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Mastech Digital Reports Sequential Revenue Growth for the First Time since the Third Quarter of 2022

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Mastech Digital, Inc. reported a 15% decline in total consolidated revenues to $46.8 million for the first quarter of 2024. However, the company saw a 2% sequential increase from the fourth quarter of 2023. The Data and Analytics Services segment revenues were $8.1 million, with the IT Staffing Services segment showing a 6% increase in billing consultant headcount. GAAP diluted earnings per share were ($0.01), while non-GAAP diluted earnings per share were $0.06. The company had $19.4 million in cash balances, no bank debt, and borrowing availability of $24.2 million as of March 31, 2024.

Positive
  • The IT Staffing Services segment achieved a 6% increase in billing consultant headcount.

  • The company saw positive sequential growth in total consolidated revenues from the fourth quarter of 2023.

  • The company's gross margins improved to 25.9% in the first quarter of 2024 compared to 24.5% in the first quarter of 2023.

Negative
  • Total consolidated revenues declined by 15% to $46.8 million in the first quarter of 2024.

  • GAAP diluted earnings per share were ($0.01) in the first quarter of 2024, compared to $0.02 in the first quarter of 2023.

  • Non-GAAP diluted earnings per share decreased to $0.06 in the first quarter of 2024, from $0.12 in the first quarter of 2023.

Insights

Mastech Digital's financial announcement indicating a sequential revenue increase for the first time since Q3 2022 appears to be a positive signal of recovery, albeit with a notable year-over-year revenue decline of $8.3 million (from $55.1 million down to $46.8 million). Such mixed results warrant a closer examination of the underlying financial health of the company.

The earnings information reveals a dip in Non-GAAP diluted earnings per share from $0.12 in Q1 2023 to $0.06 in Q1 2024. Despite a slight improvement in gross margins from 24.5% to 25.9%, a concrete analysis of cost management and operational efficiency is crucial. The reduction in S,G&A expenses by 3% suggests a tightening of operational controls, potentially beneficial for long-term profitability.

Investors should also take note of Mastech’s strong liquidity position, with $19.4 million in cash and no bank debt, which could provide resilience against market volatility. The improvement in DSO from 61 to 56 days indicates a more efficient cash conversion cycle, which is inherently positive.

The reported increase in billable consultant headcount by 6% within the IT Staffing Services segment is an important indicator of demand growth in the industry, reflecting potentially increased market activity and client engagement. This is a critical metric, as the staffing segment is often seen as a barometer for broader IT sector health. The positive momentum in terms of sequential revenue growth, even amidst overall revenue decline, might suggest an upward trend that could potentially continue into subsequent quarters.

The company’s commentary on solid activity levels and increased comfort with new assignments in the Data and Analytics Services segment also paints an optimistic picture for future revenue streams. However, it’s important to remain cautious and monitor whether these booked orders translate to sustained revenue recognition over the coming year.

The IT Staffing Services Segment Increases its Billable Consultant Base by 6% during the Quarter  

PITTSBURGH, May 8, 2024 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the first quarter ended March 31, 2024.  

Mastech_Digital_Logo

First Quarter 2024 Highlights:

  • Total consolidated revenues declined by 15% to $46.8 million, compared to revenues of $55.1 million in the first quarter of 2023. However, total consolidated revenues during the first quarter of 2024 were 2% higher sequentially from the fourth quarter of 2023;
  • The Company's Data and Analytics Services segment reported revenues of $8.1 million, compared to $9.4 million in the first quarter of 2023, and were essentially flat on a sequential basis when compared to the fourth quarter of 2023;
  • The IT Staffing Services segment achieved a 6% increase in its billing consultant headcount during the first quarter of 2024 and reported positive sequential growth when compared to the fourth quarter of 2023;
  • GAAP diluted earnings (loss) per share was ($0.01) in the first quarter of 2024, versus $0.02 in the first quarter of 2023;
  • Non-GAAP diluted earnings per share was $0.06 in the first quarter of 2024, versus $0.12 in the first quarter of 2023; and
  • On March 31, 2024, the Company had $19.4 million of cash balances on hand, no bank debt and borrowing availability of $24.2 million under its revolving credit facility.

First Quarter Results: 

Revenues for the first quarter of 2023 totaled $46.8 million, compared to $55.1 million during the corresponding quarter of 2023.  Gross profits in the first quarter of 2024 were $12.1 million, compared to $13.5 million in the same quarter of 2023. Gross margins improved to 25.9% in the 2024 first quarter, versus 24.5% in the 2023 first quarter. GAAP net income (loss) for the first quarter of 2024 totaled ($161,000) or ($0.01) per diluted share, compared to $261,000 net income, or $0.02 per diluted share, during the same period of 2023.  Non-GAAP net income for the first quarter of 2024 totaled $0.8 million or $0.06 per diluted share, compared to $1.4 million, or $0.12 per diluted share, in the first quarter of 2023.

Activity levels at the Company's Data and Analytics Services segment were solid in the first quarter of 2024, with order bookings totaling $9.6 million – all of which are expected to be recognized as revenues over the next twelve months.  During the first quarter of 2024, our clients seemed more comfortable with starting new assignments than they were during 2023.  Demand for the Company's IT Staffing Services segment noticeably increased in the first quarter of 2024, as we grew our billable consultant base by 6% during the quarter and achieved sequential revenue growth when comparing the first quarter of 2024 to the fourth quarter of 2023.

Vivek Gupta, the Company's President and Chief Executive Officer stated: "The first quarter of 2024 showed encouraging signs of market improvements in both of our business segments.  This quarter was the first quarter since the third quarter of 2022 where both of our segments' clients shifted their spending patterns in a positive direction. Additionally, gross margins improved during the quarter by 140-basis points when compared to a year ago, and we successfully reduced S,G&A expenses by 3% from the corresponding quarter of 2023.  While there is still more work to be done, we have a more positive outlook on market conditions and our growth opportunities for 2024."   

Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial Officer stated: "On March 31, 2024, we had $19.4 million of cash balances on hand, no bank debt, and borrowing availability of $24.2 million under our revolving credit facility. Our Days Sales Outstanding (DSO) measurement was a healthy 56 days at the end of first quarter, which is an improvement of 5 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.

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 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 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)












March 31,


December 31,



2024


2023






ASSETS





Current assets:





     Cash and cash equivalents 


$                    19,424


$                    21,147

     Accounts receivable, net 


32,015


29,815

     Prepaid and other current assets


6,887


5,501

           Total current assets


58,326


56,463






Equipment, enterprise software and leasehold improvements, net


1,983


1,913






Operating lease right-of-use assets, net


4,790


5,106

Deferred income taxes


738


793

Deferred financing costs, net


260


284

Non-current deposits


455


457

Goodwill, net of impairment


27,210


27,210






Intangible assets, net of amortization


12,308


13,001

           Total  assets


$                 1,06,070


$                 1,05,227






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





     Accounts payable


$                      5,473


$                      4,659

     Current portion of operating lease liability


1,242


1,236

     Accrued payroll and related costs


11,978


12,354

     Other accrued liabilities


2,066


1,622

           Total current liabilities


20,759


19,871






Long-term liabilities:





    Long-term operating lease liability, less current portion


3,517


3,843

    Long-term accrued income taxes


69


69

           Total liabilities


24,345


23,783






Shareholders' equity:





     Common stock, par value $0.01 per share


133


133

     Additional paid-in capital


35,895


35,345

     Retained earnings


52,254


52,415

     Accumulated other comprehensive income (loss)


(1,672)


(1,644)

     Treasury stock, at cost


(4,885)


(4,805)

          Total shareholders' equity


81,725


81,444

           Total liabilities and shareholders' equity


$                 1,06,070


$                 1,05,227






 

MASTECH DIGITAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)







Three Months ended March 31,



2024


2023







Revenues

$                         46,823


$                        55,063







Cost of revenues

34,692


41,581







Gross profit

12,131


13,482







Selling, general and administrative expenses

12,537


12,950







Income (loss) from  operations 

(406)


532







Other income/(expense), net

124


(53)







Income (loss) before income taxes

(282)


479







Income tax expense (benefit)

(121)


218


Net income (loss)

$                            (161)


$                             261












Earnings (loss) per share:





Basic

$                           (0.01)


$                            0.02


Diluted

$                           (0.01)


$                            0.02







Weighted average common shares outstanding:





Basic

11,615


11,638


Diluted

11,615


12,054







 

MASTECH DIGITAL, INC.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(Amounts in thousands, except per share data)

(Unaudited)








Three Months ended March 31,



2024


2023






GAAP Net Income (loss)

$                            (161)


$                             261






Adjustments:





Amortization of acquired intangible assets

693


693


Stock-based compensation

550


835


Income taxes adjustments

(319)


(388)

Non-GAAP Net Income

$                              763


$                          1,401











GAAP Diluted Earnings (Loss) Per Share

$                           (0.01)


$                            0.02

Non-GAAP Diluted Earnings Per Share

$                             0.06


$                            0.12











Weighted average common shares outstanding:




GAAP Diluted Shares

11,615


12,054

Non-GAAP Diluted Shares

11,909


12,054






 

MASTECH DIGITAL, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(Amounts in thousands)

(Unaudited)










Three Months ended March 31,




2024


2023







Revenues:





Data and analytics services

$                                 8,067


$                             9,395


IT staffing services

38,756


45,668



Total revenues

$                               46,823


$                           55,063







Gross Margin %:





Data and analytics services

46.4 %


38.5 %


IT staffing services

21.6 %


21.6 %



Total gross margin %

25.9 %


24.5 %







Segment Operating Income (Loss):





Data and analytics services

$                                  (454)


$                              (680)


IT staffing services

741


1,905



Subtotal

287


1,225







Amortization of acquired intangible assets

(693)


(693)

Interest expense and other, net

124


(53)

Income (loss) before income taxes

$                                  (282)


$                                479







 

 Logo: https://mma.prnewswire.com/media/1039524/Mastech_Digital_Logo.jpg

 

Cision View original content:https://www.prnewswire.com/news-releases/mastech-digital-reports-sequential-revenue-growth-for-the-first-time-since-the-third-quarter-of-2022-302139438.html

SOURCE Mastech Digital, Inc.

FAQ

What was the total consolidated revenues for Mastech Digital in the first quarter of 2024?

Mastech Digital reported total consolidated revenues of $46.8 million for the first quarter of 2024.

What was the GAAP diluted earnings per share in the first quarter of 2024?

The GAAP diluted earnings per share for Mastech Digital were ($0.01) in the first quarter of 2024.

What was the cash balance of Mastech Digital as of March 31, 2024?

Mastech Digital had $19.4 million in cash balances as of March 31, 2024.

Mastech Digital, Inc.

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