Mastech Digital(US:MHH)2020-08-02 16:29Financial Data and Key Metrics Changes - Revenues for Q2 2020 totaled $47.6 million, a 2% decrease from $48.5 million in Q2 2019 [12] - Gross profits increased to $12.7 million compared to $12.1 million in the same period last year, with gross margins at 26.6% in Q2 2020, up from 24.9% in Q2 2019 [15] - GAAP net income for Q2 2020 was $3 million or $0.25 per diluted share, down from $6 million or $0.53 per diluted share in Q2 2019 [20] Business Line Data and Key Metrics Changes - Data and Analytics Services segment contributed $6.8 million in revenue during Q2 2020, exceeding last year's results by approximately $100,000 [13] - IT Staffing Services segment saw a 2% decline in revenue in Q2 2020 due to early assignment ends and lower activity levels from existing clients [14] - Gross margins for Data and Analytics Services were 52.2%, an increase of 610 basis points from the previous year, while IT Staffing Services had gross margins of 22.4%, up 90 basis points from the prior year [16] Market Data and Key Metrics Changes - The Data and Analytics market is estimated to reach $275 billion by 2023, growing at a 12% CAGR [33] - Strong demand observed in verticals such as retail, distribution, healthcare, and financial services [81] Company Strategy and Development Direction - The company is focusing on transformational projects in Data and Analytics and digital technology skillsets in IT Staffing [26] - Austerity measures were implemented early to reduce SG&A expenses, which decreased by $1.2 million from the previous quarter [27] - The launch of the MAS-REMOTE service offering aims to capitalize on the shift towards remote work, with positive early client interest [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges from a position of relative strength, highlighting record gross margins and strong net income despite revenue declines [25] - The company anticipates a return to normalcy as clients adapt to the new environment, with no deterioration in previously booked contracts [52][106] Other Important Information - The company reduced debt by $7.4 million during the quarter and increased cash balances by over $2 million, maintaining a strong liquidity position [21] - Management emphasized the importance of maintaining tight control over SG&A expenses until positive indications of recovery are observed [100] Q&A Session Summary Question: Inquiry about gross margin performance and IT Staffing bill pay spread - Management confirmed no material one-time items affected margins, and the bill rate pay spread in Staffing did widen, contributing to margin strength in Q2 [60] Question: Status of delayed projects and their movement forward - Management indicated that all clients who paused projects have restarted, expecting no deterioration in the second half [64] Question: Reception of MAS-REMOTE and future launches - The MAS-REMOTE offering received positive feedback, with management optimistic about its potential and open to future innovative ideas [66][68] Question: M&A activity and pipeline - Management is actively looking for appropriate targets in the data and analytics space but has no announcements ready at this time [70] Question: Revenue trends in July compared to previous months - Management does not break down revenue on a monthly basis but noted a slowdown in reductions on the IT Staffing side towards the end of Q2 [75] Question: Changes in the sales process due to COVID - The sales process has transitioned to video and phone conferencing, maintaining success in opening new business [78] Question: Bookings comparison and duration - Q2 bookings were down slightly from Q1 but up significantly from the previous year, with most projects lasting from six to 18 months [80] Question: Demand in specific verticals - Strong demand is noted in retail, distribution, healthcare, and financial services [81] Question: Number of billable consultants - The number of billable consultants for the quarter was reported at 1,035 [86] Question: Differences between MAS-REMOTE and temporary work from home - MAS-REMOTE allows for a broader talent pool and is designed to be a more permanent solution compared to temporary work from home arrangements [88] Question: Impact of remote staffing on recruiting and competition - Remote staffing can be done from anywhere, and the company focuses on U.S.-based talent, with a unique model that combines low costs and a high recruiter-to-salesperson ratio [95]