Consolidated Gross Profit Margins of 28.2% Set a
New Quarterly Record for Mastech Digital
PITTSBURGH, Aug. 7, 2024
/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, 2024.
Second Quarter 2024 Highlights:
- Total consolidated revenues increased by $2.7 million on a sequential quarterly basis to
$49.5 million and represented our
second consecutive quarter of revenue growth;
- The Company's Data and Analytics Services segment reported
revenues of $8.9 million, which were
approximately 10% higher sequentially than revenues of $8.1 million reported in the first quarter of
2024;
- The IT Staffing Services segment reported revenues of
$40.7 million, achieving sequential
quarterly revenue growth of 5% when compared to revenues reported
in the first quarter of 2024;
- Gross profit margins during the second quarter of 2024 achieved
a Company quarterly performance record of 28.2%, as the Company's
two business segments reported margin improvements on both a
year-over-year and a sequential quarterly basis;
- GAAP diluted earnings (loss) per share was $0.12 profit in the second quarter of 2024,
versus a ($0.19) loss in the second
quarter of 2023 and a ($0.01) loss in
the first quarter of 2024; and
- Non-GAAP diluted earnings per share was $0.19 in the second quarter of 2024, versus
$0.11 in the second quarter of 2023
and $0.06 in the first quarter of
2024.
Second Quarter Results:
Revenues for the second quarter of 2024 totaled $49.5 million, compared to $52.2 million during the corresponding quarter of
2023. Gross profits in the second quarter of 2024 were $14.0 million, compared to $13.6 million in the same quarter of 2023. Gross
profit margins improved to a Company quarterly performance record
28.2% in the 2024 second quarter, versus 26.1% in the second
quarter of 2023. GAAP net income (loss) for the second quarter of
2024 totaled $1.4 million or
$0.12 per diluted share, compared to
a ($2.2 million) loss or ($0.19) per diluted share, during the same period
of 2023. Non-GAAP net income for the second quarter of 2024 totaled
$2.2 million or $0.19 per diluted share, compared to $1.3 million, or $0.11 per diluted share, in the second quarter of
2023.
Activity levels at the Company's Data and Analytics Services
segment continued to be solid in the second quarter of 2024, with
order bookings totaling $9.2 million,
as various legacy clients increased their spending on our services
when compared to last year. Similarly, our IT Staffing Services
clients have shown an increased willingness to start new
assignments during the first half of 2024, as we grew our billable
consultant base by nearly 10% over the first six months of
2024.
Vivek Gupta, the Company's
President and Chief Executive Officer stated, "The second quarter
of 2024 was a continuation of market improvements experienced
during the first quarter of 2024, as many of our clients appear to
have shifted their spending patterns in a positive direction.
Additionally, our gross profit margins improved to a Company
quarterly performance record 28.2% during the quarter due to strong
project delivery, higher consultant utilization and lower employee
benefit costs. In summary, I feel good about our second quarter
performance, with notable improvements in both top-line revenues
and bottom-line operating profits."
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial
Officer, stated, "On June 30, 2024,
we had $20.6 million of cash balances
on hand, no bank debt, and borrowing availability of $23.8 million under our revolving credit
facility. Our Days Sales Outstanding (DSO) measurement was a
healthy 53 days on June 30, 2024,
which is an improvement of 3 days when compared to a year ago."
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,
Europe, and India.
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,
our July 2017 acquisition of the
services division of InfoTrellis, Inc. and our October 2020 acquisition of AmberLeaf Partners.
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 expenses 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.
Settlement reserve on employment-related claim, net of
recoveries: In the second quarter of 2023, we recognized a
pre-tax reserve of $3.1 million
related to an employment claim asserted by a former employee who
alleged various employment-related claims against the
Company, including a claim of wrongful termination. During the
third quarter of 2023, we formally settled this claim in accordance
with the economic terms and conditions that were reflected in our
second quarter 2023 financial statements. We have excluded this
reserve in our non-GAAP financial measures because we believe it is
not indicative of our ongoing operating performance and thus its
exclusion allows investors to make more meaningful comparison
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 projections of and statements regarding the Company's
ability to generate revenues, earnings, and cash flow. 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
forecasted 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 and general economic conditions
that could cause the Company's clients 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 or any other pandemics or outbreaks disrupting day-to-day
activities 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, 2023.
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2024
|
|
2023
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
20,587
|
|
$
21,147
|
Accounts receivable,
net
|
|
32,643
|
|
29,815
|
Prepaid and other current
assets
|
|
7,385
|
|
5,501
|
Total current assets
|
|
60,615
|
|
56,463
|
|
|
|
|
|
Equipment, enterprise
software and leasehold improvements, net
|
|
2,242
|
|
1,913
|
Operating lease
right-of-use assets, net
|
|
4,471
|
|
5,106
|
Deferred income
taxes
|
|
660
|
|
793
|
Deferred financing
costs, net
|
|
236
|
|
284
|
Non-current
deposits
|
|
454
|
|
457
|
Goodwill, net of
impairment
|
|
27,210
|
|
27,210
|
Intangible assets, net
of amortization
|
|
11,615
|
|
13,001
|
Total assets
|
|
$
107,503
|
|
$
105,227
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts payable
|
|
$
5,790
|
|
$
4,659
|
Current portion of operating
lease liability
|
|
1,250
|
|
1,236
|
Accrued payroll and related
costs
|
|
11,347
|
|
12,354
|
Other accrued
liabilities
|
|
1,889
|
|
1,622
|
Total current liabilities
|
|
20,276
|
|
19,871
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Long-term operating lease liability, less current
portion
|
|
3,191
|
|
3,843
|
Long-term accrued income taxes
|
|
-
|
|
69
|
Total liabilities
|
|
23,467
|
|
23,783
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, par value $0.01 per share
|
|
134
|
|
133
|
Additional paid-in
capital
|
|
36,813
|
|
35,345
|
Retained earnings
|
|
53,645
|
|
52,415
|
Accumulated other
comprehensive income (loss)
|
|
(1,671)
|
|
(1,644)
|
Treasury stock, at
cost
|
|
(4,885)
|
|
(4,805)
|
Total shareholders' equity
|
|
84,036
|
|
81,444
|
Total liabilities and shareholders'
equity
|
|
$
107,503
|
|
$
105,227
|
|
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,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
Revenues
|
$
49,534
|
|
$
52,204
|
|
$
96,357
|
|
$
107,267
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
35,554
|
|
38,560
|
|
70,246
|
|
80,141
|
|
|
|
|
|
|
|
|
Gross profit
|
13,980
|
|
13,644
|
|
26,111
|
|
27,126
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses:
|
|
|
|
|
|
|
|
Operating
expenses
|
12,287
|
|
13,372
|
|
24,824
|
|
26,322
|
Employment-related claim, net of recoveries
|
-
|
|
3,100
|
|
-
|
|
3,100
|
Total selling, general
and administrative expenses
|
12,287
|
|
16,472
|
|
24,824
|
|
29,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
1,693
|
|
(2,828)
|
|
1,287
|
|
(2,296)
|
|
|
|
|
|
|
|
|
Other income/(expense),
net
|
116
|
|
50
|
|
240
|
|
(3)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
1,809
|
|
(2,778)
|
|
1,527
|
|
(2,299)
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
418
|
|
(605)
|
|
297
|
|
(387)
|
Net income
(loss)
|
$
1,391
|
|
$
(2,173)
|
|
$
1,230
|
|
$
(1,912)
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
Basic
|
$
0.12
|
|
$
(0.19)
|
|
$
0.11
|
|
$
(0.16)
|
Diluted
|
$
0.12
|
|
$
(0.19)
|
|
$
0.10
|
|
$
(0.16)
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
11,652
|
|
11,620
|
|
11,633
|
|
11,629
|
Diluted
|
11,922
|
|
11,620
|
|
11,915
|
|
11,629
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income
|
$
1,391
|
|
$
(2,173)
|
|
$
1,230
|
|
$
(1,912)
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
693
|
|
693
|
|
1,386
|
|
1,386
|
|
|
Stock-based
compensation
|
461
|
|
842
|
|
1,011
|
|
1,677
|
|
|
Employment-related
claim, net of recoveries
|
-
|
|
3,100
|
|
-
|
|
3,100
|
|
|
Income tax
adjustments
|
(296)
|
|
(1,171)
|
|
(615)
|
|
(1,559)
|
|
Non-GAAP Net Income
|
$
2,249
|
|
$
1,291
|
|
$
3,012
|
|
$
2,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted Earnings Per Share
|
$
0.12
|
|
$
(0.19)
|
|
$
0.10
|
|
$
(0.16)
|
|
Non-GAAP Diluted Earnings Per
Share
|
$
0.19
|
|
$
0.11
|
|
$
0.25
|
|
$
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding:
|
|
|
|
|
|
|
|
|
GAAP Diluted
Shares
|
11,922
|
|
11,620
|
|
11,915
|
|
11,629
|
|
Non-GAAP Diluted
Shares
|
11,922
|
|
11,961
|
|
11,915
|
|
12,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MASTECH DIGITAL, INC.
|
SUPPLEMENTAL FINANCIAL
INFORMATION
|
(Amounts in
thousands)
|
(Unaudited)
|
|
|
|
|
Three Months ended June 30,
|
|
Six Months ended June 30,
|
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
8,876
|
|
$
8,773
|
|
$
16,943
|
|
$
18,168
|
|
IT staffing
services
|
40,658
|
|
43,431
|
|
79,414
|
|
89,099
|
|
|
Total revenues
|
$
49,534
|
|
$
52,204
|
|
$
96,357
|
|
$
107,267
|
|
|
|
|
|
|
|
|
|
|
Gross Margin %:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
49.2 %
|
|
45.6 %
|
|
47.9 %
|
|
41.9 %
|
|
IT staffing
services
|
23.6 %
|
|
22.2 %
|
|
22.7 %
|
|
21.9 %
|
|
|
Total gross margin %
|
28.2 %
|
|
26.1 %
|
|
27.1 %
|
|
25.3 %
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Income:
|
|
|
|
|
|
|
|
|
Data and analytics
services
|
$
744
|
|
$
(881)
|
|
$
290
|
|
$
(1,561)
|
|
IT staffing
services
|
1,642
|
|
1,846
|
|
2,383
|
|
3,751
|
|
|
Subtotal
|
2,386
|
|
965
|
|
2,673
|
|
2,190
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets
|
(693)
|
|
(693)
|
|
(1,386)
|
|
(1,386)
|
Employment-related
claim, net of recoveries
|
-
|
|
(3,100)
|
|
-
|
|
(3,100)
|
Interest income
(expense) and other, net
|
116
|
|
50
|
|
240
|
|
(3)
|
Income before income taxes
|
$
1,809
|
|
$
(2,778)
|
|
$
1,527
|
|
$
(2,299)
|
|
|
|
|
|
|
|
|
|
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SOURCE Mastech Digital, Inc.