EX-99.1 2 d741597dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE:

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

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

PITTSBURGH, PA – May 8, 2024—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.

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.

# # #

For more information, contact:

Donna Kijowski

Manager, Investor Relations

Mastech Digital, Inc.

888.330.5497

MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)

 

     March 31,
2024		     December 31,
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

    $  106,070     $  105,227  
  

 

 

    

 

 

  

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

    $ 106,070     $ 105,227  
  

 

 

    

 

 

  

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