PITTSBURGH, Nov. 1, 2017 /PRNewswire/ -- Mastech
Digital, Inc. (NYSE American: MHH), a leading provider of Digital
Transformation IT services, announced today its financial results
for the third quarter of 2017.
Third Quarter 2017 Financial Highlights:
- Revenues totaled $39.2 million,
an increase of $5.0 million over last
year's top-line results and $4.1
million over second quarter 2017's results;
- The Company's data and analytics services segment, which was
acquired in July 2017, contributed
$4.1 million of revenues.
- The IT staffing services segment organically grew its billable
consultant headcount by 27, or by approximately 3 percent during
the quarter. The billable associate base totaled 995 consultants at
September 30, 2017 compared to 884
consultants at September 30, 2016 –
an increase of 111 consultants.
- Non-GAAP diluted earnings per share were $0.27 versus $0.25
in the 2016 third quarter and $0.23
in the preceding second 2017 quarter; and
- GAAP diluted earnings (loss) per share were ($0.03) versus $0.21 in the 2016 third quarter. The GAAP
diluted loss per share in the 2017 quarter was impacted by
$1.7 million of acquisition
transaction expenses.
Third Quarter Results:
Revenues for the third quarter of 2017 totaled $39.2 million compared to $34.3 million during the corresponding quarter
last year. Gross profit in the third quarter of 2017 was
$8.8 million, compared to
$6.9 million in the third quarter of
2016. GAAP net income (loss) for the third quarter of 2017 totaled
$(136,000) or $(0.03) per diluted share, compared to
$924,000 or $0.21 per diluted share during the same period
last year. Non-GAAP net income for the third quarter of 2017 was
$1.4 million or $0.27 per diluted share, compared to $1.1 million or $0.25 per diluted share in the third quarter of
2016.
The Company's data and analytics services segment, which was
acquired on July 13, 2017,
contributed $4.1 million of revenues
and was operationally accretive to earnings as reflected in our
Non-GAAP diluted earnings per share results.
Demand for the Company's IT staffing services remained robust
during the third quarter of 2017. Accordingly, during the
quarter, the Company was able to expand its billable associate
headcount in this segment by approximately 3 percent. However,
revenues were adversely impacted by a lower utilization rate due to
downtime associated with the hurricane-related disruptions in
Florida and Texas.
Commenting on the Company's 2017 third quarter results,
Vivek Gupta, Mastech Digital's Chief
Executive Officer stated, "In July
2017, we completed our acquisition of InfoTrellis'
consulting business, which specializes in data management and
analytics services. I am pleased to say that this business was
operationally accretive to earnings right out of the gate. With an
impressive management team and a strong pipeline of prospective
opportunities, I feel confident that entering this high-value space
will prove to be a pivotal moment in the evolution of Mastech
Digital."
Commenting on the other business segment Gupta added, "Our IT
staffing services business continued to grow its billable
associate-base for the third consecutive quarter. And we continued
to see tangible returns from the investments made in our sales and
recruitment organizations since the beginning of 2017. While
our revenues were adversely impacted by the disruptions caused by
the hurricanes in the states of Florida and Texas, I believe we did an admirable job of
performing well with elements of our business that we could
control. "
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "During the quarter we were able to secure a new
$65 million credit facility and
complete a $6 million private
placement transaction for the sale of the Company's common stock,
both in support of the InfoTrellis acquisition and to provide the
Company with adequate liquidity for the future. At
September 30, 2017, we had bank debt,
and net of cash balances on hand, of $40.3
million, and had borrowing capacity of approximately
$10 million under our revolving
credit facility."
Other Highlights during the Quarter:
- Mastech Digital was awarded the TechServe Alliance Excellence
Award 2017 under the Large Enterprise category. The award
recognizes and honors technology staffing and solutions companies
that deliver outstanding performance, productivity and commitment
to continuous improvement.
In conjunction with its third quarter earnings release, Mastech
Digital will host a conference call at
9:00 A.M. ET on November 1, 2017 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 8, 2017.
About Mastech Digital, Inc.:
Mastech Digital (NYSE American: MHH) is a leading provider of
Digital Transformation IT Services. The Company offers Data
Management and Analytics services; other digital transformation
services that include Salesforce.com, SAP HANA, and Digital
Learning services; and IT staffing 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 and our
July 2017 acquisition of the services
division of InfoTrellis, Inc. 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.
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.
Acquisition related transaction expenses: We incurred
significant expenses in connection with our acquisition of
InfoTrellis, Inc. which we would not have otherwise incurred in the
periods presented as part of our continuing operations. These
transaction expenses consisted 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.
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 the services division of InfoTrellis,
Inc. and the PNC credit facility and the expected performance of
Mastech Digital following completion of these
transactions. 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, 2016.
For more information, contact:
Donna
Kijowski
Manager, Investor Relations
Mastech Digitial, Inc.
888.330.5497
experience@mastechdigital.com
MASTECH DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
3,162
|
|
$
829
|
Accounts receivable,
net
|
|
30,165
|
|
21,102
|
Prepaid and other current
assets
|
|
1,900
|
|
753
|
Total current assets
|
|
35,227
|
|
22,684
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
1,428
|
|
558
|
|
|
|
|
|
Deferred income
taxes
|
|
132
|
|
254
|
|
|
|
|
|
Non-current
deposits
|
|
258
|
|
170
|
|
|
|
|
|
Goodwill
|
|
35,772
|
|
8,427
|
|
|
|
|
|
Intangible assets,
net
|
|
26,157
|
|
7,313
|
Total assets
|
|
$
98,974
|
|
$
39,406
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$
3,813
|
|
$
1,800
|
Accounts payable
|
|
3,239
|
|
1,963
|
Accrued payroll and related
costs
|
|
7,375
|
|
7,645
|
Deferred revenue and other
liabilities
|
|
1,715
|
|
849
|
Total current liabilities
|
|
16,142
|
|
12,257
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current
portion, net
|
|
39,600
|
|
8,077
|
Contingent consideration liability
|
|
17,125
|
|
-
|
Total liabilities
|
|
72,867
|
|
20,334
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
63
|
|
53
|
Additional paid-in
capital
|
|
20,208
|
|
13,863
|
Retained earnings
|
|
10,058
|
|
9,297
|
Accumulated other
comprehensive (loss)
|
|
(80)
|
|
(7)
|
Treasury stock, at
cost
|
|
(4,142)
|
|
(4,134)
|
Total shareholders' equity
|
|
26,107
|
|
19,072
|
Total liabilities and shareholders' equity
|
|
$
98,974
|
|
$
39,406
|
|
|
|
|
|
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,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues
|
$
39,228
|
|
$
34,263
|
|
$
107,414
|
|
$
99,606
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
30,410
|
|
27,366
|
|
85,310
|
|
79,707
|
|
|
|
|
|
|
|
|
Gross
profit
|
8,818
|
|
6,897
|
|
22,104
|
|
19,899
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
8,603
|
|
5,303
|
|
20,504
|
|
16,506
|
|
|
|
|
|
|
|
|
Income from
operations
|
215
|
|
1,594
|
|
1,600
|
|
3,393
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
(450)
|
|
(120)
|
|
(637)
|
|
(377)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
(235)
|
|
1,474
|
|
963
|
|
3,016
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
(99)
|
|
550
|
|
202
|
|
1,136
|
Net income
(loss)
|
$
(136)
|
|
$
924
|
|
$
761
|
|
$
1,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
(0.03)
|
|
$
0.21
|
|
$
0.16
|
|
$
0.43
|
Diluted
|
$
(0.03)
|
|
$
0.21
|
|
$
0.16
|
|
$
0.42
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
5,342
|
|
4,405
|
|
4,795
|
|
4,371
|
Diluted
|
5,365
|
|
4,493
|
|
4,835
|
|
4,469
|
|
|
|
|
|
|
|
|
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,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
(Loss)
|
$
(136)
|
|
$
924
|
|
$
761
|
|
$
1,880
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
611
|
|
204
|
|
1,018
|
|
610
|
|
Stock-based
compensation
|
70
|
|
114
|
|
285
|
|
299
|
|
Acquisition
transaction expenses
|
1,754
|
|
-
|
|
2,019
|
|
-
|
|
Severance
expenses
|
-
|
|
-
|
|
-
|
|
780
|
|
Income taxes
adjustments
|
(874)
|
|
(115)
|
|
(1,211)
|
|
(636)
|
Non-GAAP Net
Income
|
$
1,425
|
|
$
1,127
|
|
$
2,872
|
|
$
2,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$
(0.03)
|
|
$
0.21
|
|
$
0.16
|
|
$
0.42
|
Non-GAAP Diluted
Earnings Per Share
|
$
0.27
|
|
$
0.25
|
|
$
0.59
|
|
$
0.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
5,365
|
|
4,493
|
|
4,835
|
|
4,469
|
Non-GAAP Diluted
Shares
|
5,365
|
|
4,493
|
|
4,835
|
|
4,469
|
|
|
|
|
|
|
|
|
|
MASTECH DIGITAL,
INC.
|
SUPPLEMENTAL
FINANCIAL INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
September 30,
|
|
Nine Months ended
September 30,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
IT staffing
services
|
$
35,159
|
|
$
34,263
|
|
$
103,345
|
|
$
99,606
|
|
Data and analytics
services
|
4,069
|
|
-
|
|
4,069
|
|
-
|
|
|
Total
revenues
|
$
39,228
|
|
$
34,263
|
|
$
107,414
|
|
$
99,606
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
IT staffing
services
|
$
1,520
|
|
$
1,798
|
|
$
3,577
|
|
$
4,003
|
|
Data and analytics
services
|
1,060
|
|
-
|
|
1,060
|
|
-
|
|
|
Subtotal
|
2,580
|
|
1,798
|
|
4,637
|
|
4,003
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
(611)
|
|
(204)
|
|
(1,018)
|
|
(610)
|
Acquisition
transaction expenses
|
(1,754)
|
|
-
|
|
(2,019)
|
|
-
|
Interest expenses and
other, net
|
(450)
|
|
(120)
|
|
(637)
|
|
(377)
|
Income (loss)
before income taxes
|
$
(235)
|
|
$
1,474
|
|
$
963
|
|
$
3,016
|
|
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/mastech-digital-inc-reports-third-quarter-2017-results--revenues-grow-by-145-year-over-year-and-12-sequentially-300546939.html
SOURCE Mastech Digital, Inc.