Mastech Digital Reports 2% Sequential Revenue Growth for the Second Quarter of 2025
Rhea-AI Summary
Mastech Digital (NYSE American: MHH) reported its Q2 2025 financial results, showing sequential improvement despite challenging market conditions. The company achieved total consolidated revenues of $49.1 million, a 2% increase from Q1 2025, though slightly down from $49.5 million in Q2 2024.
Key highlights include consolidated gross margins increasing by 147 basis points compared to Q1 2025, with gross profits of $13.8 million. The IT Staffing Services segment saw a 3% sequential revenue growth with improved bill rates. GAAP earnings were $0.01 per diluted share, while non-GAAP earnings reached $0.15 per diluted share.
The company maintains a strong financial position with $27.9 million in cash, no bank debt, and $22.2 million available under its revolving credit facility. Days Sales Outstanding (DSO) stood at 53 days.
Positive
- Sequential revenue growth of 2% to $49.1 million in Q2 2025
- Consolidated gross margins improved by 147 basis points from Q1 2025
- Strong financial position with $27.9 million cash and no bank debt
- IT Staffing Services segment achieved 3% sequential revenue growth
- Improved bill rates and margins in IT Staffing Services segment
Negative
- Year-over-year revenue decline from $49.5 million in Q2 2024 to $49.1 million in Q2 2025
- GAAP earnings decreased to $0.01 per share from $0.12 in Q2 2024
- Data and Analytics Services segment showed softer activity with slower client decision-making
- Incurred $0.9 million in severance and transition costs in Q2 2025
News Market Reaction 1 Alert
On the day this news was published, MHH gained 3.57%, reflecting a moderate positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
Consolidated Gross Profits increased by
Second Quarter 2025 Highlights:
- Total consolidated revenues increased by
2% to$49.1 million $48.3 million - Consolidated gross margins increased by 147-basis points, compared to the gross margins achieved in the first quarter of 2025;
- The Company's Data and Analytics Services segment reported increased gross margins of 116-basis points compared to its gross margins in the first quarter of 2025;
- The IT Staffing Services segment achieved a
3% increase in its revenues during the second quarter of 2025, compared to its revenues during the first quarter of 2025; - GAAP diluted earnings (loss) per share was
$0.01 $0.12 $0.12 $1.4 million $0.9 million - Non-GAAP diluted earnings per share was
$0.15 $0.19 $0.06
Second Quarter Results:
Revenues for the second quarter of 2025 totaled
In the IT Staffing Services segment, revenue quality was enhanced through higher bill rates and increased margins, which was primarily driven by disciplined pricing and focused execution. Our sharpened focus on our top 10 client accounts, particularly in the Banking and Financial Services sector, has helped deepen engagement with these clients and reinforce our positioning in strategic client portfolios. While client activity remained below prior-year levels, consistent with the trends we are seeing in the broader market, we believe the Company's ability to expand margins and maintain pricing strength underscores the resilience of our delivery model and our ability to create value for clients in a measured demand environment.
Activity levels in the Company's Data and Analytics Services segment were softer during the second quarter when compared to the first quarter of 2025, with order bookings totaling
Nirav Patel, the Company's President and Chief Executive Officer, stated: "The second quarter of 2025 reflected ongoing measured client activity and cautious decision-making, though we are beginning to see early signs of stabilization in the broader environment. I'm pleased with our resilient performance in the first half of the year, marked by continued year-over-year growth in both revenue and gross margins. As we look ahead, we continue preparing the organization for long-term growth while positioning Mastech Digital as a trusted partner for enterprises to reimagine themselves and transition into AI-first organizations."
Commenting on the Company's financial position, Kannan Sugantharaman, Mastech Digital's Chief Financial and Operations Officer, stated: "On June 30, 2025, we had
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
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 from 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 facilitate comparisons of our results with other periods.
Severance charges: From time to time, we incur severance expenses related to the termination by the Company of leadership and other key personnel. 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.
Finance and accounting transition expense: During the first quarter of 2025, the Company's Board of Directors made the decision to implement a long-term cost-cutting initiative to transition the Company's finance and accounting functions to
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 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 Company's strategies, initiatives and expectations concerning its operations and operating results, the extent to which the Company's business is adversely affected by the impacts of the COVID-19 pandemic or any other health epidemics or other outbreaks that disrupt 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, 2024.
MASTECH DIGITAL, INC. | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(Amounts in thousands) | ||||
(Unaudited) | ||||
June 30, | December 31, | |||
2025 | 2024 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 27,933 | $ 27,742 | ||
Accounts receivable, net | 30,505 | 31,443 | ||
Prepaid and other current assets | 7,221 | 7,020 | ||
Total current assets | 65,659 | 66,205 | ||
Equipment, enterprise software and leasehold improvements, net | 1,793 | 1,998 | ||
Operating lease right-of-use assets, net | 3,192 | 3,832 | ||
Deferred income taxes | 1,674 | 1,298 | ||
Deferred financing costs, net | 142 | 189 | ||
Deferred compensation, net | 1,250 | - | ||
Non-current deposits | 463 | 444 | ||
Goodwill, net of impairment | 27,210 | 27,210 | ||
Intangible assets, net of amortization | 9,009 | 10,308 | ||
Total assets | $ 110,392 | $ 111,484 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $ 3,564 | $ 4,683 | ||
Current portion of operating lease liability | 1,313 | 1,265 | ||
Accrued payroll and related costs | 13,693 | 13,750 | ||
Other accrued liabilities | 1,148 | 879 | ||
Total current liabilities | 19,718 | 20,577 | ||
Long-term liabilities: | ||||
Long-term operating lease liability, less current portion | 1,825 | 2,486 | ||
Long-term severance liability | 1,039 | 987 | ||
Total liabilities | 22,582 | 24,050 | ||
Shareholders' equity: | ||||
Common stock, par value | 135 | 135 | ||
Additional paid-in capital | 40,064 | 38,277 | ||
Retained earnings | 54,513 | 55,817 | ||
Accumulated other comprehensive income (loss) | (1,903) | (1,910) | ||
Treasury stock, at cost | (4,999) | (4,885) | ||
Total shareholders' equity | 87,810 | 87,434 | ||
Total liabilities and shareholders' equity | $ 110,392 | $ 111,484 | ||
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, | ||||||
2025 | 2024 | 2025 | 2024 | ||||
Revenues | $ 49,097 | $ 49,534 | $ 97,414 | $ 96,357 | |||
Cost of revenues | 35,277 | 35,554 | 70,702 | 70,246 | |||
Gross profit | 13,820 | 13,980 | 26,712 | 26,111 | |||
Selling, general and administrative expenses | 13,793 | 12,287 | 28,538 | 24,824 | |||
Income (loss) from operations | 27 | 1,693 | (1,826) | 1,287 | |||
Other income/(expense), net | 183 | 116 | 274 | 240 | |||
Income (loss) before income taxes | 210 | 1,809 | (1,552) | 1,527 | |||
Income tax expense (benefit) | 75 | 418 | (248) | 297 | |||
Net income (loss) | $ 135 | $ 1,391 | $ (1,304) | $ 1,230 | |||
Earnings (loss) per share: | |||||||
Basic | $ 0.01 | $ 0.12 | $ (0.11) | $ 0.11 | |||
Diluted | $ 0.01 | $ 0.12 | $ (0.11) | $ 0.10 | |||
Weighted average common shares outstanding: | |||||||
Basic | 11,767 | 11,652 | 11,760 | 11,633 | |||
Diluted | 11,964 | 11,922 | 11,760 | 11,915 | |||
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, | |||||||
2025 | 2024 | 2025 | 2024 | |||||
GAAP Net Income (Loss) | $ 135 | $ 1,391 | $ (1,304) | $ 1,230 | ||||
Adjustments: | ||||||||
Amortization of acquired intangible assets | 649 | 693 | 1,299 | 1,386 | ||||
Stock-based compensation | 714 | 461 | 1,609 | 1,011 | ||||
Severance expense | 232 | - | 1,641 | - | ||||
Finance and accounting transition expense | 688 | - | 688 | - | ||||
Income tax adjustments | (588) | (296) | (1,347) | (615) | ||||
Non-GAAP Net Income | $ 1,830 | $ 2,249 | $ 2,586 | $ 3,012 | ||||
GAAP Diluted Earnings (Loss) Per Share | $ 0.01 | $ 0.12 | $ (0.11) | $ 0.10 | ||||
Non-GAAP Diluted Earnings Per Share | $ 0.15 | $ 0.19 | $ 0.21 | $ 0.25 | ||||
Weighted average common shares outstanding: | ||||||||
GAAP Diluted Shares | 11,964 | 11,922 | 11,760 | 11,915 | ||||
Non-GAAP Diluted Shares | 11,964 | 11,922 | 12,084 | 11,915 | ||||
MASTECH DIGITAL, INC. | |||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||
(Amounts in thousands) | |||||||||
(Unaudited) | |||||||||
Three Months ended June 30, | Six Months ended June 30, | ||||||||
2025 | 2024 | 2025 | 2024 | ||||||
Revenues: | |||||||||
Data and analytics services | $ 8,589 | $ 8,876 | $ 17,549 | $ 16,943 | |||||
IT staffing services | 40,508 | 40,658 | 79,865 | 79,414 | |||||
Total revenues | $ 49,097 | $ 49,534 | $ 97,414 | $ 96,357 | |||||
Gross Margin %: | |||||||||
Data and analytics services | 45.2 % | 49.2 % | 44.6 % | 47.9 % | |||||
IT staffing services | 24.5 % | 23.6 % | 23.6 % | 22.7 % | |||||
Total gross margin % | 28.1 % | 28.2 % | 27.4 % | 27.1 % | |||||
Segment Operating Income (Loss): | |||||||||
Data and analytics services | $ (154) | $ 744 | $ (282) | $ 290 | |||||
IT staffing services | 1,750 | 1,642 | 2,084 | 2,383 | |||||
Subtotal | 1,596 | 2,386 | 1,802 | 2,673 | |||||
Amortization of acquired intangible assets | (649) | (693) | (1,299) | (1,386) | |||||
Severance expense | (232) | - | (1,641) | - | |||||
Finance and accounting transition expense | (688) | - | (688) | - | |||||
Interest income and other, net | 183 | 116 | 274 | 240 | |||||
Income (loss) before income taxes | $ 210 | $ 1,809 | $ (1,552) | $ 1,527 | |||||
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SOURCE Mastech Digital, Inc.
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