases to insurance expense, which is included in the “Advertising, selling, general and administrative” line of our Consolidated Statements of Comprehensive Income (Loss).Income. Periodic changes to the reserve for healthcare are recorded as increases or decreases to employee benefits expense, which is included in the “Labor” line of our Consolidated Statements of Comprehensive Income (Loss).

Income.
Foreign Currencies

In most instances the functional currencies of our foreign operations are the local currencies. Assets and liabilities recorded in foreign currencies are translated in U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during a given month. Adjustments resulting from this translation are charged or credited to other comprehensive loss.income.

Geographic Concentrations

Depending on the needs of our clients, our services are provided in an integrated approach through 32 facilities worldwide, of which 6 are located outside of the U.S.

Information about the operations in different geographic areas:
  Year Ended December 31,
In thousands 2017 2016 2015
Revenue (1)
  
  
  
United States $330,944
 $324,625
 $377,717
Other countries 52,962
 79,787
 66,449
Total revenue $383,906
 $404,412
 $444,166
  December 31,
In thousands 2017 2016
Property, plant and equipment (2)
  
  
United States $18,789
 $19,810
Other countries 2,998
 4,114
Total property, plant and equipment $21,787
 $23,924
(1)Geographic revenues are based on the location of the service being performed.
(2)Property, plant and equipment are based on physical location.


Recent Accounting PronouncementsGuidance Not Yet Adopted

RecentlyIn November 2023, the FASB issued accounting pronouncements not yet adoptedstandards update (“ASU”) 2023-07, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company for annual reporting periods beginning with the fiscal year ending November 30, 2025, and for interim reporting periods beginning in fiscal year 2026. Early adoption is permitted. The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements.

Stock-Based Compensation

In May 2017,December 2023, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope2023-09, which requires enhanced income tax disclosures, including disaggregation of Modification Accounting, which provides clarified guidance on applying modification accounting to changesinformation in the terms or conditions of a share-base payment award. Thisrate reconciliation table and disaggregated information related to income taxes paid. The amendments in ASU is2023-09 are effective for annual periods, and interim periods within those annual periods, beginningthe fiscal year ending after December 15, 2017. This changeNovember 30, 2026. The Company is required to be applied prospectively to an award modified on or after the adoption date. We arecurrently evaluating the effectimpact that this update will have on ourits disclosures in the consolidated financial statements and related disclosures.statements.

Statement of Cash Flows

In August 2016, the FASBNo other new accounting pronouncements recently adopted or issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides clarified guidancehad or are expected to have a material impact on the classification of certain cash receipts and payments in the statement of cash flows. This ASU is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. This change is required to be applied using a retrospective transition method to each period presented. We are evaluating the effect that this will have on our consolidated financial statements and related disclosures.statements.

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Leases

Note C - Operating revenue from Contracts with Customers
In February 2016, the FASB issued ASU 2016-02, Leases, which requires all operating leases to be recorded on the balance sheet. The lessee will record a liability for its lease obligations (initially measured at the present value of the future lease payments not yet paid over the lease term, and an asset for its right to use the underlying asset equal to the lease liability, adjusted for lease payments made at or before lease commencement). This ASU is effective for interim and annual periods beginning after December 15, 2018. This change is required to be applied using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. Early adoption is permitted. We are evaluating the effect that this will have on our consolidated financial statements and related disclosures.

Revenue Recognition

In May 2014, the FASB issued ASUUnder Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers related to revenue recognition. Under the new standard and its related amendments (collectively known as (“ASC 606)606”), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of the new standard, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The newThis standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The newThis standard also includes criteria for the capitalization and amortization of certain contract acquisition and fulfillment costs.

Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our contracts with customers state the terms of sale, including the description, quantity, and price of the product sold or service provided. Payment terms can vary by contract, but the period between invoicing and when payment is due is not significant. The Company's contracts with its customers generally do not include rights of return or a significant financing component.
Consistent with legacy U.S. GAAP, we present sales taxes assessed on revenue-producing transactions on a net basis.
Disaggregation of Revenue
We disaggregate revenue by three key revenue streams which are aligned with our business segments. The guidance permits two methodsnature of adoption: retrospectivelythe services offered by each key revenue stream is different. The following tables summarize revenue from contracts with customers for the years ended December 31, 2023, and 2022 from our three business segments and the pattern of revenue recognition:
 For the Year Ended December 31, 2023
In thousandsRevenue for performance
obligations recognized
over time		Revenue for performance
obligations recognized at a
point in time		Total
Marketing Services$38,950 $4,254 $43,204 
Customer Care63,327 — 63,327 
Fulfillment & Logistics Services69,038 15,923 84,961 
Total Revenue$171,315 $20,177 $191,492 
For the Year Ended December 31, 2022
In thousandsRevenue for performance
obligations recognized
over time		Revenue for performance
obligations recognized at a
point in time		Total
Marketing Services$45,020 $7,955 $52,975 
Customer Care67,205 — 67,205 
Fulfillment & Logistics Services75,081 11,017 86,098 
Total Revenue$187,306 $18,972 $206,278 
Our contracts with customers may consist of multiple performance obligations. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each prior reporting period presented (full retrospective method),performance obligation based on a relative standalone selling price (“SSP”) basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or retrospectively withto a distinct good or service that forms part of a single performance obligation. For most performance obligations, we determine SSP based on the cumulative effectprice at which the performance obligation is sold separately. Although uncommon, if the SSP is not observable through past transactions, we estimate the SSP taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Further discussion of initially applying the guidance recognized at the dateother performance obligations in each of initial application (modified retrospective method). The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted, but not before the original effective date of annual reporting periods beginning after December 15, 2016.

We will adopt the new standard on January 1, 2018 utilizing the modified retrospective method. As permitted under the transition guidance, we will apply the new standard only to contracts not completed as of January 1, 2018, which represent contracts for which substantially all of the revenues have not been recognized under existing guidance.

We have established an implementation team to assist with the assessment of the impact that the new standard will have on our operations, consolidated financial statements and related disclosures. We have identified our major revenue streams follows:
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Marketing Services
Our Marketing Services segment delivers strategic planning, data strategy, performance analytics, creative development and execution, technology enablement, marketing automation, and database management. We create relevancy by leveraging data, insight, and our extensive experience in leading clients as they engage their customers through digital, traditional, and emerging channels. We are known for helping clients build deep customer relationships, create connected customer experiences, and optimize each and every customer touch point in order to deliver desired business outcomes.
Most marketing services performance obligations are satisfied over time and often offered on a project basis. We have concluded that the process of finalizing our assessment and accounting policies, includingbest approach to measure the quantificationprogress toward completion of the expected effect. The adoption of ASC 606 may have a material effectproject-based performance obligations is the input method, which is based on our consolidated financial statements. Based on analysiseither the costs or labor hours incurred to date wedepending upon whether costs or labor hours more accurately depict the transfer of value to the customer.
Our database solutions are built around centralized marketing databases with services rendered to build custom databases, database hosting services, customer or target marketing lists and data processing services.
These performance obligations, including services rendered to build a custom database, database hosting services, customer or target marketing lists and data processing services, may be satisfied over time or at a point in time. We provide SaaS solutions to host data for customers and have identified the following potential impacts:

Under existing guidance, revenue is recognized upon completion of a specified deliverable or the service. However, the new standard introduced an additional criteria which requires certain performanceconcluded that they are stand-ready obligations to be recognized over time

if on a monthly basis. Our promise to provide certain data related services meets the performance obligation doesover-time recognition criteria because our services do not create an asset with an alternative use, and we have an enforceable right to paymentpayment. For performance obligations recognized over time, we choose either the input (i.e., labor hour) or output method (i.e., number of customer records) to measure the progress toward completion depending on the nature of the services provided. Some of our other data-related services do not meet the over-time criteria and are therefore, recognized at a point-in-time, typically upon the delivery of a specific deliverable.
Our contracts may include outsourced print production work for performance completedour clients. These contracts may include a promise to date. Wepurchase postage on behalf of our clients. In such cases, we have determined we are currently evaluating the impact of these changes under the new standard.an agent, rather than principal and therefore recognize net consideration as revenue.
Customer Care
We enter intodeliver customer care services in the United States, Asia and Europe to provide advanced solutions such as voice, SMS/chat, email, integrated voice response, web self-service, social cloud monitoring and analytics.
Performance obligations are stand-ready obligations and are satisfied over time. With regard to account management and software as a service (“SaaS”), we use a time-elapsed output method to recognize revenue. For performance obligations where we charge customers a transaction-based fee, we use the output method based on transaction quantities. In most cases, our contracts which allowprovide us the customer or either partyright to invoice for services provided, therefore, we generally use the ability“as invoiced” practical expedient to terminate the contract for convenience without incurring a substantial termination penalty. Under existing guidance, we consider the stated term as the contract term and account for terminations when they occur. Under the new standard, the contract term is specified as the contractual periodrecognize revenue associated with these performance obligations unless significant discounts are offered in which the parties to the contract have enforceable rights and obligations. We are currently evaluating the impact these provisions may have on the measurement and allocation of the transaction price as well as any revenue recognition timing differences as compared to current guidance.
We perform certain services at the onset of a contract and we may receive a nonrefundable up-front fee from the customerprices for these services. Currently, we recognize these upfront fees when these services are completed. However, under the new standard, if these services do not represent their SSPs.
Fulfillment & Logistics Services
Our services, delivered internally and with our partners, include: printing, lettershop, advanced mail optimization (including commingling services), logistics and transportation optimization, monitoring and tracking, to support traditional and specialized mailings. Our print and fulfillment centers in Massachusetts and Kansas provide custom kitting services, print on demand, product recalls, trade marketing fulfillment, ecommerce product fulfillment, sampling programs, and freight optimization, thereby allowing our customers to distribute literature and other marketing materials.
Most performance obligations offered within this revenue stream are satisfied over time and utilize the input or output method, depending on the nature of the service, to measure progress toward satisfying the performance obligation. For performance obligations where we charge customers a transaction-based fee, we utilize the output method based on the quantities fulfilled. Services provided through our fulfillment centers are typically priced at a per transaction basis and our contracts provide us the right to invoice for services provided and reflects the value to the customer of the services transferred to date. In most cases, we use the “as invoiced” practical expedient to recognize revenue associated with these performance obligations unless significant discounts are offered in a contract and prices for services do not represent their standalone selling prices. Prior to the closure of our direct mail production facilities, our direct mail business contracts
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may have included a promise to transfer a good or service they may not be deemed a separate performance obligation, which would require revenue recognition over the termpurchase postage on behalf of the contract including any renewal options. We are currently evaluating the impact of these changes under the new standard.

In addition,our clients; in such cases, we have determined we are an agent, rather than principal and therefore recognize net consideration as revenue.
Transaction Price Allocated to Future Performance Obligations
We have elected to apply certain optional exemptions that limit the adoption of this standard will result in several additional disclosures, including but not limited to additional information around our performance obligations, the timing of revenue recognition,disclosure requirements over remaining performance obligations at period end to exclude performance obligations that have an original expected duration of one year or less, transactions using the “as invoiced” practical expedient, or when a performance obligation is a series and we have allocated the variable consideration directly to the services performed. As of December 31, 2023, we had no transaction prices allocated to unsatisfied or partially satisfied performance obligations.
Contract Balances
We record a receivable when revenue is recognized prior to invoicing when we have an unconditional right to consideration (only the passage of time is required before payment of that consideration is due) and a contract assetsasset when the right to payment is conditional upon our future performance such as delivery of an additional good or service (e.g. customer contract requires customer’s final acceptance of custom database solution or delivery of final marketing strategy delivery presentation before customer payment is required). If invoicing occurs prior to revenue recognition, the unearned revenue is presented on our Consolidated Balance Sheets as a contract liability, referred to as deferred revenue. The following table summarizes our contract balances as of December 31, 2023 and liabilities2022:
In thousandsDecember 31, 2023December 31, 2022
Contract assets$258 $309 
Deferred revenue and customer advances3,195 4,590 
Deferred revenue included in other long-term liabilities294 432 
Revenue recognized during the year ended December 31, 2023 from amounts included in deferred revenue as of December 31, 2022 was approximately $4.3 million. Revenue recognized during the year ended December 31, 2022 from amounts included in deferred revenue as of December 31, 2021 was approximately $3.7 million.
Costs to Obtain and significant judgments made that impactFulfill a Contract
We recognize an asset for the amountdirect costs incurred to obtain and timing of revenue fromfulfill our contracts with customers.customers to the extent that we expect to recover these costs and if the benefit is longer than one year. These additional disclosures will be included incosts are amortized to expense over the Company’s first quarter report on Form 10-Q. In addition, under the modified retrospective method of adoption, we will be required to disclose, for the first year subsequent to adoption, any significant revenue recognition differences under the new standard from what would have been recorded by us had historical revenue recognition guidance continued to be in effect for 2018. We will also be required to disclose the amount of each account impacted as a resultexpected period of the adoptionbenefit in a manner that is consistent with the transfer of the new standardrelated goods or services to which the asset relates. We impair the asset when recoverability is not anticipated. We capitalized a portion of commission expense, implementation and whatother costs that amount would have been under historical revenue recognition guidance during 2018.

This discussion ofrepresents the expected effects of our adoption of ASC 606 represents management’s best estimates of the effects of adopting ASC 606 at the time of the preparation of this Annual Report on Form 10-K. In order to complete this assessment, we are continuing to update and enhance our internal accounting systems and internal controls over financial reporting, which will include new controls around contract inception and contract modifications, as well as periodic reviews of material contracts. In addition, we are continuing to evaluate the impacts of the new guidance, including:

Our determination as to whether contract options represent material rights
Our estimation policies for variable consideration, including usage based fees and fees based on hours incurred.
Our policies to allocate the transaction price to the performance obligations in our contracts, specifically, the determination of standalone selling prices used in the allocation.
The determination of the amounts and amortization periods for costscost to obtain a contract. The remaining unamortized contract thatcosts were $0.6 million and $1.0 million as of December 31, 2023 and 2022, respectively. They are expected to be recognized as assets. In cases whereincluded in other current assets and other assets on our balance sheet. For the period under which such capitalized costs would be amortized is less thanyears presented, no impairment was recognized.
Note D - Leases
We have operating and finance leases for corporate and business offices, service facilities, call centers and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that we are reasonably certain to exercise (short-term leases). Our leases have electedremaining lease terms of one year to utilizeseven years, some of which may include options to extend the practical expedient method availableleases for up to an additional five years.
We sublease our Fullerton (CA), Jacksonville (FL) and Uxbridge (UK) facilities. The lease and sublease for Fullerton (CA) facility expired in April 2023, the lease and sublease for Uxbridge (UK) facility expired in October 2023, and the lease and sublease for Jacksonville (FL) facility will expire at the end of July 2024.
As of December 31, 2023, assets recorded under the new standard,finance and expense these contract costs as incurred.
Quantification of impacts from adopting the new standard, including income tax impacts.

Recently adopted accounting pronouncements

Employee Benefit Plans

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires entities to present the service cost component of net benefit cost with the other current compensation costs. All other components of net benefit cost are to be reported outside of operating income. This ASU is effective for annual periods beginning after December 15, 2017, with early adoption permitted. This change is required to be applied using a retrospective transition method for each period presented. We adopted the update as of the first quarter of 2017. As a result of the adoption of this ASU, we reclassified $1.9leases were approximately $0.1 million and $5.3$25.3 million respectively, and accumulated amortization associated with finance leases was $0.1 million. As of pension expenseDecember 31, 2022 assets recorded under finance and operating leases were approximately $0.6 million and $18.6 million respectively, and accumulated depreciation associated with finance leases was $1.0 million. Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
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The discount rate used to determine the commencement date present value of lease payment is the interest rate implicit in Laborthe lease, or when that is not readily determinable, we utilized our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
During the year ended December 31, 2023, we impaired two leases for the facilities we no longer occupied. The resulting impairment and early termination charges are included in our restructuring expenses for the year ended December 31, 2023. There is no impairment of leases in the year ended December 31, 2022.
The following tables present supplemental balance sheet information related to our financing and operating leases:
As of December 31, 2023As of December 31, 2022
In thousandsOperating LeasesFinance LeasesTotalOperating LeasesFinance LeasesTotal
Right-of-use Assets$25,288 $129 $25,417 $18,574 $595 $19,169 
Liabilities:
Short-term lease liabilities4,773 42 4,815 5,587 160 5,747 
Long-term lease liabilities23,687 4 23,691 16,523 52 16,575 
Total Lease Liabilities$28,460 $46 $28,506 $22,110 $212 $22,322 
For the years ended December 31, 20162023 and 2015, respectively2022, the components of lease expense were as follows:
In thousandsYear Ended December 31, 2023Year Ended December 31, 2022
Operating lease cost$5,526 $5,832 
Finance lease cost
Amortization of right-of-use assets123 166 
Interest on lease liabilities7 16 
Total Finance lease cost130 182 
Variable lease cost2,068 1,899 
Sublease income(834)(828)
Total lease cost, net$6,890 $7,085 
Other information related to Other, netleases was as follows:
In thousandsYear Ended December 31, 2023Year Ended December 31, 2022
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$12,525 $12,698 
Operating cash flows from finance leases21 15 
Financing cash flows from finance leases160 194 
Weighted Average Remaining Lease term (in years)
Operating leases6.845.92
Finance leases1.041.36
Weighted Average Discount Rate
Operating leases5.65 %3.55 %
Finance leases7.76 %5.70 %
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The maturities of the Company’s finance and operating lease liabilities as of December 31, 2023 are as follows:
In thousands
Operating Leases(1)
Finance Leases
Year Ending December 31,
2024$6,173 $44 
20254,648 3 
20264,219 1 
20274,191 — 
20284,094 — 
2028 & Beyond11,397 — 
Total future minimum lease payments34,722 48 
Less: Imputed interest6,262 2 
Total lease liabilities$28,460 $46 
(1)Non-cancelable sublease proceeds for the fiscal year ending December 31, 2024 of $0.4 million, is not included in the Consolidated Statements of Comprehensive Loss.

Goodwill and Other Intangible Assets

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step two from the goodwill impairment test. Under the amendments in ASU 2017-04, an entity should

recognize an impairment charge in the amount that the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this standard in January 2017, and have applied it as necessary in our consolidated financial statements.

Stock-Based Compensation

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting, which requires entities with share-based payment awards to recognize all related excess tax benefits and tax deficiencies as income tax expenses or benefit in the income statement. This ASU is effective for interim and annual periods beginning after December 15, 2016. We have adopted the update as of the first quarter of 2017. As a result of the adoption of this ASU, excess tax benefits or deficiencies are now reflected in the Consolidated Statements of Comprehensive Loss as a component of income taxes, whereas they previously were recognized in equity. Excess tax benefits are recognized in the Consolidated Statement of Cash Flow as an operating activity, with the prior periods adjusted accordingly. We have elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The ASU was adopted on a modified retrospective basis and no prior periods were restated as a result of this change in accounting policy.

Note B — Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurements and Disclosures, ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into three levels:
Level 1Quoted prices in active markets for identical assets or liabilities.
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Because of their maturities and/or variable interest rates, certain financial instruments have fair values approximating their carrying values. These instruments include cash and cash equivalents, accounts receivable, and trade payables. The fair value of the assets in our funded pension plan is disclosed in Note F, Employee Benefit Plans. The assumptions used to determine the fair value of our reporting units in Step One and Step Two of our goodwill impairment tests and the discounted cash flow model used to calculate the fair value of our 3Q Digital customer relationship, trade name and non-compete agreement intangible assets are disclosed in Note E, Goodwill and Other Intangible Assets. The summary of our acquisition related contingent consideration accounted for at fair value on a recurring basis is disclosed in Note M, Acquisition and Disposition.

Note C — Long-Term Debt

table above.
As of December 31, 20172023, we have no new operating leases that have not yet commenced.
Note E - Convertible Preferred Stock and Share Repurchase Program
Convertible Preferred Stock
Our Amended and Restated Certificate of Incorporation authorizes us to issue 1.0 million shares of preferred stock. On June 30, 2022, the Texas Capital FacilityCompany entered into a share repurchase agreement (the “Repurchase Agreement”) with Wipro, pursuant to which the Company agreed to repurchase all 9,926 shares of the Preferred Stock then outstanding in exchange for (i) a cash payment equal to its liquidation value, or total cash payment of $9,926,000 and (ii) 100,000 shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”). The cash portion of the repurchase price was outstanding, butpreviously paid into escrow at eachthe signing of the Repurchase Agreement on June 30, 2022 and held in escrow until the closing of yearsthe repurchase by PNC Bank, National Association, pending the re-issuance of the Preferred Stock from the State of New Jersey. Other than the release of previously escrowed funds, no additional cash was paid by Harte Hanks at closing. On December 2, 2022, we completed the closing of our June 30, 2022 definitive agreement with Wipro.
On March 20, 2023, the Company cancelled all shares of Series A Preferred Stock pursuant to the Certificate of Elimination filed with the Secretary of State of Delaware.
Share Repurchase Program
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. In the year ended December 31, 2017 and 2016,2023, we had no debt outstanding.repurchased 0.4 million shares of common stock for $2.4 million.

Note F — Long-Term Debt
Credit Facilities

Facility
On March 10, 2016, weDecember 21, 2021, the Company entered into a secured credit facility with Wells Fargo Bank, N.A. as Administrative Agent, consisting of a maximum $65.0new three year, $25.0 million asset-based revolving credit facility (the "2016 Revolving Credit Facility"“Credit Facility”), and a $45.0 million term loan facility (the "2016 Term Loan", and together with Texas Capital Bank ("TCB"). The Company’s obligations under the 2016 Revolving Credit Facility are guaranteed on a joint and several basis by the "2016 Secured Credit Facility"Company’s material subsidiaries (the “Guarantors”). The 2016 Secured Credit Facility wasis secured by substantially all the assets of our assetsthe Company and material domestic subsidiaries.the Guarantors pursuant to a Pledge and Security Agreement, dated as of December 21, 2021, between the Company, TCB and the other Guarantors party thereto (the “Security Agreement”). On December 29, 2023, the Company extended the agreement six months to June 30, 2025. The 2016 Securedextension was executed with substantially similar terms and conditions.
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The Credit Facility was usedprovides for general corporate purposes,loans up to the lesser of (a) $25.0 million, and (b) the amount available under a “borrowing base” calculated primarily by reference to replace,the Company's cash and repay remaining outstanding balances on our prior debt.

Prepayment of the 2016 Securedcash equivalents and accounts receivables. The Credit Facility allows the Company to use up to $3.0 million on of its borrowing capacity to issue letters of credit.
The loans under the Credit Facility accrue interest at a varying rate equal to the Secured Overnight Financing Rate (SOFR) plus a margin of 2.25% per annum. The interest rate was required upon7.64% as of December 31, 2023. The outstanding amounts advanced under the completion of the sale of Trillium in accordance with its amended terms. The proceeds of the Trillium sale were used to repayCredit Facility are due and payable in full allon June 30, 2025. As of December 31, 2023 and 2022, we had no borrowings outstanding loans, together with interest,under the Credit Facility. As of December 31, 2023 and all other amounts due in connection with repayment (including prepayment penalties of approximately $1.3 million). The credit and guarantee agreements related to the 2016 Secured Credit Facility were likewise terminated.

On April 17, 2017,2022, we entered into a secured credit facility with Texas Capital Bank, N.A., that provides a $20 million revolving credit facility (the "Texas Capital Credit Facility"). The Texas Capital Credit Facility is being used for general corporate purposes and to provide collateral for up to $5.0 million ofhad letters of credit issued by Texas Capital Bank. The Texas Capital Credit Facility is

secured by substantially alloutstanding in the amount of the company's assets$0.8 million. No amounts were drawn against these letters of credit as of December 31, 2023 . These letters of credit exist to support insurance programs relating to workers‘ compensation, automobile, and is guaranteed by HHS Guaranty, LLC, an entity formed to provide credit support for Harte Hanks by certain membersgeneral liability. Unused commitment balances accrued fees at a rate of the Shelton family (descendants of one of our founders)0.25%.

On January 9, 2018,As of December 31, 2023, we entered intohad the ability to borrow an amendment (the "First Amendment") to the Texas Capital Credit Facility. The First Amendment (i) increases the availabilityadditional $24.2 million under the revolving credit facility from $20 million to $22 million and (ii) extends the Texas Capital Credit Facility one year to April 17, 2020. The Credit Facility remains secured by substantially all of our assets. Our fee for the collateral balance provided by HHS Guaranty, LLC also changed from an annual fee of $0.5 million to 0.5% of collateral actually pledged; we expect that the fees payable to HHS Guaranty will be substantially similar in amount under the new terms.

Pursuant to the First Amendment, the Texas Capital Credit Facility expires on April 17, 2020 at which point all outstanding principal amounts will be due. Harte Hanks can elect to accrue interest on outstanding principal balances at either LIBOR plus 1.95% or prime plus 0.75%. Unused credit balances will accrue interest at 0.50%.

The Texas Capital Credit Facility is subject to customary covenants requiring insurance, legal compliance, payment of taxes, prohibition of second liens, and secondary indebtedness, as well as the filing of quarterly and annual financial statements. We were in compliance with all of the covenants of our credit facility at December 31, 2017.

Facility.
Cash payments for interest were $0.3 million, $5.7$0.2 million and $1.7$0.3 million for the years ended December 31, 2017, 2016,2023 and 2015,2022, respectively.

Note D — Income Taxes
The components of income tax expense (benefit) are as follows:
  Year Ended December 31,
In thousands 2017 2016 2015
Current  
  
  
Federal $348
 $(6,360) $2,920
State and local 245
 (107) 744
Foreign 472
 807
 545
Total current $1,065
 $(5,660) $4,209
       
Deferred  
  
  
Federal $(9,886) $18,619
 $(38,048)
State and local (747) 7,655
 (3,523)
Foreign (326) 16
 2
Total deferred $(10,959) $26,290
 $(41,569)
       
Total income tax expense (benefit) $(9,894) $20,630
 $(37,360)

The U.S. and foreign components of income (loss) from continuing operations before income taxes were as follows:
  Year Ended December 31,
In thousands 2017 2016 2015
United States $(49,731) $(66,828) $(217,920)
Foreign (2,023) (2,320) (506)
Total income (loss) from continuing operations before income taxes $(51,754) $(69,148) $(218,426)


The differences between total income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes were as follows:
  Year Ended December 31,
In thousands 2017 Rate 2016 Rate 2015 Rate
Computed expected income tax expense (benefit) $(18,114) 35.0 % $(24,202) 35.0 % $(76,449) 35.0 %
Goodwill impairment basis difference 6,000
 -11.6 % 6,275
 -9.1 % 36,664
 -16.8 %
Sold operations basis difference —
 — % —
 — % 686
 -0.3 %
Net effect of state income taxes (559) 1.1 % (954) 1.4 % 178
 -0.1 %
Foreign subsidiary dividend inclusions 440
 -0.8 % 843
 -1.2 % 557
 -0.3 %
Foreign tax rate differential 187
 -0.4 % 722
 -1.0 % 291
 -0.1 %
Change in valuation allowance 2,265
 -4.4 % 34,478
 -49.9 % (153) 0.1 %
Non-deductible interest 1,280
 -2.5 % 3,219
 -4.7 % 715
 -0.3 %
Stock-based compensation shortfalls 1,373
 -2.7 % —
 — % —
 — %
Change in valuation allowance due to tax reform (13,821) 26.7 % —
 — % —
 — %
Change in U.S. tax rate due to tax reform 10,391
 -20.1 % —
 — % —
 — %
Other, net 664
 -1.2 % 249
 -0.4 % 151
 -0.1 %
Income tax expense (benefit) for the period $(9,894) 19.1 % $20,630
 -29.9 % $(37,360) 17.1 %

Total income tax expense (benefit) was allocated as follows:
  Year Ended December 31,
In thousands 2017 2016 2015
Continuing operations $(9,894) $20,630
 $(37,360)
Discontinued operations —
 8,994
 5,446
Loss on sale of discontinued operations —
 (4,600) —
Stockholders’ equity 755
 (782) 2,021
Total $(9,139) $24,242
 $(29,893)

The U.S. Tax Cuts and Jobs Act (the "Tax Reform Act”) was enacted on December 22, 2017. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries (the “transition tax”). The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The main impact of the Tax Reform Act on our 2017 financial statement is the re-measurement of deferred tax balances to the new corporate tax rate, in which we recorded a deferred tax benefit of $3.4 million.

Due to the complexities involved in accounting for the recently enacted Tax Reform Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 requires that the company include in its financial statements the reasonable estimate of the impact of the Tax Reform Act on earnings to the extent such reasonable estimate has been determined. Accordingly, our U.S. provision for income tax for 2017 is based on the reasonable estimate guidance provided by SAB 118.

Additionally, we have made a provisional estimate for the transition tax. Due to net deficits in our total accumulated post-1986 foreign earnings and profits that were previously deferred from U.S. income tax, we believe that the company will not be subject to the transition tax, and therefore we have not recorded an income tax effect for the transition tax in the current period. We will update this estimate, if necessary, as the accounting for this is complete.

Effective in 2018, the Tax Reform Act also includes a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a base erosion anti-abuse tax (“BEAT”) measure that taxes certain payments between a U.S. corporation and its foreign subsidiaries. We do not expect that the company will be subject to these taxes and therefore we have not included any tax impacts of GILTI and BEAT in our 2017 financial statements.

We do not have all of the necessary information available to determine a reasonable estimate of the tax liability, if any, under the Tax Reform Act for our remaining outside basis difference in our foreign subsidiaries or to evaluate how the Tax Reform Act will affect our existing accounting position to indefinitely reinvest unremitted foreign earnings. We will continue to apply our existing accounting for this matter under ASC 740, Income Taxes, based on the tax law in effect prior to the enactment of the Tax Reform Act.


We re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. However, we are still analyzing certain aspects of the Tax Reform Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

We will continue to assess the impact from the Tax Reform Act throughout the one-year measurement period as provided by SAB 118 and will record adjustments, if necessary, in 2018.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
  Year Ended December 31,
In thousands 2017 2016
Deferred tax assets    
Deferred compensation and retirement plan $15,017
 $24,715
Accrued expenses not deductible until paid 1,619
 3,508
Employee stock-based compensation 1,757
 3,321
Accrued payroll not deductible until paid 1,111
 1,400
Accounts receivable, net 179
 406
Goodwill 700
 —
Other, net 290
 393
Foreign net operating loss carryforwards 2,887
 2,271
State net operating loss carryforwards 3,978
 3,349
Foreign tax credit carryforwards 3,653
 785
Total gross deferred tax assets 31,191
 40,148
Less valuation allowances (28,350) (40,148)
Net deferred tax assets $2,841
 $—
     
Deferred tax liabilities  
  
Property, plant and equipment $(1,941) $(3,060)
Goodwill and other intangibles (701) (6,800)
Other, net (972) (1,184)
Total gross deferred tax liabilities (3,614) (11,044)
Net deferred tax liabilities $(773) $(11,044)

A reconciliation of the beginning and ending balance of deferred tax valuation allowance is as follows:
In thousands  
Balance at December 31, 2015 $9,958
Additions:  
Charged to cost and expenses 37,798
Deductions (7,608)
Balance at December 31, 2016 $40,148
Additions:  
Charged to cost and expenses 4,111
Deductions (15,909)
Balance at December 31, 2017 $28,350

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance for deferred tax assets was $28.4 million and $40.1 million at December 31, 2017 and 2016, respectively. We recorded a $13.8 million deferred income tax benefit related to implementation of the applicable provisions of the Tax Reform Act. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present, and additional weight may be given to subjective evidence such as changes in our growth projections.


We or one of our subsidiaries file income tax returns in the U.S. federal, U.S. state, and foreign jurisdictions. For U.S. federal, U.S. state, and foreign returns, we are no longer subject to tax examinations for years prior to 2013.

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
In thousands  
Balance at December 31, 2014 $—
Additions for prior year tax positions 761
Balance at December 31, 2015 $761
Additions for prior year tax positions 206
Balance at December 31, 2016 $967
Settlements (761)
Balance at December 31, 2017 $206

Included in the balance as of December 31, 2017 are $0.2 million of unrecognized tax benefits that, if recognized, would impact our effective tax rate. Any adjustments to this liability as a result of the finalization of audits or potential settlements would not be material.

We have elected to classify any interest and penalties related to income taxes within income tax expense in our Consolidated Statements of Comprehensive Income (Loss). We did not recognize any tax benefits for the reduction of accrued interest and penalties associated with the reduction of the liability for unrecognized tax benefits during the years ended December 31, 2017 and 2016.  We did not have any interest and penalties accrued at December 31, 2017 or 2016.

As of December 31, 2017, we had net operating loss carryforwards that are available to reduce future taxable income and that will begin to expire in 2030.

Note E — Goodwill and Other Intangible Assets
As discussed in Note A, Significant Accounting Policies, goodwill is not amortized, but is tested for impairment on an annual basis or when circumstances exist that indicate goodwill may be impaired. Prior to the transaction resulting in the sale of Trillium, the company's goodwill was allocated between two reporting units; Customer Interaction and Trillium. As of December 31, 2016 we had one reporting unit.

During our annual impairment test in 2017, we performed a Step One analysis using a business enterprise value approach to determine the fair value of the business. The fair value of the reporting unit was estimated for the purpose of deriving an excess or deficit between the fair value and the carrying amount of the business enterprise. The fair value calculated using the discounted cash flow method was a component of the analysis. Estimated future cash flows were discounted at a rate of 14.0%. The results of the Step One analysis, in accordance with ASU 2017-04, indicated that the carrying value exceeded the fair value and the full carrying value of goodwill should be written-off, resulting in an impairment charge of $34.5 million. Our fair value estimates relied on management assumptions including market rates, revenue growth rates, operating margins, and discount rates.

In conjunction with the sale of Trillium on December 23, 2016, the allocated fair value of goodwill of $149.3 million was written-off. This write-off is reflected in the Income (loss) from discontinued operations, net of income taxes line of the Consolidated Statements of Comprehensive Income (Loss) in the Consolidated Financial Statements.

During our annual impairment test in 2016, we performed a Step One analysis. During the first step we used the income-based approach, in which estimated future cash flows were discounted at a rate of 11.5%. The results were combined with results of the market-based approach to determine fair value of the business. The results indicated that the fair value of the reporting unit was less than its carrying amount and a Step Two analysis was warranted.

Under Step Two, the fair value of the reporting unit was estimated for the purpose of deriving an estimate of the implied fair value of goodwill. The fair value of tangible assets along with the estimated fair value of intangible assets including non-compete agreements, trade names, and customer relationships, were taken into consideration for the analysis. Additional assumptions used in measuring the fair value of the assets and liabilities included customer attrition rates, discount rates, and royalty rates used in valuing the intangible assets, and the consideration of the market environment in valuing tangible assets. The resulting implied fair value of the goodwill was then compared to the recorded goodwill to determine the amount of impairment. The results of Step Two indicated that a goodwill write down of $38.7 million was necessary.


During 2015, as a result of a sustained decline in our market capitalization below our book value of equity and recent operating performance, the company determined that a triggering event had occurred. Using the income-based approach and the market-based approach, the fair value of the reporting unit was estimated to be below the carrying value and therefore indicated impairment. The second step of the test indicated that goodwill was impaired by $209.9 million. The impairment charge resulted in a corresponding $36.8 million tax benefit resulting in a net income impact of $173.1 million. Our fair value estimates relied on management assumptions including discount rate, revenue growth rates, operating margins, attrition rates, and royalty rates.

Our accumulated goodwill impairment was $283.1 million, $248.6 million, and $209.9 million for the years ended December 31, 2017, 2016, and 2015, respectively.

We recorded $3.5 million in goodwill in 2016 in connection with the acquisition of the business of Aleutian Consulting, Inc. on March 4, 2016. The residual purchase price methodology used in the calculation relied on management's assumptions, which are considered Level 3 inputs, as they are unobservable. This goodwill will be tax deductible.

On April 14, 2015, we sold our B2B research businesses, Aberdeen Group and Harte Hanks Market Intelligence (the "B2B research business”). As a result, the $11.1 million allocated fair value within the net book value of Customer Interaction goodwill was written off. In addition, $2.3 million of intangible assets with indefinite useful lives related to the Aberdeen Group trade name was written off. These amounts are reflected in the Loss on sale in the Other expenses section of the Consolidated Statements of Comprehensive Income (Loss).

On March 16, 2015, we acquired 3Q Digital. We performed a valuation to estimate of the total purchase consideration and values for the tangible and identifiable intangible assets. As a result, we recorded $41.8 million in goodwill and $4.8 million of identified intangible assets with definite lives for client relationships and non-compete agreements. For further discussion on transactions discussed above, see Note M, Acquisition and Disposition.

The changes in the carrying amount of goodwill are as follows:
In thousands  
Balance at December 31, 2015 $69,699
Purchase consideration 3,480
Impairment (38,669)
Balance at December 31, 2016 $34,510
Impairment (34,510)
Balance at December 31, 2017 $—

Other intangibles with definite useful lives relate to contact databases, client relationships, and non-compete agreements. They are amortized on a straight-line basis over their respective estimated useful lives, typically a period of 2 to 10 years, and reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The changes in the carrying amount of other intangibles with definite lives are as follows:
In thousands  
Balance at December 31, 2015 $4,123
Amortization (821)
Balance at December 31, 2016 $3,302
Amortization (713)
Balance at December 31, 2017 $2,589


Amortization expense related to other intangibles with definite useful lives was $0.7 million, $0.8 million, and 0.7 million for the years ended December 31, 2017, 2016, and 2015, respectively. Expected amortization expense for the next five years is as follows:
In thousands  
2018 $624
2019 613
2020 613
2021 613
2022 126
Thereafter —
Total 2,589

Note F — Employee Benefit Plans
Prior to January 1, 1999, we provided a defined benefit pension plan in which most of our employees were eligible to participate (the "Qualified Pension Plan"). In conjunction with significant enhancements to our 401(k) plan, we elected to freeze benefits under the Qualified Pension Plan as of December 31, 1998.

In 1994, we adopted a non-qualified, unfunded, supplemental pension plan (the "Restoration Pension Plan") covering certain employees, which provides for incremental pension payments so that total pension payments equal those amounts that would have been payable from the principal pension plan were it not for limitations imposed by income tax regulation. The benefits under the Restoration Pension Plan were intended to provide benefits equivalent to our Qualified Pension Plan as if such plan had not been frozen. We elected to freeze benefits under the Restoration Pension Plan as of April 1, 2014.

The overfunded or underfunded status of our defined benefit post-retirement plans is recorded as an asset or liability on our balance sheet. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation. Periodic changes in the funded status are recognized through other comprehensive income. We currently measure the funded status of our defined benefit plans as of December 31, the date of our year-end consolidated balance sheets.

The status of the defined benefit pension plans at year-end was as follows:
  Year Ended December 31,
In thousands 2017 2016
Change in benefit obligation  
  
Benefit obligation at beginning of year $179,247
 $178,715
Interest cost 7,347
 7,802
Actuarial (gain) loss 10,121
 2,127
Benefits paid (9,679) (9,397)
Benefit obligation at end of year $187,036
 $179,247
     
Change in plan assets  
  
Fair value of plan assets at beginning of year 116,725
 121,682
Actual return on plan assets 17,292
 2,883
Contributions 1,675
 1,557
Benefits paid (9,679) (9,397)
Fair value of plan assets at end of year $126,013
 $116,725
     
Funded status at end of year $(61,023) $(62,522)

The following amounts have been recognized in the Consolidated Balance Sheets at December 31:
In thousands 2017 2016
Other current liabilities $1,685
 $1,686
Pensions 59,338
 60,836
Total $61,023
 $62,522


The following amounts have been recognized in accumulated other comprehensive loss, net of tax, at December 31:
In thousands 2017 2016
Net loss $45,418
 $46,977

We are not required to make and do not intend to make any contributions to our Qualified Pension Plan in 2018. Based on current estimates we will not be required to make any contributions to our Qualified Pension Plan until 2019.

We are not required to make and do not intend to make any contributions to our Restoration Pension Plan in 2018 other than to the extent needed to cover benefit payments. We expect benefit payments under this supplemental pension plan to total approximately $1.7 million in 2018.

The following information is presented for pension plans with an accumulated benefit obligation in excess of plan assets:
In thousands 2017 2016
Projected benefit obligation $187,036
 $179,247
Accumulated benefit obligation $187,036
 $179,247
Fair value of plan assets $126,013
 $116,725

The Restoration Pension Plan had an accumulated benefit obligation of $27.6 million and $26.6 million at December 31, 2017 and 2016, respectively. 

The following table presents the components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss) for both plans:
  Year Ended December 31,
In thousands 2017 2016 2015
Net Periodic Benefit Cost (Pre-Tax)  
  
  
Interest cost 7,347
 7,802
 7,724
Expected return on plan assets (7,328) (8,245) (8,637)
Recognized actuarial loss 2,754
 2,386
 6,228
Net periodic benefit cost $2,773
 $1,943
 $5,315
       
Amounts Recognized in Other Comprehensive Income (Loss) (Pre-Tax)  
  
  
Net (gain) loss $(2,597) $5,103
 $(9,408)
       
Net (benefit) cost recognized in net periodic benefit cost and other comprehensive (income) loss $176
 $7,046
 $(4,093)
The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2018 is $2.7 million. The period over which the net loss from the Qualified Pension Plan is amortized into net periodic benefit cost was changed in 2016 from the average future service of active participants (approximately 9 years) to the average future lifetime of all participants (approximately 23 years). This change reflects that the Qualified Pension Plan is frozen and that almost all of the plan's participants are not active employees.

The weighted-average assumptions used for measurement of the defined pension plans were as follows:
  Year Ended December 31,
  2017 2016 2015
Weighted-average assumptions used to determine net periodic benefit cost  
  
  
Discount rate 4.21% 4.49% 4.13%
Expected return on plan assets 6.50% 7.00% 7.00%
  December 31,
  2017 2016
Weighted-average assumptions used to determine benefit obligations  
  
Discount rate 3.67% 4.21%

The discount rate assumptions are based on current yields of investment-grade corporate long-term bonds. The expected long-term return on plan assets is based on the expected future average annual return for each major asset class within the plan’s portfolio (which is principally comprised of equity investments) over a long-term horizon. In determining the expected long-term rate of return on plan assets, we evaluated input from our investment consultants, actuaries, and investment management firms, including their review of asset class return expectations, as well as long-term historical asset class returns. Projected returns by such consultants and economists are based on broad equity and bond indices. Additionally, we considered our historical 15-year compounded returns, which have been in excess of the forward-looking return expectations.

The funded pension plan assets as of December 31, 2017 and 2016, by asset category, are as follows:
In thousands  2017 % 2016 %
Equity securities $80,191
 64% $61,254
 52%
Debt securities 20,481
 16% 21,940
 19%
Other 25,341
 20% 33,531
 29%
Total plan assets $126,013
 100% $116,725
 100%

The fair values presented have been prepared using values and information available as of December 31, 2017 and 2016.

The following tables present the fair value measurements of the assets in our funded pension plan:
In thousands December 31,
2017		 
Quoted Prices 
in Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Equity securities $80,191
 $80,191
 $—
 $—
Debt securities 20,481
 20,481
 —
 —
Total investments, excluding investments valued at NAV 100,672
 100,672
 —
 —
Investments valued at NAV (1)
 25,341
 —
   —
Total plan assets $126,013
 $100,672
 $—
 $—
In thousands December 31,
2016		 Quoted Prices 
in Active Markets for
Identical Assets
(Level 1)		 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Equity securities $61,254
 $61,254
 $—
 $—
Debt securities 21,940
 21,940
 —
 —
Total investments, excluding investments valued at NAV 83,194
 83,194
 —
 —
Investments valued at NAV (1)
 33,531
 —
 —
 —
Total plan assets $116,725
 $83,194
 $—
 $—
(1) Investment valued at NAV are comprised of cash, cash equivalents, and short-term investments used to provide liquidity for the payment of benefits and other purposes. The commingled funds are valued at NAV based on the market value of the underlying investments, which are primarily government issued securities.

The investment policy for the Qualified Pension Plan focuses on the preservation and enhancement of the corpus of the plan’s assets through prudent asset allocation, quarterly monitoring and evaluation of investment results, and periodic meetings with investment managers.


The investment policy’s goals and objectives are to meet or exceed the representative indices over a full market cycle (3-5 years). The policy establishes the following investment mix, which is intended to subject the principal to an acceptable level of volatility while still meeting the desired return objectives:
  Target Acceptable Range Benchmark Index
Domestic Equities 50.0% 35% -75% S&P 500
Large Cap Growth 22.5% 15% -30% Russell 1000 Growth
Large Cap Value 22.5% 15% -30% Russell 1000 Value
Mid Cap Value 5.0% 5% -15% Russell Mid Cap Value
Mid Cap Growth 0.0% 0% -10% Russell Mid Cap Growth
         
Domestic Fixed Income 35.0% 15% -50% LB Aggregate
International Equities 15.0% 10% -25% MSC1 EAFE

The funded pension plan provides for investment in various investment types. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated with investments, it is reasonably possible that changes in the value of investments will occur in the near term and may impact the funded status of the plan. To address the issue of risk, the investment policy places high priority on the preservation of the value of capital (in real terms) over a market cycle. Investments are made in companies with a minimum five-year operating history and sufficient trading volume to facilitate, under most market conditions, prompt sale without severe market effect. Investments are diversified across numerous market sectors and individual companies. Reasonable concentration in any one issue, issuer, industry, or geographic area is allowed if the potential reward is worth the risk.

Investment managers are evaluated by the performance of the representative indices over a full market cycle for each class of assets. The Pension Plan Committee reviews, on a quarterly basis, the investment portfolio of each manager, which includes rates of return, performance comparisons with the most appropriate indices, and comparisons of each manager’s performance with a universe of other portfolio managers that employ the same investment style.
The expected future benefit payments for both pension plans over the next ten years as of December 31, 2017 are as follows:
In thousands  
2018 $9,922
2019 9,977
2020 10,221
2021 10,476
2022 10,855
2023-2027 57,001
Total $108,452

We also sponsor a 401(k)-retirement plan in which we matched a portion of employees’ voluntary before-tax contributions. Under this plan, both employee and matching contributions vest immediately. Total 401(k) expense for these matching payments recognized was $3.0 million for each of the years ending December 31, 2017, 2016, and 2015

Note G — Stockholders’ Equity

Dividends

We paid a dividend of $0.85 per share in the first quarter of 2016 and did not pay any dividends in 2017

Share Repurchase

Under the stock repurchase program publicly announced in August of 2014, our Board provided authorization to spend up to $20.0 million to repurchase shares of our outstanding common stock. During 2017, no shares of our common stock were purchased. We had $11.4 million remaining under the current authorization as of December 31, 2017. From 1997 through December 2017, we have paid more than $1.2 billion to repurchase 6.8 million shares under this program and previously announced programs.


Awardees of stock-based compensation may elect to have shares of common stock withheld from vested awards to meet tax obligations. These shares are returned to our treasury stock at the time of vesting. During 2017, we received 9,310 shares of our common stock, with an estimated market value of $0.1 million, from such arrangements.

Series A Convertible Preferred Stock

Harte Hanks is authorized to issue one million shares of preferred stock with a par value of $1.00. Each share of our Series A Convertible Preferred Stock (the "Series A Preferred Stock") is convertible at any time at the option of the holder into the number of shares of common stock at the initial conversion price. Dividends on the Series A Preferred Stock are accrued at a rate of 5.0% per year or the rate that cash dividends were paid in respect to shares of common stock if such rate is greater than 5.0%. Holders of Series A Preferred Stock do not have voting rights, subject to certain exceptions.

On January 23, 2018, we issued 9,926 shares of our Series A Preferred Stock to Wipro, LLC for gross proceeds of $9.9 million. Shares are convertible into 16.0% of our outstanding common stock on a pre-closing basis, priced at $9.91 per share of common stock. For so long as Wipro owns at least a majority of the preferred shares originally purchased, or is the beneficial owner of at least 5% of the company's common stock, Wipro has the right to appoint one individual as a non-voting observer to the Board and under certain circumstances Wipro may appoint a board member to the board of directors.

Note H — Stock-Based Compensation

We maintain stock incentive plans for the benefit of certain officers, directors, and employees. Our stock incentive plans provide for the ability to issue stock options, cash stock appreciation rights, performance stock units, phantom stock units and cash performance stock units. Our cash stock appreciation rights, phantom stock units and cash performance stock units settle solely in cash and are treated as the current liability, which are adjusted each reporting period based on changes in our stock price.
Compensation expense for stock-based awards is based on the fair values of the awards on the date of grant and is recognized on a straight-line basis over the vesting period of the entire award in the “Labor” line of the Consolidated Statements of Comprehensive Income (Loss). ForIncome. We recognized $1.4 million and $2.4 million of stock-based compensation expense for the years ended December 31, 2017, 2016,2023 and 2015, we recorded total stock-based compensation expense from continuing operations of $2.7 million, $2.7 million, and $5.4 million,2022, respectively.

We granted equity awards to our Chief Financial Officer in 2017, Chief Operations Officer in 2016, and our Chief Executive Officer and Chief Marketing Officer in 2015 as a material inducement for acceptance of such positions. These option, restricted stock, and performance unit awards were not submitted for stockholder approval, and were separately listed with the NYSE.

In May 2013, our stockholders approved the 2013 Omnibus Incentive Plan ("(“2013 Plan"Plan”), pursuant to which we may issue up to 500,000 shares of stock-based awards to directors, employees, and consultants, as adjusted for the reverse stock split. The 2013 Plan replaced the stockholder-approved 2005 Omnibus Incentive Plan ("(“2005 Plan"Plan”), pursuant to which we issued equity securities to directors, officers, and key employees. No additional stock-based awards will be granted under the 2005 Plan, but awards previously granted under the 2005 Plan will remain outstanding in accordance with their respective terms. In August 2018, we filed a Form S-8 to increase the total registered shares under 2013 Plan to 553,673 shares. As of December 31, 2017,2023 and 2022, there were 0.1 million190,187and 188,582 shares available, respectively, for grant under the 2013 Plan.

In 2020, we established our 2020 Equity Incentive Plan ("2020 Plan") which replaced the 2013 Equity Incentive Plan (“2013 Plan”). Any shares of common stock that remained eligible for issuance under the 2013 Plan are now instead eligible for issuance under the 2020 Plan. In August 2020, we filed a Form S-8 to register up to an aggregate of 2,521,244 shares that may be issued under the 2020 Plan. The 2020 Plan provides for the issuance of stock-based awards to directors, employees and consultants. No additional stock-based awards will be granted under the 2013 Plan, but awards previously granted under the 2013 Plan will remain outstanding in accordance with their respective terms. As of December 31, 2023 and 2022, there were 1.3 million and 1.3 million shares available, respectively, for grant under the 2020 Plan.
In August 2023, we established the 2023 Inducement Equity Incentive Plan ("2023 Plan"), pursuant to which the Company issued 240,000 shares of stock option awards, which is the limit of the plan.
Stock Options

Options granted under the 2023 Plan have an exercise price equal to the closing market price of our common stock on the date prior to the grant date. These options become exercisable in 33.3% increments on the first three anniversaries of their date of grant and expire on the tenth anniversary of their date of grant. Options to purchase 240,000 shares granted under 2023 Plan awards were outstanding as of December 31, 2023, with exercise prices ranging from $5.59 to $76.80 per share.
53
Options granted under the 2020 Plan, 2013 Plan or as inducement awards have an exercise price equal to the market value of the common stock on the grant date. These options become exercisable in 25% increments on the first four anniversaries of their date of grant and expire on the tenth anniversary of their date of grant. There were no options outstanding under the 2020 plan as of December 31, 2023 and 2022.
Options to purchase 0.1 million6,663 shares granted as inducementunder 2013 Plan awards were outstanding atas of December 31, 2017,2023, with exercise prices ranging from $10.00$5.59 to $42.60$116.40 per share.

Following the third quarter 2015 resignation Options to purchase 8,268 shares granted under 2013 Plan awards were outstanding as of our former CEO, vesting was accelerated on his unvested stock options (pursuantDecember 31, 2022, with exercise prices ranging from $76.80 to the terms of his employment agreement and inducement award), for which we recognized $0.5 million of accelerated expense in July 2015. These options were not exercised and subsequently expired.

$115.20 per share.
Options under the 2005 Plan were granted at exercise prices equal to the market value of the common stock on the grant date. All such awards have met their respective vesting dates. There were no options outstanding under the 2005 Plan as of December 31, 2023. Options to purchase 0.1 million4,400 shares were outstanding under the 2005 Plan as of December 31, 2017,2022, with exercise prices ranging from $60.40$76.80 to $159.00$115.20 per share.

Options issued through March 2015 vest in full (to the extent not previously vested) upon a change in control, as defined in the applicable equity plan. Options granted to officers after April 2015 vest in full upon a change in control if such options are not assumed or replaced by a publicly-tradedpublicly traded successor with an equivalent award (as defined in such officers’ change in control severance agreements). Additionally, 25% of the inducement options granted to the Chief Executive Officer will vest (if not previously vested) in the event her employment is terminated without cause, or if she terminates her employment for good reason (as such terms are defined in her employment agreement).


The following summarizes all stock option activity during the years ended December 31, 2017, 2016,2023 and 2015:2022:
In thousands 
Number of
Shares
 
Weighted-
Average
Exercise Price
 
Weighted- Average
Remaining Contractual
Term (Years)
 
Aggregate
Intrinsic Value (Thousands)
Options outstanding at December 31, 2014 446,365
 $114.99
    
         
Granted in 2015 197,318
 57.26
    
Exercised in 2015 (3,500) 60.40
   $67
Unvested options forfeited in 2015 (65,982) 79.59
    
Vested options expired in 2015 (113,988) 148.83
    
Options outstanding at December 31, 2015 460,213
 $87.36
    
         
Granted in 2016 15,037
 26.15
    
Exercised in 2016 —
 —
   $—
Unvested options forfeited in 2016 (57,014) 75.74
    
Vested options expired in 2016 (47,689) 160.61
    
Options outstanding at December 31, 2016 370,547
 $77.23
    
         
Granted in 2017 33,855
 10.00
    
Exercised in 2017 —
 —
   $—
Unvested options forfeited in 2017 (9,872) 73.31
    
Vested options expired in 2017 (85,563) 110.44
    
Options outstanding at December 31, 2017 308,967
 $60.80
 5.86 $—
         
Vested and expected to vest at December 31, 2017 308,967
 $60.80
 5.86 $—
         
Exercisable at December 31, 2017 201,594
 $75.42
 4.66 $—

In thousandsNumber of SharesWeighted-Average Exercise PriceWeighted- Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (Thousands)
Options outstanding at December 31, 202137,615 $80.21 1.36$— 
Adjustment and Correction(20,000)  
Granted in 2022— — — — 
Exercised in 2022— — — — 
Unvested options forfeited in 2022— — — — 
Vested options expired in 2022(4,947)95.80 — — 
Options outstanding at December 31, 202212,668 $78.88 1.16$— 
Granted in 2023240,000 $5.59 9.67288 
Exercised in 2023— — — — 
Unvested options forfeited in 2023— — — — 
Vested options expired in 2023(6,005)77.38 — — 
Options outstanding at December 31, 2023246,663 $7.61 9.38$288 
Vested and expected to vest at December 31, 2023246,663 $7.61 9.38$288 
Exercisable at December 31, 20236,663 $80.24 0.49$— 
The aggregate intrinsic value at year end in the table above represents the total pre-tax intrinsic value that would have been received by the option holders if all of the in-the-money options were exercised on December 31, 2017.2023. The pre-tax intrinsic value is the difference between the closing price of our common stock on December 31, 20172023, and the exercise price for each in-the-money option. This value fluctuates with the changes in the price of our common stock.

The following table summarizes information about stock options outstanding at December 31, 2017:2023:
Range of
Exercise Prices		Number
Outstanding		Weighted-Average
Exercise Price		Weighted-Average Remaining Life
(Years)		Number
Exercisable		Weighted-Average price per share
Outstanding and Vested
$5.59 - 76.80242,010$6.18 9.552,010$76.80 
$77.60 - 116.404,653 $81.72 0.374,653$81.72 
54
Range of
Exercise Prices
 
Number
Outstanding
 
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining Life (Years)
 
Number
Exercisable
 
Weighted-Average
Exercise Price
$0.00
 -29.99 48,892
 $14.97
 9.39 3,759
 $26.15
$30.00
 -54.99 96,866
 38.39
 7.73 48,433
 38.39
$55.00
 -79.99 94,903
 70.27
 3.96 85,785
 69.57
$80.00
 -104.99 30,941
 88.28
 5.34 26,253
 89.35
$105.00
 -129.99 22,900
 119.73
 2.23 22,900
 119.73
$130.00
 -159.99 14,465
 151.51
 0.70 14,465
 151.51
    308,967
 $60.80
 5.86 201,595
 $75.42
The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option-Pricing Model based on the following weighted-average assumptions used for grants during 2017, 2016, and 2015:
  Year Ended December 31,
  2017 2016 2015
Expected term (in years) 6.25
 6.25
 6.24
Expected stock price volatility 53.70% 44.80% 40.60%
Risk-free interest rate 2.16% 1.48% 1.58%
Expected dividend yield —% —% 5.69%

Expected term is estimated using the simplified method, which takes into account vesting and contractual term. The simplified method is being used to calculate expected term instead of historical experience due to a lack of relevant historical data resulting from changes in option vesting schedules and changes in the pool of employees receiving option grants. Expected stock price volatility is based on the historical volatility from traded shares of our stock over the expected term. The risk-free interest rate is based on the rate of a zero-coupon U.S. Treasury instrument with a remaining term approximately equal to the expected term. Expected dividend yield is based on historical stock price movement and anticipated future annual dividends over the expected term. Future annual dividends over the expected term are estimated to be nil.

The weighted-average fair value ofThere were 240,000 options granted during 2017, 2016,2023 and 2015 was $5.32, $11.66, and $13.60, respectively.no options were granted during 2022. As of December 31, 2017,2023, there was $0.7$0.8 million of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted average period of approximately 2.18 years.

Cash Stock Appreciation Rights

In 2016 and 2017, the Board of Directors approved grants of cash settling stock appreciation rights under the 2013 Plan. Cash stock appreciation rights vest in 25% increments on the first four anniversaries of the date of grant.grant and expire after 10 years. Cash stock appreciation rights settle solely in cash and are treated as a liability.

The following summarizes allThere were no cash stock appreciation rights issued during the year ended December 31, 2017:

  Number of
Units		 
Weighted-
Average 
Exercise Price
 Weighted-Average
Remaining
Contractual Term
(Years)
Cash stock appreciation rights outstanding at December 31, 2016 —
 $—
  
       
Granted in 2017 86,618
 9.70
  
Exercised in 2017 —
 —
  
Forfeited in 2017 —
 —
  
Cash stock appreciation rights outstanding at December 31, 2017 86,618
 $9.70
 9.48
       
Vested and expected to vest at December 31, 2017 86,618
 $9.70
 9.48
       
Exercisable at December 31, 2017 —
 $—
 0.00

The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option-Pricing Model based on the following weighted-average assumptions used for grants during 2017:
2017
Expected term (in years)6.25
Expected stock price volatility54.45%
Risk-free interest rate2.23%
Expected dividend yield—%

Expected term is estimated using the simplified method, which takes into account vesting2023 and contractual term. The simplified method is being used to calculate expected term instead of historical experience due to a lack of relevant historical data resulting from changes in cash stock appreciation right vesting schedules and changes in the pool of employees receiving cash stock appreciation right grants. Expected stock price volatility is based on the historical volatility from traded shares of our stock over the expected term. The risk-free interest rate is based on the rate of a zero-coupon U.S. Treasury instrument with a remaining term approximately equal to the expected term. Expected dividend yield is based on historical stock price movement and anticipated future annual dividends over the expected term. Future annual dividends over the expected term are estimated to be nil.

2022.
The fair value of each cash stock appreciation right is estimated on the date of grant using the Black-Scholes Option-Pricing Model and is revalued at the end of each period. Changes in fair value are recorded toin the income statement as changes to expense. As of December 31, 2017,2023, there was $0.4 million of totalno unrecognized compensation cost related to unvested cash stock appreciation right grants. This cost is expected to be recognized over a weighted average period of approximately 3.48 years. Changes in our

Restricted Stock Units
Restricted stock price, the volatility of our stock price, and the risk-free rate of interest will result in adjustments to compensation expense and the corresponding liability over the applicable service period

Unvested Shares

Unvested sharesunits granted as inducement awards or under the 2020 Plan and 2013 Plan vest in three equal increments on the first three anniversaries of their date of grant. UnvestedRestricted stock units settle in treasury stock or newly issued shares settle solely in common stock and are treated as equity. Outstanding unvested sharesrestricted stock units granted to officers as inducement awards or under the 2013 Plan vest in full (to the extent not previously vested) upon a change in control if such unvested shares are not assumed or replaced by a publicly-tradedpublicly traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).
Following the third quarter 2015 resignation of our former CEO, vesting was accelerated on his unvested shares (pursuant to the terms of his employment agreement and inducement award), for which we recognized $1.2 million of accelerated expense in July 2015.
The following summarizes all unvested sharerestricted stock units’ activity during 2017, 2016,2023 and 2015:2022:
  Number of
Shares		 Weighted-
Average Grant
Date Fair Value
Unvested shares outstanding at December 31, 2014 79,007
 $80.89
     
Granted in 2015 83,626
 63.80
Vested in 2015 (50,507) 82.27
Forfeited in 2015 (15,911) 78.39
Unvested shares outstanding at December 31, 2015 96,215
 $65.69
     
Granted in 2016 74,192
 26.32
Vested in 2016 (36,492) 66.96
Forfeited in 2016 (39,372) 57.79
Unvested shares outstanding at December 31, 2016 94,543
 $37.59
     
Granted in 2017 160,962
 9.81
Vested in 2017 (40,979) 41.39
Forfeited in 2017 (13,304) 27.84
Unvested shares outstanding at December 31, 2017 201,222
 $15.23
Number of SharesWeighted-Average Grant Date Fair Value
Unvested shares outstanding at December 31, 2021646,439$4.41
Adjustment and Correction40,000—
Granted in 2022208,1658.93
Vested in 2022(296,161)4.85
Forfeited in 2022(82,267)3.29
Unvested shares outstanding at December 31, 2022516,176$6.43
 
Granted in 202380,2255.73
Vested in 2023(308,523)5.53
Forfeited in 2023(44,437)7.02
Unvested shares outstanding at December 31, 2023243,441$7.24
The fair value of each unvested sharerestricted stock unit is estimated on the date of grant as the closing market price of our common stock on the date ofprior to the grant. As of December 31, 2017,2023, there was $2.1$1.1 million of total unrecognized compensation cost related to unvested shares.restricted stock units. This cost is expected to be recognized over a weighted average period of approximately 1.941.18 years.

Phantom Stock Units

In 2016 and 2017, the Board of Directors approved grants of phantom stock units under the 2013 Plan. Phantom stock units vest in 25% increments on the first four anniversaries of the date of grant. Phantom stock units settle solely in cash and are treated as a liability. Grants of phantom stock units made to officers under the 2013 Plan vest in full (to the extent not previously vested) upon a change in control if they are not assumed or replaced by a publicly-tradedpublicly traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).


The following summarizes all phantomThere were no cash stock unit activityappreciation rights issued during 2017:2023 and 2022.
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  Number of
Units		 Weighted-
Average Grant
Date Fair Value
Phantom stock units outstanding at December 31, 2015 —
 $—
     
Granted in 2016 78,140
 26.90
Vested in 2016 —
 —
Forfeited in 2016 (24,976) 26.90
Phantom stock units outstanding at December 31, 2016 53,164
 $26.90
     
Granted in 2017 56,000
 9.70
Vested in 2017 (12,483) 26.90
Forfeited in 2017 (14,644) 22.63
Phantom stock units outstanding at December 31, 2017 82,037
 $15.92

The fair value of each phantom stock unit is estimated on the date of grant as the closing market price of our common stock on the date ofprior to the grant. Changes in our stock price will result in adjustments to compensation expense and the corresponding liability over the applicable service period. As of December 31, 2017,2023, there was $0.7 million of totalno unrecognized compensation cost related to phantom stock units. This cost is expected to be recognized over a weighted average period of approximately 3.06 years.

Performance Stock Units

Under the 2013 Plan and grants of inducement awards, performancePerformance stock units are a form of share-based award similar to unvested shares, except that the number of shares ultimately issued is based on our performance against specific performance goals over a roughly three-year period. At the end of the performance period, the number of shares of stock issued will be determined in accordance with the specified performance target(s) in a range between 0% and 100%. Performance stock units vest solely in common stock and are treated as equity. Upon a change in control, performance stock units granted to officers vest on a pro-rated basis (based on time elapsed from the grant) to the extent not previously settled if they are not assumed or replaced by a publicly-tradedpublicly traded successor with an equivalent award (as such terms are defined in such officers'officers’ change-in-control severance agreements).

Performance Stock Units have been issued under the 2013 Plan, and the 2020 Plan as inducement awards.
The following summarizes all performance stock unit activity during 2017, 2016,2023 and 2015:2022:
  
Number of
Units
 
Weighted-
Average Grant-Date Fair Value
Performance stock units outstanding at December 31, 2014 60,363
 $76.07
     
Granted in 2015 66,982
 43.02
Settled in 2015 —
 —
Forfeited in 2015 (57,211) 75.40
Performance stock units outstanding at December 31, 2015 70,134
 $45.05
     
Granted in 2016 47,300
 19.00
Settled in 2016 —
 —
Forfeited in 2016 (33,004) 57.59
Performance stock units outstanding at December 31, 2016 84,430
 $25.56
     
Granted in 2017 89,124
 9.95
Settled in 2017 —
 —
Forfeited in 2017 (10,494) 47.90
Performance stock units outstanding at December 31, 2017 163,060
 $15.59

Number of
Units
Weighted-
Average Grant
Date Fair Value
Performance stock units outstanding as of December 31, 202194,110$5.41 
Granted in 2022117,000$7.77 
Settled in 2022(69,110)5.44 
Forfeited in 2022—— 
Performance stock units outstanding as of December 31, 2022142,000$7.34 
Granted in 2023— $— 
Settled in 2023— — 
Forfeited in 2023(99,000)7.14 
Performance stock units outstanding as of December 31, 202343,000$7.80 
The fair value of each performance stock unit is estimated on the date of grant as the closing market price of our common stock on the date ofprior to the grant, minus the present value of anticipated dividend payments. Periodic compensation expense is based on the current estimate of future performance against specific performance goals over a three-year period and is adjusted up or down based on those estimates. As of December 31, 2017, there was $1.3 million of2023, the total unrecognized compensation cost related to

performance stock units.units was approximately $29,770. This cost is expected to be recognized over a weighted average period of approximately 1.730.44 years. Future annual dividends over the expected term are estimated to be nil.

Cash Performance Stock Units

In 2016 and 2017, the Board of Directors approved grants of cash performance stock units under the 2013 Plan. Cash performance stock units are a form of share-based award similar to phantom stock units, except that the number of units ultimately issued is based on our performance against specific performance goals measured after a three-year period. At the end of the performance period, the number of units vesting will be determined in accordance with specified performance target(s) in a range between 0% and 100%. Cash performance stock units settle solely in cash and are treated as a liability. Upon a change in control, cash performance stock units granted to officers, vest on a pro-rated basis (based on time elapsed from the grant) to the extent not previously settled if they are not assumed or replaced by a publicly-tradedpublicly traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).

The following summarizes allThere was no cash performance stock unit activityissued during 2017:
  Number of
Shares		 Weighted-
Average Grant-Date Fair Value
Cash performance stock units outstanding at December 31, 2015 —
 $—
     
Granted in 2016 51,209
 26.90
Settled in 2016 —
 —
Forfeited in 2016 (6,812) 26.90
Cash performance stock units outstanding at December 31, 2016 44,397
 $26.90
     
Granted in 2017 109,887
 10.10
Settled in 2017 —
 —
Forfeited in 2017 (3,778) 26.90
Cash performance stock units outstanding at December 31, 2017 150,506
 $14.63

2023 and 2022.
The fair value of each cash performance stock unit is estimated on the date of grant as the closing market price of our common stock on the date ofprior to the grant, minus the present value of anticipated dividend payments. Periodic compensation expense is based on the current estimate of future performance against specific performance goals over a
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three-year period and is adjusted up or down based on those estimates. As of December 31, 2017,2023, there was $0.9 million of totalno unrecognized compensation cost related to cash performance stock units. This
Note H — Employee Benefit Plans
Prior to January 1, 1999, we provided a defined benefit pension plan for which most of our employees were eligible to participate (the “Qualified Pension Plan”). In conjunction with significant enhancements to our 401(k) plan, we elected to freeze benefits under the Qualified Pension Plan as of December 31, 1998.
In 1994, we adopted a non-qualified, unfunded, supplemental pension plan (the “Restoration Pension Plan”) covering certain employees, which provides for incremental pension payments so that total pension payments equal those amounts that would have been payable from the principal pension plan were it not for limitations imposed by income tax regulation. The benefits under the Restoration Pension Plan were intended to provide benefits equivalent to our Qualified Pension Plan as if such plan had not been frozen. We elected to freeze benefits under the Restoration Pension Plan as of April 1, 2014.
At the end of 2021, the Board of Directors of the Company approved the division of the Qualified Pension Plan into two distinct plans, “Qualified Pension Plan I” and “Qualified Pension Plan II.” The assets and liabilities of the Qualified Pension Plan that were attributable to certain participants in Qualified Pension Plan II were spun off and transferred into Qualified Pension Plan II effective as of the end of December 31, 2021, in accordance with Internal Revenue Code section 414 (I) and ERISA Section 4044.
In January 2023, the Board of Directors of the Company approved the termination of the Qualified Pension Plan I. The termination process will take approximately eighteen months to complete and will result in the transfer of our obligations pursuant to this pension plan to a third-party provider. We expect to make a cash contribution of $7.6 million to terminate the Qualified Pension Plan I.
The overfunded or underfunded status of our defined benefit post-retirement plans is recorded as an asset or liability on our consolidated balance sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation. Periodic changes in the funded status are recognized through other comprehensive income in the Consolidated Statements of Comprehensive Income. We currently measure the funded status of our defined benefit plans as of December 31, the date of our year-end Consolidated Balance Sheets.
The status of the defined benefit pension plans at year-end was as follows:
 Year Ended December 31,
In thousands20232022
Change in benefit obligation
Benefit obligation at beginning of year$143,521 $186,041 
Interest cost7,088 5,040 
Actuarial gain (loss)1,465 (37,014)
Benefits paid(10,647)(10,546)
Benefit obligation at end of year$141,427 $143,521 
Change in plan assets
Fair value of plan assets at beginning of year$103,891 $131,741 
Actual return on plan assets7,128 (20,358)
Contributions3,324 3,053 
Benefits paid(10,647)(10,545)
Fair value of plan assets at end of year$103,696 $103,891 
Funded status at end of year$(37,731)$(39,630)
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The following amounts have been recognized in the Consolidated Balance Sheets as of December 31:
In thousands20232022
Current pension liabilities$8,561 $1,858 
Long term pension liabilities - Qualified plans10,540 18,674 
Long term pension liabilities - Nonqualified plan18,630 19,098 
Total pension liabilities$37,731 $39,630 
The following amounts have been recognized in accumulated other comprehensive loss, net of tax, as of December 31:
In thousands20232022
Net loss$42,456 $44,120 
Based on current estimates, we will be required to make $2.0 million in cash contributions to our Qualified Pension Plan II, in 2024.
We are not required to make and do not intend to make any contributions to our Restoration Pension Plan in 2023 other than to the extent needed to cover benefit payments. We made benefit payments under this supplemental plan of $1.8 million in 2023.
The following information is presented for pension plans with an accumulated benefit obligation in excess of plan assets:
In thousands20232022
Projected benefit obligation$141,427 $143,521 
Accumulated benefit obligation$141,427 $143,521 
Fair value of plan assets$103,696 $103,891 
The Restoration Pension Plan had an accumulated benefit obligation of $20.5 million and $21.0 million as of December 31, 2023, and 2022, respectively.
The following table presents the components of net periodic benefit cost and other amounts recognized in other comprehensive income in the Consolidated Statements of Comprehensive Income for both plans:
Year Ended December 31,
In thousands20232022
Net Periodic Benefit Cost
Interest cost$7,088 $5,040 
Expected return on plan assets(6,216)(5,872)
Recognized actuarial loss2,521 2,876 
Net periodic benefit cost3,393 2,044 
Amounts Recognized in Other Comprehensive Income
Adjustment to pension liabilities(1,723)(10,274)
Net cost recognized in net periodic benefit cost and other comprehensive income$1,670 $(8,230)
The components of net periodic benefit costs other than the service cost component are included in Other, net in our Consolidated Statement of Comprehensive Income. The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in 2024 is $1.5 million. The period over which the net loss from the Qualified Pension Plan is amortized into net periodic benefit cost was the average future lifetime of all participants (approximately 15.7 years for Qualified Pension Plan I and approximately 24.8 years for Qualified Pension Plan II ). The Qualified Pension Plan is frozen and almost all of the plan’s participants are not active employees.
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The weighted-average assumptions used for measurement of the defined pension plans were as follows:
Weighted-average assumptions used to determine net periodic benefit costYear Ended December 31,
20232022
Discount rate
Qualified Plan I5.13 %2.75 %
Qualified Plan II5.18 %2.92 %
Restoration Plan5.12 %2.73 %
  
Expected return on plan assets
Qualified Plan I5.95 %4.25 %
Qualified Plan II7.05 %5.75 %
Restoration Plann/an/a
Weighted-average assumptions used to determine benefit obligationsDecember 31,
20232022
Discount rate
Qualified Plan I5.64 %5.13 %
Qualified Plan II4.99 %5.18 %
Restoration Plan4.92 %5.12 %
The discount rate assumptions are based on current yields of investment-grade corporate long-term bonds. The expected to be recognizedlong-term return on plan assets is based on the expected future average annual return for each major asset class within the plan’s portfolio (which is principally comprised of equity investments) over a weighted average periodlong-term horizon. In determining the expected long-term rate of approximately 2.13 years. Future annual dividendsreturn on plan assets, we evaluated input from our investment consultants, actuaries, and investment management firms, including their review of asset class return expectations, as well as long-term historical asset class returns. Projected returns by such consultants and economists are based on broad equity and bond indices. Additionally, we considered our historical 15-year compounded returns, which have been in excess of the forward-looking return expectations.
The funded pension plan assets as of December 31, 2023 and 2022, by asset category, were as follows:
In thousands2023%2022%
Equity securities$20,635 20 %$50,090 48 %
Debt securities76,036 73 %49,846 48 %
Other7,025 7 %3,955 4 %
Total plan assets$103,696 100 %$103,891 100 %
The fair values presented have been prepared using values and information available as of December 31, 2023 and 2022.
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The following tables present the fair value measurements of the assets in our funded pension plan:
In thousandsDecember 31,
2023		Quoted Prices in Active Markets
for Identical Assets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Equity securities$20,635 $20,635 $— $— 
Debt securities76,036 66,847 9,189 — 
Total investments, excluding investments valued at NAV96,671 87,482 9,189 — 
Investments valued at NAV(1)
7,025 — — — 
Total plan assets$103,696 $87,482 $9,189 $— 
In thousandsDecember 31,
2022		Quoted Prices in Active Markets
for Identical Assets
(Level 1)		Significant Other Observable
Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Equity securities$50,090 $50,090 $— $— 
Debt securities$49,846 35,575 14,271 — 
Total investments, excluding investments valued at NAV99,936 85,665 14,271 — 
Investments valued at NAV(1)
$3,955 — — — 
Total plan assets$103,891 $85,665 $14,271 $— 
(1)Investment valued at net asset value ("NAV") are comprised of cash, cash equivalents, and short-term investments used to provide liquidity for the payment of benefits and other purposes. The commingled funds are valued at NAV based on the market value of the underlying investments, which are primarily government issued securities.
The investment policy for the Qualified Pension Plans focuses on the preservation and enhancement of the corpus of the plan’s assets through prudent asset allocation, quarterly monitoring and evaluation of investment results, and periodic meetings with investment managers.
The investment policy’s goals and objectives are to meet or exceed the representative indices over a full market cycle (3-5 years). The policy establishes the following investment mix, which is intended to subject the principal to an acceptable level of volatility while still meeting the desired return objectives:
Qualified Pension Plan ITargetAcceptable RangeBenchmark Index
Equities—%0% - 20%
  U.S. Large Cap—%0% - 10%Russell 1000 TR
  U.S. Mid Cap—%0% - 5%Russell Mid Cap Index TR
  U.S. Small Cap—%0% - 5%Russell 2000 TR
International Equity
  Developed—%0% - 5%MSCI EAFE Net TR USD Index
  Emerging Markets—%0% - 5%MSCI Emerging Net Total Return
Fixed Income95%0% - 100%
  Investment Grade95%0% - 100%BBG BARC US Aggregate Bond Index
Cash Equivalent5%0%-100%ICE BofA US 3-Month Treasury Bill Index TR
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Qualified Pension Plan IITargetAcceptable RangeBenchmark Index
Equities77%62% - 87%
  U.S. Large Cap28%18% - 38%Russell 1000 TR
  U.S. Mid Cap18%13% - 23%Russell Mid Cap Index TR
  U.S. Small Cap9%4% - 14%Russell 2000 TR
International Equity
  Developed16%11% - 21%MSCI EAFE Net TR USD Index
  Emerging Markets6%0% - 9%MSCI Emerging Net Total Return
Fixed Income21%11% - 31%
  Investment Grade21%11% - 31%BBG BARC US Aggregate Bond Index
Cash Equivalent2%0%-40%ICE BofA US 3-Month Treasury Bill Index TR
The funded pension plans provide for investment in various investment types. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk. Due to the level of risk associated with investments, it is reasonably possible that changes in the value of investments will occur in the near term and may impact the funded status of these plans. To address the issue of risk, the investment policy places high priority on the preservation of the value of capital (in real terms) over a market cycle. Investments are made in companies with a minimum five-year operating history and sufficient trading volume to facilitate, under most market conditions, prompt sale without severe market effect. Investments are diversified across numerous market sectors and individual companies. Reasonable concentration in any one issue, issuer, industry, or geographic area is allowed if the potential reward is worth the risk.
Investment managers are evaluated by the performance of the representative indices over a full market cycle for each class of assets. The Pension Plan Committee reviews, on a quarterly basis, the investment portfolio of each manager, which includes rates of return, performance comparisons with the most appropriate indices, and comparisons of each manager’s performance with a universe of other portfolio managers that employ the same investment style.
The expected future benefit payments for both pension plans over the expected termnext ten years as of December 31, 2023, are estimatedas follows:
In thousands
2024$89,460 
20254,017 
20264,111 
20274,217 
20284,327 
2029 - 203322,809 
Total$128,941 
The Company also has two pension plans in its foreign jurisdictions, the associated pension liabilities are not material.
We also sponsored a 401(k) retirement plan in which we matched a portion of employees’ voluntary before-tax contributions prior to be nil.2018. Under this plan, both employee and matching contributions vest immediately. We stopped this 401(k) match program in 2018 and resumed it in 2023. We incurred $1.2 million in 401k match expense in both 2023 and 2022.

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Note I — CommitmentsIncome Taxes
Coronavirus Aid, Relief and ContingenciesEconomic Security Act

AtThe CARES Act, signed in March 2020, lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”). Under the CARES Act, corporate taxpayers may carryback net operating losses (“ NOLs”) realized during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2020 or 2021. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. As of December 31, 2017,2020, the Company filed federal net operating loss carryback claims resulting in an income tax refund for $6.4 million and $3.2 million for tax years 2019 and 2018, respectively. As of December 31, 2022, the Company has received the tax refunds for the tax years 2019 and 2018 and $2.5 million of income tax refunds from the carryback of the loss generated in 2020. We have received the remaining tax refund of $5.3 million in March 2023.
The components of income tax benefit are as follows:
Year Ended December 31,
In thousands20232022
Current
Federal$(10)$60 
State and local264 774 
Foreign871 1,546 
Total current$1,125 $2,380 
Deferred
Federal$(1,340)$(11,496)
State and local(216)(8,347)
Foreign82 — 
Total deferred$(1,474)$(19,843)
Total income benefit$(349)$(17,463)
The U.S. and foreign components of income (loss) before income taxes were as follows:
Year Ended December 31,
In thousands20232022
United States$(7,546)$10,252 
Foreign5,627 9,061 
Total (loss) income before income taxes$(1,919)$19,313 
The provision (benefit) for income taxes is based on the various rates set by federal, foreign and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The principal reasons for the difference between the statutory rate and the annual effective rate for 2023 were the state taxes, change in valuation allowance, federal and foreign income tax credits and the benefit of excess stock benefits on vested restricted stock, offset by flow-through partnership income from a United Kingdom affiliate. The principal reasons for the difference between the statutory rate and the annual effective rate for 2022 were the impact of the release of the majority of the U.S. valuation allowance, federal and foreign income tax credits, and the benefit of excess stock benefits on vested restricted stock, offset by flow-through partnership income from a United Kingdom affiliate.
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The differences between total income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate of 21% to income (loss) before income taxes were as follows:
Year Ended December 31,
In thousands20232022
Computed expected income tax (benefit) expense$(403)$4,056 
Net effect of state income taxes(206)1,074 
Foreign subsidiary dividend inclusions507 639 
Foreign tax rate differential(257)(349)
Change in valuation allowance(562)(18,243)
Return to Provision706 (141)
Change in Rate165 (2,172)
Credits(543)(1,126)
Adjustments to State Attributes(137)(1,330)
Other Adjustments, net381 129 
Income tax benefit$(349)$(17,463)
Total income tax benefit was allocated as follows:
Year Ended December 31,
In thousands20232022
Loss from operations$(349)$(17,463)
Stockholders’ equity (deficit)— — 
Total$(349)$(17,463)
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The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
Year Ended December 31,
In thousands20232022
Deferred tax assets
Deferred compensation and retirement plan$9,667 $10,246 
Accrued expenses not deductible until paid1,177 33 
Lease liability6,979 5,591 
Investment in foreign subsidiaries, outside basis difference1,604 1,047 
Interest Expense limitations971 913 
Other, net1,320 1,667 
Foreign net operating loss carryforwards1,382 1,623 
State net operating loss carryforwards5,309 5,184 
Foreign tax credit carryforwards3,730 4,212 
General Business Credit Carryovers538 546 
Total gross deferred tax assets32,677 31,062 
Less valuation allowances(7,091)(7,652)
Net deferred tax assets$25,586 $23,410 
Deferred tax liabilities
Property, plant and equipment$(1,485)$(2,024)
Right-of-use asset(6,144)(4,765)
Other, net(689)(315)
Total gross deferred tax liabilities(8,318)(7,104)
Net deferred tax assets$17,268 $16,306 
In assessing the realizability of deferred tax assets, we had lettersconsider whether it is more likely than not that some portion or all of creditthe deferred tax assets will not be realized. After considering the weight of available evidence, both positive and negative (most notably the Company’s sustained growth over the past two years), the Company concluded that it is more-likely-than-not that it will realize the majority of its U.S. deferred tax assets. Certain foreign tax credits as well as certain state net operating loss carryovers will continue to have a valuation allowance until there is substantial evidence that enough future taxable income exists at a more likely than not level in order to utilize those deferred tax assets. The valuation allowance for deferred tax assets was $7.1 million and $7.7 million as of December 31, 2023 and 2022, respectively. The change in the amount of $2.8valuation allowance is $0.6 million backed by cash collateral. No amounts were drawn against these letters of credit atfor the year ended December 31, 2017. These letters of credit exist to support insurance programs relating to workers’ compensation, automobile, and general liability.2023.

In the normal courseWe or one of our business,subsidiaries file income tax returns in the U.S. federal, U.S. state, and foreign jurisdictions. For U.S. state, federal and foreign returns, we are obligated under some agreementsno longer subject to indemnify our clientstax examinations for years prior to 2018.
There is no balance of unrecognized tax benefits as of December 31, 2023 and 2022. Any adjustments to this liability as a result of claims that we infringe on the proprietary rightsfinalization of third parties. The termsaudits or potential settlements would not be material.
We have elected to classify any interest and duration of these commitments vary and, in some cases, may be indefinite, and certain of these commitments do not limit the maximum amount of future payments we could become obligated to make there under; accordingly, our actual aggregate maximum exposurepenalties related to these typesincome taxes within income tax expense in our Consolidated Statements of commitments cannotComprehensive Income (loss).
For U.S. tax return purposes, net operating losses and tax credits are normally available to be reasonably estimated. Historically, wecarried forward to future years, subject to limitations as discussed below. As of December 31, 2023, the Company had no federal net operating loss carryforward. The federal foreign tax carryforward credits of $3.7 million will expire on various dates from 2023 to 2032. Federal general business credit carryforwards of $0.5 million will begin to expire on various dates from 2037 to 2042. The Company has state NOL carryforwards of $109.0 million, and foreign NOL carryforwards of $4.4 million.
Deferred income taxes have not been obligated to make significant payments for obligationsprovided on the undistributed earnings of this nature, and no liabilitiesour foreign subsidiaries as these earnings have been, recorded forand under current plans will continue to be, permanently reinvested in these obligations in our financial statements.subsidiaries. It is not practicable to

64
We are also currently subject to various other legal proceedingsestimate the amount of additional taxes which may be payable upon the distribution of these earnings. However, because of the provisions in the courseTax Reform Act, the tax cost of conducting our businessesrepatriation is immaterial and from timelimited to time, we may become involved in additional claimsforeign withholding taxes, currency translation and lawsuits incidental to our businesses. In the opinion of management, after consultation with counsel, none of these matters is currently considered to be reasonably possible of resulting in a material adverse effect on our consolidated financial position or results of operations. Nevertheless, we cannot predict the impact of future developments affecting our pending or future claims and lawsuits and any resolution of a claim or lawsuit within a particular fiscal quarter may adversely impact our results of operations for that quarter. We expense legal costs as incurred, and all recorded legal liabilities are adjusted as required as better information becomes available to us. The factors we consider when recording an accrual for contingencies include, among others: (i) the opinions and views of our legal counsel, (ii) our previous experience, and (iii) the decision of our management as to how we intend to respond to the complaints.state taxes.

Note J — Leases

We lease real estate and certain equipment under numerous lease agreements, most of which contain some renewal options. The total rent expense applicable to operating leases was $13.1 million, $12.4 million, and $13.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Step rent provisions and escalation clauses, normal tenant improvements, rent holidays, and other lease concessions are taken into account in computing minimum lease payments. We recognize the minimum lease payments on a straight-line basis over the minimum lease term.

The future minimum rental commitments for all non-cancelable operating leases with terms in excess of one year as of December 31, 2017 are as follows:
In thousands  
2018 $8,753
2019 8,500
2020 6,495
2021 3,889
2022 2,016
Thereafter 1,823
Total $31,476

We also lease certain equipment and software under capital leases. Our capital lease obligations at year-end were as follows:
In thousands 2017 2016
Current portion of capital leases $506
 $559
Long-term portion of capital leases 486
 1,018
Total capital lease obligation $992
 $1,577

The future minimum lease payments for all capital leases operating as of December 31, 2017 are as follows:
In thousands  
2018 $506
2019 453
2020 32
2021 1
2022 —
Thereafter —
Total $992

Note K — Earnings (Loss) Per Share

In periods in which the companyCompany has net income, the companyCompany is required to calculate earnings per share (“EPS”) using the two-class method. The two-class method is required because the company's unvested shares granted prior to 2017 areCompany’s Series A Preferred Stock is considered a participating securities. Participating securitiessecurity with objectively determinable and non-discretionary dividend participation rights. Series A Preferred stockholders have the right to receiveparticipate in dividends above their five percent dividend rate should the companyCompany declare dividends on its common stock.stock at a dividend rate higher than the five percent (on an as-converted basis). Under the two-class method, undistributed and distributed earnings are allocated on a pro-rata basis to the common and restrictedthe preferred stockholders. The weighted-average number of common and restricted sharespreferred stock outstanding during the period is then used to calculate EPS for each class of shares.

In December 2022, we repurchased all 9,926 shares of the Company's Series A Preferred Stock then outstanding.
In periods in which the companyCompany has a net loss, basic loss per share is calculated using the treasury stock method. The treasury stock method is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period. The two-class method is not used, because the two-class calculation iswould be anti-dilutive.

On January 31, 2018, we affected a 1-for-10 reverse stock split of our common stock. The calculation of basic and diluted earnings (loss) per share, as presented in the consolidated financial statements, have been adjusted to retroactively apply the reverse stock split.


Reconciliations of basic and diluted earnings (loss) per share ("EPS")EPS are as follows:
In thousands, except per share amounts 2017 2016 2015
Net Income (Loss)  
  
  
Income (loss) from continuing operations $(41,860) $(89,778) $(181,066)
Income (loss) from discontinued operations —
 (41,159) 10,138
Net income (loss) $(41,860) $(130,937) $(170,928)
       
Basic EPS  
  
  
Weighted-average common shares outstanding used in earnings per share computations 6,192
 6,149
 6,164
       
Basic earnings (loss) per share  
  
  
Continuing operations $(6.76) $(14.60) $(29.37)
Discontinued operations —
 (6.69) 1.64
Basic earnings (loss) per share $(6.76) $(21.29) $(27.73)
       
Diluted EPS  
  
  
Shares used in diluted earnings per share computations 6,192
 6,149
 6,164
       
Basic earnings (loss) per share  
  
  
Continuing operations $(6.76) $(14.60) $(29.37)
Discontinued operations —
 (6.69) 1.64
Basic earnings (loss) per share $(6.76) $(21.29) $(27.73)
       
Computation of Shares Used in Earnings Per Share Computations  
  
  
Weighted-average common shares outstanding 6,192
 6,149
 6,164
Weighted-average common equivalent shares-dilutive effect of stock options and awards —
 —
 —
Shares used in diluted earnings per share computations 6,192
 6,149
 6,164

Year Ended December 31,
In thousands, except per share amounts20232022
Numerator:
Net (loss) income$(1,570)$36,776
Less: Loss from redemption of Preferred stock—1,380
Numerator for basic and diluted EPS: income attributable to common stockholders(1,570)35,396
Denominator:
Basic EPS denominator: weighted-average common shares outstanding7,3107,101
Diluted EPS denominator7,3107,457
Basic (loss) income per common share$(0.21)$4.98 
Diluted (loss) income per common share$(0.21)$4.75 
For the purpose of calculating the shares used in the diluted EPS calculations, 0.3 million, 0.4 million, and 0.5 million anti-dilutive options have been excluded from the EPS calculations for the years ended December 31, 2017, 2016,2023 and 2015, respectively. 0.1 million, 0.1 million, and 0.1 million anti-dilutive unvested2022, respectively, the following shares werehave been excluded from the calculation of shares used in the diluted EPS calculation for the years ended December 31, 2017, 2016,calculation: 99,791 and 2015, respectively.13,366 shares of anti-dilutive market price options; 37,653 and 24,918 anti-dilutive unvested shares.

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Note LK — Comprehensive Income (Loss)

Comprehensive income (loss) for a period encompasses net income (loss) and all other changes in equity other than from transactions with our stockholders. Our comprehensive income (loss) was as follows:
  Year Ended December 31,
In thousands 2017 2016 2015
Net income (loss) $(41,860) $(130,937) $(170,928)
       
Other comprehensive income (loss):  
  
  
Adjustment to pension liability 2,597
 (5,103) 9,408
Tax (expense) benefit (1,038) 2,041
 (3,763)
Adjustment to pension liability, net of tax 1,559
 (3,062) 5,645
Foreign currency translation adjustment 316
 444
 (1,976)
Total other comprehensive income (loss) $1,875
 $(2,618) $3,669
       
Total comprehensive income (loss) $(39,985) $(133,555) $(167,259)


Changes in accumulated other comprehensive income (loss)loss by component arewere as follows:
In thousands
Defined Benefit
Pension Items
Foreign
Currency Items
Total
Balance at December 31, 2021$(54,394)$1,066 $(53,328)
Other comprehensive loss, net of tax, before reclassifications— (5,248)(5,248)
Amounts reclassified from accumulated other comprehensive loss, net of tax10,274 — 10,274 
Net current period other comprehensive income (loss), net of tax10,274 (5,248)5,026 
Balance at December 31, 2022$(44,120)$(4,182)$(48,302)
Other comprehensive income, net of tax, before reclassifications— 2,548 2,548 
Amounts reclassified from accumulated other comprehensive loss, net of tax1,664 — 1,664 
Net current period other comprehensive income, net of tax1,664 2,548 4,212 
Balance at December 31, 2023$(42,456)$(1,634)$(44,090)
In thousands 
Defined Benefit
Pension Items
 
Foreign
Currency Items
 Total
Balance at December 31, 2015 $(43,915) $355
 $(43,560)
Other comprehensive loss, net of tax, before reclassifications —
 444
 444
Amounts reclassified from accumulated other comprehensive income (loss), net of tax (3,062) —
 (3,062)
Net current period other comprehensive income (loss), net of tax (3,062) 444
 (2,618)
Balance at December 31, 2016 $(46,977) $799
 $(46,178)
Other comprehensive loss, net of tax, before reclassifications —
 316
 316
Amounts reclassified from accumulated other comprehensive income (loss), net of tax 1,559
 —
 1,559
Net current period other comprehensive income (loss), net of tax 1,559
 316
 1,875
Balance at December 31, 2017 $(45,418) $1,115
 $(44,303)

Reclassification amounts related to the defined pension plans are included in the computation of net period pension benefit cost (see Note F, H, Employee Benefit Plans)Plans).

Note MNote L — Acquisition and Dispositionof InsideOut Solutions, LLC


On March 4, 2016,December 1, 2022 (the “Closing Date”), we acquired Aleutian Consulting, Inc. for $3.5 million in cash. The resultspurchased substantially all of the acquired business, which now operates as Harte Hanks Consulting, have been included in continuing operations beginning the dayassets (the “Transaction”) of acquisition. The residual purchase price methodology was usedInsideOut Solutions, LLC, a Florida limited liability company (“InsideOut”), for determination of fair value of the tangible assets and goodwill allocation. The calculation relied on management's assumptions, which are considered Level 3 inputs, as they are unobservable

On March 16, 2015, we acquired 3Q Digital. The results of the acquired entity have been included in continuing operations beginning the day of acquisition. The fair value of the purchase consideration recognized on acquisition was $48.2 million including an initialaggregate purchase price of $30.2approximately $7.5 million (the “Purchase Price”) pursuant to an asset purchase agreement, dated as of December 1, 2022, by and between Harte Hanks and InsideOut (the “Asset Purchase Agreement”). The acquisition of InsideOut further expands our capabilities into premium sales enablement within the customer care segment and strengthens our ability to drive profitable revenue growth within our sales enablement offerings, including: (i) demand generation which creates qualified marketing leads for our clients, and (ii) inside sales offerings to further promote a client’s internal growth objectives.
Pursuant to the Asset Purchase Agreement, $5.75 million of the Purchase Price was paid in cash at closing, $1.0 million in cash was placed in escrow to satisfy indemnification obligations, and earn-outs related to future revenue performance. Separately, $0.75 million of the Purchase Price was paid at closing in 70,956 shares of Harte Hanks common stock. The share amount was based on the volume weighted closing price over the 15 trading days ending on November 28, 2022. In the year ended December 31, 2023, InsideOut didn't meet the performance requirement to earn the 1st installment of $0.5 million of the $1.0 million in escrow. As a $17.9result, $0.50 million liability forwas refunded from the present value of a contingent considerationescrow account and our goodwill amount was decreased by $0.5 million. The remaining $0.5 million cash in escrow account is included in the agreement. The contingent consideration requires us to pay the former owners an additional sum dependent upon achievementother assets in our balance sheet as of certain goals up to $35.0 million in cash. For the year ending December 31, 2017, 3Q Digital had achieved the maximum contingent consideration payout. A portion of the fair value of the purchase consideration is allocated to the tangible and intangible assets transferred based on their estimated fair value at2023.
The acquisition was accounted for under the acquisition date. The acquired intangible assets aremethod of accounting with the Company treated as follows: customer relationships of $4.3 million (amortized over seven years), trade names and trademarks of $0.3 million (amortized over two years), and non-compete agreements of $0.2 million (amortized over three years).

The following tables summarizethe acquiring entity. Accordingly, the consideration paid andby the amounts of estimated fair value ofCompany to complete the acquisition has been recorded to the assets acquired and liabilities assumed atbased upon their estimated fair values as of the date of the acquisition. The carrying values for current assets and liabilities were deemed to approximate their fair values due to the short-term nature of these assets and liabilities. The following table shows the amounts recorded as of their acquisition date.
in thousandsAmount
Accounts receivable$1,445 
Prepaid expenses148 
Property, plant and equipment177 
Total assets acquired1,770 
Less: Current liabilities assumed(761)
Net assets acquired$1,009 
66
In thousands  
Cash consideration per purchase agreement $30,245
Estimated fair value of contingent consideration 17,940
Fair value of total consideration $48,185
The Purchase Price was subject to a post-closing net working capital true-up. The true up made was immaterial.
In thousands  
Recognized amounts of tangible assets and liabilities:  
Current assets $4,135
Property and equipment 164
Other assets 389
Current liabilities (822)
Other liabilities —
Total tangible assets and liabilities $3,866
Identifiable intangible assets 4,773
Goodwill (including deferred tax adjustment of $2,299) 41,845
Total $50,484

We recognized $3.6 million of intangible assets and $2.4 million of goodwill associated with this acquisition. The amount of goodwill recorded reflects expected earning potential and synergies with our Customer Care segment. We are amortizing the intangible assets on a straight-line basis over its useful life of five years. A reconciliationsummary of the beginning and ending accrued balancesCompany’s intangible asset as of the contingent consideration using significant unobservable inputs (Level 3)December 31, 2023, is as follows:
In thousandsWeighted Average Amortization PeriodGross Carrying AmountAccumulated AmortizationNet Carrying
Amount
Customer Relationships5 years$3,600 $780 $2,820 
Estimated future amortization expense related to intangible assets as of December 31, 2023, is as follows:
In thousands
Year Ending December 31,Amount
2024$720 
2025720 
2026720 
2027660 
Total$2,820 
The Company's results of operations for the year ended December 31, 2023 includes revenue of $9.7 million from the InsideOut operation.
Note M — Litigation and Contingencies
In thousands  
Accrued contingent consideration liability as of December 31, 2015 $20,277
Accretion of interest 2,430
Adjustments to fair value 7,018
Accrued contingent consideration liability as of December 31, 2016 29,725
Accretion of interest 4,162
Accrued contingent consideration liability as of December 31, 2017 $33,887
In the normal course of our business, we are obligated under some agreements to indemnify our clients as a result of third party claims that we infringe on the proprietary rights of third parties, or third party claims relating to other ad hoc contract obligations. The terms and duration of these commitments vary and, in some cases, may be indefinite, and some of these contractual commitments do not limit the maximum amount of future payments we could become obligated to make thereunder; accordingly, our actual aggregate maximum exposure related to these types of commitments is not reasonably estimable. Historically, we have not been obligated to make significant payments for obligations of this nature, and no liabilities have been recorded for these obligations in our consolidated financial statements.

AdjustmentsWe are also subject to various claims and legal proceedings in the ordinary course of conducting our business and, from time to time, we may become involved in additional claims and lawsuits incidental to our business. We routinely assess the likelihood of adverse judgments or outcomes to these matters, as well as ranges of probable losses; to the fair value of the contingent considerationextent losses are reasonably estimable. Accruals are recorded within the "Other, net" line in the Consolidated Statements of Comprehensive Income (Loss).

On February 28, 2018, we completed the sale of 3Q Digital to an entity owned by certain former owners of the 3Q Digital business. Consideration for the sale included $5.0 million in cash proceeds, subject to certain working capital adjustments, and up to $5.0 million in additional consideration if the 3Q Digital business is sold again. The contingent consideration that related to Harte Hanks' acquisition of 3Q Digital in 2015 was assignedthese matters to the buyer, therefore relieving Harte Hanksextent that management concludes a loss is probable and the financial impact, should an adverse outcome occur, is reasonable estimable.
In the opinion of management, appropriate and adequate accruals for legal matters have been made, and management believes that the obligation. See Note P, Subsequent Events,probability of a material loss beyond the amounts accrued is remote. Nevertheless, we cannot predict the impact of future developments affecting our pending or future claims and lawsuits. We expense legal costs as incurred, and all recorded legal liabilities are adjusted as required as better information becomes available to us. The factors we consider when recording an accrual for further discussion.

On April 14, 2015, Harte Hanks sold its B2B research business. The sale resulted in a pre-tax loss of $9.5 million incontingencies include, among others: (i) the second quarter of 2015. The related asset group represented less than 5%opinions and views of our total 2014 revenuegeneral counsel and did not meetoutside legal counsel; (ii) our previous experience with similar claims; and (iii) the criteriadecision of our management as to be classified as a component of the entity. As such, the related loss on sale is included in continuing operations of the Consolidated Financial Statements. The sale resulted in write-offs of both goodwill and intangible assets allocatedhow we intend to respond to the B2B research business (see Note E, Goodwill and Other Intangible Assets).complaints.

Note N — Discontinued OperationsRestructuring Activities

OnFor the year ended December 23, 2016,31, 2023, we completed the salerecorded restructuring charges of our Trillium business to Syncsort.$5.7 million. The decision to sell Trillium was largely based on the prioritization of investments in support of optimizing our clients' customer journey across an omni-channel delivery platform, and the determination that the Trillium business is likely to be a better strategic fit and more valuable asset to other parties. The business was sold for gross proceeds of approximately $112.0 million in cash and resulted in a loss on the sale of $39.9 million, net of2023 restructuring charges included $4.6 million of income tax benefit. We believe thatconsulting expenses, $0.8 million in lease impairment expense, $0.2 million of severance charges, and $0.1 million of facility related and other expenses.
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The following table summarizes the salerestructuring charges which are recorded in “Restructuring Expense” in the Consolidated Statement of Trillium will allow usComprehensive Income.
In thousandsYear Ended December 31, 2023
Consulting expense$4,579 
Severance169 
Facility, asset impairment and other expense
Lease impairment and termination expense798 
Fixed Asset disposal and impairment charges63 
Facility and other expenses78 
Total facility, asset impairment and other expense939 
Total$5,687 
The following table summarizes the changes in liabilities related to better focus onrestructuring activities:
Year Ended December 31, 2023
In thousandsConsultingSeveranceFacility, asset impairment and other expenseTotal
Beginning balance:$— $— $— $— 
Additions4,579 169 78 4,826 
Payments and adjustment(1,005)(25)(40)(1,070)
Ending balance:$3,574 $144 $38 $3,756 
In connection with our core Customer Interaction businessescost-saving and moving towards growth.

Because the salerestructuring initiatives, we expect to incur total restructuring charges of Trillium represents a strategic shift that has a major effect on our operations and financial results, the results of operations, financial position, and cash flows for Trillium are reported separately as discontinued operations for all periods presented. Results of the remaining Harte Hanks business are reported as continuing operations.

Summarized operating results for the Trillium discontinued operations,$10.1 million through the datesend of disposal, are as follows:2024.
  Year Ended December 31,
In thousands 2017 2016 2015
Revenue $—
 $45,639
 $51,135
       
Labor —
 18,687
 22,219
Production and distribution —
 703
 1,404
Advertising, selling, general and administrative —
 10,255
 9,951
Depreciation, software and intangible asset amortization —
 2,304
 1,867
Interest expense, net —
 7,133
 (256)
Loss on sale —
 44,529
 —
Other, net —
 (1,207) 366
Income (loss) from discontinued operations before income taxes —
 (36,765) 15,584
Income tax expense —
 4,394
 5,446
Net income (loss) from discontinued operations $—
 $(41,159) $10,138


Note O — Selected Quarterly Data (Unaudited)Segment Reporting
  First Quarter Second Quarter Third Quarter Fourth Quarter
In thousands, except per share amounts 2017 2016 2017 2016 2017 2016 2017 2016
Revenues $94,894
 $99,563
 $94,722
 $97,317
 $94,424
 $97,425
 $99,866
 $110,107
                 
Operating income (loss) from continuing operations (6,342) (8,547) (1,791) (6,689) 950
 (4,086) (33,682) (34,514)
                 
Income (loss) from continuing operations before income taxes (8,862) (9,278) (4,852) (8,001) (2,098) (5,386) (35,942) (46,483)
                 
Loss from continuing operations (7,386) (6,700) (2,653) (5,902) (2,480) (4,285) (29,341) (72,891)
Discontinued operations, net of tax —
 1,097
 —
 1,639
 —
 1,244
 —
 (45,139)
Net income (loss) $(7,386) $(5,603) $(2,653) (4,263) $(2,480) $(3,041) $(29,341) $(118,030)
                 
Basic earnings (loss) per common share                
Continuing operations $(1.20) $(1.09) $(0.43) $(1.12) $(0.40) $(0.70) $(4.73) $(11.83)
Discontinued operations $—
 $0.18
 $—
 $0.40
 $—
 $0.20
 $—
 $(7.33)
                 
Diluted earnings (loss) per common share                
Continuing operations $(1.20) $(1.09) $(0.43) $(1.12) $(0.40) $(0.70) $(4.73) $(11.83)
Discontinued operations $—
 $0.18
 $—
 0.40
 $—
 $0.20
 $—
 $(7.33)

Earnings per common share amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share amounts may not equal the quarterly earnings per share amounts or the annual earnings per share amounts due to rounding.

Note P — Subsequent Events

Amendment to Credit Facility

On January 9, 2018, we enteredHarte Hanks is a leading global customer experience company. We have organized our operations into an amendment to the Texas Capital Credit Facility that increased the borrowing capacity to $22 million and extended the maturity by one year to April 17, 2020. The Texas Capital Credit Facility remains secured by substantially all of our assets and continues to be guaranteed by HHS Guaranty, an entity formed by certain members of the descendants of one of our founders. For additional information regarding the amendment to the Texas Capital Credit Facility refer to Note C, Long-Term Debt.

Securities Purchase Agreement

On January 23, 2018, we entered into a Securities Purchase Agreement with Wipro, LLC. The agreement consisted of a $9.9 million investment in exchange for 9,926 shares of Series A Preferred Stock. Dividendsthree business segments based on the Series A Preferred Stocktypes of products and services we provide: Marketing Services, Customer Care, and Fulfillment & Logistics.
Our Marketing Services segment leverages data, insight, and experience to support clients as they engage customers through digital, traditional, and emerging channels. We partner with clients to develop strategies and tactics to identify and prioritize customer audiences in B2C and B2B transactions. Our key service offerings include strategic business, brand, marketing and communications planning, data strategy, audience identification and prioritization, predictive modeling, creative development and execution across traditional and digital channels, website and app development, platform architecture, database build and management, marketing automation, and performance measurement, reporting and optimization.
Our Customer Care segment offers intelligently responsive contact center solutions, which use real-time data to effectively interact with each customer. Customer contacts are accrued at a ratehandled through phone, e-mail, social media, text messaging, chat and digital self-service support. We provide these services utilizing our advanced technology infrastructure, human resource management skills and industry experience.
Our Fulfillment & Logistics segment consists of 5.0% per year or the rate that cash dividends were paid in respect to shares of common stock if such rate is greater than 5.0%. The aggregate shares issued under the Securities Purchase Agreements are convertible into 16% of our common stock on a pre-closing basis, priced at $9.91 per share of common stock.

Along with customary protective provisions, Wipro, LLC will be able to designate an observer or director to the Board.mail and product fulfillment and logistics services. We intend to use the proceeds for general corporate purposes including for working capital purposes.

Since 2016, Wipro, LLC has providedoffer a variety of technology-related serviceproduct fulfillment solutions, including printing on demand, managing product recalls, and distributing literature and promotional products to support B2B trade, drive marketing campaigns, and improve customer experience. We are also a provider of third-party logistics and freight optimization in the United States.
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There are three principal financial measures reported to our CEO (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”). Operating income for segment reporting, disclosed below, is revenues less operating costs and allocated corporate expenses. Segment operating expenses are generally directly attributed to our segments and also include allocations of certain centrally incurred costs such as employee benefits, occupancy, information systems, accounting services, internal legal staff, and human resources administration. These costs are allocated based on actual usage or other appropriate methods. Unallocated corporate expenses are corporate overhead expenses not attributable to the Company, including databaseoperating groups. Interest income and software development, database support and analytics, IT infrastructure support, and digital campaign management. Transactions with Wipro, LLC will be classified and disclosed in 2018 as related party transactions in accordance with ASC 850, Related Party Disclosures, and in accordance with the SEC's Regulation S-X Rule 4-08(k), as applicable.

Reverse Stock Split

On January 31, 2018, we executed a 1-for-10 reverse stock split. Pursuantexpense are not allocated to the reverse stock split, every 10 pre-split shares were exchangedsegments. The Company does not allocate assets to our reportable segments for one post-split shareinternal reporting purposes, nor does our CEO evaluate operating segments using discrete asset information. The accounting policies of Harte Hanks' Common Stock. For additional information regarding the Reverse Stock Split refer tosegments are consistent with those described in the Note A, B, Significant Accounting Policies.Policies.

The following table presents financial information by segment year ended December 31, 2023:
Sale of 3Q Digital
(In thousands)Marketing ServicesCustomer CareFulfillment & LogisticsRestructuringUnallocated CorporateTotal
Operating revenue$43,204 $63,327 $84,961 $— $— $191,492 
Segment operating expense34,795 49,851 73,213 — 20,350 178,209 
Restructuring expense— — — 5,687 — 5,687 
Contribution margin$8,409 $13,476 $11,748 $(5,687)$(20,350)$7,596 
Overhead Allocation2,984 2,774 2,891 — (8,649)— 
EBITDA$5,425 $10,702 $8,857 $(5,687)$(11,701)$7,596 
Depreciation and amortization expense312 1,280 1,143 — 1,502 4,237 
Operating income (loss)$5,113 $9,422 $7,714 $(5,687)$(13,203)$3,359 

The following table presents financial information by segment year ended December 31, 2022:
On February 28, 2018, we sold our 3Q Digital, Inc. subsidiary to an entity owned by certain former owners of the 3Q Digital business. Consideration for the sale included $5.0 million in cash proceeds, subject to certain working capital adjustments, and up to $5.0 million in additional consideration if the 3Q Digital business is sold again. The $35.0 million contingent consideration obligation of the company that related to Harte Hanks' acquisition of 3Q Digital in 2015 was assigned to the buyer, therefore relieving Harte Hanks of the obligation.


INDEX TO EXHIBITS

We are incorporating certain exhibits listed below by reference to other Harte Hanks filings with the Securities and Exchange Commission, which we have identified in parentheses after each applicable exhibit.
(In thousands)Marketing ServicesCustomer CareFulfillment & LogisticsRestructuringUnallocated CorporateTotal
Operating revenue$52,975 $67,205 $86,098 $— $— $206,278 
Segment operating expense41,241 52,173 72,180 — 22,849 188,443 
Restructuring expense— — — — — — 
Contribution margin$11,734 $15,032 $13,918 $— $(22,849)$17,835 
Overhead allocation4,390 2,865 3,325 — (10,580)— 
EBITDA$7,344 $12,167 $10,593 $— $(12,269)$17,835 
Depreciation and amortization expense362 884 824 — 658 2,728 
Operating income (loss)$6,982 $11,283 $9,769 $— $(12,927)$15,107 
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Exhibit
No.Description of Exhibit

Acquisition and Dispositions
2.1
Asset Purchase Agreement, dated September 18, 2013, by and among Harte Hanks Shoppers, Inc., Southern Comprint Co. and Harte Hanks, Inc., on the one hand, and Pennysaver USA Publishing, LLC, Pennysaver USA Printing, LLC, Orbiter Properties, LLC and OpenGate Capital Management, LLC, on the other hand (filed as Exhibit 2.1 to the company’s Form 8-K dated September 19, 2013).
2.2
Agreement and Plan of Merger, dated March 16, 2015, among Harte Hanks, Inc., Harte Hanks Smart, Inc., 3Q Digital, Inc. and Maury Domengeaux, as representative to the stockholders of 3Q Digital, Inc. (filed as Exhibit 2.1 to the company's Form 10-Q dated May 7, 2015).
2.3
Membership Interest Purchase Agreement, dated April 14, 2015, between AMI Intermediate, LLC and Harte Hanks, Inc. relating to the sale of Aberdeen Group and Harte Hanks Market Intelligence (filed as Exhibit 2.2 to the company's Form 10-Q dated May 7, 2015).
2.4
Stock Purchase Agreement, dated November 29, 2016, by and among Syncsort Incorporated, Syncsort Limited, Syncsort GmbH, Harte Hanks, Inc., Harte-Hanks UK Limited, Harte-Hanks GmbH, Trillium Software, Inc., Harte-Hanks Trillium UK Limited, Harte-Hanks Trillium Software Germany GmbH and Harte Hanks, Inc. as sellers’ representative (filed as Exhibit 2.1 to the company's Form 8-K dated December 30, 2016).
2.5
3Q Agreement, dated May 1, 2017, by and between Harte Hanks, Inc. and 3Q Digital, Inc. and Maury Domengeaux, as representative to the former stockholders and option holders of 3Q Digital, Inc. (filed as Exhibit 2.1 to the company's Form 8-K dated May 4, 2017
2.6
Purchase and Sale Agreement, dated February 28, 2018 among Harte Hanks, Inc., 3Q Digital, Inc. and 3Q Digital Holdings, Inc. (filed as Exhibit 2.1 to the company's Form 8-K dated March 6, 2018)

Charter Documents
3(a)
Amended and Restated Certificate of Incorporation as amended through May 5, 1998 (filed as Exhibit 3(e) to the company’s Form 10-Q for the six months ended June 30, 1998).
3(b)
Fifth Amended and Restated Bylaws (filed as Exhibit 3.1 to the company’s Form 8-K dated December 23, 2015).
3(c)
Certificate of Amendment of Incorporation dated January 31, 2018 (filed as Exhibit 3.2 to the company’s Form 8-A/A dated January 31, 2018).
3(d)
Certificate of Designation of Series A Preferred Stock of Harte Hanks, Inc. (filed as Exhibit 3.1 to the company's form 8-K dated January 29, 2018).
Credit Agreements
10.1(a)
Term Loan Agreement by and between Harte Hanks, Inc. and Wells Fargo Bank, as administrative agent, dated March 10, 2016 (filed as Exhibit 10.1 to the company's Form 8-K dated March 11, 2016).
10.1(b)
Waiver and First Amendment to Credit Agreement as of May 16, 2016, with Wells Fargo Bank, N.A., as Administrative Agent (filed as Exhibit 10.1 in the company's Form 8-K dated May 20, 2016).
10.1(c)
Waiver and Second Amendment to Credit Agreement as of August 5, 2016, with Wells Fargo Bank, N.A., as Administrative Agent (filed as Exhibit 10.1 in the company's Form 8-K dated August 9, 2016).
10.1(d)
Waiver to Credit Agreement dated November 8, 2016, with Wells Fargo Banks, N.A., as Administrative Agent (filed as Exhibit 10.1 in the company's Form 10-Q dated November 9, 2016).
10.1(e)
Waiver to Credit Agreement dated August 14, 2017, with Texas Capital Bank, N.A., as lender (filed as Exhibit 10.1 to the company's form 10-Q dated August 17, 2017).
10.1(f)
First Amendment to Credit Agreement, dated January 9, 2018, between Harte Hanks, Inc. and Texas Capital Bank, National Association (filed as Exhibit 10.1 to the company's form 8-K dated January 10, 2018).
10.1(g)
First Amendment to Security Agreement, dated January 9, 2018, between Harte Hanks, Inc. and Texas Capital Bank, National Association (filed as Exhibit 10.2 to the company's form 8-K dated January 10, 2018).

10.1(h)
Revolving Promissory Note, dated January 9, 2018, by Harte Hanks, Inc. in favor of Texas Capital Bank, National Association (filed as Exhibit 10.3 to the company's form 8-K dated January 10, 2018).
10.1(i)
Amended and Restated Fee, Reimbursement and Indemnity Agreement, dated January 9, 2018, between Harte Hanks, Inc. and HHS Guaranty, LLC (filed as Exhibit 10.4 to the company's form 8-K dated January 10, 2018).

Management and Director Compensatory Plans and Forms of Award Agreements
10.2(a)
Harte Hanks, Inc. Restoration Pension Plan (As Amended and Restated Effective January 1, 2008) (filed as Exhibit 10.1 to the company’s Form 8-K dated June 27, 2008).
10.2(b)
Harte Hanks, Inc. 2005 Omnibus Incentive Plan (As Amended and Restated Effective February 13, 2009) (filed as Exhibit 10.1 to the company’s Form 8-K dated February 13, 2009).
10.2(c)
Amendment to Harte Hanks, Inc. 2005 Omnibus Incentive Plan, dated as of May 12, 2009 (incorporated by reference to Exhibit 4.4 to Harte Hanks Registration Statement on Form S-8, filed on May 12, 2009).
10.2(d)
Form of 2005 Omnibus Incentive Plan Non-Qualified Stock Option Agreement (filed as Exhibit 10.2(i) to the company’s Form 10-K dated March 7, 2012).
10.2(e)
Form of 2005 Omnibus Incentive Plan Bonus Stock Agreement (filed as Exhibit 10.2(j) to the company’s Form 10-K dated March 7, 2012).
10.2(f)
Form of 2005 Omnibus Incentive Plan Restricted Stock Award Agreement (filed as Exhibit 10.2(k) to the company’s Form 10-K dated March 7, 2012).
10.2(g)
Form of 2005 Omnibus Incentive Plan Performance Unit Award Agreement (filed as Exhibit 10.2(l) to the company’s Form 10-K dated March 7, 2012).
10.2(h)
Summary of Non-Employee Directors’ Compensation (included within the company’s Schedule of 14A proxy statement filed April 11, 2016).
10.2(i)
Harte Hanks, Inc. 2013 Omnibus Incentive Plan (filed as Annex A to the company’s Schedule 14A proxy statement filed April 15, 2013).
10.2(j)
Form of 2013 Omnibus Incentive Plan Non-Qualified Stock Option Agreement (filed as Exhibit 10.4 to the company’s Registration Statement on Form S-8 dated June 7, 2013).
10.2(k)
Form of 2013 Omnibus Incentive Plan Restricted Stock Award Agreement (General) (filed as Exhibit 10.1 to the company’s Registration Statement on Form S-8 dated June 7, 2013).
10.2(l)
Form of 2013 Omnibus Incentive Plan Restricted Stock Award Agreement (Director) (filed as Exhibit 10.2 to the company’s Registration Statement on Form S-8 dated June 7, 2013).
10.2(m)
Form of 2013 Omnibus Incentive Plan Performance Unit Award Agreement (filed as Exhibit 10.3 to the company’s Registration Statement on Form S-8 dated June 7, 2013).
10.2(n)
Form of Non-Qualified Stock Option Agreement between the company and Karen A. Puckett (filed as Exhibit 10.2 to the company's Form 8-K dated September 14, 2015).
10.2(o)
Form of Restricted Stock Award Agreement between the company and Karen A. Puckett (filed as Exhibit 10.3 to the company's Form 8-K dated September 14, 2015).
10.2(p)
Form of Performance Unit Award Agreement between the company and Karen A. Puckett (filed as Exhibit 10.4 to the company's Form 8-K dated September 14, 2015).
10.2(q)
Form of Non-Qualified Stock Option Agreement between Harte Hanks, Inc. and Shirish R. Lal (filed as Exhibit 10.2 to the company's Form 8-K dated February 17, 2016).
10.2(r)
Form of Restricted Stock Award Agreement between Harte Hanks, Inc. and Shirish R. Lal (filed as Exhibit 10.3 to the company's Form 8-K dated February 17, 2016).
10.2(s)
First Amendment to the Harte Hanks, Inc. Amended & Restated Restoration Pension Plan, dated October 11, 2016 (filed as Exhibit 10.1 to the company's Form 8-K dated October 14, 2016).
10.2(t)
Form of Non-Qualified Stock Option Agreement between Harte Hanks, Inc. and Frank M. Grillo (filed as Exhibit 10.1 to the company's Form 10-K dated June 6, 2017).
10.2(u)
Form of Restricted Stock Agreement between Harte Hanks, Inc. and Frank M. Grillo (filed as Exhibit 10.2 to the company's Form 10-K dated June 6, 2017).
10.2(v)
Form of Restricted Stock Agreement between Harte Hanks, Inc. and Jon C. Biro (filed as Exhibit 10.2 to the company's Form 8-K dated November 17, 2017).

10.2(w)
Form of Non-Qualified Stock Option Agreement between Harte Hanks, Inc. and Jon C. Biro (filed as Exhibit 10.3 to the company's Form 8-K dated November 17, 2017).
10.2(x)
Form of Performance Unit Award Agreement between Harte Hanks, Inc. and Jon C. Biro (filed as Exhibit 10.4 to the company's Form 8-K dated November 17, 2017).
10.2(y)
Securities Purchase Agreement, dated January 23, 2018, by and between Harte Hanks, Inc. and Wipro, LLC (filed as Exhibit 10.1 to the company's Form 8-K dated January 29, 2018).
10.2(z)
Form of Registration Rights Agreement (filed as Exhibit 10.2 to the company's Form 8-K dated January 29, 2018).

Executive Officer Employment-Related and Separation Agreements
10.3(a)
Form of Severance Agreement between the company and its Executive Officers (filed as Exhibit 99.3 to the company’s Form 8-K, dated February 2, 2018).
10.3(b)
Form of Employment Restrictions Agreement signed by the Corporate Officers of the company (filed as Exhibit 10.3 to the company’s Form 8-K dated March 15, 2011).
10.3 (c)
Transition Agreement dated July 30, 2012 between the company and Gary J. Skidmore (filed as Exhibit 10.2 to the company’s 8-K dated August 2, 2012).
10.3 (d)
Form of Indemnification Agreement for Directors and Officers (filed as Exhibit 10.1 to the company’s 8-K dated August 2, 2012).
10.3 (e)
Retirement & Consulting Agreement between the company and Larry D. Franklin dated June 7, 2013 (filed as Exhibit 10.5 to the company’s 8-K dated June 11, 2013).
10.3 (f)
Employment Agreement between the company and Robert A. Philpott dated June 8, 2013 (filed as Exhibit 10.1 to the company’s 8-K dated June 11, 2013).
10.3 (g)
Form of Severance Agreement between the company and certain of its officers (filed as Exhibit 10.6 to the company’s 8-K dated June 11, 2013).
10.3 (h)
Executive Severance Policy applicable to the company’s executive officers and certain others (filed as Exhibit 10.1 to the company’s Form 8-K, dated January 30, 2015).
10.3(i)
Retention Bonus Agreement applicable to the company's executive officers (filed as Exhibit 10.1 to the company's Form 8-K, dated July 9, 2015).
10.3(j)
Employment Agreement between the company and Karen A. Puckett dated September 13, 2015 (filed as Exhibit 10.1 to the company's Form 8-K, dated September 14, 2015).
10.3(k)
Employment Agreement between the company and Shirish R. Lal dated February 3, 2016 (filed as Exhibit 10.1 to the company's Form 8-K, dated February 17, 2016).
10.3(l)
Retention Bonus Agreement between the company and Robert L. R. Munden dated December 31, 2016 (filed as Exhibit 10.1 to the company's Form 8-K, dated December 15, 2016).
10.3(m)
Transition and Consulting Agreement, dated as of December 31, 2016, between the company and Douglas C. Shepard (filed as Exhibit 10.2 to the company's Form 8-K, dated December 15, 2016).
10.3(n)
Letter Agreement, effective September 13, 2017, by and between Harte Hanks, Inc. and Karen A. Puckett, amending Employment Agreement with Karen A. Puckett (filed as Exhibit 10.1 to the company's form 8-K dated September 14, 2017).
10.3(o)
Employment Agreement between the company and Jon C. Biro dated October 30, 2017 (filed as Exhibit 10.1 to the company's Form 8-K, dated November 17, 2017).
10.3(p)
Letter Agreement dated February 1, 2018 by and between the company and Karen A. Puckett, amending Employment Agreement with Karen A. Puckett (filed as Exhibit 99.1 to the company's From 8-K, dated February 2, 2018)
10.3(q)
Form of Amendment to Service Agreement (filed as Exhibit 99.2 to the company's Form 8-K, dated February 2, 2018)

Material Agreements
10.4(a)
Cooperation Agreement, dated July 18, 2017, by and among Harte Hanks, Inc., Sidus Investment Management, LLC, Sidus Investment Partners, L.P., Sidus Double Alpha Fund, L.P., Sidus Double Alpha Fund, Ltd., Sidus Advisors, LLC, Michael J. Barone and Alfred V. Tobia, Jr. (filed as Exhibit 10.1 to the company's Form 8-K dated July 19, 2017)



Other Exhibits
*10.1
Supplier Supply and Services Agreement Between Harte-Hanks Direct, Inc. and Wipro, LLC dated as of July 22, 2016.
*21
Subsidiaries of Harte Hanks, Inc.
*23.1
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
*23.2
Consent of KPMG LLP, Independent Registered Public Accounting Firm.
*31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1
Furnished Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2
Furnished Certification of Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101XBRL Interactive Data Files.
*Filed or furnished herewith, as applicable

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