~~This Amendment No. 1 on Form 10-K/A (“Amendment No. 1” or “Annual Report”) amends~~Portions of the annual report on Form 10-K of Harte Hanks, Inc. (together with its subsidiaries, “Harte Hanks,” “Company,” “we,” “our,” or “us”) for the fiscal year ended December 31, 2020 (the “Original Filing”), filed with the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2021 (the “Original Filing Date”). The sole purpose of this Amendment No. 1 is to include the information required by Items 10 through 14 of Part III of Form 10-K.

~~This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items~~Proxy Statement to be filed in relation to the Company’s 2024 Annual Meeting of Stockholders are incorporated ~~in the Form 10-K~~herein by reference from our definitive proxy statement if such proxy statement is filed no later than 120 days after our fiscal year-end. The Company does not anticipate that its definitive proxy statement for the 2021 annual meeting will be filed within the 120-day period. Accordingly, Part III of the Original Filing is amended as set forth below. The reference on the cover of the Original Filing to the incorporation by reference to portions of our definitive proxy statement into Part III of ~~the Original Filing is hereby deleted.~~

Table of 1934, as amended, Item 15 of Part IV of the Original Filing has been amended to contain currently dated certifications required pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (“Sarbox”) from our Principal Executive Officer and Principal Financial Officer. The currently dated certifications are attached hereto as Exhibits 31.3 and 31.4. This Amendment No. 1 does not amend, modify, or otherwise update any other information in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing. In addition, this Amendment No. 1 does not reflect events that may have occurred subsequent to the Original Filing Date.

Harte Hanks, Inc. and Subsidiaries

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Form ~~10-K/A~~10-K Report

December 31, ~~2020~~

2023


				Page
						P ART I
~~Form 10-K/A Explanatory Note~~ Item 1.		Business		3
Item 1A.		Risk Factors		10
~~Part III~~ Item 1B.		Unresolved Staff Comments		19
Item 1C		Cybersecurity		19
Item 2.		Properties		20
Item 3.		Legal Proceedings		21
Item 4.		Mine Safety Disclosures		21

P ART II
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		22
Item 6.		Selected Financial Data		22
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		29
Item 8.		Financial Statements and Supplementary Data		29
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		29
Item 9A.		Controls and Procedures		29
Item 9B.		Other Information		30
Item 9C.		Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		30

P ART III
Item 10.		Directors, Executive Officers and Corporate Governance		130
Item 11.		Executive Compensation		30
~~Item 11.~~		~~Executive Compensation~~	6

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		1030

Item 13.	Certain Relationships and Related Transactions, and Director Independence		1130

Item 14.	Principal Accountant Fees and Services		1130

P ART IV
~~Part IV~~

Item 15.	Exhibits and Financial Statement Schedules		1231
		Consolidated Financial Statements			35

~~Signatures~~SIGNATURES					14

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This ~~Amendment No. 1~~report, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by this cautionary note, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 ~~(the “1933 Act”)~~ and Section 21E of the Exchange Act. Forward-looking statements ~~may~~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 ~~our ability to reduce costs pursuant to the restructuring activities, (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)~~(2) our financial outlook for revenues, earnings ~~(loss)~~ per share, operating income, ~~(loss),~~ expense related to equity-based compensation, capital resources and other financial items, if any, ~~(4)~~(3) expectations for our businesses and for the industries in which we operate, including the impact of economic conditions of the markets we serve on the marketing expenditures and activities of our clients and prospects, ~~(5)~~(4) competitive factors, ~~(6)~~(5) acquisition and development plans, ~~(7) our stock repurchase program, (8)~~(6) expectations regarding legal proceedings and other contingent liabilities, and ~~(9)~~(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 ~~the Original Filing under~~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,” “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.

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. In 1972, Harte Hanks went public and was listed on the New York Stock Exchange (“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.

All reports filed with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are publicly available. These documents may be accessed free of charge on our website at 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. Additionally, we have adopted a code of ethics that applies to our chief executive officer, chief financial officer and 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. We will provide a printed copy of any of these documents to any requesting 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

~~PART III~~

~~ITEM 10.~~

~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

~~Implications~~

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 ~~Being~~intelligence and Artificial Intelligence ("AI"), by being a “~~Smaller Reporting Company~~”

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 ~~qualify~~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 uniquely diverse range of 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 marketing 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 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 understand their customers, category, competitors and capabilities, either as a ~~“smaller~~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 insights 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 understand 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 product 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 desired business outcomes. Realizing our clients’ success is the only valid measure of our own success, we ensure all our efforts are aligned with our clients’ business objectives and measured against defined performance metrics. It is this commitment to our clients and their businesses that allows us to 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 provide 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 other third parties to provide a portion of our overall services in certain 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 Project Elevate during 2024 through 2026 are estimated to be $16.0 million.

In connection with our cost-saving and restructuring initiatives in 2023, 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 $0.2 million of other related costs.

Customers

Our clients include large multinational enterprises, small and medium-sized businesses and government organizations. Our largest client in terms of revenue generated 11.2% of total revenues in 2023. Our largest 25 clients in terms of revenue generated 71.7% of total revenue in 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

Harte Hanks operates a modern sales and 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 B2B services company we practice the marketing and sales methodology and tactics we offer to our clients, including ABM, demand generation, content marketing, inside sales and enterprise sales. We also leverage partnerships to extend our reach and broaden our solutions.

For marketing we leverage a combination of corporate marketing resources, marketing services resources and a modern MarTech stack including CRM, content management, SEO/digital advertising tools to support 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 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.

We had14 employees in our corporate sales and marketing function as of December 31, 2023.

Competition

Our competition comes from local, national, and international marketing, advertising, customer care, print fulfillment, smaller 3PL, logistics companies, and internal client resources, against whom we compete for individual projects, entire client relationships, and marketing expenditures. The principal competitive factors in our industry are the breadth, depth and quality of service offerings, technical and strategic expertise, the perceived value of the services provided, reputation, pricing, and brand recognition. We also compete against social, mobile, web-based, email, print, broadcast, and other

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forms of advertising for marketing and advertising dollars in general. During 2023, we continued to see an increase in the in sourcing of capabilities among our clients, which resulted in a decrease in revenues from these customers.

Furthermore, competition may begin to emerge as a result of the availability of in-house information technology solutions that can replicate some of our services. We expect our clients to continue to improve their information technology systems and offerings and, in some circumstances, move the services we provide in-house.

Seasonality

Some 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 activity prior to the holiday season in the retail vertical, and due to the open enrollment period in the 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. The 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 consumer 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”), including the General Data Protection Regulation (“EU Regulation 679/2016”), 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 United States, that do not provide data subjects with an “adequate” level of privacy or security, and applies to all of our products in the EU.

•The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act (“GLB”), which, among other things, regulates the use for marketing purposes of non-public personal financial information of consumers 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”), 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”), which amended the FCRA and requires, among other things, consumer credit report notices 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 request the business not to use the information for such marketing purposes, subject to certain exceptions.

•Federal and state laws governing the use of email for marketing purposes, including the U.S. Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM”), Canada’s Anti-Spam Legislation (“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”), the Federal Communications Commission’s Telephone Consumer Protection Act (“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’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.

As a result of increasing public awareness and interest in individual privacy rights, data protection, information security, 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.

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. Continued 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.

INTELLECTUAL PROPERTY RIGHTS

Our intellectual property assets include trademarks and service marks that identify our Company 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, and trade secret laws as 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 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.

HUMAN CAPITAL RESOURCES

As of December 31, 2023, Harte Hanks employed 1,709 full-time employees and 253 part-time employees, of which approximately 980 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

This section discusses the most significant factors that could affect our business, results of operations and financial condition, including the price of our common stock. You should carefully consider the following risks, which represent the material risk factors that affect the Company and are known to the 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 we currently deem immaterial may also adversely affect our business, results of operations, or financial condition.

We have grouped these risk factors into three categories:

•Risks related to our 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 cancellable on short notice.

The marketing services we offer, in particular for 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, 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.

A large portion of our revenue is generated from a limited number of clients. The loss of a client or significant work from one or more of our clients could adversely affect our business.

Our largest client (measured in revenue) generated 11.2% of total revenues in 2023 and represented 11.2% of total accounts receivable as of December 31, 2023. Approximately 71.7% of our revenue for 2023 was generated by our 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 our larger clients or even 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 are 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.

The B2B services industry is highly competitive, highly fragmented, and subject to rapid change. We believe the principal competitive factors in this market are breadth, depth, and quality of service offerings, ability to tailor specific solutions to the needs of clients and their customers, the ability to attract, 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 at 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 consolidation among clients or competitors could result in significant market share gain by our competitors, which could have an 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 innovate our own technology infrastructure and appropriately grow our CX solutions offerings using these tools (and predicting the next generation of such tools) will affect our ability to compete. We may be unsuccessful at anticipating or responding to new developments on a timely and cost-effective basis, and our use of technology may differ from accepted practices in the marketplace. Certain of our solutions may require lengthy and complex implementations that can be subject to changing client preferences and continuing changes in technology, which can increase costs or adversely affect our 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 size of our competitors varies widely across vertical markets and service lines. Some of our competitors have significantly greater financial, technical, marketing, and other resources than we do in one or all of our market 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 that compete with ours at lower prices by accepting lower margins and profits or may be able to sell products or services that 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 in turn negatively impact 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). 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 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, 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 as 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 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, respond to their own financial constraints, whether caused by weak economic conditions, weak industry performance or client-specific circumstances, by reducing their marketing 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 an 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 long-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 successfully manage our costs 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.

Various local, national, and international regulations, as well as industry standards, give consumers varying degrees of control as to how personal data is collected, used, and shared for marketing purposes. If, due to privacy, security, or other concerns, consumers exercise their ability to prevent or limit such data collection, use, or sharing, it may impair our ability to provide direct marketing services for those consumers and 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 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 our standard service and operational levels for an extended period of time if we are unable to use 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 from a competitor. As a consequence of such an event, we would suffer a reduction in revenues and harm to (and loss of) client relationships.

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 few years, we have replaced many of our leaders (including our Chief Executive Officer, and Chief Financial Officer), some a number of times. If our new leaders fail in their new and additional roles and responsibilities (and more generally if we are unable to attract additional 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 also 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.

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

Interest rate fluctuations in Europe 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 interest rate fluctuations in the United States, specifically money market, the value of our 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, ~~company”~~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 testing 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 requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses (i) we could fail to meet our financial reporting obligations; (ii) our reputation may be adversely affected and our business and operating results could be harmed; (iii) the market price of our stock could decline; and (iv) we could be subject to litigation and/or investigations or sanctions by the SEC, 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 materially affect, our 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.

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As a result of increasing awareness and interest in privacy rights, data protection, the fair use of personal information, consumer protection, information security, and 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 scheduled to become effective in the future, comprehensive data protection, privacy, and marketing 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 most states throughout the United States. These regulations apply when processing personal data for 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 detection and response solutions, conducting audits to identify security risks as well as carrying out additional procedures to demonstrate accountability and compliance with 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 how such information can be used, as well as related controls to honor choices expressed related to if and how personal information can be processed or licensed for marketing purposes.

We anticipate new regulations will continue to be proposed and adopted in the future in the jurisdictions in which we operate and/or generate revenue. We also expect any new regulations will reflect the growing trends common to current privacy, data protection and marketing laws requiring companies to bear the burden of proving compliance efforts through demonstrable records, and may subject companies to significant 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 service offerings.

Our business may also be affected by the impact of rules and regulations on our clients’ business and marketing activities. In addition, as we acquire new capabilities and deploy new technologies to execute our strategy, we may be exposed to additional regulation. Current and future restrictions and regulations could increase compliance costs, and restrict or prevent the collection, management, aggregation, transfer, use or dissemination of personal information or change the requirements so as to require other changes to our business or our 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, multiple states have implemented opt out legislation for 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 additional 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 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 ~~term~~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 ~~defined~~costly and time-consuming, and we may encounter difficulties, delays, or significant expenses in ~~Rule 405~~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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Uncertainty around, and disruption from, new and emerging technologies, including the adoption and utilization of artificial intelligence, may result 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 continue to acquire, develop, and implement solutions that meet the evolving needs of our clients. The rapid evolution of AI will require us to expend resources to develop, test, and 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 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 quickly or efficiently as our competitors, or if our competitors develop more cost-effective or client-preferred technologies, it could have a material adverse effect on our ability to win 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 develop, deploy, or maintain these technologies.

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 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’ needs. 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 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 any failure of our telecommunications links could materially adversely affect our ability to continue to provide 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.

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. Over time, the techniques used to conduct these cyber-attacks, as well as the sources and targets of these attacks, have become increasingly sophisticated and, in some cases, 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 cyber-threats will continue to evolve with the rapid development and increased adoption of AI and machine-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 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, 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 the event such third parties fail to adequately protect and handle such sensitive or 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, as 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. 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 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 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

The covenants in the Credit Facility may limit the Company’s operating and financial flexibility.

The Credit Facility and the terms under which we borrow money under any future credit facilities or other agreements could have significant consequences for our business. The Credit Facility includes covenants currently restricting or potentially restricting the Company’s and its subsidiaries’ ability to create, incur, assume or become liable for indebtedness; make certain investments; pay dividends or repurchase the Company's stock; create, incur or assume liens, consummate mergers or acquisitions, liquidate, dissolve, suspend or cease operations, or modify accounting or tax reporting methods (other than as required by 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. Specifically, the amount and terms of the 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.”

In addition, a failure to comply with these restrictions or to maintain the financial measures and ratios contained in the Credit Facility or future debt instruments could lead to an event of default that could result in an acceleration of debt repayment obligations, and refinancing existing letters of credit.

Risks related to our pension benefit plans may adversely impact our 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 uncertainties 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 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 liability 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 located on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations.

Our sites operate on leasehold property. Our leases are subject to 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 leases with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may cause an increase in operating costs, or may cause additional cost due to relocation.

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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 several 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 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.”

Because 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.

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 a strategic transaction with us, even if such a transaction would benefit our stockholders. For example, our certificate of incorporation and bylaws 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.

As of December 31, 2023, we operated the following types of facilities in the following locations:

Domestic Offices

International Offices

Operational Warehouses

Chelmsford, Massachusetts

Hasselt, Belgium

East Bridgewater, Massachusetts

St. Petersburg, Florida

Iasi, Romania

Kansas City, Kansas

Deerfield Beach, Florida

Manila, Philippines

Lenexa, Kansas

Uxbridge, United Kingdom

Hasselt, Belgium

As of December 31, 2023, our operational facilities were for the following use and square footage by segment:


Description of Use	United States	International	Total
Office space	24,313	60,650	84,963
Fulfillment facilities	736,845	35,725	772,570
Total	761,158	96,375	857,533

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Segment						Leased Sq Ft
Customer Care						54,964
Fulfillment & Logistics						772,570
Marketing Services						23,748
						851,282
Corporate office						6,251
Total						857,533

We believe our facilities to be adequate for our business and operations as currently administered.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of its business, the Company is involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the 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

Our common stock is listed for trading on the NASDAQ under the symbol "HHS". As of January 31, 2024, there were approximately 743 common stockholders of record.The following tables set forth for the periods indicated, the high and low sale prices per share of the common stock as quoted by the NASDAQ.


Year Ended December 31, 2023	High	Low
1st Quarter	$14.24	$8.70
2nd Quarter	$9.50	$5.00
3rd Quarter	$6.70	$5.01
4th Quarter	$7.72	$5.39


Year Ended December 31, 2022	High	Low
1st Quarter	8.19	6.34
2nd Quarter	12.89	7.15
3rd Quarter	17.88	10.02
4th Quarter	12.84	9.81

Dividend Policy

The Company currently does not pay any dividends and any future payment is at the discretion of the Board of Directors.

Issuer Purchases of Equity Securities

The following table contains information about our purchases of equity securities during the fourth quarter of 2023:


Period	Total number of shares purchased	Average price paid per share		Total 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	—	$	—	—

(1)During the fourth quarter of 2023, we did not purchase any shares of our common stock through our stock repurchase program that was publicly announced on May 2, 2023. Under this program, our Board had authorized us to spend up to $6.5 million to repurchase shares of our outstanding common stock. After giving effect to these repurchases, we have remaining authority of $4.1 million to repurchase shares remaining under the program.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

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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”), contains “forward-looking statements” within the meaning of the federal securities laws. All such statements are qualified by the cautionary note included under “Forward-Looking Statements” above, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may vary materially from what is expressed in or indicated by the forward-looking statements, for the reasons described in this MD&A, in the Risk Factors in Item 101A 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 ~~Regulation S-K. Accordingly,~~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 Statements and the accompanying notes included herein.

Harte Hanks, Inc. 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 provide them with a robust customer-experience, or CX strategy, data-driven analytics, and actionable insights combined with seamless program execution to better understand, attract, and engage their customers. Our services include strategic planning, data strategy, performance analytics, creative development, and execution; technology enablement; marketing automation; B2B and B2C e-commerce; cross-channel customer care; and product, print, and mail fulfillment.

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, the financial condition of and budgets available to our 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 appropriately reflect our operations and outlook.

Management is closely monitoring inflation and wage pressure in the market, and the potential impact on our business. While inflation has not had a material impact on our business, it is possible a material increase in inflation could have an impact on our clients, and in ~~accordance~~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 Company. This review included greater than 200 meetings with ~~relevant SEC rules~~personnel at all levels of the firm and ~~guidance,~~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 savings from Project Elevate executed from 2024 to 2026 are estimated to be $16 million.

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Results of Operations

Operating results from operations were as follows:


	Year Ended December 31,
In thousands, except per share amounts	2023			% Change	2022
Operating revenue	$	191,492		-7.2%	$	206,278
Operating expenses	188,133			-1.6%	191,171
Operating income	$	3,359		-77.8%	$	15,107
Operating margin	1.8		%	-76.0%	7.3		%
Other expense (income), net	5,278			-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, 2023 vs. Year Ended December 31, 2022

Consolidated Results

Revenues

Revenues of $191.5 million for the year ended December 31, 2023 decreased $14.8 million, or 7.2%, when compared to $206.3 million for the year ended December 31, 2022. Revenue in our Marketing Services declined $9.8 million, or 18.4%, to $43.2 million, revenue in our Customer Care segment declined $3.9 million, or 5.8%, to $63.3 million and revenue in our Fulfillment & Logistics Services declined $1.1 million, or 1.3%, to $85.0 million.

Operating Expenses

Operating expenses of $188.1 million for the year ended December 31, 2023 decreased $3.0 million, or 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, 2022, primarily due to the reduction in workforce in our Customer Care and Marketing Service segment as a ~~smaller reporting company, we~~result of the lower revenue which was partially offset by higher severance expenses.

Production and Distribution expenses decreased $2.4 million, or 3.8%, when compared to the year ended December 31, 2022, primarily driven by lower brokered cost, or outsourced costs due to the lower brokered revenue.

Advertising, Selling and General and Administrative expenses decreased $1.2 million or 5.6%, when compared to 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.

Restructuring 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 components of our operating expenses are ~~allowed~~labor, transportation expenses and outsourced costs. Each of these costs is, at least in part, variable and tends to ~~take advantage~~fluctuate in line with revenues and the demand for our services. Transportation rates have increased over the last few years due to demand and supply fluctuations within the transportation industry. Future changes in transportation expenses will continue to impact our total production costs and total operating expenses and in turn our margins, which may have an impact on future demand for our supply chain management services. Postage costs of ~~specified exemptions~~mailings are borne by our clients and ~~reduced disclosure obligations, including with respect to executive compensation disclosure,~~are not directly reflected in our ~~periodic reports and proxy statements.~~

~~Directors and Officers~~

~~Directors~~

revenues or expenses.

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Other Expense (Income), net

Interest income, net, for the year ended December 31, 2023 was $135 thousand as compared to the interest expense, net of $438 thousand for the year ended December 31, 2022. The $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 for the year ended December 31, 2023, when compared to other income, net of $4.6 million for the year ended December 31, 2022. 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 ~~table sets forth certain information~~is a discussion and analysis of the results of our reporting segments for the years ended December 31, 2023 and 2022. 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 thousands	2023			% Change	2022
Operating revenues	$	43,204		-18.4%	$	52,975
EBITDA	5,425			-26.1%	7,344
Operating Income	5,113			-26.8%	6,982
Operating Income % of Revenue	11.8		%	-10.2%	13.2		%

Marketing Services segment revenue declined $9.8 million, or 18.4%, due to the decline of marketing spend and the 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 thousands	2023			% Change	2022
Operating revenues	$	63,327		-5.8%	$	67,205
EBITDA	10,702			-12.0%	12,167
Operating Income	9,422			-16.5%	11,283
Operating Income % of Revenue	14.9		%	-11.4%	16.8		%

Customer Care segment revenue declined $3.9 million, or 5.8%, primarily due to the decrease 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 $1.9 million 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 thousands	2023			% Change	2022
Operating revenues	$	84,961		-1.3%	$	86,098
EBITDA	8,857			-16.4%	10,593
Operating Income	7,714			-21.0%	9,769
Operating Income % of Revenue	9.1		%	-20.0%	11.3		%

Fulfillment & Logistics Services segment revenue declined $1.1 million, or 1.3%, primarily due to the lower revenue from the existing customers. For the year ended December 31, 2023 operating income was $7.7 million, a decrease of $2.1 million when compared to the prior year primarily due to the change in revenue mix and higher transportation costs.

Liquidity and Capital Resources

Sources and Uses of Cash

Our cash and cash equivalent balances were $18.4 million and $10.4 million as of ~~April 30, 2021 about~~December 31, 2023, and 2022, respectively. As of December 31, 2023, we had the ability to borrow an additional $24.2 million under our ~~current directors:~~

~~Name~~		~~Age~~
~~Andrew B. Benett~~		50
~~Evan Behrens~~		51
~~David L. Copeland~~		65
John H. Griffin, Jr.*		60
~~Alfred V. Tobia, Jr.~~		55

* Chairman

~~Members~~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 ~~Board~~change to the tax NOL carryback provisions included in the CARES Act.

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

Operating Activities

Net cash provided by operating activities was $10.5 million for the year ended December 31, 2023, when compared to cash provided by operating activities of $28.8 million for the year ended December 31, 2022. The $18.3 million year-over-year decrease in cash provided by operating activities was primarily due to the $38.3 millionlower net income which was partially offset by absorption of deferred taxes of $18.4 million in 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 $2.3 million for the year ended December 31, 2023, compared to cash used in investing activities of $11.5 million for the year ended December 31, 2022. The $9.2 million decrease was mainly due to the $6.3 million of cash used and returned from escrow from acquisition activities and $3.0 million less cash used to purchase property, plant and equipment in the year ended December 31, 2023, when compared to the 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 primarily due to the $10.0 million used for the repurchase of preferred stock and the $5.0 million repayment of the borrowings under our Credit Facility in the year ended December 31, 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 2022 were $5.4 million and $3.4 million, respectively. The Company will repatriate foreign cash holdings when and if it is financially efficient to do so.

Long Term Debt

On December 21, 2021, the Company entered into a three-year, $25.0 million asset-based revolving credit facility (the “Credit Facility”) with Texas Capital Bank ("TCB"). The Company’s ~~stockholders to serve until~~obligations under the ~~next annual meeting~~Credit Facility are guaranteed on a joint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all the assets of the ~~Company’s stockholders. In~~Company and the Guarantors pursuant to a Pledge and Security Agreement, dated as of December 21, 2021, between the Company, TCB and the Guarantors (the “Security Agreement”). On December 31, 2023, the Company extended the maturity date for the Credit Facility by a period of six (6) months, up to June ~~2020~~30, 2025. The extension extended the Credit Facility under substantially similar terms and conditions as originally executed.

The Credit Facility provides for loans up to the lesser of (a) $25.0 million, and (b) the amount available under a “borrowing base” calculated primarily by reference 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 ~~connection with its on-going review~~full on June 30, 2025.

The Company may repay and reborrow all or any portion of the ~~Company's corporate governance structure,~~loans advanced under the ~~Nominating and Corporate Governance Committee~~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 ~~Board (the “Nominating and Corporate Governance Committee“) recommended that the Board decrease its size~~net proceeds of issuances of capital stock (subject to ~~better reflect the size of the company and allow it to act more nimbly~~customary exceptions); or (iv) in an ~~ever-changing environment. Upon such recommendation, at~~amount equal to the ~~conclusion~~net proceeds from any issuance of debt not otherwise permitted under the ~~2020 annual meeting,~~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 Company's stock; create, incur or assume liens, consummate mergers or acquisitions, liquidate, dissolve, suspend or cease operations, or modify accounting or tax reporting methods (other than as required by U.S. GAAP).

As of December 31, 2023 and 2022, the Company had no borrowings outstanding under the Credit Facility. At each of December 31, 2023, and 2022, the Company had letters of credit in the amount of $0.8 million outstanding. No amounts were drawn against these letters of credit as of December 31, 2023, and 2022. These letters of credit exist to support insurance programs relating to workers’ compensation, and general liability. We had no other off-balance sheet financing arrangements as of December 31, 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 did not pay any dividends in either 2023 or 2022. Any future dividend declaration can be made only upon, and subject to, approval of our Board ~~determined to decrease~~of Directors, based on its ~~size from seven (7) to five (5) directors.~~

~~Andrew B. Benett~~ was appointed as the Company’s Executive Chairman and Chief Executive Officer in November of 2019 and served as Executive Chairman until April 2021. Mr. Benett continues to serve as Chief Executive Officer. Mr. Benett has over 20 years of experience in effecting business transformation within marketing services, consulting and corporate organizations. Prior to his appointment, Mr. Benett served as Global Chief Commercial Officer of Bloomberg Media from June of 2015 to September 2019, where his responsibilities included advertising sales, marketing services, events, consulting, integrated franchises, and innovation. Previously, Mr. Benett spent 13 years working for Havas Creative Group, a leading marketing communications network. While working for Havas Creative Group, Mr. Benett served as Global Chief Strategy Officer of Euro RSCG Worldwide from 2004 to 2010, until he was promoted to Global Chief Executive Officer of Arnold Worldwide in 2010, and to global CEO of Havas Creative Group in 2013. Prior to joining Euro RSCG Worldwide, Mr. Benett was EVP, Executive Director, Strategy and Innovation, at FutureBrand. He began his advertising career at McCann-Erickson in strategic planning. Mr. Benett sits onjudgment.

Share Repurchase

On May 2, 2023, the Board of Directors of ~~Viad Corp (NYSE: VVI) and is a Henry Crown Fellow at the Aspen Institute. Mr. Benett received his B.F.A. in art history with a minor in psychology from Georgetown University.~~

As our Chief Executive Officer, Mr. Benett provides valuable insight to the Board on our day-to-day operations. In addition, Mr. Benett's significant experience with marketing services and consulting organizations, and specifically his experience in effecting transformations of such organizations, provide the Board with valuable insight as the Company effects its various restructuring and reorganization plans to return to profitability.

~~Evan Behrens~~ ~~has served as a director of~~ Harte Hanks since March 2019. Mr. Behrens currently serves on the board of Hornbeck Offshore and he is also the managing member of Behrens Investment Group. Previously, Mr. Behrens served as Senior Vice President of Business Development at SEACOR Holdings from January 2008approved a share repurchase program to ~~May 2017, where he served as the Chairman~~maximize shareholder value with authorization to repurchase $6.5 million of the ~~Board~~Company’s Common Stock. During 2023, we repurchased 0.4 million shares of ~~Trailer Bridge Inc.~~common stock for a total combined purchase price of $2.4 million.

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Outlook

We consider such factors as total cash and ~~was the Managing Member~~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 ~~Illinois Corn Processors Inc. Prior~~cash is designed to ~~joining SEACOR Holdings, Mr. Behrens served~~optimize returns on cash balances and to ensure that it is readily available to meet our operating, investing, and financing requirements as a partner at Level Global Investors and, prior to that, founded and managed B Capital Advisors (formerly Behrens Rubinoff Capital Partners). Mr. Behrens has previously worked as a Senior Portfolio Manager at SAC Capital managing both equity and credit portfolios and contributed in a research capacity at Odyssey Partners/Ulysses Management. Mr. Behrens currently serves on the board of directors of Oppenheimer Holdings Inc. Previously, Mr. Behrens served as a board member of Continental Insurance Group, Ltd, Penford Corporation, Global Marine Systems Limited, Stemline Therapeutics and Sidewinder Drilling LLC. Mr. Behrens obtained an A.B. degree in Political Science from the University of Chicago.

We believe Mr. Behrens’s qualifications for our Board include his professional experience in investments and business development and his extensive experience as a director on the boards of both public and private companies.

~~David L. Copeland~~ has served as a director of Harte Hanks since 1996. He has been employed by SIPCO, Inc., the management and investment company for the Andrew B. Shelton family, since 1980, and currently serves as its President. Since 1998, he has served as a director of First Financial Bankshares, Inc., a financial holding company. Currently, he serves on the executive and nominating committees and is also the audit committee chairman of First Financial Bankshares.

they arise. We believe that ~~Mr. Copeland’s qualifications~~there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for the twelve months following the issuance of the Consolidated Financial Statements.

Critical Accounting Estimates

Our Consolidated Financial Statements are prepared in accordance with accounting principles 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 ~~Board include his~~estimates and assumptions based on historical experience ~~serving~~and on various ~~committees for a publicly traded financial holding company. We also~~other assumptions that we believe ~~he offers us extensive knowledge of financial instruments, financial~~are reasonable under the circumstances. Our actual results could differ from these estimates under different assumptions or conditions. The areas that we believe involve the most significant management estimates and ~~economic trends~~assumptions are detailed below. On an ongoing basis, management reviews its estimates and ~~accounting expertise from serving as president of SIPCO, Inc. and~~assumptions based on ~~the audit committee of First Financial Bankshares. Mr. Copeland, a certified public accountant and a chartered financial analyst, would qualify as a financial expert for our audit committee.~~

~~John H.~~ “~~Jack~~” ~~Griffin, Jr~~~~. has served as a director of Harte Hanks since July 2018. In April 2021, he was appointed as the Company’s Chairman~~currently available information.

See Note B of the ~~Board. From April~~Notes to December of 2019, he served as Vice Chairman and Chairman of the Operations Committee of Harte Hanks. Prior to that, he was a member of the Harte Hanks Office of the Chief Executive Officer (the “Office of the CEO”) from August 2018 to January 2019. Mr. Griffin is currently the Chairman of Dennis Publishing in New York and London, a position he has held since October 2018. He served as Managing Director at Oaklins DeSilva+Phillips, an advisory firm in New York City focused on mid-market M&A transactions, valuations and restructurings for firms in media, marketing services, information, education and health care communications from 2016-2018. Previously, as CEO and director of Tribune Publishing Company (from 2014-2016), Mr. Griffin led the spin-off of Tribune Publishing Company’s Newspaper Division into a separate publicly traded company. Before Tribune, Mr. Griffin founded and served as CEO of Empirical Media LLC, a consulting firm that assisted legacy media companies with digital transition, restructuring and strategic planning, from 2011-2014. Mr. Griffin was previously CEO of Time Inc. and spent a dozen years at Meredith Corporation in senior executive capacities.

We believe that Mr. Griffin’s qualifications for our Board include his proven success as both an operator and advisor to companies undergoing restructuring and reengineering solutions, along with his demonstrated record of achieving and exceeding financial targets in demanding private and public company environments. In addition, the experience Mr. Griffin gained as a member of the Office of the CEO enables him to provide the Board with additional insight into the Company’s operations, strategic initiatives and personnel.

~~Alfred V. Tobia, Jr.~~ has served as a director of Harte Hanks since July 2017. He is the President and Chief Investment Officer of Acacia Research Corp (NASDAQ: ACTG) since September 2019 and a director since June 2018. From March 2000 – September 2019, Mr. Tobia was a co-founder, general partner and portfolio manager for Sidus Investment Management, LLC and its affiliates, in which capacity he oversaw the management of the Sidus equity funds and provided analysis to the firm’s credit fund. From 1996 to 2000 Mr. Tobia was a senior managing director and supervisory analyst within the data networking and telecommunication equipment sectors at Banc of America Securities (formerly NationsBanc Montgomery Securities). From 1992 to 1996, he was a senior analyst at Wertheim Schroeder & Co., focusing on PC and entertainment software, data networking and special situations. Prior to that, Mr. Tobia was an analyst at Mabon Nugent & Co. (1986 to 1992), covering various sectors of technology.

Mr. Tobia has extensive financial experience in both public and private companies and executive experience through the management of a small-cap investment fund and a public company. Mr. Tobia's background and insights provide valuable expertise in corporate finance, strategic planning, and capital and credit markets. We believe Mr. Tobia’s qualifications for our Board include his extensive financial, executive and management experience.

~~Officers~~

~~The following persons are our current executive officers and hold the positions set forth below:~~

~~Name~~	~~Age~~	~~Principal Position~~
~~Andrew B. Benett~~	50	~~Chief Executive Officer~~
~~Laurilee Kearnes~~	49	~~Chief Financial Officer~~
~~Brian Linscott~~	48	~~Chief Operating Officer~~

~~For biographical information about Andrew B. Benett, our Chief Executive Officer, see above under “Directors”~~Consolidated Financial Statements included in ~~Part III,~~ Item 108 of this Annual ~~Report.~~

~~Laurilee Kearnes~~ ~~has served as~~Report on Form 10-K for a summary of significant accounting policies and the ~~Company’s Chief Financial Officer since November 15, 2019. Ms. Kearnes previously served as~~effect on our financial statements.

Income Taxes

We are subject to income taxes in the ~~Company’s Principal Accounting Officer~~United States and ~~Vice President, Finance~~numerous other jurisdictions. Significant judgment is required in determining our provision for income taxes and ~~Controller from August 2018 to November~~income tax assets and liabilities, including evaluating uncertainties in the application of ~~2019. Ms. Kearnes has over 20 years of experience in~~ accounting principles and ~~finance roles, including~~complex tax laws.

We record a provision for income taxes for the last 17 years with Harte Hanks in various positions including Group Controller, VP Finance, and Group VP Finance, Accounting Shared Services. Ms. Kearnes is currently serving on the OTCQX U.S. Advisory Council. Ms. Kearnes started her career in public accounting and held accounting positions with Nutraceutical Corp. and Brooks Automation prior to joining the Company. She holds a Bachelor of Science in Accounting and a Master of Accounting from Utah State University.

~~Brian Linscott~~ ~~was appointed as our Chief Operating Officer effective January 2020. Mr. Linscott~~has over two decades of experience advising clients and C-level executives on operational improvements, growth strategies, acquisitions, corporate development and capital structure across a variety of industries including media, manufacturing, and transportation. From 2015 to 2019, he served as a Partner at BR Advisors where he led the operational improvement of radio and printing companies, developed new partnerships, and facilitated asset transactions. He also serves as Operating Partner at Traverse Pointe Partners since 2014, where he advises a private equity fund on financial and operational assessment of equity investments and developed post-acquisition operational strategies to create stockholder value. From 2013 to 2015, Brian served as a Managing Director at Huron Consulting Group where he managed client relationships, oversaw consulting teams, and developed new business opportunities in Huron’s Business Advisory practice. From 2009 to 2012, Brian served as Chief Financial Officer / Senior Vice President at Sun Times Media, LLC where he created and executed a restructuring plan that led to substantial EBITDA growth, cash flow improvement, and a successful saleanticipated tax consequences of the ~~company. Mr. Linscott received his B.S. in Finance from~~reported results of operations using the ~~University of Illinois, Urbana.~~

~~Corporate Governance~~

~~We believe that strong corporate governance helps to ensure that our company is managed~~asset and liability method. Under this method, we recognize deferred tax assets and liabilities for the ~~long-term benefit~~expected future tax consequences of ~~our stockholders. We continuously review our corporate governance policies~~temporary differences between the financial reporting and ~~practices to ensure compliance with all applicable laws~~tax basis of assets and regulations (securities laws and others) and will contemplate any changes to what is considered best practices for corporate governance even if such changes are not required by relevant laws and regulations. This review is part of our continuing effort to enhance our corporate governance and to communicate our governance policies to stockholders and other interested parties. In addition, while we are not currently listed on a national securities exchange, we strive to meet the corporate governance standards applicable to non-controlled companies listed on the NYSE, as we believe such standards establish a baseline for best practices in the area of corporate governance.

~~You can access and print, free of charge, the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee,~~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 ~~Corporate Governance Principles, Business Conduct Policy, Code~~deferred tax assets to the net amount that we believe is more likely than not to be realized. A material valuation allowance 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 ~~Ethics~~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 ~~certain other policies~~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 ~~procedures~~could have a material impact on our ~~website at~~ ~~www.hartehanks.com~~ ~~under~~financial condition and operating results. The provision for income taxes includes the “Corporate Governance” section of our “Investors” tab. The information on our website is not incorporated by reference and is not part of this Annual Report. Additionally, stockholders can request copieseffects of any ~~of these documents free of charge by writing to the following address:~~

~~Harte Hanks, Inc. (Attention: Secretary)~~

~~2800 Wells Branch Parkway~~

~~Austin, Texas 78728~~

From time to time, these governance documents may be revised in response to changing regulatory requirements, our evaluation of evolving best practices and industry norms and input from our stockholders and other interested parties. We encourage you to check our website periodically for the most recent versions.

~~Board of Directors and Board Committees~~

~~Our business and affairs~~reserves that we believe are managed under the direction of the Board. The Company's By-laws provide that the Board will consist of the number of directors designated by the Board from time-to-time and, in the absence of such designation, the Board will consist of seven (7) directors. Currently, the Board has five (5) directors, as the Board determined to decrease that number from seven (7) immediately after last year's annual meeting.

The Board elects the principal executive officer and other corporate officers, acts as an advisor to and resource for management, and monitors management’s performance. The Board, with the assistance of the Compensation Committee, also assists in planning for the succession of the principal executive officer and certain other key positions. In addition, the Board oversees the conduct of our business and strategic plans to evaluate whether the business is being properly managed, and reviews and approves our financial objectives and major corporate plans and actions. Through the Audit Committee, the Board reviews and approves significant changes in the appropriate, ~~auditing and accounting principles and practice and provides oversight of internal and external audit processes, financial reporting and internal controls.~~

Our Board of Directors has established an Audit Committee, a Compensation Committee and Nominating and Corporate Governance Committee, which have the composition and responsibilities described below. Each committee operates under a charter that has been approved by the Board of Directors.

~~Director Independence~~

Our common stock is listed on the OTCQX. As required under the listing standards of the OTCQX, at least two members of the Board must qualify as “independent.” Our Board has affirmatively determined that the following three directors are independent within the meaning of the Company’s corporate governance guidelines, as well as ~~those~~the related net interest and penalties.

Legal and Other Contingencies

The Company is subject to various legal proceeding and claims that ~~are applicable to companies with shares listed on the NYSE: Messrs. Behrens, Griffin, and Tobia.~~

As part of the Board’s review of the independence of board members, questionnaires are used on an annual basis (or when a new director is added) to gather input to assist the Nominating and Corporate Governance Committee and the Board in their determinations of the independence of the non-employee directors. Based on the foregoing and on such other due consideration and diligence as it deemed appropriate, the Nominating and Corporate Governance Committee presented its 2020 findings to the Board on the independence of each of its non-employee directors, in each case in accordance with the Company's corporate governance guidelines and applicable federal securities laws. The Board determined that, other than in their capacity as directors, none of Messrs. Behrens, Griffin, and Tobia had a material relationship with Harte Hanks, either directly or as a partner, stockholder or officer of an organization that has a relationship with Harte Hanks. The Board further determined that (i) each of Messrs. Behrens, Griffin, and Tobia is otherwise independent under rules that would be applicable to companies listed on the NYSE, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee and (ii) each of Messrs. Behrens, Griffin, and Tobia satisfied the additional audit committee independence standards under Rule 10A-3 of the SEC.

When assessing the materiality of a director’s relationship with us, if any, the Board considers all known relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation, the frequency or regularity of the services, whether the services are being carried out at arm’s lengtharise 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 ~~whether~~ the ~~services are being provided substantially~~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 ~~same terms~~Company's financial condition and operating results.

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Recent Accounting Pronouncements

In October 2021, the Financial Accounting Standards 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 usrecognize 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 simplified 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 or issued had or are expected to have a material impact on the consolidated financial statements.

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

Not applicable.

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 page35 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 ~~those prevailing~~defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “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 Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate to allow timely decisions regarding required disclosure.

Our management, including our CEO and CFO, 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, 2023. Based upon such evaluation, our CEO and CFO concluded that the design and operation of these disclosure controls and procedures were effective, at the “reasonable assurance” level, to ensure information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time ~~from unrelated parties for comparable transactions. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable~~periods specified in the SEC rules and ~~familial relationships.~~

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~~Majority Voting Provisions of the Company's Bylaws~~

On July 17, 2019, the Board adopted Amendment No. 2 (the “Amendment”) to the Fifth Amended and Restated Bylaws of the Company. The Amendment amends Article I, Section 8 of the Bylaws to provide for the resignation of any director who fails to receive a majority of votes cast in favor of his or her election at an annual meeting of the stockholders (assuming that the election is uncontested) (the “Majority Voting Provision”). Under the Majority Voting Provision, each nominee who is a current director is required to submit an irrevocable resignation, which resignation would become effective upon (1) that person not receiving a majority of the votes cast in favor of his or her election in an uncontested election and (2) acceptance by the Board of that resignation in accordance with the policies and procedures adopted by the Board for such purpose. The Board, acting

Management’s Report on the recommendation of the Nominating and Corporate Governance Committee, is required to determine whether or not to accept the resignation not later than 90 days following certification of the stockholder vote, and the Board is required to accept the resignation absent a determination that a compelling reason exists for concluding that it is in the best interests of the Company for the person in question to remain as a director.

In connection with the adoption of the Amendment, the Board also adopted revisions to the Company’s Corporate Governance Principles and Nominating and Corporate Governance Committee Charter to implement the Majority Voting Provision and set forth the procedures governing the resignation of directors who do not receive a majority of the votes cast in an uncontested election.

~~Audit Committee~~

We have a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. From January 1, 2020 to May 13, 2020, the Audit Committee was composed of Melvin L. Keating, Maureen E. O’Connell and Evan Behrens. Mr. Keating was the Audit Committee Chair and he was considered an “audit committee financial expert” during this period as currently defined under the SEC and NYSE rules, and each other member of the committee is financially literate under the NYSE standards.

On May 14, 2020, in connection with the decision to decrease the size of the board, the Company re-designated the membership of all board committees. From May 14, 2020 to July 22, 2020, the Audit Committee was comprised of Maureen E. O’Connell, Evan Behrens and John H. Griffin, Jr. Ms. O’Connell served as the Audit Committee Chair and she was considered an “audit committee financial expert,” as currently defined under the SEC and NYSE rules during this period.

Following July 23, 2020, the Audit Committee was comprised of Evan Behrens, John H. Griffin, Jr. and Alfred V. Tobia, Jr., all of whom continue to serve on the committee. Mr. Behrens was the Audit Committee Chair through March 2021. Mr. Griffin is presently the Audit Committee Chair and he is considered an “audit committee financial expert,” as currently defined under the SEC and NYSE rules.

Our Board has determined that all the Audit Committee members are independent within the meaning of the applicable SEC rules and the listing standards of the NYSE as such requirements apply to members of audit committees.

The primary function of the Audit Committee is to assist the Board in fulfilling its oversight of (1) the integrity of our financial statements, including the financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance, (2) the qualifications and independence of our independent auditors, (3) the performance of our internal audit function and independent auditors, and (4) our compliance with legal and regulatory requirements.

~~The Audit Committee’s role is one of oversight.~~ Internal Control Over Financial Reporting

Management is responsible for ~~preparing~~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’s financial statements for external purposes in accordance with U.S. GAAP.

Management evaluated, under the supervision of our CEO and CFO, the ~~independent registered public accounting firm is responsible for auditing those financial statements. Management, including the internal audit staff, or outside provider~~design and effectiveness of such services, and the independent registered public accounting firm have more time, knowledge and detailed information about the Company than do Audit Committee members. Consequently, in carrying out its oversight responsibilities, the Audit Committee will not provide any expert or special assurance as to the Company’s internal control over financial ~~statements or any professional certification as to the independent registered public accounting firm’s work.~~

~~Despite no longer being listed~~reporting based on the ~~NYSE,~~framework in Internal Control - Integrated Framework (2013) issued by the ~~Board has determined that (x) all members~~Committee of Sponsoring Organization of the Audit Committee should meet the standards required for audit committee membership on the Board of an NYSE listed company as it believes those standards establish best practices for audit committee membership and (y) all current members of the Compensation Committee meet such criteria.

~~Compensation Committee~~

From January 1, 2020 to May 13, 2020, the Compensation Committee was composed of Melvin L. Keating, Maureen E. O’Connell and John H. Griffin, Jr. On May 14, 2020, in connection with the decision to decrease the size of the board, the Company re-designated all of the board committees. From May 14 2020 to July 22, 2020, the Compensation Committee was comprised of John H. Griffin, Jr., Maureen E. O’Connell and Alfred V. Tobia, Jr. Following July 23, 2020, the Compensation Committee was comprised of John H. Griffin, Jr., Evan Behrens, and Alfred V. Tobia, Jr., all of whom continue to serve on the committee. Mr. Tobia, Jr. is presently our Compensation Committee Chair.

The primary functions of the Compensation Committee are to (1) review and approve corporate goals and objectives relevant to principal executive officer compensation, evaluate the principal executive officer’s performance in light of those goals and objectives, and together with the other independent directors (as directed by the Board), determine and approve the principal executive officer’s compensation level basedTreadway Commission (“COSO”). Based on this evaluation, (2) review and recommend to the Board (as directed by the Board) non-principal executive officer compensation, incentive-compensation plans and equity-based plans, and (3) to the extent such disclosure is required, review and discuss withassessment, management ~~the Company’s “Compensation Discussion and Analysis” and produce a committee report on executive compensation as required by the SEC to be included~~concluded that internal control over financial reporting was effective.

Changes in ~~our annual proxy statement or Annual Report on Form 10-K filed with the SEC.~~

Despite no longer being listed on the NYSE, the Board has determined that (x) all members of the Compensation Committee should meet the standards required for compensation committee membership on the board of an NYSE listed company and (y) all current members of the Compensation Committee meet such criteria.

~~Nominating and Corporate Governance Committee~~

From January 1, 2020 to May 13, 2020, the Nominating and Corporate Governance Committee was composed of Maureen E. O’Connell, John H. Griffin, Jr. and Evan Behrens. On May 14, 2020, in connection with the decision to decrease the size of the board, the Company re-designated all of the board committees. The Nominating and Corporate Governance Committee is presently comprised of Evan Behrens, John H. Griffin, Jr. and Alfred V. Tobia, Jr. Mr. Behrens is our Corporate Governance Committee Chair.

The primary functions of the Governance Committee are to (1) develop, recommend to the Board, implement and maintain our Company’s corporate governance principles and policies, (2) identify, screen and recruit, consistent with criteria approved by the Board, qualified individuals to become Board members, (3) recommend that the Board select the director nominees for the next annual meeting of stockholders, (4) assist the Board in determining the appropriate size, function, operation and composition of the Board and its committees, and (5) oversee the evaluation of the Board and management.

Despite no longer being listed on the NYSE, the Board has determined that (x) all members of the Nominating and Corporate Governance Committee should meet the standards required for nominating and corporate governance committee membership on the Board of an NYSE listed company and (y) all current members meet that criteria.

Internal Control over Financial Reporting

~~Board Meetings and Attendance~~

There were 28 meetings (in total) held by the Board during the fiscal year ended December 31, 2020, including 19 Board Meetings. Separately, the Audit Committee had 5 meetings, the Compensation Committee had 3 meetings and the Nominating and Corporate Governance Committee had 1 meeting during the fiscal year ended December 31, 2020. Although the Company does not have a formal policy regarding director attendance at the annual meeting of stockholders, all directors are encouraged to attend. During the fiscal year ended December 31, 2020, all current directors attended at least 75% of the Board and applicable committee meetings held.

~~Board Leadership Structure and Self-Evaluation~~

Board leadership structures should vary for companies depending on their circumstances. The Board, through the Nominating and Corporate Governance Committee, regularly evaluates whether to combine or separate the roles of principal executive officer and Chairman, especially in connection withno changes in leadership. Upon the appointment of Mr. Benett as the Company’s Chief Executive Officer, the Board and Nominating and Corporate Governance Committee re-evaluated the Board’s leadership structure and determined that the most effective leadership structure at that time was to have Mr. Benett serve as both Executive Chairman and Chief Executive Officer with a strong independent Director serving as the Lead Independent Director. The Board believed that, as the individual with primary responsibility for implementing the Company’s turnaround plan, Mr. Benett was best positioned to chair regular Board meetings and to focus the Board’s attention on the issues of greatest importance to the Company and its stockholders. Mr. Behrens served as the Board’s Lead Independent Director until April 2021. The Lead Independent Director, supported by the chairs of the independent committees of the Board, was responsible for assessing the performance of the Executive Chairman and Chief Executive Officer and protecting against potential management conflicts.

In April 2021, the Board re-examined its leadership structure and determined that at this time the appropriate structure was to have separate individuals serve as CEO and Chairman. In connection with this decision, Mr. John H. Griffin, Jr. was elected Chairman of the Board. Separating these positions will allow Mr. Benett to focus on running the Company’s business, while allowing Mr. Griffin to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board also believes that separating the Non-Executive Chairman and Chief Executive Officer positions provides enhanced independent leadership and oversight for the Company and the Board.

Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for Harte Hanks and its stockholders. Our corporate governance guidelines provide the flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate, in light of the results of evaluations or business needs. As a result of the appointment of Mr. Griffin as Chairman, the Company no longer has a Lead Independent Director.

~~Executive Sessions~~

Our Corporate Governance Principles provide that the non-management members of the Board will hold regular executive sessions in connection with regular Board meetings to consider issues that they may determine from time to time without the presence of any member of management. If the Chairman of the Board is not a member of management, the Chairman will chair each such session and report any material issues to the full Board. If the Chairman is a member of management, the Lead Independent Director serves as the chairman of the executive sessions. In 2020, these sessions were presided over by our Lead Independent Director, and since the appointment of Mr. Griffin as Chairman, he has presided over the sessions. If the non-management directors include directors who are not “independent” under applicable SEC rules, then the independent directors will hold an executive session at least once a year. The Chairman of the Board, if an independent director, chairs each such session and reports any material issues to the full Board. If the Chairman is not an independent director, the Lead Independent Director serves as the chairman of such sessions. We believe having a substantial majority of independent, experienced directors comprising our Board benefits the Company and its stockholders by providing strong oversight and advice on the issues facing the Company.

~~Risk Oversight~~

Our Board is responsible for overseeing the risk management process. The Board focuses on our general risk management strategy and the most significant risks we face and ensures that management implements appropriate risk mitigation strategies. The Board is also apprised of particular risk management matters in connection with its general oversight and review of corporate matters.

In performing the risk management process, the Board reviews with management (1) our policies with respect to risk assessment and management of risks that may be material to us, (2) our system of disclosure controls and procedures and system of internal controls over financial reporting ~~and (3)~~during our ~~compliance with legal and regulatory requirements. The Board also reviews major legislative and regulatory developments~~most recent fiscal quarter that ~~could~~have materially ~~impact~~affected, or are reasonably likely to materially affect, our contingent liabilities and risks. Our other Board committees also consider and address risk as they perform their respective committee responsibilities. For example, our Compensation Committee evaluates the risks associated with our compensation plans and policies, and our Audit Committee monitors risks relatinginternal control over financial reporting. We have not experienced any material impact to our internal controls over financial ~~controls and reporting. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk. The leadership structure~~reporting even though most of our ~~Board described above under the section heading “Board Leadership Structure” ensures that management is properly overseen by independent directors.~~

In April 2021, recognizing the unique and evolving risks posed by cybersecurity and data protection, the Board determined to delegate to the Audit Committee the responsibility of overseeing risks related to cybersecurity, data protection (including confidential, proprietary and personal information, reputation and goodwill in all forms) and other similar risks. The Audit Committee is also responsible for overseeing and assisting in the establishment of policies and procedures to mitigate such risks. The Audit Committee Charter has been amended to update the committee’s scope of responsibility to include overseeing such risks.

~~Management is responsible for day-to-day risk management. Our finance, treasury, general counsel and internal audit functions serve as the primary~~employees have work remotely. We are continually monitoring and ~~testing groups for company-wide policies~~assessing the impact of this remote working arrangement on our internal controls to minimize the impact on their design and procedures and manage the day-to-day oversight of the risk management strategy for our ongoing business. This oversight includes identifying, evaluating and addressing potential risks that may exist at the enterprise, strategic, financial and operational levels,operating effectiveness.

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

Information required by this item is incorporated herein by reference as ~~well as compliance and reporting.~~

We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that our Board leadership structure supports this approach.

~~Stockholder Communications~~a definitive proxy statement to be filed with the ~~Board of Directors~~

Stockholders may send communications to our Board, including any individual director or the directors as a group, by mailing such communications to Harte Hanks, Inc., Attn: Corporate Secretary, 2800 Wells Branch Parkway, Austin, Texas 78728. Such correspondence shall be addressed to the Board or any individual director by either name or title.

All communications received as set forth in the preceding paragraph will be opened by our Corporate Secretary or the secretary’s designee for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to our Board or any individual director, our Corporate Secretary will make sufficient copies of the contents to send to each director to which the envelope is addressed.

~~Code of Business Conduct and Ethics~~

We have established a corporate compliance program as part of our commitment to responsible business practices in all of the communities in which we operate. The Board has adopted a Business Conduct Policy that applies to all of our directors, officers and employees, which promotes the fair, ethical, honest and lawful conduct in our business relationships with employees, customers, suppliers, competitors, government representatives, and all other business associates. In addition, we have adopted a Code of Ethics applicable to our Chief Executive Officer and all of our senior financial officers. The Business Conduct Policy and Code of Ethics form the foundation of a compliance program that includes policies and procedures covering a variety of specific areas of professional conduct, including compliance with laws, conflicts of interest, confidentiality, public corporate disclosures, insider trading, trade practices, protection and proper use of company assets, intellectual property, financial accounting, employment practices, health, safety and environment, and political contributions and payments. The Business Conduct Policy forbids employees and directors from engaging in hedging activities with respect to our securities.

Both our Business Conduct Policy and our Code of Ethics are available on our website at www.hartehanks.com, under the “Corporate Governance” subsection of our “Investors” section. In accordance with OTCQX and SEC ~~rules, we intend to disclose any future amendments to our Code of Ethics, or waivers from our Code of Ethics for our Chief Executive Officer or Chief Financial Officer.~~

~~Hedging Policy~~

The Company’s Business Conduct Policy forbids employees and directors from engaging in hedging activities or similar arrangements with respect to our securities. As of the date of this Annual Report, management of the Company is not aware of any hedging activities by Company insiders involving the Company’s securities.

~~Delinquent Section~~~~16(a) Reports~~

Section 16(a) of the Exchange Act and related rules of the SEC require our directors, officers, and persons who own more than 10% of a registered class of our equity securities (collectively the "Reporting Persons"), to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to our equity securities with the SEC. All Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports that they file. As with many public companies, we provide assistance to our directors and executive officers in making their Section 16(a) filings pursuant to powers of attorney granted by our insiders.

To our knowledge, based solely on our review of the copies of Section 16(a) reports provided to us by such Reporting Persons, including those reports that we have filed on behalf of our directors and executive officers pursuant to powers of attorney, or written representations from certain Reporting Persons we believe that there has been compliance with all Section 16(a) filing requirements applicable to such Reporting Persons with respect to the fiscal year ended December 31, 2020, except that one Form 3 and one Form 4 for Mr. Brian Linscott, were each filed late and three Form 4s for Mr. Copeland, two Form 4s for Mr. Tobia and Mr. Griffin, and one Form 4 for Mr. Behrens, were each filed late. The failure to file the Form 3 and Form 4s was inadvertent on the part of the Company’s officers and directors. The Company has enhanced its compliance system and level of awareness in order to ensure timely filings moving forward.

~~ITEM 11.~~

~~EXECUTIVE COMPENSATION~~

Our Compensation Committee reviews our executive officers’ overall compensation packages on an annual basis or more frequently as it deems warranted. We provide our executives with an annual base salary as a fixed, stable form of compensation and an annual cash bonus opportunity to create additional performance incentives. We also from time to time grant our executives equity-based awards to provide an additional incentive to grow our business and further link their interests with those of our stockholders. We have also historically allowed our executive officers to elect to receive up to 30% of annual incentive plan (“AIP”) payments in the form of restricted stock vesting on the first anniversary of the grant, with executive officers receiving 125% of the value of the forgone cash bonus in shares of restricted stock.

As a “smaller reporting company” (as such term is defined under applicable securities laws), we are required to disclose the compensation for our principal executive officer and our two other most highly compensated executive officers serving as of the last day of the applicable fiscal year. In certain cases, disclosure may also be required for individuals who served as executive officers for a portion of the fiscal year but were not serving as executive officers at the end of the year. As a smaller reporting company, we are not required to include a compensation discussion and analysis in this Annual Report.

~~For the fiscal year ended December 31, 2020, the named executive officers were:~~

•		~~Andrew B. Benett, our Chief Executive Officer;~~
•		~~Brian Linscott, our Chief Operating Officer;~~
•		~~Laurilee Kearnes, our Chief Financial Officer.~~

~~The table below sets forth the annual compensation for services rendered during fiscal 2020 and, to the extent applicable under SEC Rules, fiscal 2019.~~

~~Summary Compensation Table - Fiscal~~~~2019-2020~~

All Other

Salary

Bonus
Stock Awards
Compensation
Total
Name and Principal Position
Fiscal Year
($)

($)
($)(1)
($)
($)
(a)
(b)
(c)

(d)
(e)
(f)
(g)
Andrew B. Benett, Chief Executive Officer
2020

380,000

228,000
(2)
364,500

120,000

1,092,500

2019

57,692
(3)

—

427,500

—

485,190
Brian Linscott, Chief Operating Officer
2020

338,654

247,500
(4)
201,648

—

787,802
Laurilee Kearnes, Current Chief Financial Officer (5)
2020

282,692

167,124

120,250

667

570,733

2019

235,096

52,169

136,843

—

424,108

~~(1)~~

The amounts in columns (e) reflect the full grant date fair value of the awards calculated in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see note G of our audited financial statements for the fiscal year ended December 31, 2020 included in the Original Filing. For performance-based stock units the fair value assumed such awards vested based on probable outcome of the performance conditions as of the grant date.

~~(2)~~	~~Column (d) represents a special bonus of $228,000 Mr. Benett received in 2020 for the achievement of certain operating performance measures.~~
~~(3)~~	Includes $43,846 in base salary payments with respect to Mr. Benett’s services as Chief Executive Officer from November 18, 2019 to December 31, 2019 and $13,846 in Executive Chairman fees for the period from November 18, 2019 to December 31, 2019.
~~(4)~~	Column (d) includes a sign-on bonus of $37,500 Mr. Linscott received in connection with his appointment as Chief Operating Officer. Mr. Linscott also received a $210,000 special bonus in 2020 for the achievement of certain operating performance measures.

~~(5)~~

Ms. Kearnes was promoted from Principal Accounting Officer to Chief Financial Officer on November 15, 2019. Her base salary for 2019 is prorated based on her service in such position. The amount disclosed in column (d) for 2020 includes $2,124 in respect of her 2020 Phantom Stock vesting and a special bonus of $165,000 granted to Ms. Kearnes in 2020 for the achievement of certain accounting performance measures. The amount disclosed in column (d) for 2019 includes $2,169 in respect of her 2019 Phantom Stock vesting and a special bonus of $50,000 granted to Ms. Kearnes in 2019, $25,000 of which was paid on September 20, 2019 and $25,000 of which was paid on March 20, 2020 due to achievement of certain accounting performance measures.

~~All Other Compensation~~

Name

Year

Insurance Premiums ($) (1)

Other ($)

Total ($)

Andrew B. Benett, Chief Executive Officer

2020

—

120,000
(2)

120,000

Laurilee Kearnes, Current Chief Financial Officer

2020

667

—

667

~~(1)~~

~~Reflects annual premium paid by the Company for life insurance policies obtained in connection with providing salary continuation benefits to each of the named executive officers.~~

~~(2)~~

~~Reflects the Board fee paid to Mr. Bennett in 2020.~~

~~Stock Ownership Guidelines & Hedging Policies~~

The Committee believes that stock ownership requirements encourage officers to maintain a significant financial stake in our company, thus reinforcing the alignment of their interests with those of our stockholders. Consistent with this philosophy, we have stock ownership guidelines that require all officers to acquire and hold significant levels of our common stock. Under these guidelines (revised in February 2018), a corporate officer must reach the minimum required level of common stock ownership no later than five years from commencement of employment (and sooner in some cases). Officers promoted to a level with a higher minimum equity ownership level have three years to reach the higher level of ownership. The target ownership level (relative to base annual salary) is 500% for the CEO, 200% for executive vice presidents and senior vice presidents, and 100% for vice presidents.

~~The recent stock ownership of our executive officers is reflected below in “Item 12.~~ ~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~”. For purposes of measuring compliance with these stock ownership guidelines, all common stock (including restricted stock units) owned by an executive officer is included. Compliance with the target ownership level is measured by the greater of (i) the aggregate of the consideration paid for qualifying shares (but for unvested awards, the grant date value), or (ii) the result of multiplying the number of qualifying shares by the average closing price of the Company’s common stock over the trailing 12 months. Neither options nor performance awards are included in the compliance calculation.

If an officer has not previously met the minimum equity ownership level, the officer must retain half of the “net shares” related to any option exercise or vesting of restricted stock or performance awards. “Net shares” means the number of shares remaining after the sale of shares to cover the exercise price of options and the sale of shares sufficient to pay taxes related to the exercise of options or vesting of restricted stock or performance awards. If an executive officer has previously met the applicable target ownership level, then so long as such officer maintains the number of shares needed for compliance at that time, the officer will be deemed to be in compliance notwithstanding any stock price fluctuations.

The ownership guidelines, and compliance by officers with the guidelines, are reviewed annually by the Committee. Any remedial action for failure to comply with the stock ownership guidelines is to be determined by the Committee on a case-by-case basis. While our executive officers are endeavoring to meet these ownership thresholds, none of our officers have met the holding requirements under the guidelines. Mr. Bennett has through 2024, Mr. Linscott has through 2025, and Ms. Kearnes has through 2022 to meet the holding requirements.

~~As part of our Business Conduct Policy, we have adopted an insider trading policy that, among other things, forbids officers from engaging in hedging activities with respect to our securities.~~

~~Clawback Policy~~

In February 2018, the Board adopted a clawback policy. This policy formalized the Company’s long-standing practice of including in award agreements (or other applicable documents which provide the terms of incentive compensation) a provision that makes such incentive compensation subject to forfeiture, reimbursement and/or recoupment in the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the federal securities laws. Under the clawback policy, incentive compensation includes the following (provided that such compensation is granted, earned or vested based wholly or in part on the attainment of a financial reporting measure): annual bonuses/incentive plan awards and other short-and long-term cash incentives; stock options; stock appreciation rights; restricted stock awards and/or units; performance unit awards; and any other compensation designated as “Incentive compensation” by the Committee at the time such compensation is made, granted or awarded.

~~Equity Compensation Plan Information at Year-End~~~~2020~~

The following table provides information as of December 31, 2020 regarding total shares subject to outstanding stock options and rights and total additional shares available for issuance under Harte Hanks, Inc. 2020 Equity Incentive Plan (as amended, the “2020 Plan”) and the Amended and Restated Harte Hanks 2013 Omnibus Incentive Plan (the “2013 Plan”).

Plan Category

(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)

(b) Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (2)

(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)(3)
Equity compensation plans approved by security holders

909,724

$40.25

2,060,951

~~(1)~~

Consisting of outstanding options, restricted stock units and stock-denominated performance units. If actual performance under the performance-based restricted stock units falls below the prescribed level for these awards, fewer shares would be issued.

~~(2)~~

~~The weighted-average exercise price does not take into account any shares issuable upon vesting of outstanding restricted stock or performance restricted stock units, which have no exercise price.~~

~~(3)~~

Represents shares available under our 2020 Plan; all shares remaining available for issuance under the 2013 Plan were rolled into 2020 Plan when the 2020 Plan was approved by stockholders. Shares available for issuance under our 2020 Plan may be issued pursuant to stock options, restricted stock, performance restricted stock units, common stock and other awards that may be established pursuant to the 2020 Plan. If actual performance under the performance-based restricted stock units falls below the prescribed level for these awards, fewer shares would be issued.

~~Outstanding Equity Awards at Year End~~

The following table sets forth information regarding outstanding equity awards held at the end of 2020 by our named executive officers. These equity awards were issued pursuant to our 2020 Plan and 2013 Plan.

Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities Underlying Unexercised Options (#) Unexercisable

Option Exercise Price ($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units of Stock That Have Not Vested ($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) (2)
(a)
(b)
(c)

(d)
(e)
(f)

(g)
(h)

(i)
Andrew Benett

250,000
(3)
$
687,500

—

—
Laurilee Kearnes

200

—

$
123.1
2/5/2021

520
(5)
$
1,430

26,316
(7)
$
94,211

300

—

$
99.1
2/5/2022

73,772
(6)
$
202,873

400

—

$
77.2
2/5/2023

297

—

$
82.3
4/15/2024

854

—
(4)
$
76.8
4/15/2025

Brian Linscott

75,000
$
206,250

~~(1)~~

~~Based upon the closing market price of our common stock as of December 31, 2020 ($2.75), as reported on the OTCQX.~~

~~(2)~~

In 2017, 2018 and 2019, our Compensation Committee awarded our executives performance-based stock units which are payable, if earned, in shares of common stock or cash. The payout levels range from 0% to a maximum of 100% of the performance units granted.

~~(3)~~

150,000 of these restricted stock units generally vest in three equal annual installments on the first three anniversaries of November 18, 2019; 150,000 of these restricted stock units generally vest in three equal annual installments on the first three anniversaries of January 2, 2020.

~~(4)~~

~~This SAR is scheduled to vest on June 23 of 2021.~~

~~(5)~~	~~This phantom stock is scheduled to vest on June 23, 2021.~~
~~(6)~~	13,158 of these restricted stock units vest in three equal installments on the first three anniversary of September 6, 2019. 4,386 of these restricted stock units is scheduled to vest on September 6, 2021 and 2022. 65,000 of these restricted stock units generally vest in three equal annual installments on the first three anniversaries of August 8, 2020.
~~(7)~~	~~These performance stock units generally vest if, following a period of at least one full year from September 6, 2019, certain share price targets are met.~~

~~Executive Employment and Severance Agreements~~

~~In 2020 we had the following types of severance arrangements with our named executive officers, each addressing or intended to address different employment and/or termination circumstances:~~

•		~~our executive severance policy (the “Executive Severance Policy”);~~
•		~~our “change in control” severance agreement (the “CIC Agreements”);~~
•		~~an employment agreement with Mr. Linscott, our Chief Operating Officer (“COO Agreements”; and~~
•		~~an employment agreement with Mr. Benett, our Chief Executive Officer (the “CEO Agreement”).~~

In January 2020, the Board renewed its prior practice (established in 2019) that all severance agreements with executive officers, including each agreement made with individuals under the Executive Severance Policy, going forward, would be as determined by the Board in its discretion.

~~Executive Severance Policy~~

In January 2015, we adopted an Executive Severance Policy applicable to corporate officers and certain other executive employees designated by the Compensation Committee. The Executive Severance Policy applies only for named executive officers in circumstances when they do not have a specific agreement that determines their rights to severance. In 2020 only Ms. Kearnes was covered by the Executive Severance Policy. The Executive Severance Policy provides a participating executive whose employment is terminated without “cause,” (i) severance payments equal to such executive’s then-current base salary for the one-year severance period and (ii) subject to certain conditions, up to a year of contributions toward health care coverage. In exchange, executives are required to deliver a full release to the Company and adhere to non-competition and non-solicitation covenants. The Executive Severance Policy does not provide any acceleration of vesting for equity awards in the event of an executive’s termination. The Executive Severance Policy can be amended upon six months’ notice by the Compensation Committee, and it terminates immediately prior to a change of control of the Company.

~~CIC Agreements~~

The CIC Agreements are designed to allow us to attract and retain key talent by providing defined compensation in the event of a change in control. The payout levels and other terms of the CIC Agreements are based on the Compensation Committee’s review of publicly available market data regarding severance agreements and prior iterations of these agreements. Mr. Linscott, Mr. Benett and Ms. Kearnes are each a party to a CIC Agreement with the Company. The CIC Agreements provide that if, after a change in control, an executive (i) is terminated other than for “cause” (as defined in the agreement), death or disability or (ii) elects to terminate the executive's employment for “good reason,” then such executive is entitled to severance compensation and a cash payment sufficient to cover health insurance premiums for a defined period of time (18 to 24 months). The amount of severance compensation is the sum of (A) the executive’s annual base salary in effect immediately prior to the change in control or termination date, whichever is larger, plus (B) the executive’s target-level bonus or incentive compensation multiplied by 1.0 or 2.0. The foregoing severance multiples were reduced by 0.5 as a result of changes made in the form of CIC Agreement in 2015, but incumbent officers retained their earlier-awarded higher multiples. With respect to equity awards, the CIC Agreements provide that so long as such awards are assumed or replaced with equivalent awards by the acquirer, there will be no “single-trigger” acceleration.

~~Minimum Guarantee Agreements~~

The severance provisions of the Minimum Guarantee Agreements generally set the level of the applicable executive’s severance pay period under the applicable severance arrangement (e.g., the Severance Policy or CIC Agreement). The CEO Agreement with Mr. Benett provides that Mr. Benett will receive severance pay for a period of 18 months (as noted below). The COO Agreement with Mr. Linscott provides that Mr. Linscott will receive severance pay for a period of 12 months (as noted below).

~~CEO Agreement~~

The CEO Agreement provides for the following severance payments and benefits upon a termination of Mr. Benett’s employment by the Company without “cause” or his resignation for “good reason” (each as defined in the CEO Agreement): (i) 18 months of continued base salary and (ii) 12 months of continued health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985.

~~COO Agreement~~

The COO Agreement provides for the following severance payments and benefits upon a termination of Mr. Linscott’s employment by the Company without “cause” or his resignation for “good reason” (each as defined in the CEO Agreement): (i) 12 months of continued base salary and (ii) 12 months of continued health benefit coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985.

~~Annual Incentive Plan~~

~~We provide an annual incentive opportunity (an “AIP”) for named executive officers to achieve certain milestones~~ within the Company and, where appropriate, to advance business line performance on a year-over-year basis. This annual short-term cash incentive opportunity provides an incentive for our executives to manage our businesses to achieve targeted financial results. Our 2020 AIP for executives was administered under the 2013 Plan. We paid the following amounts to our named executive officers under the 2020 AIP, based on various financial performance and operational efficiency goals: $228,000 to Mr. Benett, $210,000 to Mr. Linscott and $165,000 to Ms. Kearnes.

~~Equity Incentive Plan~~

From time to time, the Company grants equity incentive awards to our named executive officers and other selected employees. Prior to adoption of the 2020 Plan, such awards were granted under the 2013 Plan. The 2020 Plan was approved by stockholders at the 2020 annual meeting of stockholders, and therefore no new awards will be granted under the 2013 Plan (although outstanding awards under the 2013 Plan will continue to be governed by the terms of the 2013 Plan). The 2020 Plan is administered by our Board of Directors, or a committee thereof. Currently the plan is administered by the Compensation Committee. The administrator has authority to interpret the plan provisions and make all required determinations under the 2020 Plan (including making appropriate adjustments to reflect stock splits and similar events). Employees, directors and consultants of the Company and its subsidiaries are eligible for award grants under the 2020 Plan. Awards of stock options, stock appreciation rights, restricted stock, restricted stock units and other awards may be granted under the plan.

~~DIRECTOR COMPENSATION~~

~~Director Compensation~~

Under our director compensation program in 2020, we provided compensation to our directors who are not employed by us or any of our subsidiaries (referred to herein as “non-employee directors”) as follows:

Annual Retainer
$ 60,000
Annual Equity Awards (18,000 shares)
$ 33,300
Annual Committee Chair Fee

$ 5,500 to $12,500

Lead Independent Director Fee
$ 35,000

Each independent director was able to elect, annually or in connection with such director’s appointment to the Board, to receive all or a portion of such director’s cash compensation otherwise payable for such director’s services in shares of the Company’s common stock. These shares of common stock are granted as soon as administratively practicable following the end of each of the Company’s fiscal quarters. The number of shares delivered is based on the market value of one share of the Company’s common stock on the OTCQX as of the last day of the immediately preceding quarter, in accordance with the 2020 Plan.

In 2019, the annual cash retainer was increased to $60,000 and the annual equity retainer was increased to $90,000, to compensate the directors for their increased time and efforts. In December 2019, the Board determined to maintain the annual retainers at 2019 levels. During 2020, the Board decided to reduce the annual equity retainer to 18,000 shares of the Company's common stock. In addition, in July of 2020 the Board determined to eliminate the separate committee retainer fees and ceased paying such fees on July 22, 2020. Non-employee directors only received their annual retainer fee after that date. ~~At August 8, 2020,~~ ~~the date of grant, this equaled $33,300.~~

Mr. Benett, our Chief Executive Officer and also a director of the Board, received a cash retainer fee of $120,000 in respect of his role as a director, which amount is included in the Summary Compensation Table.

~~2020~~~~Director Compensation for Non-Employee Directors~~

~~The following table sets forth the total compensation paid to our non-employee directors for their service on our board of directors during fiscal 2020:~~

Name
Fees Earned or Paid in Cash($) (1)
Option Awards ($)
Stock Awards ($) (2)
Total ($)
David L. Copeland
60,000
—
33,300
93,300
John H. Griffin Jr.
60,000
—
33,300
93,300
Melvin L. Keating
40,538
—
33,300
73,838
Maureen E. O’Connell
37,742
—
33,300
71,042
Alfred V. Tobia Jr.
63,075
—
33,300
96,375
Evan Behrens
79,570
—
33,300
112,870

~~(1)~~	~~This Column includes annual Board fees, and the committee retainers directors received in cash.~~
~~(2)~~	Each of the independent directors was granted restricted stock units in 2020 with a grant date fair value of $33,300 (rounded down to the nearest whole share), computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see note G of our audited financial statements for the fiscal year ended December 31, 2020 included in our Form 10-K for the same period. Restricted stock units granted in 2020 provide for vesting on the first anniversary of the date of grant.
~~(3)~~	~~This amount also includes $19,570 of annual Lead Independent Director fee Mr. Behrens received in 2020.~~

~~Director Stock Ownership Guidelines~~~~& Hedging Policy~~

Under our Corporate Governance Principles and Stock Ownership Guidelines, non-employee directors are expected to hold five times the annual cash retainer amount in company stock (an increase from three times the annual cash retainer amount). Employee directors are likewise subject to the Stock Ownership Guidelines, but as applicable to their management level rather than directorship. Currently, each of our directors is in compliance with this policy. As part of our Business Conduct Policy, we have adopted an insider trading policy that, among other things, forbids directors from engaging in hedging activities with respect to our securities.

~~ITEM 12.~~

~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

The following table sets forth the number of shares of our common stock beneficially owned by (1) our “named executive officers” included in the Summary Compensation Table below, (2) each current Harte Hanks director, (3) each person known by Harte Hanks to beneficially own more than 5% of the outstanding shares of our common stock, and (4) all current Harte Hanks directors and executive officers as a group. Except as otherwise noted below, (a) the persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them, and (b) ownership is as of March 31, 2021, when 6,666,984 shares of our common stock were outstanding.

Name and Address of Beneficial Owner (1)(2)
Number of Shares of Common Stock
Percent of Class
Named Executive Officers

Andrew B. Benett
213,500
*
Brian Linscott
36,004
*
Laurilee Kearnes
4,318
*
Directors

Evan Behrens
40,636
*
David L. Copeland (3)
390,947
5.86%
John H. Griffin, Jr.
51,389
*
Alfred V. Tobia, Jr.
55,741
*

5% Holders

Wipro LLC (4)
1,001,658
15.02%
William Blair & Company LLC (5)
661,118
9.92%
Houston H. Harte (6)
660,816
9.91%
Fondren Management LP (7)
592,000
8.88%
Westerly Holdings LLC (8)
975,000
14.62%
Dimensional Fund Advisors LP (9)
271,009
4.06%

All current directors and executive officers as a group (7 persons)(10)
792,535
11.89%

*	~~less than 1%.~~

~~(1)~~

The address of (a) Houston H. Harte is P.O. Box 17424, San Antonio, TX 78217, (b) Dimensional Fund Advisors, Inc. is 6300 Bee Cave Road, Building One, Austin, TX 78746, (c) Fondren Management LP is 1177 West Loop South, Suite 1625, Houston, Texas 77027, (d) Wipro LLC is 2 Tower Center Blvd, Suite 2200, East Brunswick, NJ 08816, (e) Westerly Holdings LLC, 201 Mission Street, Suite 580 San Francisco, CA 94105, (f) William Blair & Company LLC is 150 North Riverside Plaza, Chicago, IL 60606 and (g) each other beneficial owner is c/o Harte Hanks, Inc., 2800 Wells Branch Parkway, Austin, TX 78728.

~~(2)~~

~~Does not include shares that may be acquired upon the future exercise of options that will not vest within 60~~120 days ~~of March 31, 2021.~~

~~(3)~~

Includes the following shares to which Mr. Copeland disclaims beneficial ownership: (a) 3,800 shares held as custodian for unrelated minors for which Mr. Copeland is the sole custodian, (b) 30,150 shares that are owned by various trusts for which he serves as trustee or co-trustee and holds shared voting and dispositive power, (c) 306,246 shares owned by the Shelton Family Foundation, of which he is one of nine directors and an employee, and (d) an aggregate of 1,010 of the disclaimed shares are held in trusts of which Mr. Copeland serves as the sole trustee and holds sole voting and investment power. Information relating to this stockholder is based on the stockholder’s Schedule 13D, filed with the SEC on December 5, 2019 and stock transactions that Mr. Copeland informed the Company of in 2020.

~~(4)~~

Wipro, LLC owns 9,926 shares of Series A Convertible Preferred Stock, which shares are convertible into up to 1,001,658 shares of the Company’s common stock at Wipro LLC’s election. Information relating to this stockholder is based on the stockholder’s Schedule 13D, filed with the SEC on February 9, 2018.

~~(5)~~

661,118 shares are held by William Blair & Company, L.L.C., in its capacity as investment adviser, to clients who have granted discretionary authority to dispose of or direct the disposition of the shares to William Blair & Company, L.L.C. Those clients have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities. One such client, Sarah Harte in her position as trustee of the Harte Management Trust, is known to have such right or power with respect to more than five percent of the common stock. Information relating to this stockholder is based on the stockholder’s Schedule 13G, filed with the SEC on February 11, 2021.

~~(6)~~

660,816 shares are held in the Harte Management Trust, over which Houston H. Harte, Carolyn Harte and Sarah Harte share voting and dispositive power. Information relating to this stockholder group is based on such group’s Schedules 13D/A filed with the SEC on March 29, 2019.

~~(7)~~

Includes 554,000 shares held by BLR Partners LP and 38,000 shares held by The Radoff Family Foundation. BLRPart, LP, as the general partner of BLR Partners LP may be deemed to be the beneficial owner of the 554,000 shares beneficially owned by BLR Partners LP. BLRGP Inc., as the general partner of BLRPart, LP, may be deemed the beneficial owner of the 554,000 shares beneficially owned by BLR Partners LP. Fondren Management, LP, as the investment manager of BLR Partners LP, may be deemed the beneficial owner of the 554,000 shares beneficially owned by BLR Partners LP. FMLP Inc., as the general partner of Fondren Management, LP, may be deemed the beneficial owner of the 554,000 shares beneficially owned by BLR Partners LP. For the purposes of the reporting requirements of the Exchange Act, Bradley L. Radoff, as the sole shareholder and sole director of BLRGP Inc. and FMLP Inc. and a director of The Radoff Family Foundation, may be deemed the beneficial owner of the (i) 554,000 shares of Common Stock beneficially owned by LR Partners and (ii) 38,000 shares of Common Stock beneficially owned by The Radoff Family Foundation. Information relating to this stockholder is based on the stockholder’s Schedule 13D/A, filed with the SEC on August 27, 2019.

~~(8)~~

Represents 975,000 shares held for the accounts of Westerly Partners, L.P., a Delaware limited partnership, and Westerly Partners QP, L.P., a Delaware limited partnership. Westerly Capital Management, LLC serves as investment manager and Westerly Holdings LLC serves as the general partner to Westerly Partners, L.P. and Westerly Partners QP, L.P. For the purposes of the reporting requirements of the Exchange Act, Westerly Holdings LLC may be deemed to beneficially own 975,000 shares of Common Stock. Information relating to this stockholder is based on Amendment No. 2 the stockholder’s Schedule 13G/A, filed with the SEC on February 4, 2021.

~~(9)~~

Represents shares held by investment advisory clients of Dimensional Fund Advisors LP (“Dimensional”) for whom Dimensional serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In its role as investment advisor, sub-adviser and/or manager, Dimensional or its subsidiaries possess sole voting power over 262,560 such shares and sole investment power over all such shares that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reflected are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the securities held in their respective accounts. To the knowledge of Dimensional, the interest of no one such Fund exceeds 5% of the Company’s common stock. Information relating to this stockholder is based on the stockholder’s Schedule 13G, filed with the SEC on February 8, 2019.

~~(10)~~

~~This group includes Andrew B. Benett, Laurilee Kearnes, Brian Linscott, Evan Behrens, David L. Copeland, John H. Griffin, Jr. and Alfred V. Tobia, Jr.~~

~~ITEM 13.~~

~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

Our Board reviews related party transactions for potential conflict of interest issues and has adopted certain policies and procedures relating to its review, approval or ratification of any transaction in which the Company is a participant and that is required to be reported by the SEC’s rules and regulations regarding transactions with related persons. As set forth in the Nominating and Corporate Governance Committee’s charter, except for matters delegated by the Board to the Audit Committee, all proposed related transactions and conflicts of interest should be presented to the Nominating and Corporate Governance Committee for its consideration. If required by law, SEC regulations or any other applicable rule or regulations, such transactions must obtain Nominating and Corporate Governance Committee approval. In reviewing any such transactions and potential transactions, the Nominating and Corporate Governance Committee may take into account a variety of factors that it deems appropriate, which may include, for example, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the value and materiality of such transaction, any affiliate transaction restrictions that may be included in our debt agreements, any impact on the Board’s evaluation of a non-employee director’s independence or on such director’s eligibility to serve on one of the Board’s committees and any required public disclosures by Harte Hanks.

~~Indemnification of Officers and Directors~~

Our Certificate of Incorporation and Bylaws require us to indemnify our officers and directors to the fullest extent permitted by the Delaware General Corporation Law. These documents also contain provisions that provide for the indemnification of our directors for third party actions and actions by or in the right of Harte Hanks that mirror Section 145 of the Delaware General Corporation Law.

In December 2019, the Company entered into an indemnification agreement with each of our directors and executive officers (the “Indemnification Agreements”). The Board determined that it is in the best interests of the Company and its stockholders to enter into Indemnification Agreements in order to attract and retain highly competent individuals to serve, or continue to serve, as directors and executive officers. The Indemnification Agreements, among other things, subject to certain exceptions, require the Company to indemnify, and advance expenses to, each director and executive officer to the fullest extent permitted by the laws of the State of Delaware, including indemnification of expenses such as attorneys' fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of the Company, arising out of such person's services as a director or executive officer.

Our Certificate of Incorporation also states that the Company has the power to purchase and maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against such expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. We also have and intend to maintain director and officer liability insurance, if available on reasonable terms.

Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

~~ITEM 14.~~

~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

~~Independent Auditor Fees and Services~~

~~Deloitte served as our independent accountant for a portion~~ of the fiscal year ended December 31, ~~2019. Moody, Famiglietti & Andronico, LLP (“MFA”) served as our independent accountant upon the dismissal of Deloitte on April 12, 2019 and for all of fiscal 2020. MFA continues~~2023.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item will be included in an amendment hereto or a definitive proxy statement to ~~serve as our independent accountant.~~

~~The following table sets forth the aggregate amount of various professional fees billed by our principal accountants:~~

Years Ended

December 31,

2020

2019
Audit fees

$441,150

$375,000
Tax Fees (relating to state, federal and international tax matters) — —
Audit related fees

—

—
All Other Fees

—

—
Total audit and audit-related fees

$441,150

$375,000

~~Audit Fees~~~~. Audit fees consist of aggregate fees for the annual financial statement audit, quarterly financial statement reviews and services in connection with filings~~be filed with the ~~SEC. All audit fees are approved by the Board.~~

~~Audit~~-~~Related Fees~~~~. Audit-related fees consist of aggregate fees for assurance and related services other than those included under “Audit Fees” above. Includes charges for statutory audits of certain~~SEC within 120 days of the ~~Company’s foreign subsidiaries~~fiscal year ended December 31, 2023.

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

Information required by ~~countries~~this item will be included in ~~which they are domiciled in 2020 and 2019.~~

~~Tax Fees~~. Tax fees include fees for professional services for tax compliance, tax advice and tax planning, primarily, fees related to tax preparation services. All tax fees are approved by the Audit Committee.

~~All Other Fees~~~~: Other fee include fees for products and services other than the services reported above. All other fees are approved by the Audit Committee.~~

~~Pre-Approval Policies and Procedures~~

Our Audit Committee has established procedures for pre-approval of audit and non-audit services as set forth in the Audit Committee Charter. The Audit Committee considers whether the audit fee disclosed above are compatible with maintaining MFA's independence and has so determined that the service provided by MFA is compatible with maintaining MFA’s independence. The Audit Committee pre-approved audit services provided to us by MFA in 2020 and those proposedan amendment hereto or a definitive proxy statement to be ~~provided~~filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

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

Information required by ~~MFA~~this item will be included in ~~2021.~~

an amendment hereto or a definitive proxy statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item will be included in an amendment hereto or a definitive proxy statement to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023.

Table of Contents

PART IV


ITEM 15.			EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

15(a)(1)		Financial Statements
~~(A)~~
		The ~~following documents were~~financial statements filed ~~or furnished~~ as part of ~~the Original Filing:~~

~~15(a)(1)~~	~~Financial Statements~~

	~~The financial statements included~~this report and referenced in Item 8 are presented in the Consolidated Financial Statements and the notes thereto beginning at page35of ~~the Original Filing.~~ 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 exhibits listed in Item 15 of the Original Filing~~

	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.

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.						~~(B) The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index that follows and are being filed as part of this Amendment No. 1:~~

~~Exhibit~~
~~No.~~		Description of Exhibit

~~Acquisition and Dispositions~~

~~2.1~~		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)
*3.1
~~2.2~~		~~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)~~.
*3.2
~~3(b)~~	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)~~.
3.3
~~3(c)~~	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).
*3.4
~~3(d)~~	Fifth Amended and Restated Bylaws.
3.5		Elimination of Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock of Harte Hanks, Inc. (filed as Exhibit 3.1 to the ~~company's~~Company's Form 8-K dated ~~December 23, 2015)~~March 24, 2023).

~~Credit Agreements~~

~~10.1(a)~~ *10.01		~~Credit~~Loan Agreement, dated ~~April 17, 2017, with~~December 21, 2021, among Harte Hanks, Inc. the subsidiary guarantors party thereto and Texas Capital Bank, ~~N.A., as lender (filed as Exhibit 10.1 to the company's form 8-K dated April 21, 2017).~~National Association.
*10.02
~~10.1(b)~~	~~Waiver to Credit~~Security 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(c)~~	~~First Amendment to Credit Agreement, dated January 9, 2018,~~December 21, 2021, 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).~~Association.
10.03
~~10.1(d)~~	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(e)~~	Third Amendment to Credit Agreement, dated as of May 11, 2020 with Texas Capital Bank, N.A., as lender incorporated by reference into this Annual report on Form 10-K/A (filed as Exhibit 10.1(a) to the company's Form 10-Q for three months ended March 31, 2020).

~~10.1(f)~~	~~Revolving Promissory Note, dated as of May 11, 2020 in favor of Texas Capital Bank, N.A., as lender (filed as Exhibit 10.1(b) to the company's Form 10-Q for three months ended March 31, 2020).~~

~~10.1 (g)~~	Second Amendment to Security Agreement, dated May 11, 2020 between Harte Hanks, Inc. and Texas Capital Banks, N.A.(filed as Exhibit 10.1(c) to the company's Form 10-Q for three months ended March 31, 2020).

~~10.1 (h)~~	Second Amended and Restated Fee, Reimbursement and Indemnity Agreement, dated May 11, 2020 between Harte Hanks, Inc. and HHS Guaranty, LLC(filed as Exhibit 10.1(d) to the company's Form 10-Q for three months ended March 31, 2020).

~~10.1 (i)~~	~~Small Business Administration Paycheck Protection Program Loan Note, dated as of April 14, 2020 (filed as Exhibit 10.1(e) to the company's Form 10-Q for three months ended March 31, 2020).~~

~~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~~’sCompany’s Form 8-K dated June 27, 2008).
10.04
~~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 2013 Omnibus Incentive Plan Performance Restricted Stock Unit Award Agreement~~

~~10.2(o)~~		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~~Company's Form 8-K dated October 14, 2016).
10.05
~~10.2(p)~~		~~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(q)~~		~~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(r)~~		~~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(s)~~		~~Harte Hanks, Inc.2020 Equity Incentive Plan, dated as of August 3, 2020~~ ~~(incorporated by reference to Appendix A of the Company’s definitive proxy statement on Schedule 14A as filed with the Commission on May 22, 2020 (SEC File No. 001-07120)).~~

~~10.2(t)~~		~~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)~~		~~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 (d)~~		~~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 (e)~~		~~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(f)~~		~~Employment Agreement between the company and Andrew Bennett dated November 19, 2019 (filed as Form 8-K, dated November 19, 2019).~~

~~10.3(g)~~		~~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)

~~10.4 (b)~~		Cooperation Agreement dated as of May 17, 2018, by and between Harte Hanks, Inc. Houston H. Harte, Sarah Harte, Carolyn Harte, Larry D. Franklin and the Franklin Family Foundation (filed as Exhibit 99.1 to the Company's Current Report on Form 8-K dated May 17, 2018).

~~Other Exhibits~~

*10.5	~~Supplier Supply and Services Agreement Between Harte-Hanks Direct, Inc. and Wipro, LLC dated as of July 22, 2016.~~

*10.5 (b)	Securities Purchase Agreement, dated January 23, 2018, by and between Harte Hanks, Inc. and Wipro, LLC (filed as Exhibit 10.1 to the ~~company~~’scompany's Form 8-K dated January 29, 2018).
10.06			Amended and Restated Harte Hanks 2013 Omnibus Incentive Plan effective September 13,2018 (filed on Form S-8 file number 333-227325 as exhibit 4.1 ).
*10.07		Harte Hanks, Inc. 2020 Equity Incentive Plan, dated August 3, 2020 (as filed S-8 file number 333-240325 ).
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 1 9 , 202 3 (filed as Exhibit 10.1 to the company's Form 8-K, dated June 20 , 202 3 ).
*10.10		Separation Agreement between the Company and Brian Linscott effective as of June 21, 2023.
10.11		Hart Hanks Inc. 2023 Inducement Equity Incentive Plan (Filed as Exhibit 99.01 to the company's Form S-8 on August 25, 2023 as file number 333-274226).
10.12		Separation Agreement between the Company and Lauri Kearnes effective as of October 15, 2025 (filed as Exhibit 10.1 to the company's Form 8-K, dated October 17, 2023).
10.13		First Amendment to Loan Agreement , effective December 29, 2023 , among Harte Hanks Inc. the subsidiary guarantors party thereto and with Te xas Capital Bank (filed as E xhibit 10.1 on 8-K dat ed January 5, 202 4 ).
*21.1			Subsidiaries of Harte Hanks, Inc.
*23.1			Consent of Baker Tilly US LLP.
*~~23.1~~ 31.1			~~Consent of Moody, Famiglietti & Andronico, 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
*31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1
~~31.3~~	~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.4~~	~~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
*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

*Previously filed or furnished with the Original Filing, as applicable.

Table of Contents


INDEX TO EXHIBITS (continued)
Exhibit No.						Description of Exhibit
*101.INS						Inline 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.SCH						Inline XBRL Taxonomy Extension Schema Document.
*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document.
*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
*101.DEF						Inline XBRL Definition Linkbase Document.
*104						Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).
*Filed or furnished herewith, as applicable

Table of Contents

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/ ~~Andrew Benett~~ Kirk Davis
	Kirk Davis	~~Andrew Benett~~
	Chief Executive Officer

Date:	April 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/ Kirk Davis						/s/ David Garrison
Kirk Davis						David Garrison
~~Date:~~ Chief Executive Officer						Chief Financial Officer
Date: April ~~30, 2021~~ 1, 2024						Date: April 1, 2024

/s/ John H. Griffin, Jr.						/s/ Genevieve C. Combes
John H. Griffin Jr., Director						Genevieve C. Combes, Director
Date: April 1, 2024						Date: April 1, 2024


/s/ David L. Copeland						/s/ Radoff, Bradley L
David L. Copeland, Director						Bradley L. Radoff, Director
Date: April 1, 2024						Date: April 1, 2024


/s/ Liz Ross
Liz Ross, Director
Date: April 1, 2024

Table of Contents

Harte Hanks, Inc. and Subsidiaries

Index to Consolidated Financial Statements

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.

1435

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Harte Hanks, Inc. and Subsidiaries:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Harte Hanks, Inc. and Subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, changes in stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public 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 audits 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.

Table of Contents

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/ Baker Tilly US, LLP

We have served as the Company’s auditor since 2019.

Tewksbury, Massachusetts

April 1, 2024

Table of Contents


Harte Hanks, Inc. and Subsidiaries Consolidated Balance Sheets	December 31,
In thousands, except per share and share amounts	2023		2022
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 receivable	7,935		8,202
Prepaid expenses	1,915		2,176
Prepaid income tax and income tax receivable	1,758		4,262
Other current assets	928		1,607
Total current assets	65,213		66,311
Net property, plant and equipment	8,855		10,523
Right-of-use assets	25,417		19,169
Other assets
Intangible assets, net	2,820		3,540
Goodwill	1,926		2,398
Deferred tax assets, net	17,268		16,306
Other long-term assets	1,258		1,737
Total other assets	23,272		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 expenses	5,615		6,679
Deferred revenue and customer advances	3,195		4,590
Customer postage and program deposits	1,815		1,223
Other current liabilities	9,495		2,862
Short-term lease liabilities	4,815		5,747
Total current liabilities	48,111		43,566
Pension liabilities - Qualified plans	10,540		18,674
Pension liabilities - Nonqualified plan	18,630		19,098
Long-term lease liabilities	23,691		16,575
Other long-term liabilities	1,928		3,263
Total liabilities	102,900		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, respectively	12,221		12,221
Additional paid-in capital	157,889		218,411
Retained earnings	844,920		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’ equity	19,857		18,808
Total liabilities and stockholders’ equity	$	122,757	$	119,984
See Accompanying Notes to Consolidated Financial Statements.

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Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income


	Year Ended December 31,
In thousands, except per share amounts	2023		2022
Operating revenue	$	191,492	$	206,278
Operating expenses
Labor	97,968		104,620
Production and distribution	59,568		61,930
Advertising, selling, general and administrative	20,673		21,893
Restructuring expense	5,687		—
Depreciation and amortization expense	4,237		2,728
Total operating expenses	188,133		191,171
Operating income	3,359		15,107
Other expense (income), net
Interest (income) expense, net	(135)		438
Other expense (income), net	5,413		(4,644)
Total other expense (income), net	5,278		(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
Basic	7,310		7,101
Diluted	7,310		7,457

Comprehensive income, net of tax
Net (loss) income	$	(1,570)	$	36,776

Adjustment to pension liability	1,664		10,274
Foreign currency translation adjustments	2,548		(5,248)
Total other comprehensive income, net of tax	4,212		5,026

Comprehensive income	$	2,642	$	41,802

See Accompanying Notes to Consolidated Financial Statements.

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Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Deficit)


In thousands	Preferred 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 income											5,026		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.

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Harte Hanks, Inc. and Subsidiaries Consolidated Statements of Cash Flows


	Year Ended December 31,
In thousands	2023			2022
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 expense	4,237			2,728
Restructuring expense	861			—
Stock-based compensation	1,418			2,355
Net pension payment	70			(1,009)
Deferred income taxes	(1,474)			(19,843)
Changes in assets and liabilities, net of dispositions:
Accounts receivable, net and contract assets	5,654			3,843
Prepaid expenses, income tax receivable and other current assets	3,440			2,779
Accounts payable and accrued expense	844			6,200
Deferred revenue and customer advances	(1,395)			383
Customer postage and program deposits	592			(5,273)
Other accrued expenses and liabilities	(2,200)			(147)
Net cash provided by operating activities	10,477			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 equipment	3			57
Acquisition of InsideOut	500			(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 cash	2,548			(5,248)

Net increase (decrease) in cash and cash equivalents and restricted cash	7,500			(3,769)
Cash and cash equivalents and restricted cash at beginning of year	11,364			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

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

Note A — Background 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 include the accounts 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 its consolidated subsidiaries, or all of them taken as a whole, as the context may require.

Reclassifications

Certain amounts in the consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation.

Operating Expense Presentation in the Consolidated Statements of Comprehensive Income

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

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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 thousands	2023		2022
Balance at beginning of year	$	163	$	266
Net charges to expense	321		(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 thousands	2023		2022
United States	$	173,162	$	183,470
Other countries	18,330		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 thousands	2023		2022
United States	$	8,005	$	10,219
Other countries	850		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,
	2023		2022
Top ten customers	48.5	%	50.6	%
Top twenty-five customers	71.7	%	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 upon 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 contract, or contracts, with a customer

•Identification of the performance 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 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 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 each contract. These fees are typically a set 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 is 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 is typically based on a fixed price per month or per contract.

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Fair Value of Financial Instruments

Financial 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 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 and restricted cash, accounts receivable, trade payables, and long-term debt. The fair value of the assets in our funded pension plan is 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 thousands	2023		2022
Property, plant and equipment
Buildings and improvements	$	4,635	$	4,387
Equipment and furniture	20,881		20,478
Software	18,030		20,724
Software development and equipment installations in progress	1,842		8,947
Gross property, plant and equipment	45,388		54,536
Less accumulated depreciation	(36,533)		(44,013)
Net property, plant and equipment	$	8,855	$	10,523

Property, plant and equipment are stated 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 improvements						3 to 40
Software						2 to 10
Equipment and furniture						3 to 20

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 recorded $0.1 million and $0.2 million of impairment of long-lived assets in 2023 and 2022, respectively.

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Leases

We determine if an arrangement is a lease at its inception. Operating and finance leases are included in the lease right-of-use (“ROU”) assets and in 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 commencement 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 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

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

Goodwill is the amount by which the cost of the acquired net assets in a business combination exceeds the fair value of the identifiable net assets on the date of purchase. Goodwill is not amortized. Goodwill is reviewed for impairment at least annually during the fourth quarter, or more frequently if events occur indicating the potential for impairment.

The Company has three reporting segments, but the current goodwill balance is booked in the Customer Care segment. During its goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying 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 these 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, then no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairment test. 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 no 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 and subsequently amortized over their useful lives using the straight-line method, which reflects the pattern of benefit, and assumes no residual value.

Finite-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 is not recoverable on 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 estimate 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 generate to determine if a write-down to the recoverable amount is appropriate. If such assets are written down, an impairment will be recognized as the amount by which the book value of the asset group exceeds the recoverable amount. There is no impairment of our intangible 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 is based upon the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is 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. 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. Our workers’ compensation programs are a guaranteed cost 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. On December 31, 2023 and 2022, our reserve for healthcare, workers’ compensation, net, automobile, and general liability was $1.1 million, for the year ended December 31, 2023 and 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. 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.

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 income.

Recent Accounting Guidance Not Yet Adopted

In November 2023, the FASB issued accounting standards 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.

No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the consolidated financial statements.

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Note C - Operating revenue from Contracts with Customers

Under Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (“ASC 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 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. This standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This 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 nature of the 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 thousands	Revenue 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 Care	63,327		—		63,327
Fulfillment & Logistics Services	69,038		15,923		84,961
Total Revenue	$	171,315	$	20,177	$	191,492


	For the Year Ended December 31, 2022
In thousands	Revenue 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 Care	67,205		—		67,205
Fulfillment & Logistics Services	75,081		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 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 to a distinct good or service that forms part of a single performance obligation. For most performance obligations, we determine SSP based on the price 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 other performance obligations in each of 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 best approach to measure the progress toward completion of the project-based performance obligations is the input method, which is based on either the costs or labor hours incurred to date depending 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 concluded that they are stand-ready obligations to be recognized over time on a monthly basis. Our promise to provide certain data related services meets the over-time recognition criteria because our services do not create an asset with an alternative use, and we have an enforceable right to payment. 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 our clients. These contracts may include a promise to purchase postage on behalf of our clients. In such cases, we have determined we are an agent, rather than principal and therefore recognize net consideration as revenue.

Customer Care

We deliver 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 provide us the right to invoice for services provided, therefore, we generally 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 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 purchase postage on behalf of 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 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 asset 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 2022:


In thousands	December 31, 2023		December 31, 2022
Contract assets	$	258	$	309
Deferred revenue and customer advances	3,195		4,590
Deferred revenue included in other long-term liabilities	294		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 Fulfill a Contract

We recognize an asset for the direct costs incurred to obtain and fulfill our contracts with customers to the extent that we expect to recover these costs and if the benefit is longer than one year. These costs are amortized to expense over the expected period of the benefit in a manner that is consistent with the transfer of the related 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 other costs that represents the cost to obtain a contract. The remaining unamortized contract costs were $0.6 million and $1.0 million as of December 31, 2023 and 2022, respectively. They are included in other current assets and other assets on our balance sheet. For the years 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 remaining lease terms of one year to seven years, some of which may include options to extend the leases 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 finance and operating leases were approximately $0.1 million and $25.3 million respectively, and accumulated amortization associated with finance leases was $0.1 million. As of December 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 the 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, 2023						As of December 31, 2022
In thousands	Operating Leases		Finance Leases		Total		Operating Leases		Finance Leases		Total
Right-of-use Assets	$	25,288	$	129	$	25,417	$	18,574	$	595	$	19,169

Liabilities:
Short-term lease liabilities	4,773		42		4,815		5,587		160		5,747
Long-term lease liabilities	23,687		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, 2023 and 2022, the components of lease expense were as follows:


In thousands	Year Ended December 31, 2023		Year Ended December 31, 2022
Operating lease cost	$	5,526	$	5,832
Finance lease cost
Amortization of right-of-use assets	123		166
Interest on lease liabilities	7		16
Total Finance lease cost	130		182
Variable lease cost	2,068		1,899
Sublease income	(834)		(828)
Total lease cost, net	$	6,890	$	7,085

Other information related to leases was as follows:


In thousands	Year Ended December 31, 2023			Year 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 leases	21			15
Financing cash flows from finance leases	160			194

Weighted Average Remaining Lease term (in years)

Operating leases	6.84			5.92
Finance leases	1.04			1.36

Weighted Average Discount Rate
Operating leases	5.65		%	3.55		%
Finance leases	7.76		%	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
2025	4,648		3
2026	4,219		1
2027	4,191		—
2028	4,094		—
2028 & Beyond	11,397		—
Total future minimum lease payments	34,722		48
Less: Imputed interest	6,262		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 table above.

As of December 31, 2023, 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 Company 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 previously paid into escrow at the signing of the Repurchase Agreement on June 30, 2022 and held in escrow until the closing of the 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, 2023, we repurchased 0.4 million shares of common stock for $2.4 million.

Note F — Long-Term Debt

Credit Facility

On December 21, 2021, the Company entered a new three year, $25.0 million asset-based revolving credit facility (the “Credit Facility”) with Texas Capital Bank ("TCB"). The Company’s obligations under the Credit Facility are guaranteed on a joint and several basis by the Company’s material subsidiaries (the “Guarantors”). The Credit Facility is secured by substantially all the assets of the Company and 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 extension was executed with substantially similar terms and conditions.

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The Credit Facility provides for loans up to the lesser of (a) $25.0 million, and (b) the amount available under a “borrowing base” calculated primarily by reference to the Company's cash and cash 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 7.64% as of December 31, 2023. The outstanding amounts advanced under the Credit Facility are due and payable in full on June 30, 2025. As of December 31, 2023 and 2022, we had no borrowings outstanding under the Credit Facility. As of December 31, 2023 and 2022, we had letters of credit outstanding in the amount of $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 general liability. Unused commitment balances accrued fees at a rate of 0.25%.

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

Cash payments for interest were $0.2 million and $0.3 million for the years ended December 31, 2023 and 2022, respectively.

Note G — 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. We recognized $1.4 million and $2.4 million of stock-based compensation expense for the years ended December 31, 2023 and 2022, respectively.

In May 2013, our stockholders approved the 2013 Omnibus Incentive Plan (“2013 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”), 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, 2023 and 2022, there were 190,187and 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.

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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 6,663 shares granted under 2013 Plan awards were outstanding as of December 31, 2023, with exercise prices ranging from $5.59 to $116.40 per share. Options to purchase 8,268 shares granted under 2013 Plan awards were outstanding as of December 31, 2022, with exercise prices ranging from $76.80 to $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 4,400 shares were outstanding under the 2005 Plan as of December 31, 2022, with exercise prices ranging from $76.80 to $115.20 per share.

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 traded successor with an equivalent award (as defined in such officers’ change in control severance agreements).

The following summarizes all stock option activity during the years ended December 31, 2023 and 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, 2021	37,615	$	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, 2022	12,668	$	78.88	1.16	$	—

Granted in 2023	240,000	$	5.59	9.67	288
Exercised in 2023	—	—		—	—
Unvested options forfeited in 2023	—	—		—	—
Vested options expired in 2023	(6,005)	77.38		—	—
Options outstanding at December 31, 2023	246,663	$	7.61	9.38	$	288

Vested and expected to vest at December 31, 2023	246,663	$	7.61	9.38	$	288

Exercisable at December 31, 2023	6,663	$	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, 2023. The pre-tax intrinsic value is the difference between the closing price of our common stock on December 31, 2023, 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, 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 - 76.80	242,010	$	6.18	9.55	2,010	$	76.80
$77.60 - 116.40	4,653	$	81.72	0.37	4,653	$	81.72

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There were 240,000 options granted during 2023 and no options were granted during 2022. As of December 31, 2023, there was $0.8 million of unrecognized compensation cost related to unvested stock options.

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 and expire after 10 years. Cash stock appreciation rights settle solely in cash and are treated as a liability.

There were no cash stock appreciation rights issued during 2023 and 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 in the income statement as changes to expense. As of December 31, 2023, there was no unrecognized compensation cost related to unvested cash stock appreciation right grants.

Restricted Stock Units

Restricted stock units 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. Restricted stock units settle in treasury stock or newly issued shares and are treated as equity. Outstanding restricted 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 traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).

The following summarizes all restricted stock units’ activity during 2023 and 2022:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested shares outstanding at December 31, 2021	646,439	$4.41

Adjustment and Correction	40,000	—
Granted in 2022	208,165	8.93
Vested in 2022	(296,161)	4.85
Forfeited in 2022	(82,267)	3.29
Unvested shares outstanding at December 31, 2022	516,176	$6.43

Granted in 2023	80,225	5.73
Vested in 2023	(308,523)	5.53
Forfeited in 2023	(44,437)	7.02
Unvested shares outstanding at December 31, 2023	243,441	$7.24

The fair value of each restricted stock unit is estimated on the date of grant as the closing market price of our common stock on the date prior to the grant. As of December 31, 2023, there was $1.1 million of total unrecognized compensation cost related to restricted stock units. This cost is expected to be recognized over a weighted average period of approximately 1.18 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 traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).

There were no cash stock appreciation rights issued during 2023 and 2022.

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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 prior 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, 2023, there was no unrecognized compensation cost related to phantom stock units.

Performance Stock Units

Performance 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 traded successor with an equivalent award (as such terms are defined in such 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 2023 and 2022:


	Number of Units	Weighted- Average Grant Date Fair Value
Performance stock units outstanding as of December 31, 2021	94,110	$	5.41

Granted in 2022	117,000	$	7.77
Settled in 2022	(69,110)	5.44
Forfeited in 2022	—	—
Performance stock units outstanding as of December 31, 2022	142,000	$	7.34

Granted in 2023	—	$	—
Settled in 2023	—	—
Forfeited in 2023	(99,000)	7.14
Performance stock units outstanding as of December 31, 2023	43,000	$	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 prior 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, 2023, the total unrecognized compensation cost related to performance stock units was approximately $29,770. This cost is expected to be recognized over a weighted average period of approximately 0.44 years.

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 traded successor with an equivalent award (as such terms are defined in such officers’ change-in-control severance agreements).

There was no cash performance stock unit issued during 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 prior 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, 2023, there was no unrecognized compensation cost related to cash performance stock units.

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 thousands	2023		2022
Change in benefit obligation
Benefit obligation at beginning of year	$	143,521	$	186,041
Interest cost	7,088		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 assets	7,128		(20,358)
Contributions	3,324		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 thousands	2023		2022
Current pension liabilities	$	8,561	$	1,858
Long term pension liabilities - Qualified plans	10,540		18,674
Long term pension liabilities - Nonqualified plan	18,630		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 thousands	2023		2022
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 thousands	2023		2022
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 thousands	2023		2022
Net Periodic Benefit Cost
Interest cost	$	7,088	$	5,040
Expected return on plan assets	(6,216)		(5,872)
Recognized actuarial loss	2,521		2,876
Net periodic benefit cost	3,393		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 cost	Year Ended December 31,
	2023		2022
Discount rate
Qualified Plan I	5.13	%	2.75	%
Qualified Plan II	5.18	%	2.92	%
Restoration Plan	5.12	%	2.73	%

Expected return on plan assets
Qualified Plan I	5.95	%	4.25	%
Qualified Plan II	7.05	%	5.75	%
Restoration Plan	n/a		n/a


Weighted-average assumptions used to determine benefit obligations	December 31,
	2023		2022
Discount rate
Qualified Plan I	5.64	%	5.13	%
Qualified Plan II	4.99	%	5.18	%
Restoration Plan	4.92	%	5.12	%

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, 2023 and 2022, by asset category, were as follows:


In thousands	2023		%		2022		%
Equity securities	$	20,635	20	%	$	50,090	48	%
Debt securities	76,036		73	%	49,846		48	%
Other	7,025		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 thousands	December 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 securities	76,036		66,847		9,189		—
Total investments, excluding investments valued at NAV	96,671		87,482		9,189		—
Investments valued at NAV(1)	7,025		—		—		—
Total plan assets	$	103,696	$	87,482	$	9,189	$	—


In thousands	December 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 NAV	99,936		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 I	Target	Acceptable Range	Benchmark 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 Income	95%	0% - 100%
Investment Grade	95%	0% - 100%	BBG BARC US Aggregate Bond Index
Cash Equivalent	5%	0%-100%	ICE BofA US 3-Month Treasury Bill Index TR

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Qualified Pension Plan II	Target	Acceptable Range	Benchmark Index
Equities	77%	62% - 87%
U.S. Large Cap	28%	18% - 38%	Russell 1000 TR
U.S. Mid Cap	18%	13% - 23%	Russell Mid Cap Index TR
U.S. Small Cap	9%	4% - 14%	Russell 2000 TR
International Equity
Developed	16%	11% - 21%	MSCI EAFE Net TR USD Index
Emerging Markets	6%	0% - 9%	MSCI Emerging Net Total Return
Fixed Income	21%	11% - 31%
Investment Grade	21%	11% - 31%	BBG BARC US Aggregate Bond Index
Cash Equivalent	2%	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 next ten years as of December 31, 2023, are as follows:


In thousands
2024	$	89,460
2025	4,017
2026	4,111
2027	4,217
2028	4,327
2029 - 2033	22,809
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 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 — Income Taxes

Coronavirus Aid, Relief and Economic Security Act

The 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, 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 thousands	2023		2022
Current
Federal	$	(10)	$	60
State and local	264		774
Foreign	871		1,546
Total current	$	1,125	$	2,380

Deferred
Federal	$	(1,340)	$	(11,496)
State and local	(216)		(8,347)
Foreign	82		—
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 thousands	2023		2022
United States	$	(7,546)	$	10,252
Foreign	5,627		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 thousands	2023		2022
Computed expected income tax (benefit) expense	$	(403)	$	4,056
Net effect of state income taxes	(206)		1,074
Foreign subsidiary dividend inclusions	507		639
Foreign tax rate differential	(257)		(349)
Change in valuation allowance	(562)		(18,243)
Return to Provision	706		(141)
Change in Rate	165		(2,172)
Credits	(543)		(1,126)
Adjustments to State Attributes	(137)		(1,330)
Other Adjustments, net	381		129
Income tax benefit	$	(349)	$	(17,463)

Total income tax benefit was allocated as follows:


	Year Ended December 31,
In thousands	2023		2022
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 thousands	2023		2022
Deferred tax assets
Deferred compensation and retirement plan	$	9,667	$	10,246
Accrued expenses not deductible until paid	1,177		33
Lease liability	6,979		5,591
Investment in foreign subsidiaries, outside basis difference	1,604		1,047
Interest Expense limitations	971		913
Other, net	1,320		1,667
Foreign net operating loss carryforwards	1,382		1,623
State net operating loss carryforwards	5,309		5,184
Foreign tax credit carryforwards	3,730		4,212
General Business Credit Carryovers	538		546
Total gross deferred tax assets	32,677		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 consider whether it is more likely than not that some portion or all of the 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 valuation allowance is $0.6 million for the year ended December 31, 2023.

We or one of our 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 no longer subject to tax 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 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).

For U.S. tax return purposes, net operating losses and tax credits are normally available to be carried 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 provided on the undistributed earnings of our foreign subsidiaries as these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. It is not practicable to

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estimate the amount of additional taxes which may be payable upon the distribution of these earnings. However, because of the provisions in the Tax Reform Act, the tax cost of repatriation is immaterial and limited to foreign withholding taxes, currency translation and state taxes.

Note J — Earnings Per Share

In periods in which the Company has net income, the Company is required to calculate earnings per share (“EPS”) using the two-class method. The two-class method is required because the Company’s Series A Preferred Stock is considered a participating security with objectively determinable and non-discretionary dividend participation rights. Series A Preferred stockholders have the right to participate in dividends above their five percent dividend rate should the Company declare dividends on its common 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 the preferred stockholders. The weighted-average number of common and preferred 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 Company 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 calculation would be anti-dilutive.

Reconciliations of basic and diluted EPS are as follows:


	Year Ended December 31,
In thousands, except per share amounts	2023		2022
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 outstanding	7,310		7,101
Diluted EPS denominator	7,310		7,457

Basic (loss) income per common share	$	(0.21)	$	4.98
Diluted (loss) income per common share	$	(0.21)	$	4.75

For the years ended December 31, 2023 and 2022, respectively, the following shares have been excluded from the calculation of shares used in the diluted EPS calculation: 99,791 and 13,366 shares of anti-dilutive market price options; 37,653 and 24,918 anti-dilutive unvested shares.

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Note K — Comprehensive Income

Comprehensive income (loss) for a period encompasses net income (loss) and all other changes in equity other than from transactions with our stockholders.

Changes in accumulated other comprehensive loss by component were 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 tax	10,274		—		10,274
Net current period other comprehensive income (loss), net of tax	10,274		(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 tax	1,664		—		1,664
Net current period other comprehensive income, net of tax	1,664		2,548		4,212
Balance at December 31, 2023	$	(42,456)	$	(1,634)	$	(44,090)

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

Note L — Acquisition of InsideOut Solutions, LLC

On December 1, 2022 (the “Closing Date”), we purchased substantially all of the assets (the “Transaction”) of InsideOut Solutions, LLC, a Florida limited liability company (“InsideOut”), for an aggregate purchase price of approximately $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 result, $0.50 million was refunded from the escrow account and our goodwill amount was decreased by $0.5 million. The remaining $0.5 million cash in escrow account is included in other assets in our balance sheet as of December 31, 2023.

The acquisition was accounted for under the acquisition method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition has been recorded to the assets acquired and liabilities assumed based 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 thousands						Amount
Accounts receivable						$1,445
Prepaid expenses						148
Property, plant and equipment						177
Total assets acquired						1,770
Less: Current liabilities assumed						(761)
Net assets acquired						$1,009

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The Purchase Price was subject to a post-closing net working capital true-up. The true up made was immaterial.

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 summary of the Company’s intangible asset as of December 31, 2023, is as follows:


In thousands	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer Relationships	5 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
2025	720
2026	720
2027	660
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 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.

We 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 extent losses are reasonably estimable. Accruals are recorded for these matters to the extent 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 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 contingencies include, among others: (i) the opinions and views of our general counsel and outside legal counsel; (ii) our previous experience with similar claims; and (iii) the decision of our management as to how we intend to respond to the complaints.

Note N — Restructuring Activities

For the year ended December 31, 2023, we recorded restructuring charges of $5.7 million. The 2023 restructuring charges 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.

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The following table summarizes the restructuring charges which are recorded in “Restructuring Expense” in the Consolidated Statement of Comprehensive Income.


In thousands	Year Ended December 31, 2023
Consulting expense	$	4,579
Severance	169
Facility, asset impairment and other expense
Lease impairment and termination expense	798
Fixed Asset disposal and impairment charges	63
Facility and other expenses	78
Total facility, asset impairment and other expense	939

Total	$	5,687

The following table summarizes the changes in liabilities related to restructuring activities:


	Year Ended December 31, 2023
In thousands	Consulting		Severance		Facility, asset impairment and other expense		Total
Beginning balance:	$	—	$	—	$	—	$	—
Additions	4,579		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 cost-saving and restructuring initiatives, we expect to incur total restructuring charges of $10.1 million through the end of 2024.

Note O — Segment Reporting

Harte Hanks is a leading global customer experience company. We have organized our operations into three business segments based on the types 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 handled 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 mail and product fulfillment and logistics services. We offer a variety of product 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 operating groups. Interest income and expense are not allocated to the segments. The Company does not allocate assets to our reportable segments for internal reporting purposes, nor does our CEO evaluate operating segments using discrete asset information. The accounting policies of the segments are consistent with those described in the Note B, Significant Accounting Policies.

The following table presents financial information by segment year ended December 31, 2023:


(In thousands)	Marketing Services		Customer Care		Fulfillment & Logistics		Restructuring		Unallocated Corporate		Total

Operating revenue	$	43,204	$	63,327	$	84,961	$	—	$	—	$	191,492
Segment operating expense	34,795		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 Allocation	2,984		2,774		2,891		—		(8,649)		—
EBITDA	$	5,425	$	10,702	$	8,857	$	(5,687)	$	(11,701)	$	7,596
Depreciation and amortization expense	312		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:


(In thousands)	Marketing Services		Customer Care		Fulfillment & Logistics		Restructuring		Unallocated Corporate		Total

Operating revenue	$	52,975	$	67,205	$	86,098	$	—	$	—	$	206,278
Segment operating expense	41,241		52,173		72,180		—		22,849		188,443
Restructuring expense	—		—		—		—		—		—
Contribution margin	$	11,734	$	15,032	$	13,918	$	—	$	(22,849)	$	17,835
Overhead allocation	4,390		2,865		3,325		—		(10,580)		—
EBITDA	$	7,344	$	12,167	$	10,593	$	—	$	(12,269)	$	17,835
Depreciation and amortization expense	362		884		824		—		658		2,728
Operating income (loss)	$	6,982	$	11,283	$	9,769	$	—	$	(12,927)	$	15,107


Delaware	74-1677284		~~74-1677284~~ 1 Executive Drive, Chelmsford, MA 01824
(State or other jurisdiction of	(I.R.S. Employer		(Address of principal executive offices,
incorporation or organization)			~~(I.R.S. Employer~~ Identification Number)
		including zip code)


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	~~HRTH~~ HHS	~~OTCQX~~ NASDAQ

~~Large accelerated filer~~	☐	~~Accelerated filer~~	☐
~~Non-accelerated filer~~	☒	~~Smaller reporting company~~	☒
		~~Emerging growth company~~	☐


			x			☒			ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			o			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

									All Other
		Salary			Bonus		Stock Awards		Compensation		Total
Name and Principal Position	Fiscal Year	($)			($)		($)(1)		($)		($)
(a)	(b)	(c)			(d)		(e)		(f)		(g)
Andrew B. Benett, Chief Executive Officer	2020		380,000			228,000	(2)	364,500		120,000		1,092,500
	2019		57,692	(3)		—		427,500		—		485,190
Brian Linscott, Chief Operating Officer	2020		338,654			247,500	(4)	201,648		—		787,802
Laurilee Kearnes, Current Chief Financial Officer (5)	2020		282,692			167,124		120,250		667		570,733
	2019		235,096			52,169		136,843		—		424,108

Name	Year	Insurance Premiums ($) (1)		Other ($)			Total ($)
Andrew B. Benett, Chief Executive Officer	2020		—		120,000	(2)		120,000
Laurilee Kearnes, Current Chief Financial Officer	2020		667		—			667

Plan Category		(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1)		(b) Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (2)		(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)(3)
Equity compensation plans approved by security holders		909,724		$40.25		2,060,951

	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) (2)
(a)	(b)		(c)			(d)		(e)	(f)			(g)		(h)			(i)
Andrew Benett										250,000	(3)	$	687,500		—			—
Laurilee Kearnes		200		—		$	123.1	2/5/2021		520	(5)	$	1,430		26,316	(7)	$	94,211
		300		—		$	99.1	2/5/2022		73,772	(6)	$	202,873
		400		—		$	77.2	2/5/2023
		297		—		$	82.3	4/15/2024
		854		—	(4)	$	76.8	4/15/2025
Brian Linscott										75,000		$	206,250

Annual Retainer	$	60,000
Annual Equity Awards (18,000 shares)	$ 33,300
Annual Committee Chair Fee	$ 5,500 to $12,500
Lead Independent Director Fee	$	35,000

Name	Fees Earned or Paid in Cash($) (1)	Option Awards ($)	Stock Awards ($) (2)	Total ($)
David L. Copeland	60,000	—	33,300	93,300
John H. Griffin Jr.	60,000	—	33,300	93,300
Melvin L. Keating	40,538	—	33,300	73,838
Maureen E. O’Connell	37,742	—	33,300	71,042
Alfred V. Tobia Jr.	63,075	—	33,300	96,375
Evan Behrens	79,570	—	33,300	112,870

Name and Address of Beneficial Owner (1)(2)	Number of Shares of Common Stock	Percent of Class
Named Executive Officers
Andrew B. Benett	213,500	*
Brian Linscott	36,004	*
Laurilee Kearnes	4,318	*
Directors
Evan Behrens	40,636	*
David L. Copeland (3)	390,947	5.86%
John H. Griffin, Jr.	51,389	*
Alfred V. Tobia, Jr.	55,741	*

5% Holders
Wipro LLC (4)	1,001,658	15.02%
William Blair & Company LLC (5)	661,118	9.92%
Houston H. Harte (6)	660,816	9.91%
Fondren Management LP (7)	592,000	8.88%
Westerly Holdings LLC (8)	975,000	14.62%
Dimensional Fund Advisors LP (9)	271,009	4.06%

All current directors and executive officers as a group (7 persons)(10)	792,535	11.89%

	Years Ended
	December 31,
	2020	2019
Audit fees	$441,150	$375,000
Tax Fees (relating to state, federal and international tax matters)	—	—
Audit related fees	—	—
All Other Fees	—	—
Total audit and audit-related fees	$441,150	$375,000


Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (PCAOB ID: 23)			36

Consolidated Balance Sheets as of December 31, 202 3 and 2022			38

Consolidated Statements of Comprehensive Income for the years ended December 31, 202 3 and 2022			39

Consolidated Statements of Changes in Stockholders' Equity (Deficit ) for the years ended December 31, 20 2 3 and 2022			40

Consolidated Statements of Cash Flows for the years ended December 31, 202 3 and 2022			41

Notes to Consolidated Financial Statements			42