PITTSBURGH, Oct. 28, 2020 /PRNewswire/ -- Mastech Digital,
Inc. (NYSE American: MHH), a leading provider of Digital
Transformation IT Services, announced today its financial results
for the third quarter ended September 30,
2020.
Third Quarter 2020 Highlights:
- The Company's Data and Analytics Services segment reported
$7.2 million of revenues,
representing a 6% sequential improvement over the second quarter of
2020 and a modest increase over the third quarter of 2019;
- The IT Staffing Services segment reported a modest gain in
Consultants-on-Billing headcount reversing the downward trend of
declines in the first half of 2020, achieving revenue of
$40.2 million. The quarterly revenue
represents a decline of approximately 5% compared to third quarter
of 2019 and a 1% decrease from the previous quarter;
- Total revenues of $47.4 million,
compared to revenues of $49.5 million
in the third quarter of 2019, reflect the impact of COVID-19 and
continued uncertain market conditions;
- Gross margins grew to a record 27.6%, which was 100 basis
points higher than the previous record achieved in the second
quarter of 2020;
- GAAP diluted earnings per share were $0.25 in the third quarter of 2020 versus
$0.17 in the third quarter of 2019;
and
- Non-GAAP diluted earnings per share were $0.32 in the third quarter of 2020 versus
$0.23 in the third quarter of
2019.
Third Quarter Results:
Mastech Digital revenues for the third quarter of 2020 totaled
$47.4 million compared to
$49.5 million during the
corresponding quarter last year. Gross profits in the third quarter
of 2020 were $13.1 million, higher
than the $12.3 million in the same
quarter of 2019, despite lower revenues in the 2020 period. Gross
margins in the 2020 quarter were a record 27.6% or 270-basis points
higher than third quarter 2019. GAAP net income for the third
quarter of 2020 totaled $3.0 million
or $0.25 per diluted share, compared
to $1.9 million or $0.17 per diluted share during the same period
last year. Non-GAAP net income for the third quarter of 2020 was
$3.8 million or $0.32 per diluted share, compared to $2.6 million or $0.23 per diluted share in the third quarter of
2019.
Activity levels at the Company's Data and Analytics Services
segment held up well during the quarter despite some project
delays, particularly in Europe and
parts of Asia. This segment
recorded year-over-year and sequential revenue growth and record
gross margins. Activity levels for the Company's IT Staffing
Services segment picked up modestly, realizing the first increase
in Consultants-on-Billing headcount after material declines in the
first half of the year. Additionally, gross margins for this
segment continued to expand in third quarter 2020 to a record
performance of 22.6%.
"I'm pleased with the performance of both business segments in
the third quarter considering the backdrop of continuing uncertain
economic conditions. Our Data & Analytics business delivered
significant sequential growth, which, coupled with the recent
acquisition of AmberLeaf Partners, Inc., has positioned the
business to scale as global markets begin to open up. Our IT
Staffing segment's new remote staffing offering, MAS-REMOTE, gained
traction with our customers, driving an increase in the Consultants
on-Billing headcount this quarter," stated Vivek Gupta, the Company's President and Chief
Executive Officer.
"The Marketing, Customer Support, and Sales Operations/Support
capabilities of our acquisition AmberLeaf, broadens Mastech
Digital's offerings and will help our clients learn faster from
more complete insights. We are all very excited about the
opportunities this will open," added Paul
Burton, Chief Executive of Mastech InfoTrellis."
Expanding on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "During the third quarter, we reduced bank debt by
another $6.1 million, further
improving our leverage ratios and increasing our cash availability
under our existing credit facility to $22.5
million from $17.3 million a
quarter ago. Additionally, despite challenging economic conditions,
our accounts receivable balance remains of top credit quality."
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 a determination was made that the 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.
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 2019 period, we recorded a reduction
in acquisition-related transaction expense due to revised estimates
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.
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) statements regarding the expected benefits to the
Company from the completion of the AmberLeaf 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 the Company's 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, the Company's ability to
create, acquire and build new lines of business, to attract and
retain qualified personnel, reduce costs and conserve cash, the
extent to which the Company's business is adversely affected by the
impacts of the COVID-19 pandemic and governmental
responses to limit the further spread of COVID-19 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.
+91-888.330.5497
MASTECH DIGITAL,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$4,014
|
|
$2,981
|
Accounts receivable,
net
|
|
31,258
|
|
32,352
|
Prepaid and other current
assets
|
|
2,647
|
|
1,597
|
Total current assets
|
|
37,919
|
|
36,930
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
2,133
|
|
2,476
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
3,642
|
|
4,617
|
|
|
|
|
|
|
|
|
|
|
Non-current
deposits
|
|
392
|
|
405
|
|
|
|
|
|
Goodwill, net of
impairment
|
|
26,106
|
|
26,106
|
|
|
|
|
|
Intangible assets,
net
|
|
18,052
|
|
20,050
|
Total assets
|
|
$88,244
|
|
$90,584
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of long-term
debt
|
|
$4,575
|
|
$4,575
|
Current portion of operating
lease liability
|
|
1,188
|
|
1,396
|
Accounts payable
|
|
3,114
|
|
4,027
|
Accrued payroll and related
costs
|
|
11,325
|
|
7,902
|
Other accrued
liabilities
|
|
739
|
|
1,191
|
Total current liabilities
|
|
20,941
|
|
19,091
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term debt, less current portion, net
|
|
3,865
|
|
20,682
|
Long-term operating lease liability, less current
portion
|
|
2,558
|
|
3,321
|
Long-term accrued income taxes
|
|
185
|
|
185
|
Long-term payroll tax liability
|
|
3,107
|
|
-
|
Long-term deferred income taxes
|
|
726
|
|
1,025
|
Total liabilities
|
|
31,382
|
|
44,304
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value
$0.01 per share
|
|
130
|
|
127
|
Additional paid-in
capital
|
|
24,901
|
|
21,939
|
Retained earnings
|
|
36,595
|
|
28,759
|
Accumulated other
comprehensive income (loss)
|
|
(577)
|
|
(358)
|
Treasury stock, at
cost
|
|
(4,187)
|
|
(4,187)
|
Total shareholders' equity
|
|
56,862
|
|
46,280
|
Total liabilities and shareholders' equity
|
|
$88,244
|
|
$90,584
|
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,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
$47,383
|
|
$49,543
|
|
$145,391
|
|
$143,214
|
Cost of
revenues
|
34,293
|
|
37,214
|
|
106,926
|
|
107,996
|
Gross
profit
|
13,090
|
|
12,329
|
|
38,465
|
|
35,218
|
Selling, general and
administrative expenses:
|
|
|
|
|
|
|
|
Operating expenses
|
8,873
|
|
9,259
|
|
28,158
|
|
27,768
|
Revaluation of contingent consideration liability
|
-
|
|
-
|
|
-
|
|
(6,069)
|
Total selling,
general and administrative expenses
|
8,873
|
|
9,259
|
|
28,158
|
|
21,699
|
|
|
|
|
|
|
|
|
Income from
operations
|
4,217
|
|
3,070
|
|
10,307
|
|
13,519
|
Other
income/(expense), net
|
(191)
|
|
(380)
|
|
(574)
|
|
(1,441)
|
Income before income
taxes
|
4,026
|
|
2,690
|
|
9,733
|
|
12,078
|
Income tax
expense
|
1,028
|
|
741
|
|
1,897
|
|
3,207
|
Net income
|
$2,998
|
|
$1,949
|
|
$7,836
|
|
$8,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Basic
|
$0.26
|
|
$0.18
|
|
$0.70
|
|
$0.80
|
Diluted
|
$0.25
|
|
$0.17
|
|
$0.66
|
|
$0.79
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
11,381
|
|
11,039
|
|
11,260
|
|
11,022
|
Diluted
|
12,042
|
|
11,205
|
|
11,911
|
|
11,198
|
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,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income
|
$2,998
|
|
$1,949
|
|
$7,836
|
|
$8,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
656
|
|
673
|
|
1,998
|
|
2,017
|
|
|
|
Stock-based
compensation
|
462
|
|
263
|
|
1,530
|
|
766
|
|
|
|
Acquisition
transaction expenses
|
-
|
|
(110)
|
|
-
|
|
(110)
|
|
|
|
Revaluation of
contingent consideration liability
|
-
|
|
-
|
|
-
|
|
(6,069)
|
|
|
|
Income tax
adjustments
|
(270)
|
|
(225)
|
|
(907)
|
|
885
|
|
|
Non-GAAP Net
Income
|
$3,846
|
|
$2,550
|
|
$10,457
|
|
$6,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Earnings Per Share
|
$0.25
|
|
$0.17
|
|
$0.66
|
|
$0.79
|
|
|
Non-GAAP Diluted
Earnings Per Share
|
$0.32
|
|
$0.23
|
|
$0.88
|
|
$0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
12,042
|
|
11,205
|
|
11,911
|
|
11,198
|
|
|
Non-GAAP Diluted
Shares
|
12,042
|
|
11,205
|
|
11,911
|
|
11,198
|
|
MASTECH DIGITAL,
INC.
|
SUPPLEMENTAL
FINANCIAL INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended
September 30,
|
|
Nine Months ended
September 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$7,176
|
|
$7,080
|
|
$21,308
|
|
$19,502
|
|
IT staffing
services
|
40,207
|
|
42,463
|
|
124,083
|
|
123,712
|
|
|
Total
revenues
|
$47,383
|
|
$49,543
|
|
$145,391
|
|
$143,214
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
%:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
55.9%
|
|
45.7%
|
|
51.7%
|
|
45.8%
|
|
IT staffing
services
|
22.6%
|
|
21.4%
|
|
22.1%
|
|
21.3%
|
|
|
Total gross margin
%
|
27.6%
|
|
24.9%
|
|
26.5%
|
|
24.6%
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Income:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$1,579
|
|
$1,530
|
|
$3,661
|
|
$3,856
|
|
IT staffing
services
|
3,294
|
|
2,103
|
|
8,644
|
|
5,501
|
|
|
Subtotal
|
4,873
|
|
3,633
|
|
12,305
|
|
9,357
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
(656)
|
|
(673)
|
|
(1,998)
|
|
(2,017)
|
Revaluation of
contingent consideration liability
|
-
|
|
-
|
|
-
|
|
6,069
|
Acquisition
transaction expenses
|
-
|
|
110
|
|
-
|
|
110
|
Interest expense and
other, net
|
(191)
|
|
(380)
|
|
(574)
|
|
(1,441)
|
Income before
income taxes
|
$4,026
|
|
$2,690
|
|
$9,733
|
|
$12,078
|
View original
content:http://www.prnewswire.com/news-releases/mastech-digital-delivers-solid-third-quarter-results-301161523.html
SOURCE Mastech Digital, Inc.