Harte Hanks Inc. (NYSE: HHS) has announced that it is in the process of exploring strategic alternatives for Trillium Software business. The business generated revenue of $11.2 million in 1Q2016.
Although Harte Hanks said that it did not intend to make further public comments on the issue of seeking strategic deals for Trillium, it hinted that a sale of the business was part of the consideration. The other alternative is that the company could bring on board a partner to own a portion of the business.
Whether Harte Hanks Inc. (NYSE: HHS) sells Trillium in entirety or only a portion of the business, it expects to generate some cash and drop some burden so that it can focus on its core competencies.
According to CEO, Karen Puckett, a sale of Trillium software business should pave the way for Harte Hanks to achieve more rapid growth and generate stronger cash flow.
What’s the value in Trillium?
It is not clear how much Harte Hanks Inc. (NYSE: HHS) is valuing Trillium. But the business contributed $11.2 million to the topline in 1Q2016 compared $11.9 million in the corresponding quarter a year earlier. Lower revenue licenses as well as a decrease in incomes related to maintenance and professional services contributed the revenue hit in Trillium business in the latest quarter.
Harte Hanks Inc. (NYSE: HHS) squeezed $2.2 million in operating revenue from Trillium in 1Q2016. But the amount dropped from $3 million a year earlier because of the lower revenue. However, Harte Hanks believes that transition to subscription business model was the major contributor to the revenue hit at Trillium.
Overall, Harte Hanks generated revenue of $110.7 million in 1Q2016, down from $121.2 million in the like quarter a year earlier. It logged EPS loss of $0.09 in the latest quarter compared to $0.03 a year ago.
The perfect timing for Harte Hanks Inc. (NYSE: HHS)?
At a time when Trillium is shifting to a recurrent revenue model, the board of Harte Hanks Inc. (NYSE: HHS) determined that it was the best time to explore strategic opportunities for the business. Nevertheless, the company made it clear that there was no guarantee that its efforts to secure a strategic fit for Trillium would result in a deal.