Harte Hanks is trimming $10 million in annual costs and selling its 3Q Digital subsidiary as part of a plan to enhance the San Antonio marketing company’s “strategic position and financial flexibility,” the San Antonio company said in a statement Tuesday.

A large part of the cost cuts will come through employee layoffs and attrition, Harte Hanks spokesman Scott Hamilton said. He declined to say how many employees will be affected other than to say the figure will be “minor.” There will be consolidation of back-office and information technology functions, he said.

Harte Hanks, which specializes in direct mail marketing, has less than a dozen employees in San Antonio and about 5,000 across the globe, Hamilton said. It operates in 11 states, four European countries and the Philippines, but he said there are no plans to close any locations.

The cost reductions are intended “to increase focus, simplify operations and provide additional liquidity,” Harte Hanks said in its statement.

The plan to sell 3Q Digital, a digital marketing agency, comes a little more than two years after the business was acquired for $30.2 million in cash.

The 2015 deal included the possibility of additional cash payments ranging from nothing up to $35 million, depending on the achievement of certain revenue growth goals, Harte Hanks disclosed in a Securities and Exchange Commission filing that year. Hamilton said any additional payments that may be owed would be made in the first quarter of next year.

Harte Hanks did not disclose how much 3Q Digital might fetch in a sale.

“We believe 3Q Digital is a highly attractive asset and its sale will unlock its maximum value for our stockholders,” Harte Hanks CEO and President Karen Puckett said in a statement. The company expects to continue to partner with 3Q Digital after the sale.

The initiatives will “further focus” the company on its “core business of providing data driven customer engagement marketing services to brands,” Harte Hanks said in its statement.

In December, Harte Hanks sold its Trillium Software business to Syncsort Inc. for $112 million. Net proceeds were used to pay off debt.

Meanwhile, Harte Hanks disclosed it has secured $20 million in financing for two years from Texas Capital Bank. The company will use the money for working capital and general corporate purposes. The financing has been guaranteed by certain members of the Shelton family, descendants of one of Harte Hanks’ founders. The family collectively owns about 5 percent of Harte Hanks’ stock.

Harte Hanks is late in filing its financial results for the fourth quarter and full-year for 2016. It estimated that it lost up to $65 million on up to $405 million in revenue from continuing operations in 2016. It lost $170.9 million on $444.2 million in revenue in 2015.

It attributed the slide in revenue to reduced mail volumes, client attrition and the sale of a business.

The company blamed the late filing of its financial results, in part, on additional “time-consuming review, testing and evaluation related to potential material weaknesses in internal controls,” according to an April 6 SEC filing.

Harte Hanks also disclosed it’s not in compliance with the New York Stock Exchange’s listing requirements because of the failure to timely file financial results. The company can regain compliance by filing the results by Sept. 16. It can also seek an extension of up to six months. Nevertheless, the NYSE could begin delisting the company’s stock at any time, the company added in the SEC filing.

Harte Hanks’ shares were up 15 cents to $1.39 in early Tuesday afternoon trading.


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