PITTSBURGH, July 29, 2020 /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,
2020.
Second Quarter 2020 Highlights:
- Total revenues declined 2% to $47.6
million, compared to revenues of $48.5 million in the 2019 second quarter,
reflecting the impact of COVID-19;
- The Company's Data and Analytics Services segment reported
$6.8 million of revenues, which
represented a 2% increase compared to the second quarter of
2019;
- The IT Staffing Services segment achieved revenue of
$40.8 million, which represented a
decline of approximately 2% compared to a year earlier;
- Gross margins grew to a record 26.6%, which was 170 basis
points higher than the second quarter of 2019;
- GAAP diluted earnings per share were $0.25 in the second quarter of 2020 versus
$0.53 in the 2019 second quarter. The
2019 second quarter included a favorable $6.1 million pretax benefit for the revaluation
of a contingent consideration liability which favorably impacted
GAAP diluted earnings per share by $0.40; and
- Non-GAAP diluted earnings per share were $0.33 in the second quarter of 2020 versus
$0.20 in the 2019 second
quarter.
Mastech's Response to COVID-19:
Vivek Gupta, the Company's
President and Chief Executive Officer, stated, "I am pleased
to say that the revenue decline was smaller than anticipated; and
that our proactive actions, such as moving our entire workforce to
a work-from-home model, instituting balanced austerity measures,
and resisting temporary pricing pressures, allowed us to largely
eliminate any negative impact on our gross margins and operating
profits during the second quarter of 2020. Additionally, I believe
our approach to date in responding to the crisis will serve us well
in preparation for a future economic recovery."
Second Quarter Results:
Revenues for the second quarter of 2020 totaled
$47.6 million compared to
$48.5 million during the
corresponding quarter last year. Gross profits in the second
quarter of 2020 were $12.7 million,
higher than the $12.1 million in the
same quarter of 2019, despite lower revenues in the 2020 period.
Gross margins in the second quarter of 2020 were a record 26.6% or
170-basis points higher than gross margins in the second quarter of
2019. GAAP net income for the second quarter of 2020 totaled
$3.0 million or $0.25 per diluted share, compared to $6.0 million or $0.53 per diluted share during the same period
last year. It should be noted that the second quarter of 2019
results benefited from a $6.1 million
pretax revaluation of a contingent consideration
liability. Non-GAAP net income for the second quarter of 2020
was $3.9 million or $0.33 per diluted share, compared to $2.2 million or $0.20 per diluted share in the second quarter of
2019.
Activity levels at the Company's Data and Analytics Services
segment held up well during the quarter despite some project
delays. This segment did have a strong quarter of new
bookings, which gives some indication that clients are willing to
move forward with high-priority projects. Demand for the Company's
IT Staffing Services segment was certainly below levels experienced
a year ago. However, as the second quarter progressed, the demand
did pick-up, albeit at a somewhat slower pace.
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "During the second quarter, we reduced bank debt
by $7.4 million; increased our cash
balances by over $2 million; improved
our leverage ratios and increased our cash availability under our
credit facility to $17.3 million from
$15.2 million a quarter ago. As
we stated at the start of this crisis, maintaining our strong
liquidity position is a top priority for us during these uncertain
times."
Lastly, the quarter saw the launch of a new Remote
Staffing service offering branded as MAS-REMOTE. This service
allows Mastech Digital to offer to its customers the best
technology talent in the U.S. - which is often not available within
their geographic locations, but can be found elsewhere in the
country.
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 Solutions, Digital Learning, and IT
Staffing Services with a Digital First approach. A
minority-owned enterprise, Mastech Digital is headquartered in
Pittsburgh, PA with offices across
the U.S., Canada, EMEA,
India and ASEAN.
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.
Contingent consideration liability revaluation: In connection
with the InfoTrellis acquisition, the Company may have been
required to pay future consideration that was 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 2019 this contingent consideration
liability was reduced by $6.1 million
to zero, after determining that relevant conditions for payment of
such liability was 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.
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 effects of the COVID-19 pandemic
and the regulatory, social and business responses thereto.
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, 2019.
For more information, contact:
Donna Kijowski
Manager, Investor Relations
Mastech Digital, Inc.
+1-888-330-5497
MASTECH DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
4,743
|
|
$
2,981
|
Accounts receivable,
net
|
|
31,208
|
|
32,352
|
Prepaid and other current
assets
|
|
1,224
|
|
1,597
|
Total current assets
|
|
37,175
|
|
36,930
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
2,230
|
|
2,476
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
3,978
|
|
4,617
|
|
|
|
|
|
|
|
|
|
|
Non-current
deposits
|
|
385
|
|
405
|
|
|
|
|
|
Goodwill, net of
impairment
|
|
26,106
|
|
26,106
|
|
|
|
|
|
Intangible assets,
net
|
|
18,708
|
|
20,050
|
Total assets
|
|
$
88,582
|
|
$
90,584
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$
4,575
|
|
$
4,575
|
Current portion of operating
lease liability
|
|
1,295
|
|
1,396
|
Accounts payable
|
|
3,073
|
|
4,027
|
Accrued payroll and related
costs
|
|
9,616
|
|
7,902
|
Other accrued
liabilities
|
|
1,554
|
|
1,191
|
Total current liabilities
|
|
20,113
|
|
19,091
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current portion, net
|
|
9,933
|
|
20,682
|
Long-term operating lease liability, less current
portion
|
|
2,760
|
|
3,321
|
Long-term accrued income taxes
|
|
185
|
|
185
|
Long-term payroll tax liability
|
|
1,495
|
|
-
|
Long-term deferred income taxes
|
|
837
|
|
1,025
|
Total liabilities
|
|
35,323
|
|
44,304
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
130
|
|
127
|
Additional paid-in
capital
|
|
24,432
|
|
21,939
|
Retained earnings
|
|
33,597
|
|
28,759
|
Accumulated other
comprehensive income (loss)
|
|
(713)
|
|
(358)
|
Treasury stock, at
cost
|
|
(4,187)
|
|
(4,187)
|
Total shareholders' equity
|
|
53,259
|
|
46,280
|
Total liabilities and shareholders' equity
|
|
$
88,582
|
|
$
90,584
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Revenues
|
$
47,583
|
|
$
48,472
|
|
$
98,008
|
|
$
93,671
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
34,927
|
|
36,418
|
|
72,633
|
|
70,782
|
|
|
|
|
|
|
|
|
Gross
profit
|
12,656
|
|
12,054
|
|
25,375
|
|
22,889
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses:
|
|
|
|
|
|
|
|
Operating Expenses
|
9,042
|
|
9,544
|
|
19,285
|
|
18,509
|
Revaluation of contingent consideration liability
|
-
|
|
(6,069)
|
|
-
|
|
(6,069)
|
Total selling,general
and administrative expenses
|
9,042
|
|
3,475
|
|
19,285
|
|
12,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
3,614
|
|
8,579
|
|
6,090
|
|
10,449
|
|
|
|
|
|
|
|
|
Other
income/(expense), net
|
(157)
|
|
(507)
|
|
(383)
|
|
(1,061)
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
3,457
|
|
8,072
|
|
5,707
|
|
9,388
|
|
|
|
|
|
|
|
|
Income tax
expense
|
488
|
|
2,114
|
|
869
|
|
2,466
|
Net income
|
$
2,969
|
|
$
5,958
|
|
$
4,838
|
|
$
6,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.26
|
|
$
0.54
|
|
$
0.43
|
|
$
0.63
|
Diluted
|
$
0.25
|
|
$
0.53
|
|
$
0.41
|
|
$
0.62
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
11,271
|
|
11,022
|
|
11,199
|
|
11,013
|
Diluted
|
11,948
|
|
11,164
|
|
11,849
|
|
11,183
|
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,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
$
2,969
|
|
$
5,958
|
|
$
4,838
|
|
$
6,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
669
|
|
672
|
|
1,342
|
|
1,344
|
|
|
|
Stock-based
compensation
|
612
|
|
267
|
|
1,068
|
|
503
|
|
|
|
Revaluation of
contingent consideration liability
|
-
|
|
(6,069)
|
|
-
|
|
(6,069)
|
|
|
|
Income taxes
adjustments
|
(341)
|
|
1,351
|
|
(637)
|
|
1,110
|
|
|
Non-GAAP Net
Income
|
$
3,909
|
|
$
2,179
|
|
$
6,611
|
|
$
3,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$
0.25
|
|
$
0.53
|
|
$
0.41
|
|
$
0.62
|
|
|
Non-GAAP Diluted
Earnings Per Share
|
$
0.33
|
|
$
0.20
|
|
$
0.56
|
|
$
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
11,948
|
|
11,164
|
|
11,849
|
|
11,183
|
|
|
Non-GAAP Diluted
Shares
|
11,948
|
|
11,164
|
|
11,849
|
|
11,183
|
|
MASTECH DIGITAL,
INC.
|
SUPPLEMENTAL
FINANCIAL INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
June 30,
|
|
Six Months ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
6,772
|
|
$
6,654
|
|
$
14,132
|
|
$
12,422
|
|
IT staffing
services
|
40,811
|
|
41,818
|
|
83,876
|
|
81,249
|
|
|
Total
revenues
|
$
47,583
|
|
$
48,472
|
|
$
98,008
|
|
$
93,671
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
%:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
52.2%
|
|
46.1%
|
|
49.5%
|
|
45.8%
|
|
IT staffing
services
|
22.4%
|
|
21.5%
|
|
21.9%
|
|
21.2%
|
|
|
Total gross margin
%
|
26.6%
|
|
24.9%
|
|
25.9%
|
|
24.4%
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Income:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
1,173
|
|
$
1,285
|
|
$
2,082
|
|
$
2,326
|
|
IT staffing
services
|
3,110
|
|
1,897
|
|
5,350
|
|
3,398
|
|
|
Subtotal
|
4,283
|
|
3,182
|
|
7,432
|
|
5,724
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
(669)
|
|
(672)
|
|
(1,342)
|
|
(1,344)
|
Revaluation of
contingent consideration liability
|
-
|
|
6,069
|
|
-
|
|
6,069
|
Interest expense and
other, net
|
(157)
|
|
(507)
|
|
(383)
|
|
(1,061)
|
Income before
income taxes
|
$
3,457
|
|
$
8,072
|
|
$
5,707
|
|
$
9,388
|
View original
content:http://www.prnewswire.com/news-releases/mastech-digital-reports-strong-second-quarter-2020-results-despite-covid-19-301101934.html
SOURCE Mastech Digital, Inc.