PITTSBURGH, Pennsylvania,
July 25, 2018 /PRNewswire/ --
Mastech Digital, Inc. (NYSE American: MHH), a leading provider
of Digital Transformation IT Services, announced today its
financial results for the second quarter ended June 30, 2018 and, additionally, that its Board
of Directors has declared a two-for-one stock split of its common
stock.
Second Quarter 2018 Highlights:
- Revenues increased 28% to a total of $44.9 million, compared to revenues of
$35.1 million in the 2017 second
quarter; sequentially, revenues increased by 4% over the first
quarter of 2018
- The Company's data and analytics services segment, acquired on
July 13, 2017, contributed
$6.1 million of revenues during the
quarter
- Organic revenues in the Company's IT staffing services segment
increased by 11% compared to the second quarter of 2017 and
sequentially increased by 6% over the first quarter of 2018
- The number of billable consultants at June 30, 2018 in the Company's IT staffing
services segment grew by 6% during the quarter
- GAAP diluted earnings per share were $0.51 versus $0.15
in the 2017 second quarter
- Non-GAAP diluted earnings per share were $0.41 versus $0.23
in the 2017 second quarter
Board of Directors Declares Company Stock Split:
On July 24, 2018, the Company's
Board of Directors declared a two-for-one stock split of its common
stock. The record date for the stock split is August 13, 2018. Shareholders of record as
of the close of business on the record date will receive one new
share of common stock of the Company for every share that they own
on such date. The distribution of the new shares of common stock
will be made on August 24,
2018. The Company expects its common stock to begin trading
at the split-adjusted price on August 27,
2018.
Commenting on the Board's decision, Vivek Gupta, Mastech Digital's President and CEO
stated, "This action reflects our confidence about the future and
our objective of increasing the liquidity of our shares for
shareholders and potential investors."
Second Quarter Results:
Revenues for the second quarter of 2018 totaled $44.9 million, compared to $35.1 million during the corresponding quarter
last year. Gross profit in the second quarter of 2018 was
$10.9 million, compared to
$7.1 million in the second quarter of
2017. GAAP net income for the second quarter of 2018 totaled
$2.8 million or $0.51 per diluted share, compared to $696,000 or $0.15
per diluted share during the same period last year. Non-GAAP net
income for the second quarter of 2018 was $2.3 million or $0.41 per diluted share, compared to $1.1 million or $0.23 per diluted share in the second quarter of
2017.
Activity levels continue to remain robust in our data and
analytics business segment, and we continue to secure new
assignments. The revenue growth for this segment, however, was
impacted this quarter due to the inherent lumpiness in this
project-based business. Demand for the Company's IT staffing
services also remained strong during the second quarter, and our
billable consultant-base expanded by 65 consultants during the
quarter. Additionally, gross margins in the IT staffing services
segment increased by 120 basis points in the 2018 second quarter,
when compared to the same period last year.
During the quarter, the contingent consideration liability
related to the InfoTrellis acquisition was reduced by $9.1 million and contingent transaction fees were
lowered by $140,000. These reductions
were recorded after the Company determined that relevant conditions
for the payment of such liabilities were unlikely to be fully
satisfied. Additionally, the Company performed a quantitative
impairment test related to the InfoTrellis acquisition as a result
of the revaluation of contingent consideration. Based on the
results of this testing, the Company recorded a $7.7 million impairment associated with the
carrying amount of goodwill related to the InfoTrellis
acquisition. The aggregate impact of these three items
was a net reduction to selling, general and administrative expenses
of $1.5 million during the second
quarter of 2018.
"It feels good to report record earnings for the second
consecutive quarter," said Vivek
Gupta, President and CEO, Mastech Digital. "While there was
a bit of softness in our data and analytics segment due to certain
project completions, our pipeline remains very strong. We continue
to win important deals in this area that contribute to our digital
transformation journey. Our IT staffing segment also continues to
impress with significant increase in revenues, gross margins, and
net income."
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "At June 30, 2018,
we had bank debt, net of cash balances on hand, of $37.0 million and approximately $12.0 million of borrowing capacity available to
us under our revolving credit line. Our accounts receivable balance
remains of high quality; however, our Days Sales Outstanding
measurement remained elevated at quarter-end as compared to our
target range due to temporary inefficiencies related to the
implementation of our new Cloud-based ERP platform."
In conjunction with its second quarter earnings release, Mastech
Digital will host a conference call at 9:00
A.M. ET on July 25, 2018 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 Investors section
and follow the links to the live webcast. The webcast will remain
available for replay through August 1,
2018.
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.,
Canada 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.
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. In the 2018 period, we recorded a reduction
in acquisition-related transaction expense due to a revised
estimate of investment banking fees associated with contingent
consideration payments. We believe that providing non-GAAP
financial measures that exclude these expenses / credits 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.
Revaluation of contingent consideration liability: In connection
with the InfoTrellis acquisition, the Company may be required to
pay future consideration that is contingent upon the achievement of
specific earnings before interest and tax objectives ("EBIT"). As
of the acquisition date, the Company recorded a contingent
consideration liability representing the estimated fair value of
such contingent consideration that was expected to be paid. In the
second quarter of 2018, this contingent consideration liability was
revalued and reduced by $9.1 million
after the Company determined that relevant conditions for the
payment of such liability were unlikely to be fully satisfied.
While it is probable that adjustments to the contingent
consideration liability will occur in the future, we believe that
providing non-GAAP financial measures that exclude this reduction
to expense 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.
Goodwill impairment: The Company accounts for acquisitions in
accordance with guidance found in ASC 805, Business
Combinations. Accordingly, excess purchase price over the
fair value of net tangible assets and identifiable intangible
assets are recorded as goodwill. Goodwill is not amortized but is
tested for impairment at least on an annual basis. If impairment is
indicated, a write-down to fair value is recorded based on the
excess of the carrying value of the asset over its fair market
value. As a result of the revaluation of the contingent
consideration liability related to the InfoTrellis acquisition, we
performed a quantitative impairment test on June 30, 2018. Based on the results of this
testing, the Company recorded a $7.7
million impairment associated with the carrying value of
goodwill related to the InfoTrellis acquisition. While it is
possible that goodwill impairment could occur in the future, we
believe that providing non-GAAP financial measures that exclude
impairment expense 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,
(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, and (iii) the
consummation, effectiveness and completion of the Company's planned
two-for-one stock split and the timing thereof, including but not
limited to, the record date and the distribution date. 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,
2017.
MASTECH DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
747
|
|
$
2,478
|
Accounts receivable,
net
|
|
35,405
|
|
30,662
|
Prepaid and other current
assets
|
|
1,131
|
|
1,533
|
Total current assets
|
|
37,283
|
|
34,673
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
2,202
|
|
1,899
|
|
|
|
|
|
Deferred income
taxes
|
|
188
|
|
468
|
|
|
|
|
|
Non-current
deposits
|
|
364
|
|
255
|
|
|
|
|
|
Goodwill
|
|
28,106
|
|
35,844
|
|
|
|
|
|
Intangible assets,
net
|
|
24,084
|
|
25,465
|
Total assets
|
|
$
92,227
|
|
$
98,604
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$
4,384
|
|
$
4,003
|
Accounts payable
|
|
3,561
|
|
5,028
|
Accrued payroll and related
costs
|
|
9,129
|
|
8,969
|
Other accrued
liabilities
|
|
2,162
|
|
2,109
|
Total current liabilities
|
|
19,236
|
|
20,109
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current portion, net
|
|
33,382
|
|
34,149
|
Contingent consideration liability
|
|
8,019
|
|
17,125
|
Long-term accrued income taxes
|
|
68
|
|
68
|
Total liabilities
|
|
60,705
|
|
71,451
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
63
|
|
63
|
Additional paid-in
capital
|
|
20,531
|
|
20,304
|
Retained earnings
|
|
15,120
|
|
10,923
|
Accumulated other
comprehensive income (loss)
|
|
(18)
|
|
17
|
Treasury stock, at
cost
|
|
(4,174)
|
|
(4,154)
|
Total shareholders' equity
|
|
31,522
|
|
27,153
|
Total liabilities and shareholders' equity
|
|
$
92,227
|
|
$
98,604
|
MASTECH DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Amounts in
thousands, except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months ended
June 30,
|
|
Six Months ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
$
44,894
|
|
$
35,086
|
|
$
88,227
|
|
$
68,186
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
34,002
|
|
28,009
|
|
67,074
|
|
54,900
|
|
|
|
|
|
|
|
|
Gross
profit
|
10,892
|
|
7,077
|
|
21,153
|
|
13,286
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
6,435
|
|
6,095
|
|
14,258
|
|
11,901
|
|
|
|
|
|
|
|
|
Income from
operations
|
4,457
|
|
982
|
|
6,895
|
|
1,385
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
(607)
|
|
(106)
|
|
(1,119)
|
|
(187)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
3,850
|
|
876
|
|
5,776
|
|
1,198
|
|
|
|
|
|
|
|
|
Income tax
expense
|
1,033
|
|
180
|
|
1,579
|
|
301
|
Net income
|
$
2,817
|
|
$
696
|
|
$
4,197
|
|
$
897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.52
|
|
$
0.15
|
|
$
0.77
|
|
$
0.20
|
Diluted
|
$
0.51
|
|
$
0.15
|
|
$
0.76
|
|
$
0.20
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
5,463
|
|
4,536
|
|
5,462
|
|
4,517
|
Diluted
|
5,571
|
|
4,576
|
|
5,553
|
|
4,563
|
MASTECH DIGITAL,
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,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
$
2,817
|
|
$
696
|
|
$
4,197
|
|
$
897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
689
|
|
204
|
|
1,382
|
|
407
|
|
|
|
Stock-based
compensation
|
120
|
|
108
|
|
225
|
|
215
|
|
|
|
Acquisition
transaction expenses
|
(140)
|
|
265
|
|
(140)
|
|
265
|
|
|
|
Goodwill
impairment
|
7,738
|
|
-
|
|
7,738
|
|
-
|
|
|
|
Revaluation of
contingent consideration liability
|
(9,106)
|
|
-
|
|
(9,106)
|
|
-
|
|
|
|
Income taxes
adjustments
|
187
|
|
(220)
|
|
(27)
|
|
(337)
|
|
|
Non-GAAP Net
Income
|
$
2 ,305
|
|
$
1,053
|
|
$
4,269
|
|
$
1,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$
0.51
|
|
$
0.15
|
|
$
0.76
|
|
$
0.20
|
|
|
Non-GAAP Diluted
Earnings Per Share
|
$
0.41
|
|
$
0.23
|
|
$
0.77
|
|
$
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
5,571
|
|
4,576
|
|
5,553
|
|
4,563
|
|
|
Non-GAAP Diluted
Shares
|
5,571
|
|
4,576
|
|
5,553
|
|
4,563
|
|
MASTECH DIGITAL,
INC.
|
SUPPLEMENTAL
FINANCIAL INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
June 30,
|
|
Six Months ended
June 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
IT staffing
services
|
$
38,811
|
|
$
35,086
|
|
$
75,572
|
|
$
68,186
|
|
Data and analytics
services
|
6,083
|
|
-
|
|
12,655
|
|
-
|
|
|
Total
revenues
|
$
44,894
|
|
$
35,086
|
|
$
88,227
|
|
$
68,186
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
%:
|
|
|
|
|
|
|
|
|
IT staffing
services
|
21.4%
|
|
20.2%
|
|
20.7%
|
|
19.5%
|
|
Data and analytics
services
|
42.2%
|
|
-
|
|
43.3%
|
|
-
|
|
|
Total gross margin
%
|
24.3%
|
|
20.2%
|
|
24.0%
|
|
19.5%
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Income:
|
|
|
|
|
|
|
|
|
IT staffing
services
|
$
2,227
|
|
$
1,451
|
|
$
3,583
|
|
$
2,057
|
|
Data and analytics
services
|
1,411
|
|
-
|
|
3,186
|
|
-
|
|
|
Subtotal
|
3,638
|
|
1,451
|
|
6,769
|
|
2,057
|
|
|
|
|
|
|
|
|
|
|
Acquisition
transaction expenses
|
140
|
|
(265)
|
|
140
|
|
(265)
|
Amortization of
acquired intangible assets
|
(689)
|
|
(204)
|
|
(1,382)
|
|
(407)
|
Goodwill
impairment
|
(7,738)
|
|
|
|
(7,738)
|
|
|
Revaluation of
contingent consideration liability
|
9,106
|
|
|
|
9,106
|
|
|
Interest expense and
other, net
|
(607)
|
|
(106)
|
|
(1,119)
|
|
(187)
|
Income before
income taxes
|
$
3,850
|
|
$
876
|
|
$
5,776
|
|
$
1,198
|
|
|
|
|
|
|
|
|
|
|
For more information, contact:
Donna Kijowski
Manager, Investor Relations
Mastech Digital, Inc.
+1-888-330-5497
View original
content:http://www.prnewswire.com/news-releases/mastech-digital-reports-28-revenue-growth-in-second-quarter-2018-board-of-directors-declares-a-2-for-1-stock-split-300686278.html
SOURCE Mastech Digital, Inc.