Mastech Digital Reports First Quarter 2021 Results
Mastech Digital, Inc. (MHH) reported its Q1 2021 financial results, with consolidated revenues of $49.8 million, a 2% sequential increase from Q4 2020. While the Data and Analytics Services segment saw strong bookings, revenues remained flat year-over-year. The IT Staffing Services segment added a record 99 consultants, marking a 9% increase in demand. GAAP net income decreased to $1.2 million ($0.10 per share) from $1.9 million ($0.16). The company had cash reserves of $7.2 million with no debt, positioning it for future growth amid improving customer demand.
- Consolidated revenues increased by 2% sequentially from Q4 2020.
- IT Staffing Services segment added a record 99 consultants-on-billing, a 9% increase.
- Company holds cash reserves of $7.2 million with no borrowings.
- Improved bookings in the Data and Analytics Services segment signal potential growth.
- Q1 2021 revenues decreased to $49.8 million from $50.4 million year-over-year.
- GAAP net income fell to $1.2 million, a decline from $1.9 million in Q1 2020.
- Project delays negatively impacted revenues and margins.
PITTSBURGH, April 28, 2021 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the first quarter ended March 31, 2021.
First Quarter 2021 Highlights:
- Consolidated revenues totaled
$49.8 million , a2% sequential increase over fourth quarter 2020; - The Company's Data and Analytics Services segment reported a strong bookings performance during the quarter, despite flat revenues as compared to the previous quarter;
- Customer demand improved as the COVID-19 situation recovers in North America and drives our S,G&A investments to capture anticipated future revenues;
- The IT Staffing Services segment added a record 99 consultants-on-billing, an increase of
9% during the quarter, as the demand for its services continued to increase; - Consolidated gross margins increased 50-basis points on a year-over-year basis;
- GAAP diluted earnings per share were
$0.10 in the first quarter of 2021 versus$0.16 in the first quarter of 2020; - Non-GAAP diluted earnings per share were
$0.19 in the first quarter of 2021 versus$0.23 in the first quarter of 2020.
First Quarter Results:
Revenues for the first quarter of 2021 totaled
Activity levels at the Company's Data and Analytics Services segment were flat during the quarter when compared to last quarter, despite a much stronger bookings performance. Project delays materially impacted first quarter results in terms of revenues, gross margins and bottom-line results. Demand for the Company's IT Staffing Services segment increased materially during the quarter, with a
Vivek Gupta, the Company's President and Chief Executive Officer stated "While customers continued to be cautious in starting new projects in the data and analytics space, our IT Staffing Services segment saw a material increase in new assignment opportunities during the quarter. The increase in D&A bookings, particularly in the latter part of the quarter, gives us confidence that the Data and Analytics segment is well positioned for meaningful growth for the year."
Further commenting on the data & analytics marketplace, Paul Burton, the Chief Executive of the Company's Data & Analytics Services segment, said, "We are seeing encouraging signs that customers are becoming more comfortable commencing new projects. We believe this trend, combined with pent-up global demand, positions the segment for strong revenue growth for the remainder of the year as compared to 2020."
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial Officer, stated, "At March 31, 2021 we had cash balances on hand of
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, EMEA, India and ASEAN.
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.
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 (i) projections of revenues, earnings, and cash flow, and (ii) statements regarding the expected benefits to the Company from the completion of the AmberLeaf acquisition. 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, 2020.
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, | December 31, | |||
2021 | 2020 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 7,242 | $ 7,677 | ||
Accounts receivable, net | 36,206 | 32,134 | ||
Prepaid and other current assets | 1,238 | 1,346 | ||
Total current assets | 44,686 | 41,157 | ||
Equipment, enterprise software and leasehold improvements, net | 1,895 | 1,971 | ||
Operating lease right-of-use assets | 3,199 | 3,286 | ||
Deferred income taxes | 804 | 796 | ||
Non-current deposits | 459 | 396 | ||
Goodwill, net of impairment | 32,510 | 32,510 | ||
Intangible assets, net | 21,137 | 21,930 | ||
Total assets | $ 104,690 | $ 102,046 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Current portion of long-term debt | $ 4,400 | $ 4,400 | ||
Current portion of operating lease liability | 1,056 | 1,079 | ||
Accounts payable | 3,915 | 2,589 | ||
Accrued payroll and related costs | 12,882 | 12,374 | ||
Other accrued liabilities | 1,571 | 1,529 | ||
Total current liabilities | 23,824 | 21,971 | ||
Long-term liabilities: | ||||
Long-term debt, less current portion, net | 11,795 | 12,875 | ||
Contingent consideration liability | 2,882 | 2,882 | ||
Long-term operating lease liability, less current portion | 2,273 | 2,325 | ||
Long-term accrued income taxes | 165 | 165 | ||
Long-term payroll tax liabilities | 2,295 | 2,295 | ||
Total liabilities | 43,234 | 42,513 | ||
Shareholders' equity: | ||||
Common stock, par value | 130 | 130 | ||
Additional paid-in capital | 26,231 | 25,509 | ||
Retained earnings | 39,814 | 38,620 | ||
Accumulated other comprehensive income (loss) | (532) | (539) | ||
Treasury stock, at cost | (4,187) | (4,187) | ||
Total shareholders' equity | 61,456 | 59,533 | ||
Total liabilities and shareholders' equity | $ 104,690 | $ 102,046 | ||
MASTECH DIGITAL, INC. | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(Amounts in thousands, except per share data) | ||||
(Unaudited) | ||||
Three Months ended March 31, | ||||
2021 | 2020 | |||
Revenues | $ 49,775 | $ 50,425 | ||
Cost of revenues | 36,971 | 37,706 | ||
Gross profit | 12,804 | 12,719 | ||
Selling, general and administrative expenses | 10,935 | 10,243 | ||
Income from operations | 1,869 | 2,476 | ||
Other income/(expense), net | (232) | (226) | ||
Income before income taxes | 1,637 | 2,250 | ||
Income tax expense | 443 | 381 | ||
Net income | $ 1,194 | $ 1,869 | ||
Earnings per share: | ||||
Basic | $ 0.10 | $ 0.17 | ||
Diluted | $ 0.10 | $ 0.16 | ||
Weighted average common shares outstanding: | ||||
Basic | 11,415 | 11,127 | ||
Diluted | 11,997 | 11,675 | ||
MASTECH DIGITAL, INC. | |||||
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | |||||
(Amounts in thousands, except per share data) | |||||
(Unaudited) | |||||
Three Months ended March 31, | |||||
2021 | 2020 | ||||
GAAP Net Income | $ 1,194 | $ 1,869 | |||
Adjustments: | |||||
Amortization of acquired intangible assets | 793 | 673 | |||
Stock-based compensation | 621 | 456 | |||
Income taxes adjustments | (365) | (296) | |||
Non-GAAP Net Income | $ 2,243 | $ 2,702 | |||
GAAP Diluted Earnings Per Share | $ 0.10 | $ 0.16 | |||
Non-GAAP Diluted Earnings Per Share | $ 0.19 | $ 0.23 | |||
Weighted average common shares outstanding: | |||||
GAAP Diluted Shares | 11,997 | 11,675 | |||
Non-GAAP Diluted Shares | 11,997 | 11,675 | |||
MASTECH DIGITAL, INC. | |||||
SUPPLEMENTAL FINANCIAL INFORMATION | |||||
(Amounts in thousands) | |||||
(Unaudited) | |||||
Three Months ended March 31, | |||||
2021 | 2020 | ||||
Revenues: | |||||
Data and analytics services | $ 8,794 | $ 7,360 | |||
IT staffing services | 40,981 | 43,065 | |||
Total revenues | $ 49,775 | $ 50,425 | |||
Gross Margin %: | |||||
Data and analytics services | |||||
IT staffing services | |||||
Total gross margin % | |||||
Segment Operating Income: | |||||
Data and analytics services | 394 | 909 | |||
IT staffing services | $ 2,268 | $ 2,240 | |||
Subtotal | 2,662 | 3,149 | |||
Amortization of acquired intangible assets | (793) | (673) | |||
Interest expense and other, net | (232) | (226) | |||
Income before income taxes | $ 1,637 | $ 2,250 | |||
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SOURCE Mastech Digital, Inc.
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