Mastech Digital Reports 16% Increase in Revenues in the Second Quarter 2022
Mastech Digital achieved significant financial milestones in Q2 2022, reporting $62.1 million in consolidated revenue, a 16% organic increase year-over-year. The Data and Analytics segment excelled with a 26% revenue growth, totaling $11.3 million. IT Staffing recorded $50.9 million in revenue with 23.3% gross margin. GAAP net income declined to $2.4 million or $0.20 per diluted share from $3.7 million a year prior, influenced by previous year's contingent liability revaluation. Non-GAAP earnings rose to $3.6 million or $0.30 per share.
- Consolidated revenues grew to $62.1 million, a 16% year-over-year increase.
- Data and Analytics segment achieved $11.3 million in revenue, marking a 26% organic growth.
- IT Staffing segment reached record revenues of $50.9 million with gross margins of 23.3%.
- Non-GAAP earnings per share rose to $0.30 compared to $0.29 year-over-year.
- GAAP net income decreased to $2.4 million from $3.7 million year-over-year.
- Investment in Data and Analytics segment increased costs, impacting net income.
The Data & Analytics Segment Achieved
PITTSBURGH, Aug. 3, 2022 /PRNewswire/ --Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the second quarter ending June 30, 2022.
Second Quarter 2022 Financial Highlights:
- The Company delivered consolidated revenues of
$62.1 million in the second quarter of 2022, which represented organic growth of16% over revenues of$53.7 million in the 2021 second quarter; - The Company's Data and Analytics Services segment reported revenues of
$11.3 million , an organic increase of26% over last year's$9.0 million ; - The IT Staffing segment achieved revenues of
$50.9 million and record gross margins of23.3% during the second quarter 2022. Top-line organic growth totaled14% compared to the second quarter of 2021; - GAAP diluted earnings per share was
$0.20 in the second quarter of 2022 compared to$0.19 in the second quarter of 2021, after adjusting for a$0.12 benefit due to the 2021 favorable revaluation of a contingent consideration liability; and - Non-GAAP diluted earnings per share was
$0.30 in the second quarter of 2022 compared to$0.29 in the 2021 second quarter.
Second Quarter 2022 Results:
Revenues for the second quarter of 2022 totaled
Activity levels at the Company's Data and Analytics Services segment were solid, as revenues expanded by
Commenting on second quarter financial results, Vivek Gupta, the Company's President and Chief Executive Officer stated,"Both of our business segments delivered solid double digit year-over-year revenue growth, as well as strong sequential revenue growth during the quarter. While net income was impacted by investments made in the Data and Analytics segment to support future growth and strengthen our cloud services capabilities, I am very pleased with our overall strategic progress during the quarter."
"I'm happy to say that we delivered record revenues in the Data and Analytics segment during the second quarter and we are excited about the future opportunities for this business," said Ganeshan Venkateshwaran, the Chief Executive Officer of the Company's Data and Analytics Services segment.
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, 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 expense 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.
Contingent consideration liability revaluation: In connection with the AmberLeaf acquisition, the Company was required to pay future consideration contingent upon the achievement of specific financial objectives. As of the acquisition date, the Company recorded a contingent consideration liability representing the estimated fair value of the contingent consideration that was expected to be paid. In the second quarter of 2021, this contingent consideration liability was reduced by
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 and governmental responses to limit the further spread of COVID-19 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, 2021.
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) | ||||
June 30, | December 31, | |||
2022 | 2021 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 6,722 | $ 6,622 | ||
Accounts receivable, net | 51,208 | 43,393 | ||
Prepaid and other current assets | 3,102 | 3,890 | ||
Total current assets | 61,032 | 53,905 | ||
Equipment, enterprise software and leasehold improvements, net | 3,291 | 3,038 | ||
Operating lease right-of-use assets | 4,641 | 4,894 | ||
Non-current deposits | 491 | 595 | ||
Goodwill, net of impairment | 32,510 | 32,510 | ||
Intangible assets, net of amortization | 17,176 | 18,760 | ||
Total assets | $ 119,141 | $ 113,702 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Current portion of long-term debt | $ 4,400 | $ 4,400 | ||
Current portion of operating lease liability | 1,530 | 1,479 | ||
Accounts payable | 6,724 | 4,954 | ||
Accrued payroll and related costs | 13,250 | 14,240 | ||
Other accrued liabilities | 1,417 | 1,771 | ||
Total current liabilities | 27,321 | 26,844 | ||
Long-term liabilities: | ||||
Long-term debt, less current portion, net | 6,170 | 8,334 | ||
Long-term operating lease liability, less current portion | 3,179 | 3,706 | ||
Long-term accrued income taxes | 125 | 125 | ||
Deferred income taxes | 816 | 265 | ||
Total liabilities | 37,611 | 39,274 | ||
Shareholders' equity: | ||||
Common stock, par value | 133 | 131 | ||
Additional paid-in capital | 31,048 | 28,250 | ||
Retained earnings | 55,609 | 50,841 | ||
Accumulated other comprehensive income (loss) | (1,073) | (607) | ||
Treasury stock, at cost | (4,187) | (4,187) | ||
Total shareholders' equity | 81,530 | 74,428 | ||
Total liabilities and shareholders' equity | $ 119,141 | $ 113,702 | ||
MASTECH DIGITAL, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(Amounts in thousands, except per share data) | |||||||
(Unaudited) | |||||||
Three Months ended June 30, | Six Months ended June 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenues | $ 62,117 | $ 53,658 | $ 121,872 | $ 103,433 | |||
Cost of revenues | 45,371 | 39,343 | 89,194 | 76,314 | |||
Gross profit | 16,746 | 14,315 | 32,678 | 27,119 | |||
Selling, general and administrative expenses: | |||||||
Operating expenses | 13,198 | 10,986 | 25,823 | 21,921 | |||
Revaluation of contingent consideration liability | - | (1,982) | - | (1,982) | |||
Total selling, general and administrative expenses | 13,198 | 9,004 | 25,823 | 19,939 | |||
Income from operations | 3,548 | 5,311 | 6,855 | 7,180 | |||
Other income/(expense), net | 68 | (144) | 8 | (376) | |||
Income before income taxes | 3,616 | 5,167 | 6,863 | 6,804 | |||
Income tax expense | 1,180 | 1,429 | 2,095 | 1,872 | |||
Net income | $ 2,436 | $ 3,738 | $ 4,768 | $ 4,932 | |||
Earnings per share: | |||||||
Basic | $ 0.21 | $ 0.33 | $ 0.41 | $ 0.43 | |||
Diluted | $ 0.20 | $ 0.31 | $ 0.39 | $ 0.41 | |||
Weighted average common shares outstanding: | |||||||
Basic | 11,607 | 11,442 | 11,558 | 11,425 | |||
Diluted | 12,110 | 12,002 | 12,079 | 11,999 | |||
MASTECH DIGITAL, INC. | ||||||||||
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||||
(Amounts in thousands, except per share data) | ||||||||||
(Unaudited) | ||||||||||
Three Months ended June 30, | Six Months ended June 30, | |||||||||
2022 | 2021 | 2022 | 2021 | |||||||
GAAP Net Income | $ 2,436 | $ 3,738 | $ 4,768 | $ 4,932 | ||||||
Adjustments: | ||||||||||
Amortization of acquired intangible assets | 792 | 793 | 1,584 | 1,586 | ||||||
Stock-based compensation | 752 | 757 | 1,278 | 1,378 | ||||||
Revaluation of contingent consideration liability | - | (1,982) | - | (1,982) | ||||||
Income tax adjustments | (406) | 121 | (746) | (244) | ||||||
Non-GAAP Net Income | $ 3,574 | $ 3,427 | $ 6,884 | $ 5,670 | ||||||
GAAP Diluted Earnings Per Share | $ 0.20 | $ 0.31 | $ 0.39 | $ 0.41 | ||||||
Non-GAAP Diluted Earnings Per Share | $ 0.30 | $ 0.29 | $ 0.57 | $ 0.47 | ||||||
Weighted average common shares outstanding: | ||||||||||
GAAP Diluted Shares | 12,110 | 12,002 | 12,079 | 11,999 | ||||||
Non-GAAP Diluted Shares | 12,110 | 12,002 | 12,079 | 11,999 | ||||||
MASTECH DIGITAL, INC. | |||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||
(Amounts in thousands) | |||||||||
(Unaudited) | |||||||||
Three Months ended June 30, | Six Months ended June 30, | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||
Revenues: | |||||||||
Data and analytics services | $ 11,250 | $ 8,950 | $ 21,402 | $ 17,744 | |||||
IT staffing services | 50,867 | 44,708 | 100,470 | 85,689 | |||||
Total revenues | $ 62,117 | $ 53,658 | $ 121,872 | $ 103,433 | |||||
Gross Margin %: | |||||||||
Data and analytics services | 43.6 % | 46.7 % | 44.3 % | 46.2 % | |||||
IT staffing services | 23.3 % | 22.7 % | 23.1 % | 22.1 % | |||||
Total gross margin % | 27.0 % | 26.7 % | 26.8 % | 26.2 % | |||||
Segment Operating Income: | |||||||||
Data and analytics services | $ 817 | $ 769 | $ 1,789 | $ 1,163 | |||||
IT staffing services | 3,523 | 3,353 | 6,650 | 5,621 | |||||
Subtotal | 4,340 | 4,122 | 8,439 | 6,784 | |||||
Amortization of acquired intangible assets | (792) | (793) | (1,584) | (1,586) | |||||
Revaluation of contingent consideration liability | - | 1,982 | - | 1,982 | |||||
Interest expense and other, net | 68 | (144) | 8 | (376) | |||||
Income before income taxes | $ 3,616 | $ 5,167 | $ 6,863 | $ 6,804 | |||||
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SOURCE Mastech Digital, Inc.
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