Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2025 totaled $49.1 million, reflecting a year-over-year decrease of 0.9% compared to Q2 2024 [11] - GAAP net income for Q2 2025 was $100,000 or $0.01 per diluted share, down from $1.4 million or $0.12 per diluted share in Q2 2024 [12] - Non-GAAP net income for Q2 2025 was $1.8 million or $0.15 per diluted share, compared to $2.2 million or $0.19 per diluted share in Q2 2024 [12] - Consolidated gross profit dollars decreased by 1.1% in 2025 compared to 2024, with gross margins dropping by seven basis points [12] Business Line Data and Key Metrics Changes - IT Staffing Services segment revenue for Q2 2025 was $500,000, a decrease of 0.4% from Q2 2024 [11] - Data and Analytics Services segment reported revenue of $8.6 million in Q2 2025, which was 3.2% lower than Q2 2024 [11] - Order bookings in the Data and Analytics segment totaled $5.8 million, down from $9.2 million in Q2 2024 [11] Market Data and Key Metrics Changes - The market remains cautious, but early signs of stabilization are noted, particularly in North America [5] - Clients are prioritizing investments that deliver clear business value while managing budgets prudently [5] Company Strategy and Development Direction - The company is focusing on strategic initiatives to unlock efficiency, including transitioning finance and accounting functions to India [8] - There is an emphasis on building differentiated offerings through partnerships, such as with Informatica [18] - The company aims to position itself as a trusted partner for enterprises navigating an AI-first world [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver value despite a cautious market [10] - There is a focus on executing priorities and preparing for future opportunities [9] - The company is optimistic about the gradual improvement in macroeconomic conditions [6] Other Important Information - The company had a cash balance of $27.9 million as of June 30, 2025, with no bank debt outstanding [13] - Day sales outstanding (DSO) measurement was 53 days, consistent with the previous year [13] Q&A Session Summary Question: Is the finance and accounting fully moved? Are there any more one-time expenses? - The transition is on track and expected to be completed by Q4 2025, with no additional one-time expenses anticipated [15][16] Question: What is the progress on the Informatica partnership? - Initial progress has been positive, with joint solution offerings being developed [18][19] Question: Will CGI's revenue go to zero? - No drastic changes are expected; client engagement remains strong [20] Question: Can you discuss revenue mix and average bill rate? - Bill rates have increased to approximately $85-$86, reflecting improved revenue quality [25][26] Question: What are the cash usage priorities? - The company is evaluating cash usage for buybacks and targeted investments aligned with long-term growth [32] Question: What are the expectations for CapEx by the end of the year? - No significant increase in CapEx is expected; it will remain in line with past spending [34]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-34099 MASTECH DIGITAL, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA 26-2753540 (State or other jurisdiction of incorpora ...

[Mastech Digital Q2 2025 Earnings Release](index=1&type=section&id=Mastech%20Digital%20Q2%202025%20Earnings%20Release) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported a 2% sequential revenue growth to $49.1 million, though GAAP net income declined significantly due to one-time costs [Overall Performance](index=1&type=section&id=Overall%20Performance) Q2 2025 vs. Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $49.1M | $49.5M | -0.8% | | Gross Profits | $13.8M | $14.0M | -1.4% | | Gross Margin | 28.1% | 28.2% | -10 bps | | GAAP Net Income | $0.1M | $1.4M | -92.8% | | GAAP Diluted EPS | $0.01 | $0.12 | -91.7% | | Non-GAAP Net Income | $1.8M | $2.2M | -18.2% | | Non-GAAP Diluted EPS | $0.15 | $0.19 | -21.1% | Q2 2025 vs. Q1 2025 Performance | Metric | Q2 2025 vs. Q1 2025 | Note | | :--- | :--- | :--- | | Consolidated Revenues | +2% | From $48.3M to $49.1M | | Consolidated Gross Margins | +147 bps | - | | GAAP Diluted EPS | $0.01 | vs. ($0.12) | | Non-GAAP Diluted EPS | $0.15 | vs. $0.06 | - Q2 2025 results included **$0.9 million** of combined severance and Finance & Accounting transition costs, while Q1 2025 included **$1.4 million** of severance expense[5](index=5&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) - The **IT Staffing Services** segment achieved a 3% sequential revenue increase, driven by higher bill rates and disciplined pricing[4](index=4&type=chunk)[5](index=5&type=chunk) - The **Data and Analytics Services** segment experienced softer activity with order bookings of $5.8 million, reflecting cautious client spending[5](index=5&type=chunk)[6](index=6&type=chunk) [Management Commentary and Financial Position](index=2&type=section&id=Management%20Commentary%20and%20Financial%20Position) Management noted resilient performance and market stabilization while maintaining a strong financial position with no bank debt - CEO Nirav Patel highlighted early signs of market stabilization and the company's strategic focus on becoming a partner for AI-first transformations[7](index=7&type=chunk) - The company maintains a strong financial position with **$27.9 million in cash**, no bank debt, and **$22.2 million** in borrowing availability[7](index=7&type=chunk) - Days Sales Outstanding (DSO) was **53 days**, which is within the company's target range[7](index=7&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section provides the unaudited condensed consolidated financial statements for the second quarter ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,933 | $27,742 | | Total current assets | $65,659 | $66,205 | | Total assets | $110,392 | $111,484 | | Total current liabilities | $19,718 | $20,577 | | Total liabilities | $22,582 | $24,050 | | Total shareholders' equity | $87,810 | $87,434 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months ended June 30, 2025 | Three Months ended June 30, 2024 | | :--- | :--- | :--- | | Revenues | $49,097 | $49,534 | | Gross profit | $13,820 | $13,980 | | Income from operations | $27 | $1,693 | | Net income | $135 | $1,391 | | Diluted EPS | $0.01 | $0.12 | [Reconciliation of GAAP to Non-GAAP Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | GAAP Net Income | $135 | | Amortization of acquired intangible assets | $649 | | Stock-based compensation | $714 | | Severance expense | $232 | | Finance and accounting transition expense | $688 | | Income tax adjustments | ($588) | | **Non-GAAP Net Income** | **$1,830** | - Non-GAAP measures exclude items like amortization, stock-based compensation, and one-time expenses to provide a more meaningful comparison of operational performance[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) [Supplemental Financial Information (by Segment)](index=8&type=section&id=Supplemental%20Financial%20Information%20(by%20Segment)) Q2 2025 Segment Revenues (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Data and analytics services | $8,589 | $8,876 | | IT staffing services | $40,508 | $40,658 | | **Total revenues** | **$49,097** | **$49,534** | Q2 2025 Segment Gross Margin % | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Data and analytics services | 45.2% | 49.2% | | IT staffing services | 24.5% | 23.6% | | **Total gross margin %** | **28.1%** | **28.2%** | [Disclosures](index=2&type=section&id=Disclosures) This section details the rationale for using non-GAAP measures and includes a standard forward-looking statements disclaimer - The company presents non-GAAP measures to supplement GAAP results, believing they offer investors useful information for period-to-period comparisons[9](index=9&type=chunk)[10](index=10&type=chunk) - A cost-cutting initiative to transition finance functions to India is expected to cost **$2.0 million** and yield annual savings of **$1.2 million** post-transition[14](index=14&type=chunk) - The release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[15](index=15&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2025 totaled INR 48.3 million, reflecting a year-over-year increase of 3.2% compared to Q1 2024 [18] - GAAP net income for Q1 2025 was a net loss of $1.4 million or $0.12 per diluted share, compared to a net loss of $200,000 or $0.01 per diluted share in Q1 2024 [20] - Non-GAAP net income for Q1 2025 was $800,000 or $0.06 per diluted share, unchanged from Q1 2024 [20] - Consolidated gross profit dollars increased by 6.3% in Q1 2025 compared to the same quarter in 2024, with gross margins improving by 80 basis points [20] Business Segment Data and Key Metrics Changes - The Data Analytics Services segment reported revenues of INR 9 million in Q1 2025, an increase of 11.1% year-over-year [18] - The IT Staffing Services segment achieved revenues of INR 39.4 million in Q1 2025, a 1.6% increase compared to Q1 2024, despite a decline in the billable consultant base by 15 consultants [19] - Order bookings in the Data and Analytics segment totaled INR 11.7 million, exceeding last year's Q1 performance of INR 9.6 million [19] Market Data and Key Metrics Changes - The macroeconomic environment has impacted client spending patterns, leading to a cautious approach in decision-making [11] - There is a noted demand for AI-driven digital modernization, indicating continued relevance for enterprise customers [11][41] Company Strategy and Development Direction - The company is focused on synergizing data modernization and IT staffing solutions to offer cohesive high-value services [10] - An expanded partnership with Informatica aims to enhance data modernization capabilities and support AI-led transformation initiatives [8][26] - The company plans to unveil a go-forward strategy later this year to position itself as a leading partner for Global 2000 enterprise customers transitioning to AI-first organizations [10] Management's Comments on Operating Environment and Future Outlook - Management expresses cautious optimism regarding the long-term demand for AI-driven solutions despite current macroeconomic uncertainties [40][42] - The company acknowledges that clients are reprioritizing spending but are not pausing their transformation agendas altogether [41] - Management emphasizes the importance of delivering high-impact ROI aligned solutions to meet evolving client needs [41] Other Important Information - The company had a cash balance of INR 24.7 million as of March 31, 2025, with no bank debt outstanding [20] - The average bill rate is trending between 84.5 and 85.5, up from 83 to 83.5 last quarter and from 79 a year ago [44] Q&A Session Summary Question: Concerns about data and analytics segment margins - Management noted that gross margins in the Data and Analytics segment were impacted by lower utilization and a one-time reserve adjustment on a fixed bid project, which is expected to be a one-time issue [23] Question: Details on the relationship with Informatica - The expanded partnership with Informatica is now more strategic, focusing on co-developing industry-specific accelerators and launching an outcomes lab for joint solutions [26][27] Question: Stock buybacks in the quarter - The company has not conducted any stock buybacks in the last quarter but has 423,000 shares available for repurchase and plans to be more active moving forward [28][29] Question: Consultant count for the quarter - The billable headcount in staffing landed at 991 [35] Question: Client demand and feedback trends - There was no significant month-to-month lumpiness in demand, with growth noted in AI-driven digital modernization [37] Question: Active customer industry verticals - The healthcare licenses practice showed prior traction, but overall demand has been broad-based [38] Question: Initial thoughts on leading the company - Management remains cautiously optimistic about the market conditions and believes long-term demand drivers for AI-driven transformations are strong [40][42] Question: Bill rate trends - The average bill rate has increased due to higher rates on new assignments and reflects the type of skills employed recently [44]

Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2025 totaled INR 48.3 million, reflecting a year-over-year increase of 3.2% compared to Q1 2024 [15] - GAAP net income for Q1 2025 was a net loss of $1.4 million or $0.12 per diluted share, compared to a net loss of $200,000 or $0.01 per diluted share in Q1 2024 [18] - Non-GAAP net income for Q1 2025 was $800,000 or $0.06 per diluted share, unchanged from Q1 2024 [18] - Consolidated gross profit dollars increased by 6.3% in Q1 2025 compared to the same quarter in 2024, with gross margins improving by 80 basis points [18] Business Line Data and Key Metrics Changes - The Data Analytics Services segment reported revenues of INR 9 million in Q1 2025, an increase of 11.1% compared to Q1 2024 [16] - Revenues in the IT Staffing Services segment totaled INR 39.4 million in Q1 2025, a 1.6% increase from Q1 2024, despite a decline in the billable consultant base by 15 consultants [17] Market Data and Key Metrics Changes - The company noted that client spending patterns were impacted by economic uncertainty, but still achieved year-over-year revenue growth in both business segments [15][10] - The average bill rate increased to between 84.5 and 85.5, up from 83 to 83.5 in the previous quarter and from 79 a year ago, reflecting higher rates on new assignments [42] Company Strategy and Development Direction - The company is focused on synergizing data modernization and IT staffing solutions to offer cohesive high-value services [9] - An expanded partnership with Informatica aims to enhance data modernization capabilities and support AI-led transformation initiatives for clients globally [6][7] - The company plans to unveil a go-forward strategy later this year to position itself as a leading partner for Global 2,000 enterprise customers transitioning to AI-first organizations [9] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macroeconomic environment, acknowledging ongoing uncertainty but highlighting strong long-term demand for AI-driven transformations [37][39] - The company is committed to supporting clients through the shift to an AI-first world, while recognizing that near-term volatility may continue to bring uncertainty [11] Other Important Information - The company had a cash balance of INR 24.7 million as of March 31, 2025, with no bank debt outstanding and cash availability of INR 23.7 million under its revolving credit facility [18] Q&A Session Summary Question: Concerns about Data and Analytics segment margins - Management acknowledged that gross margins in the Data and Analytics segment were impacted by lower utilization and a one-time reserve adjustment, estimating a reduction of about two percentage points [21] Question: Details on the relationship with Informatica - The expanded partnership with Informatica is seen as a strategic enhancement, focusing on co-developing industry-specific solutions and launching an outcomes lab for clients [23] Question: Stock buybacks in the quarter - The company has not executed any stock buybacks in the last quarter but has 423,000 shares available for repurchase and plans to become active in the buyback program moving forward [26] Question: Consultant count for the quarter - The billable headcount in staffing landed at 991 [31] Question: Client demand and feedback trends - Management noted that there was no significant month-to-month lumpiness in client demand, with continued growth in AI-driven digital modernization [34] Question: Insights on company leadership and market conditions - Management remains cautiously optimistic about the market, noting that while clients are reprioritizing spending, they are not pausing transformation agendas altogether [37]

Financial Performance - Total consolidated revenues increased by 3% to $48.3 million, compared to $46.8 million in Q1 2024[5] - Consolidated gross profits increased by 6% to $12.9 million, with gross margins rising to 26.7% from 25.9% in Q1 2024[3][5] - The Data and Analytics Services segment reported revenues of $9.0 million, an 11% increase from $8.1 million in Q1 2024[5] - The IT Staffing Services segment achieved a 2% revenue increase, totaling $39.4 million compared to $38.8 million in Q1 2024[22] Net Income and Loss - GAAP net loss for Q1 2025 was ($1.4 million) or ($0.12) per diluted share, compared to a net loss of ($161,000) or ($0.01) per diluted share in Q1 2024[3][5] - Non-GAAP net income for Q1 2025 was $0.8 million, or $0.06 per diluted share, consistent with Q1 2024[3][5] Cash and Financial Position - Cash balances on hand as of March 31, 2025, were $24.7 million, with no bank debt and $23.7 million available under the revolving credit facility[6] - Days Sales Outstanding (DSO) stood at 56 days, well within the targeted range[6] Expenses and Future Outlook - The Company incurred $1.4 million in severance expenses during Q1 2025, compared to no severance expenses in Q1 2024[5] - The Company remains cautiously optimistic about future growth despite a challenging demand environment[6]

Core Insights - Mastech Digital, Inc. reported a 6% increase in consolidated gross profits for the first quarter of 2025, reflecting resilience in a challenging demand environment [1][3]. Financial Performance - Revenues for Q1 2025 reached $48.3 million, up from $46.8 million in Q1 2024, marking a 3% increase [3][7]. - Gross profits for Q1 2025 were $12.9 million, compared to $12.1 million in Q1 2024, with gross margins improving to 26.7% from 25.9% [3][7]. - The GAAP net loss for Q1 2025 was ($1.4 million) or ($0.12) per diluted share, compared to a net loss of ($161,000) or ($0.01) per diluted share in Q1 2024 [3][7]. - Non-GAAP net income for Q1 2025 was $0.8 million, consistent with the same period in 2024, translating to $0.06 per diluted share [3][7]. Segment Performance - The Data and Analytics Services segment generated revenues of $9.0 million, an 11% increase from $8.1 million in Q1 2024 [7]. - The IT Staffing Services segment saw a 2% revenue increase in Q1 2025 compared to the same quarter in 2024 [7]. - Order bookings for the Data and Analytics Services segment totaled $11.7 million, while demand for IT Staffing Services was lower than the previous year due to market uncertainties [4][5]. Management Commentary - The CEO highlighted the challenging demand environment but expressed cautious optimism, noting year-over-year growth in both business units [5]. - The CFO reported a cash balance of $24.7 million as of March 31, 2025, with no bank debt and $23.7 million available under the revolving credit facility [5]. Balance Sheet Overview - As of March 31, 2025, total assets were $110.1 million, with total liabilities at $23.1 million, resulting in shareholders' equity of $86.9 million [15].

Revenue Performance - Total revenues for the three months ended March 31, 2025, were $48.317 million, an increase of 3.2% from $46.823 million in the same period of 2024[42] - The Data and Analytics Services segment generated $8.960 million in revenue for the three months ended March 31, 2025, up 11.1% from $8.067 million in 2024[42] - The IT Staffing Services segment reported revenue of $39.357 million for the three months ended March 31, 2025, compared to $38.756 million in 2024, reflecting a growth of 1.5%[42] - Revenue from the United States was $47.752 million for the three months ended March 31, 2025, compared to $46.116 million in 2024[44] - Revenues for Q1 2025 totaled $48.3 million, a 3% increase from $46.8 million in Q1 2024, driven by 11% growth in Data and Analytics Services and 2% growth in IT Staffing Services[103] Client Concentration - The top ten clients accounted for approximately 56% of total revenues in Q1 2025, compared to 51% in Q1 2024[43] - The company’s revenues are highly concentrated among a limited number of clients, which may impact operational results[100] Profitability and Expenses - Gross profit for Data and Analytics Services was $3,947,000 in Q1 2025, compared to $3,745,000 in Q1 2024, resulting in a gross margin of 44.1%[83] - Total gross profit increased to $12,892,000 in Q1 2025 from $12,131,000 in Q1 2024, with a total gross margin of 26.7%[83] - SG&A expenses increased to $14.7 million in Q1 2025, representing 30.4% of total revenues, compared to $12.5 million or 26.7% in Q1 2024[109] - Stock-based compensation expense for Q1 2025 was $895,000, up 62.73% from $550,000 in Q1 2024[61] Goodwill and Impairment - Goodwill related to the IT Staffing Services segment remained unchanged at $8.427 million as of March 31, 2025[47] - The Company recorded a goodwill impairment of $5.3 million related to the Data and Analytics Services segment in 2023[45] Tax and Losses - The Company reported a loss before income taxes of $1,762,000 for Q1 2025, compared to a loss of $282,000 in Q1 2024[73] - The total provision for income taxes for Q1 2025 was a benefit of $323,000, compared to a benefit of $121,000 in Q1 2024[74] - The company reported an effective tax benefit of ($323,000) for Q1 2025, compared to ($121,000) in Q1 2024, reflecting a significant change in tax strategy[113] Cash Flow and Assets - Cash used in operating activities for Q1 2025 was ($3.0 million), compared to ($1.3 million) in Q1 2024, with a net loss of ($1.4 million) in 2025[117] - As of March 31, 2025, the company had cash balances of $24.7 million and no bank debt outstanding, with $23.7 million of borrowing capacity available[114] - Total assets decreased to $110,076,000 as of March 31, 2025, from $111,484,000 as of December 31, 2024[84] Future Outlook and Costs - The company expects to incur additional costs of $500,000 to $750,000 during the transition of finance and accounting functions to India, with anticipated annual savings of approximately $1,200,000 post-transition[94] - Economic conditions in North America improved in 2024, but uncertainty remains for 2025 due to potential changes in administration policies[99] Stock Incentive Plans - The Company granted 22,140 restricted share units and 702,358 stock options at a strike price of $15.41 during Q1 2025[60] - As of March 31, 2025, there were 430,000 shares available for grant under the Stock Incentive Plan and 798,000 shares under the 2024 Inducement Stock Incentive Plan[60] - The 2024 Inducement Stock Incentive Plan was terminated effective May 14, 2025, ceasing further grants under this plan[60] - The Company has 432,059 shares available for purchase under the Employee Stock Purchase Plan as of March 31, 2025[65] New Business and Demand - New bookings in Q1 2025 totaled $11.7 million, up from $9.6 million in Q1 2024, indicating strong demand for services[104]

PITTSBURGH, May 7, 2025 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, has scheduled a conference call to discuss the results for the first quarter ended March 31, 2025. The conference call will occur on Friday, May 16th at 9:00 a.m. Eastern Time and will be hosted by Mr. Nirav Patel, CEO, and Mr. Kannan Sugantharaman, CFO. The conference call can be accessed through a listen-only dial-in number or through a live webcast. To listen to th ...

Kannan Sugantharaman to Join as Chief Financial and Operations Officer on April 14, 2025; Jack Cronin to Step Down After 27 Years of Service. PITTSBURGH, April 7, 2025 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation Services, today announced the appointment of Kannan Sugantharaman as Chief Financial and Operations Officer, effective April 14, 2025. Sugantharaman succeeds Jack Cronin, who will step down after more than two decades of distinguished serv ...