PITTSBURGH, July 31, 2019 /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,
2019.
Second Quarter 2019 Highlights:
- Total revenues increased 8% to $48.5
million, compared to revenues of $44.9 million in the 2018 second quarter;
- The Company's data and analytics services segment reported
record quarterly revenues of $6.7
million, representing 9% growth over the same quarter last
year and a 15% sequential increase over our last quarter;
- The IT staffing segment achieved organic revenue growth of 8%
during the second quarter of 2019 compared to the second quarter of
2018 and a 6% sequential increase over our last quarter;
- GAAP diluted earnings per share were $0.53 in the second quarter of 2019 versus
$0.25 in the 2018 second quarter; the
current quarter benefited by a $6.1
million pretax revaluation of a contingent consideration
liability;
- Non-GAAP diluted earnings per share were $0.20 in the second quarter of 2019 compared to
$0.21 in the 2018 second
quarter;
- Bank debt, less cash balances on hand, was reduced by
$7.6 million during the quarter, as
cash conversion issues related to system implementation disruptions
materially improved.
Second Quarter Results:
Revenues for the second quarter of 2019 totaled $48.5 million compared to $44.9 million during the corresponding quarter
last year. Gross profit in the second quarter of 2019 was
$12.1 million, compared to
$10.9 million in the same quarter of
2018. GAAP net income for the second quarter of 2019 totaled
$6.0 million or $0.53 per diluted share, compared to $2.8 million or $0.25 per diluted share during the same period
last year. Non-GAAP net income for the second quarter of 2019
was $2.2 million or $0.20 per diluted share, compared to $2.3 million or $0.21 per diluted share in the second quarter of
2018. Activity levels at the Company's data and analytics
services segment continued to strengthen from the previous quarter
and revenues in the second quarter of 2019 increased by
approximately $0.9 million over
revenues reported in the first quarter of 2019. This 15%
sequential growth reflected an increase in activity levels for the
third consecutive quarter. Demand for the Company's IT
staffing services also remained strong during the quarter.
"I am extremely pleased with the performance of our data and
analytics segment, which once again showed healthy sequential
growth on the strength of continued pipeline expansion and project
wins," commented Vivek Gupta,
Mastech Digital's Chief Executive Officer. "During the quarter, we
significantly enlarged our services stack and hired several key
executives, and I am happy to say that we are already seeing
payback from these investments. Going forward, we will continue to
invest, in a disciplined manner, to capitalize on the bullish
conditions that we are seeing in the marketplace. Our IT
staffing segment continued to deliver above industry average
growth, at higher gross margins, as we continue our focus on
digital technologies," Mr. Gupta added.
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "At June 30, 2019 we
had bank debt, net of cash balances on hand, of $29.4 million and approximately $12.5 million of borrowing capacity available to
us under our revolving credit line. During the quarter, debt
levels, net of cash, declined by $7.6
million, as our cash conversion issues related to the
implementation of our new Cloud-based ERP platform are largely
behind us."
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, 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.
Acquisition-related transaction expenses: We incurred
significant expenses in connection with our July 2017 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. No
transaction expenses were incurred in 2019. 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.
Contingent consideration liability revaluation: In connection
with the InfoTrellis acquisition, the Company was required to pay
future consideration that was contingent upon the achievement of
specific earnings before interest and tax objectives. 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 2019 and 2018, this contingent consideration liability was
reduced by $6.1 million and
$9.1 million, respectively, after
determining that relevant conditions for payment of such liability
were unlikely to be satisfied. We believe that providing non-GAAP
financial measures that exclude these adjustments 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 reductions to contingent
consideration related to the July
2017 InfoTrellis acquisition, we performed quantitative
impairment tests on June 30, 2019 and
June 30, 2018. The results of
these tests indicated no impairment of goodwill in 2019 and a
$7.7 million impairment associated
with the carrying value of goodwill in 2018. 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,
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,
2018.
|
|
|
MASTECH DIGITAL,
INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
3,869
|
|
$
1,294
|
Accounts receivable,
net
|
|
35,791
|
|
38,080
|
Prepaid and other current
assets
|
|
1,349
|
|
1,321
|
Total current assets
|
|
41,009
|
|
40,695
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
2,438
|
|
2,208
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
4,980
|
|
-
|
|
|
|
|
|
Deferred income
taxes
|
|
-
|
|
297
|
|
|
|
|
|
Non-current
deposits
|
|
447
|
|
540
|
|
|
|
|
|
Goodwill, net of
impairment
|
|
26,106
|
|
26,106
|
|
|
|
|
|
Intangible assets,
net
|
|
21,394
|
|
22,738
|
Total assets
|
|
$
96,374
|
|
$
92,584
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$
4,575
|
|
$
4,575
|
Current portion of operating
lease liability
|
|
1,339
|
|
-
|
Accounts payable
|
|
3,909
|
|
4,127
|
Accrued payroll and related
costs
|
|
10,088
|
|
7,728
|
Other accrued
liabilities
|
|
1,271
|
|
1,476
|
Total current liabilities
|
|
21,182
|
|
17,906
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current portion, net
|
|
28,366
|
|
34,129
|
Contingent consideration liability
|
|
-
|
|
6,069
|
Long-term operating lease liability, less current
portion
|
|
3,736
|
|
-
|
Long-term accrued income taxes
|
|
204
|
|
204
|
Deferred income taxes
|
|
1,157
|
|
-
|
Total liabilities
|
|
54,645
|
|
58,308
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
127
|
|
126
|
Additional paid-in
capital
|
|
21,437
|
|
20,829
|
Retained earnings
|
|
24,536
|
|
17,614
|
Accumulated other
comprehensive income (loss)
|
|
(184)
|
|
(119)
|
Treasury stock, at
cost
|
|
(4,187)
|
|
(4,174)
|
Total shareholders' equity
|
|
41,729
|
|
34,276
|
Total liabilities and shareholders' equity
|
|
$
96,374
|
|
$
92,584
|
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,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
Revenues
|
$
48,472
|
|
$
44,894
|
|
$
93,671
|
|
$
88,227
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
36,418
|
|
34,002
|
|
70,782
|
|
67,074
|
|
|
|
|
|
|
|
|
Gross
profit
|
12,054
|
|
10,892
|
|
22,889
|
|
21,153
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
3,475
|
|
6,435
|
|
12,440
|
|
14,258
|
|
|
|
|
|
|
|
|
Income from
operations
|
8,579
|
|
4,457
|
|
10,449
|
|
6,895
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
(507)
|
|
(607)
|
|
(1,061)
|
|
(1,119)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
8,072
|
|
3,850
|
|
9,388
|
|
5,776
|
|
|
|
|
|
|
|
|
Income tax
expense
|
2,114
|
|
1,033
|
|
2,466
|
|
1,579
|
Net income
|
$
5,958
|
|
$
2,817
|
|
$
6,922
|
|
$
4,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.54
|
|
$
0.26
|
|
$
0.63
|
|
$
0.38
|
Diluted
|
$
.53
|
|
$
0.25
|
|
$
0.62
|
|
$
0.38
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
11,022
|
|
10,926
|
|
11,013
|
|
10,924
|
Diluted
|
11,164
|
|
11,142
|
|
11,183
|
|
11,106
|
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,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
$
5,958
|
|
$
2,817
|
|
$
6,922
|
|
$
4,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
672
|
|
689
|
|
1,344
|
|
1,382
|
|
|
|
Stock-based
compensation
|
267
|
|
120
|
|
503
|
|
225
|
|
|
|
Acquisition
transaction expenses/(credits)
|
-
|
|
(140)
|
|
-
|
|
(140)
|
|
|
|
Goodwill
impairment
|
-
|
|
7,738
|
|
-
|
|
7,738
|
|
|
|
Revaluation of
contingent consideration liability
|
(6,069)
|
|
(9,106)
|
|
(6,069)
|
|
(9,106)
|
|
|
|
Income tax effect of
pretax adjustments
|
1,351
|
|
187
|
|
1,110
|
|
(27)
|
|
|
Non-GAAP Net
Income
|
$
2,179
|
|
$
2,305
|
|
$
3,810
|
|
$
4,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$
0.53
|
|
$
0.25
|
|
$
0.62
|
|
$
0.38
|
|
|
Non-GAAP Diluted
Earnings Per Share
|
$
0.20
|
|
$
0.21
|
|
$
0.34
|
|
$
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
11,164
|
|
11,142
|
|
11,183
|
|
11,106
|
|
|
Non-GAAP Diluted
Shares
|
11,164
|
|
11,142
|
|
11,183
|
|
11,106
|
|
MASTECH DIGITAL,
INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
June 30,
|
|
Six Months ended
June 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
6,654
|
|
$
6,083
|
|
$
12,422
|
|
$
12,655
|
|
IT staffing
services
|
41,818
|
|
38,811
|
|
81,249
|
|
75,572
|
|
|
Total
revenues
|
$
48,472
|
|
$
44,894
|
|
$
93,671
|
|
$
88,227
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
%:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
46.1%
|
|
42.2%
|
|
45.8%
|
|
43.3%
|
|
IT staffing
services
|
21.5%
|
|
21.4%
|
|
21.2%
|
|
20.7%
|
|
|
Total gross margin
%
|
24.9%
|
|
24.3%
|
|
24.4%
|
|
24.0%
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Income:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
1,285
|
|
$
1,411
|
|
$
2,326
|
|
$
3,186
|
|
IT staffing
services
|
1,897
|
|
2,227
|
|
3,398
|
|
3,583
|
|
|
Subtotal
|
3,182
|
|
3,638
|
|
5,724
|
|
6,769
|
|
|
|
|
|
|
|
|
|
|
Acquisition
transaction expenses
|
-
|
|
140
|
|
-
|
|
140
|
Amortization of
acquired intangible assets
|
(672)
|
|
(689)
|
|
(1,344)
|
|
(1,382)
|
Goodwill
impairment
|
-
|
|
(7,738)
|
|
-
|
|
(7,738)
|
Revaluation of
contingent consideration liability
|
6,069
|
|
9,106
|
|
6,069
|
|
9,106
|
Interest expense and
other, net
|
(507)
|
|
(607)
|
|
(1,061)
|
|
(1,119)
|
Income before
income taxes
|
$
8,072
|
|
$
3,850
|
|
$
9,388
|
|
$
5,776
|
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-8-revenue-growth-in-second-quarter-2019-300893886.html
SOURCE Mastech Digital, Inc.