PITTSBURGH, Oct. 26, 2016 /PRNewswire/ -- Mastech Digital,
Inc. (NYSE MKT: MHH), a national provider of Information Technology
staffing and Digital Transformation services, announced today its
financial results for the third quarter ended September 30, 2016.
Third Quarter 2016 Highlights:
- Revenues totaled $34.3 million,
which represented a 2% sequential increase over second quarter 2016
and were essentially flat compared to the 2015 third quarter.
- Gross profit margins increased to 20.1% from 19.9% in the third
quarter of 2015;
- GAAP diluted earnings per share were $0.21 versus $0.20
per diluted share in the 2015 third quarter; and
- Non-GAAP diluted earnings per share were $0.25 versus $0.25
per diluted share in the 2015 third quarter.
Third Quarter Results:
Revenues for the third quarter of 2016 totaled $34.3 million compared to $34.6 million during the corresponding quarter
last year. Gross profit in the third quarter of 2016 was
$6.9 million compared to $6.9 million in the third quarter of 2015. GAAP
net income for the third quarter of 2016 totaled $924,000, compared to $887,000 during the same period last year.
Non-GAAP net income for the third quarter of 2016 was $1.1 million, compared to $1.1 million in the third quarter of 2015.
GAAP diluted earnings per share were $0.21 in the third quarter of 2016 compared to
$0.20 in the third quarter of
2015. Non-GAAP diluted earnings per share were $0.25 in the third quarter of 2016 compared to
$0.25 for the corresponding period in
2015.
Demand for the Company's staffing services was in-line with the
previous quarter; however, a higher level of assignment ends
resulted in a decline to our consultant-base of approximately 3%
during the quarter. Gross margins in the third quarter of
2016 were 20.1%, representing a slight improvement from the 19.9%
gross margins that were reported in third quarter 2015.
Commenting on the Company's third quarter 2016, Vivek Gupta, Mastech Digital's Chief Executive
Officer, stated, "During the quarter we were able to grow our
revenues by 2% from the previous quarter and deliver solid
bottom-line results. Additionally, we rebranded the Company,
which included our name change to Mastech Digital, a new logo and
the launch of a refreshed corporate website - all reflective of our
ongoing transformation into a digital technologies company.
As our digital services gain further traction over the next several
quarters, we expect that the pace at which we grow our business
will accelerate as well."
Jack Cronin, Mastech Digital's
Chief Financial Officer, stated, "Our financial position at
September 30, 2016 remains strong
with access to approximately $8
million of unused borrowing capacity. During the
quarter, we were able to improve our accounts receivable "days
sales outstanding" measurement by one-day to 58 days."
In conjunction with its third quarter earnings release, Mastech
Digital will host a conference call at 9:00 A. M. ET on
October 26, 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.mastechdigital.com. Simply click on the Investor
Relations section and follow the links to the live webcast.
The webcast will remain available for replay through November 2, 2016.
About Mastech Digital, Inc.:
Mastech Digital (NYSE MKT: MHH) is a national provider of IT
staffing and digital transformation services focused on solving its
customers' digital transformation challenges. The Company's IT
staffing services span across digital and mainstream technologies
while its digital transformation services
include Salesforce.com, SAP HANA and digital learning
services. A minority-owned enterprise, Mastech Digital is
headquartered in Pittsburgh, PA
with offices across the U.S. and India. For more information,
visit www.mastechdigital.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 benefits to Mastech Digital from
completing the acquisition of Hudson IT and the expected
performance of Mastech Digital 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 DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
738
|
|
$
848
|
Accounts receivable,
net
|
|
24,389
|
|
19,190
|
Prepaid and other current
assets
|
|
828
|
|
587
|
Deferred income
taxes
|
|
175
|
|
217
|
Total current assets
|
|
26,130
|
|
20,842
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
576
|
|
656
|
Deferred income
taxes
|
|
26
|
|
92
|
Deferred financing costs, net
|
|
68
|
|
97
|
Non-current
deposits
|
|
231
|
|
237
|
Goodwill
|
|
8,427
|
|
8,427
|
Intangible assets,
net
|
|
7,516
|
|
8,126
|
Total assets
|
|
$
42,974
|
|
$
38,477
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$
1,800
|
|
$
1,800
|
Accounts payable
|
|
2,073
|
|
2,213
|
Accrued payroll and related
costs
|
|
5,957
|
|
5,965
|
Deferred revenue and other
liabilities
|
|
766
|
|
1,958
|
Total current liabilities
|
|
10,596
|
|
11,936
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current
portion
|
|
14,262
|
|
10,738
|
|
|
|
|
|
Total liabilities
|
|
24,858
|
|
22,674
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
53
|
|
52
|
Additional paid-in
capital
|
|
13,564
|
|
13,114
|
Retained earnings
|
|
8,657
|
|
6,777
|
Accumulated other
comprehensive (loss)
|
|
(29)
|
|
(19)
|
Treasury stock, at
cost
|
|
(4,129)
|
|
(4,121)
|
Total shareholders' equity
|
|
18,116
|
|
15,803
|
Total liabilities and shareholders' equity
|
|
$
42,974
|
|
$
38,477
|
|
|
|
|
|
MASTECH DIGITAL,
INC
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Amounts in
thousands, except per share data)
|
(Unaudited)
|
|
|
Three Months ended
September 30,
|
|
Nine Months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues
|
$
34,263
|
|
$
34,565
|
|
$
99,606
|
|
$
90,930
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
27,366
|
|
27,686
|
|
79,707
|
|
73,849
|
|
|
|
|
|
|
|
|
Gross
profit
|
6,897
|
|
6,879
|
|
19,899
|
|
17,081
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
5,303
|
|
5,356
|
|
16,506
|
|
14,611
|
|
|
|
|
|
|
|
|
Income
from operations
|
1,594
|
|
1,523
|
|
3,393
|
|
2,470
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
(120)
|
|
(124)
|
|
(377)
|
|
(139)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
1,474
|
|
1,399
|
|
3,016
|
|
2,331
|
|
|
|
|
|
|
|
|
Income tax
expense
|
550
|
|
512
|
|
1,136
|
|
867
|
Net income
|
$
924
|
|
$
887
|
|
$
1,880
|
|
$
1,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.21
|
|
$
0.20
|
|
$
0.43
|
|
$
0.34
|
Diluted
|
$
0.21
|
|
$
0.20
|
|
$
0.42
|
|
$
0.33
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
4,405
|
|
4,341
|
|
4,371
|
|
4,334
|
Diluted
|
4,493
|
|
4,438
|
|
4,469
|
|
4,438
|
|
|
|
|
|
|
|
|
MASTECH DIGITAL,
INC
|
RECONCILIATION OF
GAAP MEASURES TO NON-GAAP MEASURES
|
(Amounts in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months ended
September 30,
|
|
Nine Months ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
$
924
|
|
$
887
|
|
$
1,880
|
|
$
1,464
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
204
|
|
202
|
|
610
|
|
237
|
Stock-based compensation
|
114
|
|
106
|
|
299
|
|
299
|
Acquisition transaction
expenses
|
-
|
|
25
|
|
-
|
|
624
|
Severance expenses
|
-
|
|
-
|
|
780
|
|
305
|
Income
taxes adjustments
|
(115)
|
|
(122)
|
|
(636)
|
|
(553)
|
Non-GAAP Net
Income
|
$
1,127
|
|
$
1,098
|
|
$
2,933
|
|
$
2,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$
0.21
|
|
$
0.20
|
|
$
0.42
|
|
$
0.33
|
Non-GAAP Diluted
Earnings Per Share
|
$
0.25
|
|
$
0.25
|
|
$
0.66
|
|
$
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
4,493
|
|
4,438
|
|
4,469
|
|
4,438
|
Non-GAAP Diluted
Shares
|
4,493
|
|
4,438
|
|
4,469
|
|
4,438
|
|
|
|
|
|
|
|
|
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SOURCE Mastech Digital, Inc.