Company Overview - Mastech Digital, Inc. operates in the IT staffing and digital transformation services sector, bridging older workforce solutions with newer technology consulting [1] Investment Focus - Grassroots Trading emphasizes objective and unbiased research, focusing on small- to mid-cap companies while also identifying opportunities in larger companies [1]

Revenue Performance - Total revenues for 2024 were $198.9 million, a 1.1% decline from $201.1 million in 2023, with Data and Analytics Services segment revenues increasing by 6.6% and IT Staffing Services segment revenues decreasing by 2.6%[209] - Mastech Digital, Inc. reported revenues of $198.943 million for the year ended December 31, 2024, a decrease of 1% from $201.098 million in 2023[308] - The Data and Analytics Services segment generated $36,625,000 in 2024, up 6.6% from $34,358,000 in 2023, but down 9.8% from $40,594,000 in 2022[389] - The IT Staffing Services segment reported revenues of $162,318,000 in 2024, a decrease of 2.5% from $166,740,000 in 2023 and a decrease of 19.5% from $201,644,000 in 2022[389] - Revenue from the United States was $195,455,000 in 2024, a slight decrease from $197,246,000 in 2023 and a significant decrease from $236,187,000 in 2022[391] Profitability and Margins - Gross profit for 2024 increased to $55.6 million, an 8.9% increase year-over-year, with total gross margin percentage rising to 27.9% from 25.4% in 2023[214] - Gross margins for Data and Analytics Services segment improved to 49.1% in 2024, up 560 basis points from 43.5% in 2023, reflecting higher utilization and improved efficiencies[215] - The company's gross profit increased to $55.597 million in 2024, up 9% from $51.036 million in 2023[308] - In 2023, the company's gross profit decreased to $51.0 million, a 19% decline from $63.2 million in 2022, with gross profit as a percentage of revenue at 25.4% compared to 26.1% in 2022[224] Expenses and Cost Management - SG&A expenses decreased to $51.8 million in 2024, representing 26.0% of total revenues, down from $60.3 million or 30.0% in 2023[216] - The company's SG&A expenses in 2023 totaled $60.3 million, representing 30.0% of total revenues, up from $51.0 million or 21.1% in 2022, with adjusted SG&A expenses at 23.2% in 2023 versus 19.2% in 2022[228] - Selling, general and administrative expenses decreased to $51.806 million in 2024, down from $60.311 million in 2023, reflecting improved cost management[308] Client Concentration - The top ten clients accounted for 54% of total revenues in 2024, with financial services representing approximately 49% of total revenues[213] - The Company's top ten clients accounted for approximately 54% of total revenues in 2024, compared to 53% in both 2023 and 2022[391] - The Company had two clients, CGI and Allegis, that exceeded 10% of total revenues in 2024, with CGI accounting for 14.5% and Allegis for 10.7%[389] Cash Flow and Financial Position - Cash provided by operating activities was $7.2 million in 2024, down from $16.0 million in 2023, with a net loss of $7.1 million in 2023[236] - The company had cash balances of $27.7 million as of December 31, 2024, with no bank debt outstanding and approximately $22.6 million of borrowing capacity[232] - The company’s cash and cash equivalents rose to $27.742 million in 2024, an increase of 31% from $21.147 million in 2023[306] - The company’s total equity as of December 31, 2024, was $87,434,000, an increase from $81,444,000 in 2023[315] Tax and Valuation - The effective tax rate for 2024 was 23.1%, compared to a negative rate of (21.0%) in 2023, influenced by a worthless stock deduction from the dissolution of a Singapore entity[219] - The effective tax rate for 2023 was (21.0%), compared to 30.3% in 2022, largely due to shortfalls in expected tax benefits on stock options[231] - As of December 31, 2024, the Company provided a valuation allowance of $452,000 related to the uncertainty of the realization of foreign net operating losses[275] - The company evaluates its deferred tax assets and records a valuation allowance when it is more likely than not that some portion will not be realized[275] Goodwill and Impairment - The company reported a goodwill impairment charge of $5.3 million in 2023, related to the Data and Analytics Services segment, compared to no impairment in 2022[225] - Goodwill remained unchanged at $27.210 million, with no impairment recorded in 2024, compared to an impairment of $5.300 million in 2023[301][308] - The Company performed quantitative impairment tests related to its IT Staffing Services segment and found no impairment associated with the carrying amount of goodwill for 2024, 2023, and 2022[264] Operational Highlights - Bookings for 2024 totaled $41 million, consistent with the full year 2023's performance, indicating stable demand[210] - The Company recognizes revenue on fixed price contracts over time as services are rendered, using a cost-based input method to measure progress[254] - Unbilled receivables represent amounts recognized as revenues based on services performed, which will be invoiced in a subsequent period[257] - The Company expanded its service offerings to include engineering staffing services in late 2023[388] Stock and Shareholder Information - The weighted average diluted shares outstanding increased to 12.014 million in 2024 from 11.613 million in 2023[308] - The company repurchased 9,222 shares of common stock at an average price of $8.70 per share in 2024, and 67,699 shares at an average price of $9.10 per share in 2023[371] - The company held 1.7 million shares in its treasury at a cost of approximately $4.9 million as of December 31, 2024[372]

Financial Data and Key Metrics Changes - Consolidated revenues for Q4 2024 totaled $50.7 million, a year-over-year increase of 10.2% compared to Q4 2023 [22] - GAAP net income for Q4 2024 was $0.3 million or $0.02 per diluted share, compared to a net loss of $5.4 million or a negative $0.46 per share in Q4 2023 [25] - Non-GAAP net income for Q4 2024 was $2.8 million or $0.23 per diluted share, compared to $1.3 million or $0.11 per diluted share in Q4 2023 [25] - Full year 2024 revenues were $198.9 million, largely in line with full year 2023 revenues [26] - Gross margins in 2024 totaled 27.9%, compared to 25.4% in 2023 [26] Business Line Data and Key Metrics Changes - Data and Analytics Services segment reported revenues of $10.3 million in Q4 2024, a 26.2% increase year-over-year and 9.4% sequentially [22] - IT Staffing Services segment had revenues of $40.5 million in Q4 2024, achieving year-over-year revenue growth of 6.8% [23] - Billable consultant base declined by 63 consultants during the quarter, consistent with previous years due to seasonal assignment ends [23] - Q4 2024 gross margin percent was a company record 29%, with significant margin expansion in both business segments [24] Market Data and Key Metrics Changes - Order bookings in Q4 2024 totaled $11 million, somewhat below expectations, with project delays noted in the Data and Analytics segment [22][54] - Clients exhibited greater caution in decision-making, leading to longer sales cycles and delayed bookings [54][55] Company Strategy and Development Direction - The company is at an inflection point due to the AI revolution, requiring sharper execution focus and a founder's mindset for growth [11] - The strategy for 2025 includes leading with urgency, building a compelling portfolio of offerings, and executing with discipline [16][18][19] - The company aims to refine its strategy and create a growth story that is uniquely its own [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainties in the macro environment affecting technology investments, but remains confident in the strong appetite for AI-driven solutions [12][14] - The company plans to accelerate growth and enhance offerings while taking a structured approach to defining its long-term strategy [33] Other Important Information - The liquidity position remains solid with no bank debt outstanding and $27.7 million in cash balances [28] - The share repurchase program has been extended to February 2026, with 423,000 shares remaining [61] Q&A Session Summary Question: Approach to increasing staffing and D&A - Management is taking a structured approach to defining long-term strategy, focusing on growth and enhancing offerings [32][33] Question: Opportunities in government efficiency - Management sees government opportunities, especially in Data and Analytics [35] Question: Employee count at year-end - The company ended the year with 1,816 employees, up from 1,648 in 2023 [37] Question: Spending plans for the year - SG&A expenses are expected to maintain the same percentage as in 2024, with some increases in the first half due to hiring [44][45] Question: Tax rate expectations - The tax rate is influenced by stock compensation true-ups, with a recent rate lower than 25% [49] Question: Commentary on bookings during the quarter - Bookings were affected by project delays and uncertainty in the marketplace, leading to a longer sales cycle [54][55] Question: Thoughts on share repurchase program extension - The Board decided to extend the share repurchase program due to fewer blackout periods expected in 2025 [61] Question: Potential acquisitions and cash uses - M&A remains part of the growth strategy, but clarity on the direction is needed before executing transactions [66]

Financial Performance - Consolidated revenues for Q4 2024 increased by 10.2% to $50.7 million, compared to $46.1 million in Q4 2023[3] - Gross profits for Q4 2024 were $14.7 million, up from $11.3 million in Q4 2023, with gross margins reaching a record 29.0%[5] - Revenues for Q4 2024 reached $50,747 thousand, a 10.8% increase from $46,052 thousand in Q4 2023[23] - Gross profit for Q4 2024 was $14,715 thousand, up 29.5% from $11,344 thousand in Q4 2023[23] - Total revenues for the year ended December 31, 2024 were $198,943 thousand, a slight decrease from $201,098 thousand in 2023[23] Segment Performance - The Data and Analytics Services segment reported revenues of $10.3 million, a 26.2% increase year-over-year[5] - Data and analytics services revenue for Q4 2024 was $10,284 thousand, a 26.1% increase from $8,152 thousand in Q4 2023[27] - IT Staffing Services segment revenues rose by 6.8% to $40.5 million compared to $37.9 million in Q4 2023[5] - IT staffing services revenue for Q4 2024 was $40,463 thousand, up from $37,900 thousand in Q4 2023, representing a 6.8% increase[27] Profitability - GAAP net income for 2024 was $3.4 million, or $0.28 per diluted share, compared to a loss of $7.1 million, or ($0.61) per diluted share in 2023[6] - Non-GAAP net income for 2024 totaled $8.6 million, or $0.71 per diluted share, compared to $5.3 million, or $0.44 per diluted share in 2023[6] - Net income for Q4 2024 was $297 thousand, compared to a net loss of $5,351 thousand in Q4 2023[25] - Non-GAAP net income for Q4 2024 increased to $2,802 thousand from $1,326 thousand in Q4 2023[25] - Basic earnings per share for Q4 2024 was $0.03, compared to a loss of $0.46 per share in Q4 2023[25] Cash and Debt Management - Cash balances increased by $6.6 million during 2024, reaching $27.7 million as of December 31, 2024, with no bank debt[7] - The Board of Directors extended the share repurchase program for an additional year through February 8, 2026, with 423,000 shares available for repurchase[8] Operational Metrics - The company experienced a decline of 63 billable consultants in the IT Staffing Services segment during Q4 2024, consistent with seasonal trends[4] - Days Sales Outstanding (DSO) stood at 52 days as of December 31, 2024, within the targeted range[7] - The company reported a total operating income of $65 thousand in Q4 2024, a significant recovery from an operating loss of $6,930 thousand in Q4 2023[23] - Total gross margin percentage improved to 29.0% in Q4 2024 from 24.6% in Q4 2023[27]

Core Insights - Mastech Digital, Inc. reported a revenue growth of 10.2% year-over-year for the fourth quarter of 2024, totaling $50.7 million compared to $46.1 million in the same quarter of 2023 [3][7] - The Data and Analytics Services segment achieved a remarkable revenue growth of 26.2% in the fourth quarter of 2024, generating $10.3 million [4][7] - The company extended its share repurchase program for an additional year through February 8, 2026, with 423,000 shares available for repurchase as of December 31, 2024 [9][10] Fourth Quarter 2024 Highlights - Gross profits for the fourth quarter of 2024 were $14.7 million, up from $11.3 million in the same quarter of 2023 [3][7] - GAAP net income for the fourth quarter was $0.3 million or $0.02 per diluted share, a significant improvement from a loss of $5.4 million or ($0.46) per diluted share in the fourth quarter of 2023 [3][7] - Non-GAAP net income for the fourth quarter was $2.8 million, or $0.23 per diluted share, compared to $1.3 million, or $0.11 per diluted share, in the fourth quarter of 2023 [3][7] Full Year 2024 Results - Total revenues for the full year of 2024 were $198.9 million, slightly down from $201.1 million in 2023 [5] - Gross profits for 2024 were $55.6 million, representing 27.9% of total revenues, compared to $51.0 million or 25.4% in 2023 [5] - GAAP net income for 2024 was $3.4 million or $0.28 per diluted share, compared to a loss of $7.1 million or ($0.61) per diluted share in 2023 [5] Segment Performance - The IT Staffing Services segment reported revenues of $40.5 million in the fourth quarter of 2024, a 6.8% increase from $37.9 million in the same quarter of 2023 [4][7] - The Data and Analytics Services segment's gross margin was 49.5% in the fourth quarter of 2024, up from 44.7% in the fourth quarter of 2023 [26] - The IT Staffing Services segment achieved a gross margin of 23.8% in the fourth quarter of 2024, compared to 20.3% in the same quarter of 2023 [26] Financial Position - As of December 31, 2024, the company had cash balances of $27.7 million and no bank debt, with borrowing availability of approximately $22.6 million under its revolving credit facility [8] - The Days Sales Outstanding (DSO) stood at 52 days, well within the targeted range [8]

Core Viewpoint - Mastech Digital, Inc. is set to discuss its fourth quarter and full year results for 2024 in a conference call scheduled for February 19, 2025 [1] Group 1: Conference Call Details - The conference call will be hosted by CEO Nirav Patel and CFO Jack Cronin [1] - Access to the call will be available via a listen-only dial-in number (877-407-3980) or through a live webcast on the company's website [2] - A replay of the call will be available for 7 days, with specific access numbers provided for domestic and international callers [3] Group 2: Company Overview - Mastech Digital is a leading provider of Digital Transformation IT Services, focusing on Data Management and Analytics Solutions, Digital Learning, and IT Staffing Services [4] - The company operates with a Digital First approach and is a minority-owned enterprise [4] - Mastech Digital is headquartered in Pittsburgh, PA, with offices in the U.S., Canada, Europe, and India [4]

Core Points - Mastech Digital, Inc. has awarded non-qualified stock options to its new President and CEO, Nirav Patel, for up to 702,358 shares of common stock, effective January 6, 2025 [1] - The stock options will vest based on the Company's Quarterly Average Market Capitalization, with specific milestones set at $300 million, $450 million, and $600 million [2] - The options are subject to acceleration and forfeiture based on the termination of Mr. Patel's employment or a 'Change of Control' of the Company [3] Company Overview - Mastech Digital, Inc. is a leading provider of Digital Transformation Services, focusing on delivering technology talent and innovative solutions to drive digital transformation [4] - The company operates globally, with headquarters in Pittsburgh, PA, and delivery centers in North America and India [4]

Core Points - Nirav Patel has been appointed as President and CEO of Mastech Digital, effective January 6, 2025, succeeding Vivek Gupta who has led the company for nine years [2][6] - Patel has over 20 years of experience in technology, previously serving as President and CEO of Bristlecone, where he significantly scaled the business and expanded its workforce [3][4] - The Board of Directors expressed strong support for Patel's appointment, highlighting his expertise in data and AI-driven transformation as aligned with the company's strategic priorities [5][6] Company Transition - Vivek Gupta is stepping down after nine years, during which he transformed Mastech Digital from an IT staffing company to a technology-focused solutions organization [7][8] - Under Gupta's leadership, the company expanded into digital transformation services and improved its revenue quality and gross margin profile [7] - Gupta's last day will be February 28, 2025, marking his nine-year anniversary with the company [9] Company Overview - Mastech Digital, Inc. is a leading provider of Digital Transformation Services, specializing in technology talent and innovative solutions to drive digital transformation [10]

Financial Performance - Revenues for Q3 2024 reached $51,839,000, a 8.6% increase from $47,779,000 in Q3 2023[5] - Gross profit for Q3 2024 was $14,771,000, up 17.6% from $12,566,000 in Q3 2023[5] - Net income for Q3 2024 was $1,875,000, compared to a net income of $125,000 in Q3 2023, representing a significant increase[6] - Basic earnings per share for Q3 2024 was $0.16, compared to $0.01 in Q3 2023[5] - The company reported a total comprehensive income of $1,831,000 for Q3 2024, compared to $37,000 in Q3 2023[6] - Net income for the nine months ended September 30, 2024, was $3,105,000, compared to a net loss of $(1,787,000) for the same period in 2023, indicating a significant turnaround in profitability[11] - For the nine months ended September 30, 2024, net income was $3.1 million, compared to a net loss of $1.8 million for the same period in 2023[5] Revenue Breakdown - Total revenues for the three months ended September 30, 2024, were $51.839 million, an increase from $47.779 million in the same period of 2023, representing a growth of approximately 4.4%[27] - The Data and Analytics Services segment generated $9.398 million in revenue for the three months ended September 30, 2024, compared to $8.038 million in 2023, reflecting a year-over-year increase of 16.9%[27] - The IT Staffing Services segment reported revenues of $42.441 million for the three months ended September 30, 2024, up from $39.741 million in 2023, indicating a growth of 6.8%[27] - Revenues for Q3 2024 totaled $51.8 million, an 8% increase from $47.8 million in Q3 2023, driven by 17% growth in Data and Analytics Services and 7% growth in IT Staffing Services[98] - Data and Analytics Services segment revenues reached $9.4 million in Q3 2024, up 17% from $8.0 million in Q3 2023, attributed to higher activity levels and new assignments[99] - IT Staffing Services segment revenues totaled $42.4 million in Q3 2024, a 7% increase from $39.8 million in Q3 2023, reflecting higher demand for services[100] Assets and Liabilities - Total assets as of September 30, 2024, were $111,485,000, an increase from $105,227,000 as of December 31, 2023[8] - Total current assets increased to $65,815,000 as of September 30, 2024, compared to $56,463,000 at the end of 2023[8] - Total liabilities as of September 30, 2024, were $24,958,000, up from $23,783,000 at the end of 2023[8] - Shareholders' equity increased to $86,527,000 as of September 30, 2024, compared to $81,444,000 at the end of 2023[8] - Cash and cash equivalents increased to $23,885,000 from $21,147,000, reflecting a growth of 12.9%[8] - The total current liabilities increased to $22,101,000 from $19,871,000, representing a rise of 11.6%[8] Operating Expenses - Operating expenses for Q3 2024 were $12,332,000, slightly down from $12,615,000 in Q3 2023[5] - SG&A expenses for the three months ended September 30, 2024 totaled $12.3 million, representing 23.8% of total revenues, a decrease from $12.6 million or 26.4% in the same period of 2023[105] - Total SG&A expenses for the nine months ended September 30, 2024 were $37.2 million, or 25.1% of total revenues, down from $42.0 million or 27.1% in the same period of 2023[117] - General and administrative expenses decreased by $1.8 million in the first nine months of 2024 compared to the same period in 2023, primarily due to staff reductions and lower stock-based compensation[118] Stock and Compensation - Stock-based compensation expense for the nine months ended September 30, 2024, was $1,553 thousand, down from $2,501 thousand in the same period of 2023[11] - Stock-based compensation expense for the three months ended September 30, 2024 was $542,000, down from $824,000 in the same period of 2023, while for the nine months it was $1.6 million compared to $2.5 million in 2023[46] - The Company granted 40,130 restricted share units and 525,000 stock options at an average strike price of $8.41 during the nine months ended September 30, 2024, compared to 19,924 restricted share units and 125,000 stock options at an average strike price of $11.24 in 2023[45] Taxation - Total provision for income taxes for the three months ended September 30, 2024, was $697,000, compared to a benefit of $29,000 in the same period of 2023, reflecting a significant increase[61] - The effective tax rate for the three months ended September 30, 2024 was 27.1%, compared to 18.8% in the same period of 2023, due to higher state income tax rates[108] - The total provision for income taxes for the nine months ended September 30, 2024, was $994,000, while it was $(358,000) for the same period in 2023[63] Market and Strategic Focus - The company continues to focus on digital transformation IT services, targeting large and medium-sized organizations[13] - Mastech Digital's acquisition strategy has enhanced its capabilities in data management and analytics services, particularly through the acquisition of InfoTrellis and AmberLeaf[14] - The company anticipates potential disruptions in global markets due to the ongoing impact of COVID-19 variants[16] - The company anticipates continued economic uncertainty impacting demand for services in 2024, influenced by inflation and geopolitical factors[94] Client Concentration - The Company's top ten clients accounted for approximately 56% of total revenues for the three months ended September 30, 2024, compared to 52% in the same period of 2023[28] - The company had two clients contributing over 10% of total revenues in Q3 2024, with CGI at 14.0% and Allegis at 11.7%[98]

Revenue Growth - Total consolidated revenues for Q3 2024 increased by $4.1 million year-over-year to $51.8 million, marking the third consecutive quarter of revenue growth [2]. - The Data and Analytics Services segment reported revenues of $9.4 million, a 17% increase compared to Q3 2023, and a 6% increase sequentially from Q2 2024 [2]. - The IT Staffing Services segment achieved revenues of $42.4 million, reflecting a 7% year-over-year growth and a 4% sequential growth from Q2 2024 [2]. - Total revenues for the three months ended September 30, 2024, were $51,839,000, an increase from $47,779,000 in the same period of 2023, representing a growth of 4.4% [17]. - Data and analytics services revenue increased to $9,398,000 for the three months ended September 30, 2024, compared to $8,038,000 in 2023, reflecting a growth of 16.9% [17]. - IT staffing services revenue rose to $42,441,000 for the three months ended September 30, 2024, up from $39,741,000 in 2023, marking a growth of 6.8% [17]. Profitability - Gross margins reached a record 28.5% in Q3 2024, up from 26.3% in Q3 2023 [3]. - Non-GAAP net income for the three months ended September 30, 2024, was $2,769,000, compared to $1,257,000 in the same period of 2023, an increase of 120.1% [16]. - GAAP net income for the three months ended September 30, 2024, was $1,875,000, compared to a loss of $125,000 in 2023 [16]. - Income before income taxes for the three months ended September 30, 2024, was $2,572,000, significantly higher than $154,000 in the same period of 2023 [17]. Earnings Per Share - GAAP diluted earnings per share were $0.16 in Q3 2024, compared to $0.01 in Q3 2023 and $0.12 in Q2 2024 [2]. - Non-GAAP diluted earnings per share increased to $0.23 in Q3 2024, up from $0.11 in Q3 2023 [3]. - Non-GAAP diluted earnings per share for the three months ended September 30, 2024, was $0.23, up from $0.11 in the same period of 2023 [16]. Cash Flow and Financial Position - Cash balances on hand as of September 30, 2024, were $23.9 million, with no bank debt and approximately $25 million available under the revolving credit facility [5]. - Free cash flow for the first nine months of 2024 totaled $2.3 million, including $4.3 million in investments to support revenue growth [5]. Operational Metrics - Order bookings in the Data and Analytics Services segment totaled $11.1 million, exceeding Q3 2023 bookings by $6 million [4]. - The company experienced a 13% increase in its billable consultant base over the first nine months of 2024 [4]. - Segment operating income for data and analytics services was $1,145,000 for the three months ended September 30, 2024, compared to a loss of $832,000 in 2023 [17]. - The company reported a gross margin of 50.7% for data and analytics services in the three months ended September 30, 2024, compared to 45.8% in 2023 [17].