[10-Q] Mastech Digital, Inc. Quarterly Earnings Report
Mastech Digital reported largely steady revenue but narrower profits for the quarter ended June 30, 2025. Quarterly revenue was $49.1 million, essentially unchanged from $49.5 million a year earlier, with gross profit of $13.8 million versus $14.0 million in Q2 2024. Net income fell to $0.1 million for the quarter compared with $1.4 million a year ago, and the six-month period produced a loss of $(1.3) million versus prior-year income of $1.2 million.
Operationally, billable headcount declined to 980 consultants from 1,035 a year earlier while average bill rates rose to $85.32/hour from $81.94. The company had $27.9 million in cash, no borrowings on its credit facility and roughly $22.2 million of unused capacity. SG&A rose due to severance and a finance/accounting transition to India; management expects transition costs of $0.5–$0.75 million and about $1.3 million of severance related to the change.
Mastech Digital ha registrato ricavi sostanzialmente stabili ma utili più contenuti nel trimestre chiuso il 30 giugno 2025. I ricavi trimestrali sono stati di 49,1 milioni di dollari, praticamente invariati rispetto ai 49,5 milioni di un anno prima, con un utile lordo di 13,8 milioni rispetto a 14,0 milioni nel secondo trimestre 2024. L'utile netto è sceso a 0,1 milioni di dollari per il trimestre rispetto a 1,4 milioni un anno fa, e il periodo di sei mesi ha mostrato una perdita di 1,3 milioni di dollari rispetto a un utile di 1,2 milioni dell'anno precedente.
Dal punto di vista operativo, il personale fatturabile è calato a 980 consulenti dai 1.035 dell'anno precedente, mentre la tariffa media oraria è salita a 85,32 $/ora da 81,94 $/ora. La società disponeva di 27,9 milioni di dollari in cassa, senza utilizzo della linea di credito e con circa 22,2 milioni di dollari di capacità inutilizzata. Le spese SG&A sono aumentate a causa di oneri di fine rapporto e della transizione delle funzioni finanziarie/contabili in India; la direzione prevede costi di transizione compresi tra 0,5 e 0,75 milioni di dollari e circa 1,3 milioni di dollari di indennità legate al cambiamento.
Mastech Digital informó ingresos básicamente estables pero beneficios más reducidos en el trimestre cerrado el 30 de junio de 2025. Los ingresos trimestrales fueron de 49,1 millones de dólares, prácticamente sin cambios respecto a los 49,5 millones del año anterior, con un beneficio bruto de 13,8 millones frente a 14,0 millones en el 2T 2024. El beneficio neto cayó a 0,1 millones en el trimestre frente a 1,4 millones un año antes, y el periodo de seis meses registró una pérdida de 1,3 millones frente a un beneficio de 1,2 millones del año anterior.
En el plano operativo, la plantilla facturable descendió a 980 consultores desde 1.035 un año antes, mientras que la tarifa media por hora subió a 85,32 $/h desde 81,94 $/h. La compañía tenía 27,9 millones de dólares en efectivo, sin préstamos en su línea de crédito y con aproximadamente 22,2 millones de capacidad sin usar. Los gastos SG&A aumentaron debido a indemnizaciones y a la transición de finanzas/contabilidad a India; la dirección espera costes de transición de 0,5–0,75 millones y alrededor de 1,3 millones en indemnizaciones relacionadas con el cambio.
Mastech Digital은 2025년 6월 30일 종료된 분기에 매출은 대체로 안정적이었지만 이익은 축소되었다고 발표했습니다. 분기 매출은 49.1 million 달러로 전년 동기의 49.5 million 달러와 거의 동일했으며, 매출총이익은 13.8 million 달러로 2024년 2분기의 14.0 million 달러보다 소폭 감소했습니다. 순이익은 분기 기준 0.1 million 달러로 전년 동기의 1.4 million 달러에서 줄었고, 상반기 기준으로는 1.3 million 달러의 손실을 기록해 전년의 1.2 million 달러 이익에서 전환했습니다.
운영 측면에서는 청구 가능한 인력이 전년 1,035명에서 980명으로 감소한 반면 평균 청구 요율은 시간당 85.32달러로 81.94달러에서 상승했습니다. 회사는 현금 27.9 million 달러를 보유하고 있었고 신용 한도는 사용하지 않았으며 약 22.2 million 달러의 미사용 여력이 있었습니다. SG&A는 해고 관련 비용과 재무/회계 기능의 인도 이전으로 인해 증가했으며, 경영진은 전환 비용을 0.5–0.75 million 달러, 전환 관련 해고 수당을 약 1.3 million 달러로 예상하고 있습니다.
Mastech Digital a annoncé des revenus globalement stables mais des bénéfices réduits pour le trimestre clos le 30 juin 2025. Le chiffre d'affaires trimestriel s'est élevé à 49,1 millions de dollars, quasiment identique aux 49,5 millions de l'année précédente, avec un bénéfice brut de 13,8 millions contre 14,0 millions au T2 2024. Le résultat net est tombé à 0,1 million pour le trimestre, contre 1,4 million un an plus tôt, et la période de six mois affiche une perte de 1,3 million contre un bénéfice de 1,2 million l'année précédente.
Sur le plan opérationnel, le nombre de consultants facturables est passé à 980 contre 1 035 un an plus tôt, tandis que le tarif horaire moyen a augmenté à 85,32 $/heure contre 81,94 $/heure. La société disposait de 27,9 millions de dollars en liquidités, n'avait pas utilisé sa facilité de crédit et bénéficiait d'environ 22,2 millions de capacité non utilisée. Les SG&A ont augmenté en raison d'indemnités de licenciement et du transfert des fonctions finance/comptabilité vers l'Inde ; la direction prévoit des coûts de transition de 0,5–0,75 million et environ 1,3 million d'indemnités liés à ce changement.
Mastech Digital meldete für das zum 30. Juni 2025 endende Quartal weitgehend stabile Umsätze, aber geringere Gewinne. Der Quartalsumsatz belief sich auf 49,1 Millionen US-Dollar, praktisch unverändert gegenüber 49,5 Millionen vor einem Jahr, das Bruttoergebnis lag bei 13,8 Millionen gegenüber 14,0 Millionen im 2. Quartal 2024. Der Nettogewinn fiel im Quartal auf 0,1 Millionen gegenüber 1,4 Millionen vor einem Jahr, und für die sechsmonatige Periode entstand ein Verlust von 1,3 Millionen gegenüber einem Gewinn von 1,2 Millionen im Vorjahr.
Operativ sank die abrechenbare Belegschaft von 1.035 auf 980 Berater, während der durchschnittliche Stundensatz von 81,94 auf 85,32 US-Dollar stieg. Das Unternehmen verfügte über 27,9 Millionen US-Dollar in bar, hatte keine Inanspruchnahme der Kreditlinie und rund 22,2 Millionen US-Dollar ungenutzte Kapazität. SG&A stieg aufgrund von Abfindungen und der Verlagerung von Finanz-/Rechnungswesen nach Indien; das Management erwartet Übergangskosten von 0,5–0,75 Millionen und etwa 1,3 Millionen an Abfindungen im Zusammenhang mit der Umstellung.
- None.
- None.
Insights
TL;DR: Revenue stability masks margin pressures and one-time restructuring costs that drove quarterly profit sharply lower versus last year.
Revenue was essentially flat at $49.1 million, with total gross margin steady near 28%. The key negative drivers were higher SG&A from severance and the finance/accounting transition, which pushed operating income to $0.03 million for the quarter and reduced net income to $0.1 million. Operational metrics show mixed signals: billable consultants declined to 980 from 1,035 year-over-year, but average bill rates increased to $85.32/hour, supporting IT Staffing margin expansion. Liquidity is solid with $27.9 million cash and zero outstanding borrowings, providing flexibility to absorb transition costs. Overall, results are mixed and reflect near-term restructuring expenses rather than a material revenue decline.
TL;DR: Client concentration and restructuring costs elevate operational and execution risk in the near term.
The company reports client concentration with three clients exceeding 10% of revenue and the top ten clients representing ~58% of revenue, increasing exposure to individual client decisions. Management disclosed targeted severance of ~$1.3 million and ongoing transition costs to relocate finance and accounting to India (estimated $0.5–$0.75 million), with $500,000 of severance already incurred. Goodwill remains unchanged but past impairments in the Data and Analytics segment underscore sensitivity to revenue declines. While covenant compliance and liquidity appear intact, concentrated revenue and restructuring execution risk are material near-term governance considerations.
Mastech Digital ha registrato ricavi sostanzialmente stabili ma utili più contenuti nel trimestre chiuso il 30 giugno 2025. I ricavi trimestrali sono stati di 49,1 milioni di dollari, praticamente invariati rispetto ai 49,5 milioni di un anno prima, con un utile lordo di 13,8 milioni rispetto a 14,0 milioni nel secondo trimestre 2024. L'utile netto è sceso a 0,1 milioni di dollari per il trimestre rispetto a 1,4 milioni un anno fa, e il periodo di sei mesi ha mostrato una perdita di 1,3 milioni di dollari rispetto a un utile di 1,2 milioni dell'anno precedente.
Dal punto di vista operativo, il personale fatturabile è calato a 980 consulenti dai 1.035 dell'anno precedente, mentre la tariffa media oraria è salita a 85,32 $/ora da 81,94 $/ora. La società disponeva di 27,9 milioni di dollari in cassa, senza utilizzo della linea di credito e con circa 22,2 milioni di dollari di capacità inutilizzata. Le spese SG&A sono aumentate a causa di oneri di fine rapporto e della transizione delle funzioni finanziarie/contabili in India; la direzione prevede costi di transizione compresi tra 0,5 e 0,75 milioni di dollari e circa 1,3 milioni di dollari di indennità legate al cambiamento.
Mastech Digital informó ingresos básicamente estables pero beneficios más reducidos en el trimestre cerrado el 30 de junio de 2025. Los ingresos trimestrales fueron de 49,1 millones de dólares, prácticamente sin cambios respecto a los 49,5 millones del año anterior, con un beneficio bruto de 13,8 millones frente a 14,0 millones en el 2T 2024. El beneficio neto cayó a 0,1 millones en el trimestre frente a 1,4 millones un año antes, y el periodo de seis meses registró una pérdida de 1,3 millones frente a un beneficio de 1,2 millones del año anterior.
En el plano operativo, la plantilla facturable descendió a 980 consultores desde 1.035 un año antes, mientras que la tarifa media por hora subió a 85,32 $/h desde 81,94 $/h. La compañía tenía 27,9 millones de dólares en efectivo, sin préstamos en su línea de crédito y con aproximadamente 22,2 millones de capacidad sin usar. Los gastos SG&A aumentaron debido a indemnizaciones y a la transición de finanzas/contabilidad a India; la dirección espera costes de transición de 0,5–0,75 millones y alrededor de 1,3 millones en indemnizaciones relacionadas con el cambio.
Mastech Digital은 2025년 6월 30일 종료된 분기에 매출은 대체로 안정적이었지만 이익은 축소되었다고 발표했습니다. 분기 매출은 49.1 million 달러로 전년 동기의 49.5 million 달러와 거의 동일했으며, 매출총이익은 13.8 million 달러로 2024년 2분기의 14.0 million 달러보다 소폭 감소했습니다. 순이익은 분기 기준 0.1 million 달러로 전년 동기의 1.4 million 달러에서 줄었고, 상반기 기준으로는 1.3 million 달러의 손실을 기록해 전년의 1.2 million 달러 이익에서 전환했습니다.
운영 측면에서는 청구 가능한 인력이 전년 1,035명에서 980명으로 감소한 반면 평균 청구 요율은 시간당 85.32달러로 81.94달러에서 상승했습니다. 회사는 현금 27.9 million 달러를 보유하고 있었고 신용 한도는 사용하지 않았으며 약 22.2 million 달러의 미사용 여력이 있었습니다. SG&A는 해고 관련 비용과 재무/회계 기능의 인도 이전으로 인해 증가했으며, 경영진은 전환 비용을 0.5–0.75 million 달러, 전환 관련 해고 수당을 약 1.3 million 달러로 예상하고 있습니다.
Mastech Digital a annoncé des revenus globalement stables mais des bénéfices réduits pour le trimestre clos le 30 juin 2025. Le chiffre d'affaires trimestriel s'est élevé à 49,1 millions de dollars, quasiment identique aux 49,5 millions de l'année précédente, avec un bénéfice brut de 13,8 millions contre 14,0 millions au T2 2024. Le résultat net est tombé à 0,1 million pour le trimestre, contre 1,4 million un an plus tôt, et la période de six mois affiche une perte de 1,3 million contre un bénéfice de 1,2 million l'année précédente.
Sur le plan opérationnel, le nombre de consultants facturables est passé à 980 contre 1 035 un an plus tôt, tandis que le tarif horaire moyen a augmenté à 85,32 $/heure contre 81,94 $/heure. La société disposait de 27,9 millions de dollars en liquidités, n'avait pas utilisé sa facilité de crédit et bénéficiait d'environ 22,2 millions de capacité non utilisée. Les SG&A ont augmenté en raison d'indemnités de licenciement et du transfert des fonctions finance/comptabilité vers l'Inde ; la direction prévoit des coûts de transition de 0,5–0,75 million et environ 1,3 million d'indemnités liés à ce changement.
Mastech Digital meldete für das zum 30. Juni 2025 endende Quartal weitgehend stabile Umsätze, aber geringere Gewinne. Der Quartalsumsatz belief sich auf 49,1 Millionen US-Dollar, praktisch unverändert gegenüber 49,5 Millionen vor einem Jahr, das Bruttoergebnis lag bei 13,8 Millionen gegenüber 14,0 Millionen im 2. Quartal 2024. Der Nettogewinn fiel im Quartal auf 0,1 Millionen gegenüber 1,4 Millionen vor einem Jahr, und für die sechsmonatige Periode entstand ein Verlust von 1,3 Millionen gegenüber einem Gewinn von 1,2 Millionen im Vorjahr.
Operativ sank die abrechenbare Belegschaft von 1.035 auf 980 Berater, während der durchschnittliche Stundensatz von 81,94 auf 85,32 US-Dollar stieg. Das Unternehmen verfügte über 27,9 Millionen US-Dollar in bar, hatte keine Inanspruchnahme der Kreditlinie und rund 22,2 Millionen US-Dollar ungenutzte Kapazität. SG&A stieg aufgrund von Abfindungen und der Verlagerung von Finanz-/Rechnungswesen nach Indien; das Management erwartet Übergangskosten von 0,5–0,75 Millionen und etwa 1,3 Millionen an Abfindungen im Zusammenhang mit der Umstellung.
Table of Contents
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
PENNSYLVANIA |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
Table of Contents
MASTECH DIGITAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2025
TABLE OF CONTENTS
| Page | ||||||
| PART 1 |
FINANCIAL INFORMATION | 3 | ||||
| Item 1. |
Financial Statements: | 3 | ||||
| (a) | Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2025 and 2024 | 3 | ||||
| (b) | Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2025 and 2024 | 4 | ||||
| (c) | Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2025 and December 31, 2024 | 5 | ||||
| (d) | Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2025 and 2024 | 6 | ||||
| (e) | Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2025 and 2024 | 7 | ||||
| (f) | Notes to Condensed Consolidated Financial Statements (Unaudited) | 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 28 | ||||
| Item 4. |
Controls and Procedures | 29 | ||||
| PART II |
OTHER INFORMATION | 29 | ||||
| Item 1. |
Legal Proceedings | 29 | ||||
| Item 1A. |
Risk Factors | 29 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 30 | ||||
| Item 5. |
Other Information | 30 | ||||
| Item 6. |
Exhibits | 31 | ||||
| SIGNATURES | 32 | |||||
2
Table of Contents
ITEM 1. |
FINANCIAL STATEMENTS |
Three Months Ended June 30, |
Six Months Ended June 30, |
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2025 |
2024 |
2025 |
2024 |
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| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues |
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| Gross profit |
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| Selling, general and administrative expenses |
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| Income (loss) from operations |
( |
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| Interest income (expense), net |
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| Other income (expense), net |
( |
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) | ( |
) | ( |
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| Income (loss) before income taxes |
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| Income tax expense (benefit) |
( |
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| Net income (loss) |
$ | $ | $ | ( |
) | $ | ||||||||||
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| Earnings (loss) per share: |
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| Basic |
$ | $ | $ | ( |
) | $ | ||||||||||
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| Diluted |
$ | $ | $ | ( |
) | $ | ||||||||||
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| Weighted average common shares outstanding: |
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| Basic |
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| Diluted |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2025 |
2024 |
2025 |
2024 |
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| Net income (loss) |
$ | $ | $ | ( |
) | $ | ||||||||||
| Other comprehensive income (loss): |
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| Foreign currency translation adjustments |
( |
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| Total other comprehensive income (loss), net of taxes |
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| Total comprehensive income (loss) |
$ | $ | $ | ( |
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June 30, 2025 |
December 31, 2024 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | $ | ||||||
| Accounts receivable, net of allowance for credit losses of $ |
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| Unbilled receivables |
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| Prepaid and other current assets |
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| Total current assets |
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| Equipment, enterprise software, and leasehold improvements, at cost: |
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| Equipment |
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| Enterprise software |
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| Leasehold improvements |
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| Less – accumulated depreciation and amortization |
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| Net equipment, enterprise software, and leasehold improvements |
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| Operating lease right-of-use |
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| Deferred income taxes |
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| Deferred financing costs, net |
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| Deferred compensation, net |
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| Non-current deposits |
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| Goodwill, net of impairment |
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| Intangible assets, net of amortization |
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| Total assets |
$ | $ | ||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
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| Accrued payroll and related costs |
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| Current portion of operating lease liability |
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| Other accrued liabilities |
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| Deferred revenue |
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| Total current liabilities |
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| Long-term liabilities: |
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| Long-term operating lease liability, less current portion |
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| Long-term severance liability |
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| Total liabilities |
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| Commitments and contingent liabilities (Note 5) |
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| Shareholders’ equity: |
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| Preferred Stock, |
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| Common Stock, par value $ |
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| Additional paid-in-capital |
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| Retained earnings |
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| Accumulated other comprehensive income (loss) |
( |
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| Treasury stock, at cost; |
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| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity |
$ | $ | ||||||
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Common Stock |
Additional Paid-in Capital |
Accumulated Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
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| Balances, December 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Net (loss) |
— | — | ( |
) | — | — | ( |
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| Other comprehensive gain, net of taxes |
— | — | — | — | ||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
| Stock options exercised |
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| Balances, March 31, 2025 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
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| Net income |
— | — | — | — | ||||||||||||||||||||
| Employee common stock purchases |
— | — | — | — | ||||||||||||||||||||
| Other comprehensive gain, net of taxes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
| Stock options exercised |
— | — | — | — | ||||||||||||||||||||
| Shares repurchased |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances, June 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
|||||||||||||||||||
| Balances, December 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Net (loss) |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
| Other comprehensive (loss), net of taxes |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
| Shares repurchased |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances, March 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
— | — | — | — | ||||||||||||||||||||
| Employee common stock purchases |
— | — | — | — | ||||||||||||||||||||
| Other comprehensive gain, net of taxes |
— | — | — | — | ||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
| Stock options exercised |
— | — | — | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balances, June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Six Months Ended June 30, |
||||||||
2025 |
2024 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | ( |
) | $ | ||||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Bad debt expense |
( |
) | ||||||
| Interest amortization of deferred financing costs |
||||||||
| Stock-based compensation expense |
||||||||
| Deferred income taxes, net |
( |
) | ||||||
| Operating lease assets and liabilities, net |
||||||||
| Amortization of deferred compensation |
||||||||
| Long-term severance liability |
||||||||
| Payment of deferred compensation |
( |
) | ||||||
| Loss on disposition of fixed assets |
||||||||
| Long term accrued income taxes |
( |
) | ||||||
| Working capital items: |
||||||||
| Accounts receivable and unbilled receivables |
( |
) | ||||||
| Prepaid and other current assets |
( |
) | ||||||
| Accounts payable |
( |
) | ||||||
| Accrued payroll and related costs |
( |
) | ( |
) | ||||
| Other accrued liabilities |
( |
) | ||||||
| Deferred revenue |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash flows provided by (used in) operating activities |
( |
) | ||||||
| |
|
|
|
|||||
| INVESTING ACTIVITIES: |
||||||||
| Recovery of (payment for) non-current deposits |
( |
) | ||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash flows (used in) investing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| FINANCING ACTIVITIES: |
||||||||
| Proceeds from the issuance of common shares |
||||||||
| Purchase of treasury stock |
( |
) | ( |
) | ||||
| Proceeds from the exercise of stock options |
||||||||
| |
|
|
|
|||||
| Net cash flows provided by financing activities |
||||||||
| |
|
|
|
|||||
| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
| |
|
|
|
|||||
| Net change in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents, beginning of period |
||||||||
| |
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | $ | ||||||
| |
|
|
|
|||||
1. |
Description of Business and Basis of Presentation: |
2. |
Revenue from Contracts with Customers |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Data and Analytics Services Segment |
||||||||||||||||
Time-and-material |
$ | $ | $ | $ | ||||||||||||
Fixed-price Contracts |
||||||||||||||||
Subtotal Data and Analytics Services |
$ |
$ |
$ |
$ |
||||||||||||
IT Staffing Services Segment |
||||||||||||||||
Time-and-material |
$ | $ | $ | $ | ||||||||||||
Fixed-price Contracts |
||||||||||||||||
Subtotal IT Staffing Services |
$ |
$ |
$ |
$ |
||||||||||||
Total Revenues |
$ |
$ |
$ |
$ |
||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
United States |
$ | $ | $ | $ | ||||||||||||
Canada |
||||||||||||||||
India and Other |
||||||||||||||||
Total revenues |
$ |
$ |
$ |
$ |
||||||||||||
3. |
Goodwill and Other Intangible Assets, net |
Six Months Ended June 30, 2025 |
Twelve Months Ended December 31, 2024 |
|||||||
(in thousands) |
||||||||
IT Staffing Services: |
||||||||
Beginning balance |
$ | $ | ||||||
Goodwill recorded |
||||||||
Impairment |
||||||||
Ending Balance |
$ | $ | ||||||
Six Months Ended June 30, 2025 |
Twelve Months Ended December 31, 2024 |
|||||||
(in thousands) |
||||||||
Data and Analytics Services: |
||||||||
Beginning balance |
$ | $ | ||||||
Goodwill recorded |
||||||||
Impairment |
||||||||
Ending Balance |
$ | $ | ||||||
As of June 30, 2025 |
||||||||||||||||
(Amounts in thousands) |
Amortization Period (In Years) |
Gross Carrying Value |
Accumulative Amortization |
Net Carrying Value |
||||||||||||
IT Staffing Services: |
||||||||||||||||
Client relationships |
$ | $ | $ | |||||||||||||
Covenant-not-to-compete |
||||||||||||||||
Trade name |
||||||||||||||||
Data and Analytics Services: |
||||||||||||||||
Client relationships |
||||||||||||||||
Covenant-not-to-compete |
||||||||||||||||
Trade name |
||||||||||||||||
Technology |
||||||||||||||||
Total Intangible Assets |
$ | $ | $ | |||||||||||||
As of December 31, 2024 |
||||||||||||||||
(Amounts in thousands) |
Amortization Period (In Years) |
Gross Carrying Value |
Accumulative Amortization |
Net Carrying Value |
||||||||||||
IT Staffing Services: |
||||||||||||||||
Client relationships |
$ | $ | $ | |||||||||||||
Covenant-not-to-compete |
||||||||||||||||
Trade name |
||||||||||||||||
Data and Analytics Services: |
||||||||||||||||
Client relationships |
||||||||||||||||
Covenant-not-to-compete |
||||||||||||||||
Trade name |
||||||||||||||||
Technology |
||||||||||||||||
Total Intangible Assets |
$ | $ | $ | |||||||||||||
Years Ended December 31, |
||||||||||||||||||||
2025 |
2026 |
2027 |
2028 |
2029 |
||||||||||||||||
(Amounts in thousands) |
||||||||||||||||||||
Amortization expense |
$ | $ | $ | $ | $ | |||||||||||||||
4. |
Leases |
June 30, 2025 |
December 31, 2024 |
|||||||
(in thousands) |
||||||||
Assets: |
||||||||
Long-term operating lease right-of-use |
$ | $ | ||||||
Liabilities: |
||||||||
Short-term operating lease liability |
$ | $ | ||||||
Long-term operating lease liability |
||||||||
Total Liabilities |
$ | $ | ||||||
Amount as of June 30, 2025 |
||||
(in thousands) |
||||
2025 (for remainder of year) |
$ | |||
2026 |
||||
2027 |
||||
2028 |
||||
2029 |
||||
Thereafter |
||||
Total |
$ | |||
Less: Imputed interest |
( |
) | ||
Present value of operating lease liabilities |
$ | |||
5. |
Commitments and Contingencies |
6. |
Employee Benefit Plan |
7. |
Stock-Based Compensation |
8. |
Credit Facility |
9. |
Income Taxes |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Income (loss) before income taxes: |
||||||||||||||||
Domestic |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
Foreign |
||||||||||||||||
Income (loss) before income taxes |
$ | $ | $ | ( |
) | $ | ||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Current provision (benefit): |
||||||||||||||||
Federal |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
State |
( |
) | ( |
) | ||||||||||||
Foreign |
||||||||||||||||
Total current provision (benefit) |
||||||||||||||||
Deferred provision (benefit): |
||||||||||||||||
Federal |
( |
) | ( |
) | ||||||||||||
State |
( |
) | ( |
) | ||||||||||||
Foreign |
||||||||||||||||
Total deferred provision (benefit) |
( |
) | ( |
) | ||||||||||||
Change in valuation allowance |
( |
) | ( |
) | ( |
) | — | |||||||||
Total provision (benefit) for income taxes |
$ | $ | $ | ( |
) | $ | ||||||||||
Three Months Ended June 30, 2025 |
Three Months Ended June 30, 2024 |
|||||||||||||||
Income taxes computed at the federal statutory rate |
$ | % | $ | % | ||||||||||||
State income taxes, net of federal tax benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Excess tax expense (benefit) from stock options/restricted shares |
||||||||||||||||
Worthless stock deduction |
||||||||||||||||
Difference in income tax rate on foreign earnings/other |
||||||||||||||||
Change in valuation allowance |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| $ | % | $ | % | |||||||||||||
Six Months Ended June 30, 2025 |
Six Months Ended June 30, 2024 |
|||||||||||||||
Income taxes computed at the federal statutory rate |
$ | ( |
) | ( |
)% | $ | % | |||||||||
State income taxes, net of federal tax benefit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Excess tax expense (benefit) from stock options/restricted shares |
( |
) | ( |
) | ||||||||||||
Worthless stock deduction |
( |
) | ( |
) | ||||||||||||
Difference in income tax rate on foreign earnings/other |
||||||||||||||||
Change in valuation allowance |
( |
) | ( |
) | ||||||||||||
| $ | ( |
) | ( |
)% | $ | % | ||||||||||
10. |
Shareholders’ Equity |
11. |
Earnings (Loss) Per Share |
12. |
Business Segments and Geographic Information |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Revenues: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total revenues |
$ | $ | $ | $ | ||||||||||||
Cost of Revenues: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total cost of revenues |
$ | $ | $ | $ | ||||||||||||
Gross Profit: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total gross profit |
$ | $ | $ | $ | ||||||||||||
Gross Margin %: |
||||||||||||||||
Data and Analytics Services |
% | % | % | % | ||||||||||||
IT Staffing Services |
% | % | % | % | ||||||||||||
Total gross margin % |
% | % | % | % | ||||||||||||
Sales & Marketing Expenses: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total sales & marketing expenses |
$ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
Operations Expenses: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total operations expenses |
$ | $ | $ | $ | ||||||||||||
General & Administrative Expenses: |
||||||||||||||||
Data and Analytics Services |
$ | $ | $ | $ | ||||||||||||
IT Staffing Services |
||||||||||||||||
Total general & administrative expenses |
$ | $ | $ | $ | ||||||||||||
Segment operating income (loss): |
||||||||||||||||
Data and Analytics Services |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
IT Staffing Services |
||||||||||||||||
Subtotal |
||||||||||||||||
Unallocated Cost: |
||||||||||||||||
Amortization of acquired intangible assets |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Finance and accounting transition expense |
( |
) | ( |
) | ||||||||||||
Severance expense |
( |
) | ( |
) | ||||||||||||
Interest income (expense), FX, gains (losses) and other, net |
||||||||||||||||
Income (loss) before income taxes |
$ | $ | $ | ( |
) | $ | ||||||||||
June 30, 2025 |
December 31, 2024 |
|||||||
(Amounts in thousands) |
||||||||
Total assets: |
||||||||
Data and Analytics Services |
$ | $ | ||||||
IT Staffing Services |
||||||||
Total assets |
$ | $ | ||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2025 |
2024 |
2025 |
2024 |
|||||||||||||
(Amounts in thousands) |
||||||||||||||||
United States |
$ | $ | $ | $ | ||||||||||||
Canada |
||||||||||||||||
India and Other |
||||||||||||||||
Total revenues |
$ | $ | $ | $ | ||||||||||||
13. |
Recently Issued Accounting Standards |
Table of Contents
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
You should read the following discussion in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2024, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 14, 2025.
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about future events, future performance, plans, strategies, expectations, prospects, competitive environment and regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words, “may”, “will”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend” or the negative of these terms or similar expressions in this quarterly report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under “Risk Factors”, “Forward-Looking Statements” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2024. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update forward-looking statements and the estimates and assumptions associated with them, after the date of this quarterly report on Form 10-Q, except to the extent required by applicable securities laws.
20
Table of Contents
Website Access to SEC Reports:
The Company’s website is www.mastechdigital.com. The Company’s Annual Report on Form 10-K for the year ended December 31, 2024, current reports on Form 8-K and all other reports filed with the SEC, are available free of charge on the Investors page. The website is updated as soon as reasonably practical after such reports are filed electronically with the SEC.
Critical Accounting Policies
Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024 for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the six months ended June 30, 2025.
2024 Primentor, Inc. Consulting Agreement
On January 12, 2024, we entered into a consulting services agreement with Primentor, Inc. (“Primentor”) to provide the Company with strategic advisory and management consulting services, as well as any other business and organizational strategy services as the Board of Directors of the Company may reasonably request from time to time. The initial term of the consulting services agreement is for a three-year period that commenced on January 12, 2024, and the Company may request to renew the term for additional successive one-year terms, in which case Primentor and the Company will negotiate to agree upon the scope of the additional services and the amount of additional consulting fees. During 2024, the Company incurred consulting expenses of approximately $1.1 million related to these services. In 2025 and 2026, the Company expects to pay Primentor approximately $270,000 and $120,000, respectively, plus reimbursement of any reasonable and documented out-of-pocket expenses incurred by Primentor in rendering such services.
Transition of the Company’s finance and accounting functions to India:
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 India. During 2025, the Company expects to incur additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process. As of June 30, 2025, the Company has incurred approximately $200,000 of additional costs and estimates total expenses to range from $500,000 to $750,000 for the transition period.
Additionally, the Company expects to pay approximately $1.3 million of severance expense related to this initiative. As of June 30, 2025, the Company has incurred approximately $500,000 in severance. Post-transition cost savings are expected to approximate $1.2 million per annum.
Overview:
We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations.
Our portfolio of offerings includes data management and analytics services, other digital transformation services, such as digital learning services, and IT Staffing Services.
We operate in two reporting segments – Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand “Mastech InfoTrellis” and are delivered largely on a project basis with on-site and off-shore resources. These data and analytics capabilities and expertise were acquired through our acquisition of InfoTrellis and enhanced and expanded subsequent to the acquisition. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition enhanced our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as other digital transformation services.
21
Table of Contents
Both business segments provide their services across various industry verticals, including financial services, government, healthcare, manufacturing, retail, technology telecommunications and transportation. In our Data and Analytics Services segment, we evaluate our revenues and gross profits largely by service line. In our IT Staffing Services segment, we evaluate our revenues and gross profits largely by sales channel responsibility. This analysis within both our reporting segments is multi-purposed and includes technologies employed, client relationships, and geographic locations.
Data and Analytics:
We provide information regarding our new bookings in our Data and Analytics Services segment, which represents the estimated value of client engagements, including those acquired through acquisitions, as well as renewals and extensions to existing contracts, because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. New bookings can vary significantly quarter to quarter, depending, in part, on the timing of the signing of a small number of large engagements. Among other factors, the types of services and solutions to be delivered, the duration of the engagement and the pace and level of client spending impact the timing of the conversion of new bookings to revenues. In addition, substantially all of our contracts are terminable by the client on short notice, with little or no termination penalties. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New bookings involve estimates and judgments. There are no third-party standards or requirements governing the calculation of bookings. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally provided in prior periods.
Economic Trends and Outlook:
Generally, our business outlook is highly correlated to general North American economic conditions, particularly with respect to our IT Staffing Services segment. During periods of increasing employment and economic expansion, demand for our services tends to increase. Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. With economic expansion in 2010 through 2019 activity levels improved. However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses. These supply-side challenges pressured resource costs and, to some extent, gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies. However, with the COVID-19 pandemic surfacing in the first quarter of 2020, we realized that economic growth would quickly turn into recessionary conditions, which had a material impact on activity levels in both of our business segments. In 2021, we were encouraged by the global rollout of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants had caused some uncertainty and disruption in the global markets. In 2022 and 2023, COVID-19-related concerns seemed to subside; however, increased inflation, challenges in the financial sector related to increasing interest rates, and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of 2022 and for the entire year of 2023. In 2024, economic conditions in North American improved over the course of the year as job growth and inflationary outlooks showed positive signs of improvement. However, as we move into the second half of 2025, uncertainty and caution continues to persist in the marketplace, driven in part by lingering questions around the direction and implementation of immigration, trade and other policies under the new administration (including the implementation of tariffs and other trade measures). These evolving dynamics have contributed to extended decision-making cycles and conservative spending behavior among clients. Given these and other factors, it remains difficult to reliably forecast how market conditions will develop for the remainder of 2025 or during 2026 and beyond.
In addition to tracking general economic conditions in the markets that we service, a large portion of our revenues is generated from a limited number of clients (see Item 1A, the Risk Factor entitled “Our revenues are highly concentrated, and the loss of a significant client would adversely affect our business and revenues” in our Annual Report on Form 10-K for the year ended December 31, 2024). Accordingly, our trends and outlook are additionally impacted by the prospects and well-being of these specific clients. This “account concentration” factor may result in our results of operations deviating from the prevailing economic trends from time to time.
Within our IT Staffing Services segment, a larger portion of our revenues has come from strategic relationships with systems integrators. Additionally, many large end users of IT staffing services are employing MSP’s to manage their contractor spending. Both of these dynamics may pressure our IT staffing gross margins in the future.
Results of Operations for the Three Months Ended June 30, 2025 as Compared to the Three Months Ended June 30, 2024:
Revenues:
Revenues for the three months ended June 30, 2025 totaled $49.1 million, compared to $49.5 million for the corresponding three-month period in 2024. This 1% year-over-year revenue decrease reflected a modest revenue decrease in our IT Staffing Services segment and a 3% decline in our Data and Analytics Services segment. For the three months ended June 30, 2025, the Company had three clients that each had revenues in excess of 10% of total revenues (Fidelity 15.0%, Populus = 12.4% and CGI = 11.0%). For the three months ended June 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 14.9% and Populus = 10.7%). The Company’s top ten clients represented approximately 58% and 53% of total revenues for the three months ended June 30, 2025 and 2024, respectively.
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Below is a tabular presentation of revenues by reportable segment for the three months ended June 30, 2025 and 2024, respectively:
| Revenues (Amounts in millions) |
Three Months Ended June 30, 2025 |
Three Months Ended June 30, 2024 |
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| Data and Analytics Services |
$ | 8.6 | $ | 8.9 | ||||
| IT Staffing Services |
40.5 | 40.6 | ||||||
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| Total revenues |
$ | 49.1 | $ | 49.5 | ||||
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Revenues from our Data and Analytics Services segment totaled $8.6 million in the second quarter ended June 30, 2025, which is slightly lower compared to $8.9 million in the corresponding period last year. While activity levels remained relatively flat to slightly down, we continue to see strong engagement from existing clients. New bookings in the second quarter of 2025 totaled approximately $5.8 million, compared to bookings of $9.2 million in the second quarter of 2024
Revenues from our IT Staffing Services segment totaled $40.5 million in the three months ended June 30, 2025, compared to $40.6 million during the corresponding 2024 period. Revenue was essentially flat year-over-year as lower demand for our services in 2025 was largely offset by higher bill rates. Billable consultants at June 30, 2025 totaled 980-consultants compared to 1,035-consultants one year earlier. During the first half of 2025, our billable consultant-base reduced by 26-consultants. Our average bill rate during the second quarter of 2025 was $85.32 per hour compared to $81.94 per hour in the corresponding 2024 quarter. The increase in average bill rate was due to higher quality of revenues in the new assignments during the first half of 2025 and was reflective of the types of skill sets that we deployed. Permanent placement / fee revenues were approximately $0.3 million during the 2025 second quarter, which were up $0.1 million from the corresponding 2024 quarter.
Gross Margins:
Gross profits in the second quarter of 2025 totaled $13.8 million, which was $0.2 million lower than the second quarter of 2024 gross profits. Gross profit as a percentage of revenue was 28.1% for the three-month period ended June 30, 2025, compared to 28.2% during the same period of 2024. This 10-basis point reduction in gross margins reflected higher margins in our IT Staffing Services business segments, offset by lower margins from our Data and Analytics Services segment during the current quarter.
Below is a tabular presentation of gross margin by reporting segment for the three months ended June 30, 2025 and 2024, respectively:
| Gross Margin |
Three Months Ended June 30, 2025 |
Three Months Ended June 30, 2024 |
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| Data and Analytics Services |
45.2 | % | 49.2 | % | ||||
| IT Staffing Services |
24.5 | 23.6 | ||||||
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| Total gross margin |
28.1 | % | 28.2 | % | ||||
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Gross margins from our Data and Analytics Services segment were 45.2% of revenues during the second quarter of 2025, which represented a decrease of 400-basis points compared to 49.2% of revenues during the second quarter of 2024. The margin reduction was primarily the result of a lower utilization rate in the 2025 quarter compared to the second quarter of 2024.
Gross margins from our IT Staffing Services segment were 24.5% in the second quarter of 2025 compared to 23.6% during the corresponding quarter of 2024. This 90-basis point increase was due to higher quality placements on new assignments in 2025.
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Selling, General and Administrative (“SG&A”) Expenses:
Below is a tabular presentation of operating expenses by expense category for the three months ended June 30, 2025 and 2024, respectively:
| SG&A Expenses (Amounts in millions) | Three Months Ended June 30, 2025 |
Three Months Ended June 30, 2024 |
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| Data and Analytics Services Segment |
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| Sales and Marketing |
$ | 1.8 | $ | 1.9 | ||||
| Operations |
0.2 | 0.2 | ||||||
| General & Administrative |
2.0 | 1.5 | ||||||
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| Subtotal Data and Analytics Services |
$ | 4.0 | $ | 3.6 | ||||
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| IT Staffing Services Segment |
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| Sales and Marketing |
$ | 2.4 | $ | 2.2 | ||||
| Operations |
1.8 | 2.1 | ||||||
| General & Administrative |
4.0 | 3.7 | ||||||
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| Subtotal IT Staffing Services |
$ | 8.2 | $ | 8.0 | ||||
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| Amortization of Acquired Intangible Assets |
$ | 0.7 | $ | 0.7 | ||||
| Severance Expense |
0.2 | — | ||||||
| Finance and Accounting Transition Expense |
0.7 | — | ||||||
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| Total SG&A Expenses |
$ | 13.8 | $ | 12.3 | ||||
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SG&A expenses for the three months ended June 30, 2025, totaled $13.8 million or 28.1% of total revenues, compared to $12.3 million or 24.8% of total revenues for the three months ended June 30, 2024. Excluding the severance expense and finance and accounting transition expense in the 2025 period and the amortization of acquired intangible assets in both periods, SG&A expense as a percentage of total revenues would have been 24.8% and 23.4%, respectively.
Fluctuations within SG&A expense components during the second quarter of 2025, compared to the second quarter of 2024, included the following:
| • | Sales expense was $0.1 million higher in the 2025 period compared to the corresponding 2024 period. The increase was primarily related to our IT Staffing Services segment, which had higher recruiting costs for sales leadership. Sales expenses in our Data and Analytics Services segment were essentially flat. |
| • | Operations expenses decreased by $0.3 million in the 2025 period compared to the corresponding 2024 period. The entire decline occurred in our IT Staffing Services segment due to staff reductions. In our Data and Analytics Services segment, operating expenses were essentially flat. |
| • | General and administrative expenses increased by $0.8 million in the 2025 period compared to the corresponding 2024 period. General and administrative expenses in our Data and Analytics Services segment increased by $0.5 million due to bad debt expense, executive leadership hires and higher stock-based compensation expense in the 2025 period. In our IT Staffing Services segment, general and administrative expenses increased by $0.3 million largely due to executive leadership hires, and higher stock-based compensation expense. |
| • | Amortization of acquired intangible assets was $0.7 million in both the 2025 and 2024 periods. |
| • | Severance expense was $0.2 million in the 2025 period, compared to no expense in the second quarter of 2024. The expense related to the Company’s exiting IT Staffing Sales Management. |
| • | Finance and accounting transition expense was $0.7 million in the 2025 period, compared to no expense in the second quarter of 2024. The expense relates to the Company’s decision to transition the Company’s finance and accounting functions to India and includes severance and additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process. |
Other Income / (Expense) Components:
Other Income / (Expense) for the three months ended June 30, 2025, consisted of interest income of $190,000 and foreign exchange losses of ($7,000). For the three months ended June 30, 2024, Other Income / (Expense) consisted of interest income of $130,000 and foreign exchange losses of ($14,000). The higher level of interest income was reflective of higher cash balances in the 2025 period.
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Income Tax Expense (Benefit):
Income tax expense (benefit) for the three months ended June 30, 2025, totaled $75,000, representing an effective tax rate on pre-tax income of 35.7%, compared to $418,000 expense for the three months ended June 30, 2024, which represented an effective tax rate on pre-tax income of 23.1%. In the 2024 period our effective tax rate was favorably impacted by a partial reversal of our tax valuation allowance due to profit generation in two of our foreign subsidiaries during the second quarter.
Results of Operations for the Six Months Ended June 30, 2025 as Compared to the Six Months Ended June 30, 2024:
Revenues:
Revenues for the six months ended June 30, 2025, totaled $97.4 million, compared to $96.4 million for the corresponding six- month period in 2024. This 1% year-over-year revenue increase reflected a 4% increase in our Data and Analytics Services segment and a 1% increase in our IT Staffing Services segment. For the six months ended June 30, 2025, the Company had three clients that each had revenues in excess of 10% of total revenues (Fidelity = 14.0%, Populus = 12.1% and CGI = 11.5%). For the six months ended June 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 16.1% and Populus = 10.1%). The Company’s top ten clients represented approximately 58% and 52% of total revenues for the six months ended June 30, 2025 and 2024, respectively.
Below is a tabular presentation of revenues by reportable segment for the six months ended June 30, 2025 and 2024, respectively:
| Revenues (Amounts in millions) |
Six Months Ended June 30, 2025 |
Six Months Ended June 30, 2024 |
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| Data and Analytics Services |
$ | 17.5 | $ | 17.0 | ||||
| IT Staffing Services |
79.9 | 79.4 | ||||||
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| Total revenues |
$ | 97.4 | $ | 96.4 | ||||
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Revenues from our Data and Analytics Services segment totaled $17.5 million during the six months ended June 30, 2025, compared to $17.0 million in the corresponding six-month period last year. The 4% year-over-year increase largely reflected strong revenues during the first quarter of 2025 compared to the corresponding quarter of 2024. Order bookings for the first six months of 2025 totaled approximately $17.4 million, compared to bookings of $19 million for the first six months of 2024.
Revenues from our IT Staffing Services segment totaled $79.9 million in the six months ended June 30, 2025, compared to $79.4 million during the corresponding 2024 period. This 1% increase largely reflected an increase in average bill rate due to higher quality of placements, offset by a lower level of billable consultants. At June 30, 2025 billable consultants totaled 980-consultants compared to 1,035-consultants at June 30, 2024.
Gross Margins:
Gross profits in the six months ended June 30, 2025 totaled $26.7 million compared to $26.1 million in the corresponding period last year. Gross profit as a percentage of revenue was 27.4% for the six-month period ended June 30, 2025, compared to 27.1% during the same period of 2024. This 30-basis point increase largely reflected improvements in our IT Staffing Services segment, offset by lower margins in our Data and Analytics Services segment.
Below is a tabular presentation of gross margin by reporting segment for the six months ended June 30, 2025 and 2024, respectively:
| Gross Margin |
Six Months Ended June 30, 2025 |
Six Months Ended June 30, 2024 |
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| Data and Analytics Services |
44.6 | % | 47.9 | % | ||||
| IT Staffing Services |
23.6 | 22.7 | ||||||
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| Total gross margin |
27.4 | % | 27.1 | % | ||||
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Gross margins from our Data and Analytics Services segment were 44.6% of revenues during the six-month period ended June 30, 2025, compared to 47.9% in the corresponding period of 2024. This gross margin decrease reflected lower utilization rates during the first six months of 2025.
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Gross margins from our IT Staffing Services segment were 23.6% in the six months ended June 30, 2025, compared to 22.7% during the corresponding period of 2024. This 90-basis point increase was due to higher margins and bill rates on new assignments in 2025.
Selling, General and Administrative (“SG&A”) Expenses:
Below is a tabular presentation of operating expenses by expense category for the six months ended June 30, 2025, and 2024, respectively:
| SG&A Expenses (Amounts in millions) | Six Months Ended June 30, 2025 |
Six Months Ended June 30, 2024 |
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| Data and Analytics Services Segment |
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| Sales and Marketing |
$ | 3.9 | $ | 4.3 | ||||
| Operations |
0.3 | 0.3 | ||||||
| General & Administrative |
3.9 | 3.2 | ||||||
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| Subtotal Data and Analytics Services |
$ | 8.1 | $ | 7.8 | ||||
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| IT Staffing Services Segment |
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| Sales and Marketing |
$ | 4.6 | $ | 4.4 | ||||
| Operations |
3.9 | 4.1 | ||||||
| General & Administrative |
8.3 | 7.1 | ||||||
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| Subtotal IT Staffing Services |
$ | 16.8 | $ | 15.6 | ||||
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| Amortization of Acquired Intangible Assets |
$ | 1.3 | $ | 1.4 | ||||
| Severance Expense |
1.6 | — | ||||||
| Finance and Accounting Transition Expense |
0.7 | — | ||||||
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| Total SG&A Expenses |
$ | 28.5 | $ | 24.8 | ||||
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SG&A expenses for the six months ended June 30, 2025, totaled $28.5 million or 29.3% of total revenues, compared to $24.8 million or 25.8% of total revenues for the six months ended June 30, 2024. Excluding the severance expense and finance and accounting transition expense in the 2025 period and the amortization of acquired intangible assets in both periods, SG&A expense as a percentage of total revenues would have been 25.6% and 24.3%, respectively.
Fluctuations within SG&A expense components during the first six months of 2025, compared to the first six months of 2024, included the following:
| • | Sales expense decreased by $0.2 million in the 2025 period compared to the corresponding 2024 period. In our Data and Analytics Services segment sales expense decreased by $0.4 million which was due to headcount reductions. Sales expenses in our IT Staffing Services segment were up $0.2 million compared to the previous year due to higher recruiting costs for sales leadership. |
| • | Operations expense decreased by $0.2 million in the 2025 period compared to the corresponding 2024 period. The entire decline occurred in our IT Staffing Services segment due to staff reductions. |
| • | General and administrative expense increased by $1.9 million in the 2025 period compared to the corresponding 2024 period. General and administrative expense in our IT Staffing Services segment, increased by $1.2 million largely due to executive compensation, including stock-based compensation, as well as higher recruiting fees. In our Data and Analytics Services segment, general and administrative expense increased by $0.7 million primarily due to executive compensation, including stock based compensation, and bad debt expense. |
| • | Amortization of acquired intangible assets was $0.1 million lower in the 2025 period compared to the corresponding 2024 period, as a portion of our intangible assets became fully amortized in 2025. |
| • | Severance expense was $1.6 million in the 2025 period, compared to no expense in the 2024 period. The expense related to the Company’s exiting Chief Financial Officer and IT Staffing Sales Management. |
| • | Finance and accounting transition expense was $0.7 million in the 2025 period, compared to no expense in the 2024 period. The expense relates to the Company’s decision to transition the Company’s finance and accounting functions to India and includes severance and additional costs related to the duplication of resources and travel expenses during the training and knowledge transfer process. |
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Other Income / (Expense) Components:
Other Income / (Expense) for the six months ended June 30, 2025, consisted of net interest income of $305,000 and foreign exchange losses of ($31,000). For the six months ended June 30, 2024, Other Income / (Expense) consisted of interest income of $284,000 and foreign exchange losses of ($44,000). The interest income was reflective of higher cash balances on hand in the 2025 period.
Income Tax Expense:
Income tax expense (benefit) for the six months ended June 30, 2025 totaled $(248,000) representing an effective tax rate on pre-tax income of 16.0% compared to $297,000 for the six months ended June 30, 2024, which represented a 19.4% effective tax rate on pre-tax income. The 2025 period tax rate compared to the 2024 period reflected a favorable adjustment to our tax valuation allowance due to the utilization of Singapore tax benefits offset by shortfalls in the expected tax benefits of option exercised in 2024.
Liquidity and Capital Resources:
Financial Conditions and Liquidity:
As of June 30, 2025, we had no bank debt, cash balances on hand of $27.9 million and approximately $22.2 million of borrowing capacity under our existing credit facility.
Historically, we have funded our organic business needs with cash generated from operating activities. Controlling our operating working capital levels by closely managing our accounts receivable balance is an important element of cash generation. As of June 30, 2025, our accounts receivable “days sales outstanding” (“DSOs”) measurement remained steady at 53-days, which was the level reported at June 30, 2024.
We believe that cash provided by operating activities, cash balances on hand and current availability under our credit facility will be adequate to fund our business needs and support our share repurchase program that we announced in February 2023 over the next twelve months, absent any acquisition-related activities.
Cash flows provided by (used in) operating activities:
Cash provided by operating activities for the six months ended June 30, 2025, totaled $0.3 million compared to cash (used in) operating activities of ($0.1 million) during the six months ended June 30, 2024. Elements of cash flow during the 2025 period were a net (loss) of ($1.3) million, non-cash charges of $1.3 million and a decrease in operating working capital levels of $0.3 million. Elements of cash flow during the corresponding 2024 period were a net income of $1.2 million, non-cash charges of $2.9 million and an increase in operating working capital levels of ($4.2 million). Operating working capital decreased in 2025 due to lower accounts receivable and an increase in other accrued liabilities.
Cash flows (used in) investing activities:
Cash (used in) investing activities for the six months ended June 30, 2025, was ($188,000) compared to ($751,000) for the six months ended June 30, 2024. In 2025 investing activities included capital expenditures of ($169,000), and office lease deposits of ($19,000). In 2024, investing activities consisted of capital expenditures.
Cash flows provided by (used in) financing activities:
Cash provided by financing activities for the six months ended June 30, 2025, totaled $64,000 and consisted of proceeds from the exercise of stock options of $108,000, the issuance of common shares related to our Employee Stock Purchase Plan of $70,000, partially offset by the purchase of treasury shares of ($114,000). Cash provided by financing activities for the six months ended June 30, 2024, totaled $378,000 and consisted of proceeds from the exercise of stock options of $322,000, the issuance of common shares related to our Employee Stock Purchase Plan of $136,000, partially offset by the purchase of treasury shares of ($80,000).
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Off-Balance Sheet Arrangements:
Other than $324,000 in outstanding letters of credit issued under our Credit Agreement, we do not have any off-balance sheet arrangements. For further details about the outstanding letters of credit, refer to Note 8 — “Credit Facility” in the Notes to Condensed Consolidated Financial Statements included herein.
Inflation:
We do not believe that inflation had a significant impact on our results of operations for the periods presented, although economic uncertainty, including the concerns of our clients and other companies with respect to inflationary conditions in North America and elsewhere, has had and may continue to have an adverse impact on the demand for our services. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seek to ensure that billing rates reflect increases in costs due to inflation. However, high levels of inflation may result in higher interest rates which could increase our borrowing costs in the future if we elect to draw on our current or future credit facilities.
In addition, refer to “Item 1A. Risk factors” in our 2024 Annual Report on Form 10-K for a discussion about risks that inflation directly or indirectly may pose to our business.
Seasonality:
Our consultants’ billable hours are affected by national holidays and vacation policies. Accordingly, we generally have lower utilization rates and higher benefit costs during the fourth quarter. Additionally, assignment completions tend to be higher near the end of the calendar year, which largely impacts our revenue and gross profit performance during the subsequent quarter.
Recently Issued Accounting Standards:
Recent accounting pronouncements are described in Note 13 to the accompanying financial statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
In addition to the inherent operational risks, the Company is exposed to certain market risks, primarily related to changes in interest rates and currency fluctuations.
Interest Rates
As of June 30, 2025, we had no outstanding borrowings under the Credit Agreements — Refer to Note 8 — “Credit Facility” in the Notes to Condensed Consolidated Financial Statements, included herein.
Currency Fluctuations
The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currencies of the Company’s Indian and European subsidiaries are the local currency of the location of such subsidiary. The results of operations of the Company’s Indian and European subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company’s Indian and European subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Shareholders’ Equity. Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Condensed Consolidated Statements of Operations, and have not been material for all periods presented. A hypothetical 10% increase or decrease in overall foreign currency rates in the first six months of 2025 would not have had a material impact on our consolidated financial statements.
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| ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of Company management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
In the ordinary course of our business, we are involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.
| ITEM 1A. | RISK FACTORS |
There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 14, 2025.
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ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| Period |
Total Number of Shares Purchased (1) |
Average Price per Share (1) |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |
Maximum Number of Shares that May Yet Be Purchased Under this Plan or Programs (1) |
||||||||||||
| April 1, 2025 — April 30, 2025 |
— | $ | — | — | 423,079 | |||||||||||
| May 1, 2025 — May 31, 2025 |
6,201 | $ | 7.33 | — | 416,878 | |||||||||||
| June 1, 2025 — June 30, 2025 |
10,310 | $ | 6.64 | — | 406,568 | |||||||||||
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| Total |
16,511 | $ | 6.90 | — | 406,568 | |||||||||||
| (1) | On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of Common Stock over a two-year period. Repurchases under the program may occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques (including a Rule 10b5-1 program), or by any combination of such methods, and the program may be modified, suspended or terminated at any time at the discretion of the Board of Directors. On February 19, 2025, the Company announced that the Board of Directors had authorized an extension of its previously announced share repurchase program for an additional year through February 8, 2026. The Company did not repurchase any shares of its Common Stock during the quarter ended June 30, 2025, other than through this publicly announced share repurchase program. |
ITEM 5. |
OTHER INFORMATION |
Table of Contents
| ITEM 6. | EXHIBITS |
(a) Exhibits
| 10.1 | Executive Employment Agreement, made as of March 31, 2025, by and between Mastech Digital, Inc. and Kannan Sugantharaman (incorporated by reference to Exhibit 10.1 to Mastech Digital, Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 4, 2025) | |
| 10.2 | Executive Employment Agreement, made as of March 31, 2025, by and between Mastech Digital Private Limited and Kannan Sugantharaman (incorporated by reference to Exhibit 10.2 to Mastech Digital, Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 4, 2025) | |
| 10.3 | First Amendment to Mastech Digital, Inc. Stock Incentive Plan, as Amended and Restated, executed May 14, 2025, incorporated by reference to Exhibit 10.1 to Mastech Digital, Inc.’s Current Report on Form 8-K filed with the SEC on May 19, 2025 | |
| 10.4 | Confidential Separation Agreement and General Release among Mastech Digital, Inc., Mastech Digital Technologies, Inc. and John J. Cronin, Jr. | |
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith. | |
| 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer is filed herewith. | |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Executive Officer is furnished herewith. | |
| 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Financial Officer is furnished herewith. | |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 13th day of August, 2025.
| MASTECH DIGITAL, INC. | ||||
| August 13, 2025 | /s/ NIRAV PATEL | |||
| Nirav Patel Chief Executive Officer | ||||
| /s/ KANNAN SUGANTHARAMAN | ||||
| Kannan Sugantharaman | ||||
| Chief Financial Officer | ||||
| (Principal Financial Officer) | ||||
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