PITTSBURGH, July 27, 2016 /PRNewswire/ -- Mastech
Holdings, Inc. (NYSE MKT: MHH), a national provider of Information
Technology staffing services, announced today its financial results
for the second quarter ended June 30,
2016.
Second Quarter 2016 Highlights:
- Revenues totaled $33.6 million
compared to $29.3 million in the 2015
second quarter; and represented a 6% sequential increase over first
quarter 2016;
- Gross profit margins increased to 20.5% from 18.8% in the
second quarter of 2015 and 19.3% in the first quarter of 2016;
- Non-GAAP diluted earnings per share were $0.25 versus $0.18
per diluted share in the 2015;
- GAAP diluted earnings per share were $0.21 versus $0.09
per diluted share in the 2015 second quarter; and
- Consultants-on-Billing increased by 7% during the second
quarter of 2016 compared to flat organic growth in the second
quarter of 2015.
Second Quarter Results:
Revenues for the second quarter of 2016 totaled $33.6 million compared to $29.3 million during the corresponding quarter
last year. Gross profit in the second quarter of 2016 was
$6.9 million compared to $5.5 million in the second quarter of 2015. GAAP
net income for the second quarter of 2016 totaled $945,000, compared to $382,000 during the same period last
year. Non-GAAP net income for the second quarter of 2016 was
$1.1 million, compared to
$801,000 in the second quarter of
2015. GAAP diluted earnings per share were $0.21 in the second quarter of
2016 compared to $0.09 in the
second quarter of 2015. Non-GAAP diluted earnings per share were
$0.25 in the second quarter of 2016
compared to $0.18 for the
corresponding period in 2015.
Demand for the Company's staffing services was up from the
previous quarter, resulting in an increase to our consultant-base
of 62 consultants to a total of 916 consultants-on-billing at
quarter end. Gross margins in the second quarter of 2016 were
20.5%, representing a material increase from both the previous
quarter's 19.3% gross margin performance and the 18.8% margins that
were reported in second quarter 2015.
Commenting on the Company's second quarter 2016, Vivek Gupta, Mastech's Chief Executive Officer,
stated, "We were able to organically grow our consultant-base
during the quarter by 7%; our gross margins improved nicely from a
quarter ago; and we completed a number of personnel moves aimed at
strengthening our leadership capabilities and improving our
operational effectiveness. Additionally, we have begun our journey
of re-positioning Mastech to capitalize on opportunities in the
vast area of digital technologies."
Jack Cronin, Mastech's Chief
Financial Officer, stated, "Our financial position at June 30, 2016 remains strong with $13 million of outstanding debt, net of cash
balances on hand, and access to $10.7
million of borrowing capacity. During the quarter, we
were able to reduce our outstanding debt balance by approximately
$1.7 million."
In conjunction with its second quarter earnings release, Mastech
will host a conference call at 9:00 A. M. ET on July 27, 2016 to discuss these results and to
answer questions. A live webcast of this conference call will
be available on the Company's website, www.mastech.com. Simply
click on the Investor Relations section and follow the links to the
live webcast. The webcast will remain available for replay
through August 3, 2016.
About Mastech Holdings, Inc.:
Leveraging the power of 30 years of
IT experience, Mastech (NYSE MKT:
MHH) provides Information Technology Staffing services in
the disciplines which drive today's business operations.
More information about Mastech can be found at Mastech's
website: www.mastech.com.
Use of non-GAAP Measures:
This press release contains non-GAAP financial measures to
supplement our financial results presented on a GAAP
basis. The presentation of these financial measures is not
intended to be considered in isolation or as a substitute for, or
superior to, financial information prepared and presented in
accordance with GAAP. Investors are cautioned that
there are material limitations associated with the use of
non-GAAP financial measures as an analytical
tool. Reconciliations of these non-GAAP measures to their
comparable GAAP measures are included in the attached financial
tables.
We believe that providing non-GAAP net income and non-GAAP
diluted earnings per share offers investors useful supplemental
information about the financial performance of our business,
enables comparison of financial results between periods where
certain items may vary independent of business performance, and
allows for greater transparency with respect to key metrics used by
management in operating our business. Additionally, management
uses these non-GAAP financial measures in evaluating the
Company's performance.
Specifically, the non-GAAP financial measures contained herein
exclude the following expense items:
Amortization of acquired intangible assets: We
amortize intangible assets acquired in connection with our
June 2015 acquisition of Hudson
IT. We exclude these amortization expenses in our non-GAAP
financial measures because we believe it allows investors to make
more meaningful comparisons between our operating results and those
of other companies within our industry and facilitates a helpful
comparison of our results with other periods.
Acquisition related transaction expenses: We incurred
significant expenses in connection with our acquisition of Hudson
IT which we generally would not have otherwise incurred in the
periods presented as part of our continuing operations. These
transaction expenses consist of investment banking fees, legal
expenses, audit charges related to our acquired companies and
various advisor costs. We believe that providing non-GAAP financial
measures that exclude these expenses allows investors to make more
meaningful comparisons between our operating results and those of
other companies within our industry and facilitates a helpful
comparison of our results with other periods.
Stock-based compensation expenses: We incur material
recurring expense related to non-cash, stock-based compensation. We
exclude these expenses in our non-GAAP financial measures because
we believe that it provides investors with meaningful supplemental
information regarding operational performance. In particular,
because of varying available valuation methodologies, subjective
assumptions and the variety of award types that companies can use
under ASC 718, we believe that providing non-GAAP financial
measures that exclude these expenses allows investors to make more
meaningful comparisons between our operating results and those of
other companies within our industry and facilitates comparison of
our results with other periods.
Severance charges: From time to time, we incur
severance expense related to the termination by the Company of
leadership personnel. While it is probable that these expenses will
occur in the future, we believe that providing non-GAAP financial
measures that exclude these expenses are useful for investors to
understand the effects of these items on our total operating
expenses and facilitate comparison of our results with other
periods.
Forward-Looking Statements:
Certain statements contained in this release are forward-looking
statements based on management's expectations, estimates,
projections and assumptions. Words such as "expects,"
"anticipates," "plans," "believes," "scheduled," "estimates" and
variations of these words and similar expressions are intended to
identify forward-looking statements, which include but are not
limited to (i) projections of revenues, earnings, and cash flow,
and (ii) the expected completion of the acquisition, the time frame
in which this will occur, the expected benefits to Mastech from
completing the acquisition and the expected performance of Mastech
following completion of the acquisition. These statements are based
on information currently available to the Company and it assumes no
obligation to update the forward-looking statements as
circumstances change. These statements are not guarantees of
future performance and involve certain risks and uncertainties,
which are difficult to predict. Therefore, actual future results
and trends may differ materially from what is forecast in
forward-looking statements due to a variety of factors, including,
without limitation, the level of market demand for its services,
the highly competitive market for the types of services offered by
the Company, the impact of competitive factors on profit margins,
market conditions that could cause the Company's customers to
reduce their spending for its services, and the Company's ability
to create, acquire and build new lines of business, to attract and
retain qualified personnel, reduce costs and conserve cash, and
other risks that are described in more detail in the Company's
filings with the Securities and Exchange Commission including its
Form 10-K for the year ended December 31, 2015.
MASTECH HOLDINGS,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
735
|
|
$
|
848
|
Accounts receivable,
net
|
|
|
22,755
|
|
|
19,190
|
Prepaid and other current
assets
|
|
|
731
|
|
|
587
|
Deferred income
taxes
|
|
|
284
|
|
|
217
|
Total current assets
|
|
|
24,505
|
|
|
20,842
|
|
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
|
603
|
|
|
656
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
|
99
|
|
|
92
|
|
|
|
|
|
|
|
Deferred
financing costs, net
|
|
|
78
|
|
|
97
|
|
|
|
|
|
|
|
Non-current
deposits
|
|
|
232
|
|
|
237
|
|
|
|
|
|
|
|
Goodwill
|
|
|
8,427
|
|
|
8,427
|
|
|
|
|
|
|
|
Intangible assets,
net
|
|
|
7,720
|
|
|
8,126
|
Total assets
|
|
$
|
41,664
|
|
$
|
38,477
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of long-term
debt
|
|
$
|
1,800
|
|
$
|
1,800
|
Accounts payable
|
|
|
2,901
|
|
|
2,213
|
Accrued payroll and related
costs
|
|
|
7,122
|
|
|
5,965
|
Deferred revenue and other
liabilities
|
|
|
1,009
|
|
|
1,958
|
Total current liabilities
|
|
|
12,832
|
|
|
11,936
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
Long-term debt, less current
portion
|
|
|
11,913
|
|
|
10,738
|
Total liabilities
|
|
|
24,745
|
|
|
22,674
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
|
52
|
|
|
52
|
Additional paid-in
capital
|
|
|
13,295
|
|
|
13,114
|
Retained earnings
|
|
|
7,733
|
|
|
6,777
|
Accumulated other
comprehensive (loss)
|
|
|
(40)
|
|
|
(19)
|
Treasury stock, at
cost
|
|
|
(4,121)
|
|
|
(4,121)
|
Total shareholders' equity
|
|
|
16,919
|
|
|
15,803
|
Total liabilities and shareholders' equity
|
|
$
|
41,664
|
|
$
|
38,477
|
MASTECH HOLDINGS,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Amounts in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months ended
June 30,
|
|
Six Months ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
33,629
|
|
$
|
29,305
|
|
$
|
65,343
|
|
$
|
56,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
26,740
|
|
|
23,790
|
|
|
52,341
|
|
|
46,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
6,889
|
|
|
5,515
|
|
|
13,002
|
|
|
10,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
5,225
|
|
|
4,896
|
|
|
11,203
|
|
|
9,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
1,664
|
|
|
619
|
|
|
1,799
|
|
|
947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
|
|
(139)
|
|
|
2
|
|
|
(257)
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
|
1,525
|
|
|
621
|
|
|
1,542
|
|
|
932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
580
|
|
|
239
|
|
|
586
|
|
|
355
|
Net
income
|
|
$
|
945
|
|
$
|
382
|
|
$
|
956
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.22
|
|
$
|
0.09
|
|
$
|
0.22
|
|
$
|
0.13
|
Diluted
|
|
$
|
0.21
|
|
$
|
0.09
|
|
$
|
0.21
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,354
|
|
|
4,332
|
|
|
4,353
|
|
|
4,330
|
Diluted
|
|
|
4,451
|
|
|
4,436
|
|
|
4,450
|
|
|
4,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MASTECH HOLDINGS,
INC.
|
RECONCILIATION OF
GAAP MEASURES TO NON-GAAP MEASURES
|
(Amounts in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
Three Months ended
June 30,
|
|
|
Six Months ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
|
$
|
945
|
|
$
|
382
|
|
$
|
956
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of acquired intangible assets
|
|
|
203
|
|
|
34
|
|
|
406
|
|
|
34
|
Stock-based compensation
|
|
|
70
|
|
|
98
|
|
|
185
|
|
|
193
|
Acquisition transaction
expenses
|
|
|
-
|
|
|
549
|
|
|
-
|
|
|
599
|
Severance expenses
|
|
|
-
|
|
|
-
|
|
|
780
|
|
|
305
|
Income
taxes adjustments
|
|
|
(104)
|
|
|
(262)
|
|
|
(521)
|
|
|
(430)
|
Non-GAAP Net
Income
|
|
$
|
1,114
|
|
$
|
801
|
|
$
|
1,806
|
|
$
|
1,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
|
$
|
0.21
|
|
$
|
0.09
|
|
$
|
0.21
|
|
$
|
0.13
|
Non-GAAP Diluted
Earnings Per Share
|
|
$
|
0.25
|
|
$
|
0.18
|
|
$
|
0.41
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
|
|
4,451
|
|
|
4,436
|
|
|
4,450
|
|
|
4,437
|
Non GAAP Diluted
Shares
|
|
|
4,451
|
|
|
4,436
|
|
|
4,450
|
|
|
4,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Mastech Holdings, Inc.