Mastech Digital Reports Record Third Quarter 2021 Results
Mastech Digital (NYSE American: MHH) reported third-quarter 2021 results, achieving record revenues of $59.5 million, a 26% increase from Q3 2020. The Data and Analytics Services segment generated revenues of $10.5 million (+19% YoY), while IT Staffing Services reached $49 million (+22% YoY). Gross profits rose to $16.6 million from $13.1 million in Q3 2020. GAAP EPS was $0.28, up from $0.25, and Non-GAAP EPS was $0.38, compared to $0.32. Cash on hand was $5.4 million, with no borrowings under the credit facility, indicating a strong financial position.
- Record consolidated revenues of $59.5 million, a 26% increase YoY.
- Data and Analytics segment achieved record revenue of $10.5 million, 19% organic growth.
- IT Staffing Services segment reported record revenues of $49 million, a 22% increase YoY.
- Gross profits increased to $16.6 million from $13.1 million YoY.
- GAAP diluted EPS rose to $0.28 from $0.25 YoY.
- Non-GAAP diluted EPS improved to $0.38 from $0.32 YoY.
- Strong cash position with $5.4 million on hand and no credit facility borrowings.
- None.
PITTSBURGH, Oct. 27, 2021 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the third quarter ended September 30, 2021.
Third Quarter 2021 Highlights:
- Consolidated revenues totaled a record
$59.5 million , a26% increase over the third quarter 2020, with sequential growth of11% when compared to the second quarter of 2021; - The Company's Data and Analytics Services segment reported record revenues of
$10.5 million , representing year-over-year organic growth of19% and sequential growth of18% over second quarter 2021, reflecting healthy pipeline activities during the first nine months of 2021; - The IT Staffing Services segment reported record revenues of
$49 million , an increase of22% over third quarter of 2020 and representing sequential growth of10% over second quarter 2021, largely due to a24% increase in consultants-on-billing achieved during the first nine months of 2021; - Consolidated gross margins increased 30 basis points on a year-over-year basis and were 120 basis points higher than in the second quarter of 2021;
- GAAP diluted earnings per share were
$0.28 in the third quarter of 2021 versus$0.25 in the third quarter of 2020; - Non-GAAP diluted earnings per share were
$0.38 in the third quarter of 2021 versus$0.32 in the third quarter of 2020, and represented an improvement of$0.09 over the second quarter of 2021.
Third Quarter Results:
Revenues for the third quarter of 2021 totaled
Activity levels at the Company's Data and Analytics Services segment remained strong during the quarter and are reflected in our record revenue performance during the quarter. Demand for the Company's IT Staffing Services segment continued to be strong, resulting in record revenues of
Vivek Gupta, the Company's President and Chief Executive Officer stated "The financial results for the third quarter reflect one of the Company's strongest quarters since going public in 2008. I am very pleased with the performance of both of our business units. Our data and analytics segment reported record revenues, with an expanded pipeline and strong gross margins of
Further commenting on the Data & Analytics segment, Paul Burton, the Chief Executive of the Company's Data & Analytics Services segment, said "I'm excited about our record revenue performance in the third quarter and the opportunities that we see for the business in the fourth quarter and during 2022. In addition to strong organic growth, having the financial capacity to execute on potential inorganic opportunities in the marketplace is an important aspect of our overall business strategy for the future."
Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial Officer, stated, "At September 30, 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.
Contingent consideration liability revaluation: In connection with the AmberLeaf acquisition, the Company may be required to pay future consideration that is 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 such 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 (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 and the expected performance of Mastech Digital following completion of this transaction. 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) | ||||
September 30, | December 31, | |||
2021 | 2020 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | $ 5,447 | $ 7,677 | ||
Accounts receivable, net | 45,375 | 32,134 | ||
Prepaid and other current assets | 4,171 | 1,346 | ||
Total current assets | 54,993 | 41,157 | ||
Equipment, enterprise software and leasehold improvements, net | 2,201 | 1,971 | ||
Operating lease right-of-use assets | 5,229 | 3,286 | ||
Non-current deposits | 597 | 396 | ||
Deferred income taxes | - | 796 | ||
Goodwill, net of impairment | 32,510 | 32,510 | ||
Intangible assets, net | 19,552 | 21,930 | ||
Total assets | $ 115,082 | $ 102,046 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Current portion of long-term debt | $ 4,400 | $ 4,400 | ||
Current portion of operating lease liability | 1,494 | 1,079 | ||
Accounts payable | 4,942 | 2,589 | ||
Accrued payroll and related costs | 15,552 | 12,374 | ||
Other accrued liabilities | 1,458 | 1,529 | ||
Total current liabilities | 27,846 | 21,971 | ||
Long-term liabilities: | ||||
Long-term debt, less current portion, net | 9,636 | 12,875 | ||
Contingent consideration liability | 900 | 2,882 | ||
Long-term operating lease liability, less current portion | 4,052 | 2,325 | ||
Long-term accrued income taxes | 165 | 165 | ||
Long-term payroll tax liability | 2,295 | 2,295 | ||
Deferred income taxes | 17 | - | ||
Total liabilities | 44,911 | 42,513 | ||
Shareholders' equity: | ||||
Common stock, par value | 131 | 130 | ||
Additional paid-in capital | 27,865 | 25,509 | ||
Retained earnings | 46,958 | 38,620 | ||
Accumulated other comprehensive (loss) | (596) | (539) | ||
Treasury stock, at cost | (4,187) | (4,187) | ||
Total shareholders' equity | 70,171 | 59,533 | ||
Total liabilities and shareholders' equity | $ 115,082 | $ 102,046 | ||
MASTECH DIGITAL, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(Amounts in thousands, except per share data) | |||||||
(Unaudited) | |||||||
Three Months ended September 30, | Nine Months ended September 30, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Revenues | $ 59,531 | $ 47,383 | $ 162,964 | $ 145,391 | |||
Cost of revenues | 42,911 | 34,293 | 119,225 | 106,926 | |||
Gross profit | 16,620 | 13,090 | 43,739 | 38,465 | |||
Selling, general and administrative expenses: | |||||||
Operating expenses | 11,645 | 8,873 | 33,566 | 28,158 | |||
Revaluation of contingent consideration liability | - | - | (1,982) | - | |||
Total selling, general and administrative expenses | 11,645 | 8,873 | 31,584 | 28,158 | |||
Income from operations | 4,975 | 4,217 | 12,155 | 10,307 | |||
Other income/(expense), net | (235) | (191) | (611) | (574) | |||
Income before income taxes | 4,740 | 4,026 | 11,544 | 9,733 | |||
Income tax expense | 1,334 | 1,028 | 3,206 | 1,897 | |||
Net income | $ 3,406 | $ 2,998 | $ 8,338 | $ 7,836 | |||
Earnings per share: | |||||||
Basic | $ 0.30 | $ 0.26 | $ 0.73 | $ 0.70 | |||
Diluted | $ 0.28 | $ 0.25 | $ 0.69 | $ 0.66 | |||
Weighted average common shares outstanding: | |||||||
Basic | 11,441 | 11,381 | 11,430 | 11,260 | |||
Diluted | 12,025 | 12,042 | 12,007 | 11,911 | |||
MASTECH DIGITAL, INC. | ||||||||||
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||||
(Amounts in thousands, except per share data) | ||||||||||
(Unaudited) | ||||||||||
Three Months ended September 30, | Nine Months ended September 30, | |||||||||
2021 | 2020 | 2021 | 2020 | |||||||
GAAP Net Income | $ 3,406 | $ 2,998 | $ 8,338 | $ 7,836 | ||||||
Adjustments: | ||||||||||
Amortization of acquired intangible assets | 792 | 656 | 2,378 | 1,998 | ||||||
Stock-based compensation | 693 | 462 | 2,071 | 1,530 | ||||||
Revaluation of contingent consideration liability | - | - | (1,982) | - | ||||||
Income tax adjustments | (323) | (270) | (567) | (907) | ||||||
Non-GAAP Net Income | $ 4,568 | $ 3,846 | $ 10,238 | $ 10,457 | ||||||
GAAP Diluted Earnings Per Share | $ 0.28 | $ 0.25 | $ 0.69 | $ 0.66 | ||||||
Non-GAAP Diluted Earnings Per Share | $ 0.38 | $ 0.32 | $ 0.853 | $ 0.88 | ||||||
Weighted average common shares outstanding: | ||||||||||
GAAP Diluted Shares | 12,025 | 12,042 | 12,007 | 11,911 | ||||||
Non-GAAP Diluted Shares | 12,025 | 12,042 | 12,007 | 11,911 | ||||||
MASTECH DIGITAL, INC. | |||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||
(Amounts in thousands) | |||||||||
(Unaudited) | |||||||||
Three Months ended September 30, | Nine Months ended September 30, | ||||||||
2021 | 2020 | 2021 | 2020 | ||||||
Revenues: | |||||||||
Data and analytics services | $ 10,523 | $ 7,176 | $ 28,267 | $ 21,308 | |||||
IT staffing services | 49,008 | 40,207 | 134,697 | 124,083 | |||||
Total revenues | $ 59,531 | $ 47,383 | $ 162,964 | $ 145,391 | |||||
Gross Margin %: | |||||||||
Data and analytics services | |||||||||
IT staffing services | |||||||||
Total gross margin % | |||||||||
Segment Operating Income: | |||||||||
Data and analytics services | $ 1,851 | $ 1,579 | $ 3,014 | $ 3,661 | |||||
IT staffing services | 3,916 | 3,294 | 9,537 | 8,644 | |||||
Subtotal | 5,767 | 4,873 | 12,551 | 12,305 | |||||
Amortization of acquired intangible assets | (792) | (656) | (2,378) | (1,998) | |||||
Revaluation of contingent consideration liability | - | - | 1,982 | - | |||||
Interest expense and other, net | (235) | (191) | (611) | (574) | |||||
Income before income taxes | $ 4,740 | $ 4,026 | $ 11,544 | $ 9,733 | |||||
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SOURCE Mastech Digital, Inc.
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