Mastech Digital Reports 8% Revenue Growth in Second Quarter 2019
Second Quarter 2019 Highlights:
- Total revenues increased 8% to
$48.5 million , compared to revenues of$44.9 million in the 2018 second quarter; - The Company's data and analytics services segment reported record quarterly revenues of
$6.7 million , representing 9% growth over the same quarter last year and a 15% sequential increase over our last quarter; - The IT staffing segment achieved organic revenue growth of 8% during the second quarter of 2019 compared to the second quarter of 2018 and a 6% sequential increase over our last quarter;
- GAAP diluted earnings per share were
$0.53 in the second quarter of 2019 versus$0.25 in the 2018 second quarter; the current quarter benefited by a$6.1 million pretax revaluation of a contingent consideration liability; - Non-GAAP diluted earnings per share were
$0.20 in the second quarter of 2019 compared to$0.21 in the 2018 second quarter; - Bank debt, less cash balances on hand, was reduced by
$7.6 million during the quarter, as cash conversion issues related to system implementation disruptions materially improved.
Second Quarter Results:
Revenues for the second quarter of 2019 totaled
"I am extremely pleased with the performance of our data and analytics segment, which once again showed healthy sequential growth on the strength of continued pipeline expansion and project wins," commented
Commenting on the Company's financial position,
About
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
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.
Acquisition-related transaction expenses: We incurred significant expenses in connection with our
Contingent consideration liability revaluation: In connection with the InfoTrellis acquisition, the Company was required to pay future consideration that was contingent upon the achievement of specific earnings before interest and tax 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 2019 and 2018, this contingent consideration liability was reduced by
Goodwill impairment: The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. Accordingly, excess purchase price over the fair value of net tangible assets and identifiable intangible assets are recorded as goodwill. Goodwill is not amortized but is tested for impairment at least on an annual basis. If impairment is indicated, a write-down to fair value is recorded based on the excess of the carrying value of the asset over its fair market value. As a result of the reductions to contingent consideration related to the
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) the expected benefits to
MASTECH DIGITAL, INC.
|
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June 30, |
December 31, |
|||
2019 |
2018 |
|||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
$ 3,869 |
$ 1,294 |
||
Accounts receivable, net |
35,791 |
38,080 |
||
Prepaid and other current assets |
1,349 |
1,321 |
||
Total current assets |
41,009 |
40,695 |
||
Equipment, enterprise software and leasehold improvements, net |
2,438 |
2,208 |
||
Operating lease right-of-use assets |
4,980 |
- |
||
Deferred income taxes |
- |
297 |
||
Non-current deposits |
447 |
540 |
||
Goodwill, net of impairment |
26,106 |
26,106 |
||
Intangible assets, net |
21,394 |
22,738 |
||
Total assets |
$ 96,374 |
$ 92,584 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||
Current liabilities: |
||||
Current portion of long-term debt |
$ 4,575 |
$ 4,575 |
||
Current portion of operating lease liability |
1,339 |
- |
||
Accounts payable |
3,909 |
4,127 |
||
Accrued payroll and related costs |
10,088 |
7,728 |
||
Other accrued liabilities |
1,271 |
1,476 |
||
Total current liabilities |
21,182 |
17,906 |
||
Long-term liabilities: |
||||
Long-term debt, less current portion, net |
28,366 |
34,129 |
||
Contingent consideration liability |
- |
6,069 |
||
Long-term operating lease liability, less current portion |
3,736 |
- |
||
Long-term accrued income taxes |
204 |
204 |
||
Deferred income taxes |
1,157 |
- |
||
Total liabilities |
54,645 |
58,308 |
||
Shareholders' equity: |
||||
Common stock, par value $0.01 per share |
127 |
126 |
||
Additional paid-in capital |
21,437 |
20,829 |
||
Retained earnings |
24,536 |
17,614 |
||
Accumulated other comprehensive income (loss) |
(184) |
(119) |
||
Treasury stock, at cost |
(4,187) |
(4,174) |
||
Total shareholders' equity |
41,729 |
34,276 |
||
Total liabilities and shareholders' equity |
$ 96,374 |
$ 92,584 |
MASTECH DIGITAL, INC. |
|||||||
Three Months ended June 30, |
Six Months ended June 30, |
||||||
2019 |
2018 |
2019 |
2018 |
||||
Revenues |
$ 48,472 |
$ 44,894 |
$ 93,671 |
$ 88,227 |
|||
Cost of revenues |
36,418 |
34,002 |
70,782 |
67,074 |
|||
Gross profit |
12,054 |
10,892 |
22,889 |
21,153 |
|||
Selling, general and administrative expenses |
3,475 |
6,435 |
12,440 |
14,258 |
|||
Income from operations |
8,579 |
4,457 |
10,449 |
6,895 |
|||
Other income/(expense), net |
(507) |
(607) |
(1,061) |
(1,119) |
|||
Income before income taxes |
8,072 |
3,850 |
9,388 |
5,776 |
|||
Income tax expense |
2,114 |
1,033 |
2,466 |
1,579 |
|||
Net income |
$ 5,958 |
$ 2,817 |
$ 6,922 |
$ 4,197 |
|||
Earnings per share: |
|||||||
Basic |
$ 0.54 |
$ 0.26 |
$ 0.63 |
$ 0.38 |
|||
Diluted |
$ .53 |
$ 0.25 |
$ 0.62 |
$ 0.38 |
|||
Weighted average common shares outstanding: |
|||||||
Basic |
11,022 |
10,926 |
11,013 |
10,924 |
|||
Diluted |
11,164 |
11,142 |
11,183 |
11,106 |
MASTECH DIGITAL, INC. |
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Three Months ended June 30, |
Six Months ended June 30, |
|||||||||
2019 |
2018 |
2019 |
2018 |
|||||||
GAAP Net Income |
$ 5,958 |
$ 2,817 |
$ 6,922 |
$ 4,197 |
||||||
Adjustments: |
||||||||||
Amortization of acquired intangible assets |
672 |
689 |
1,344 |
1,382 |
||||||
Stock-based compensation |
267 |
120 |
503 |
225 |
||||||
Acquisition transaction expenses/(credits) |
- |
(140) |
- |
(140) |
||||||
Goodwill impairment |
- |
7,738 |
- |
7,738 |
||||||
Revaluation of contingent consideration liability |
(6,069) |
(9,106) |
(6,069) |
(9,106) |
||||||
Income tax effect of pretax adjustments |
1,351 |
187 |
1,110 |
(27) |
||||||
Non-GAAP Net Income |
$ 2,179 |
$ 2,305 |
$ 3,810 |
$ 4,269 |
||||||
GAAP Diluted Earnings Per Share |
$ 0.53 |
$ 0.25 |
$ 0.62 |
$ 0.38 |
||||||
Non-GAAP Diluted Earnings Per Share |
$ 0.20 |
$ 0.21 |
$ 0.34 |
$ 0.38 |
||||||
Weighted average common shares outstanding: |
||||||||||
GAAP Diluted Shares |
11,164 |
11,142 |
11,183 |
11,106 |
||||||
Non-GAAP Diluted Shares |
11,164 |
11,142 |
11,183 |
11,106 |
MASTECH DIGITAL, INC. |
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Three Months ended June 30, |
Six Months ended June 30, |
||||||||
2019 |
2018 |
2019 |
2018 |
||||||
Revenues: |
|||||||||
Data and analytics services |
$ 6,654 |
$ 6,083 |
$ 12,422 |
$ 12,655 |
|||||
IT staffing services |
41,818 |
38,811 |
81,249 |
75,572 |
|||||
Total revenues |
$ 48,472 |
$ 44,894 |
$ 93,671 |
$ 88,227 |
|||||
Gross Margin %: |
|||||||||
Data and analytics services |
46.1% |
42.2% |
45.8% |
43.3% |
|||||
IT staffing services |
21.5% |
21.4% |
21.2% |
20.7% |
|||||
Total gross margin % |
24.9% |
24.3% |
24.4% |
24.0% |
|||||
Segment Operating Income: |
|||||||||
Data and analytics services |
$ 1,285 |
$ 1,411 |
$ 2,326 |
$ 3,186 |
|||||
IT staffing services |
1,897 |
2,227 |
3,398 |
3,583 |
|||||
Subtotal |
3,182 |
3,638 |
5,724 |
6,769 |
|||||
Acquisition transaction expenses |
- |
140 |
- |
140 |
|||||
Amortization of acquired intangible assets |
(672) |
(689) |
(1,344) |
(1,382) |
|||||
Goodwill impairment |
- |
(7,738) |
- |
(7,738) |
|||||
Revaluation of contingent consideration liability |
6,069 |
9,106 |
6,069 |
9,106 |
|||||
Interest expense and other, net |
(507) |
(607) |
(1,061) |
(1,119) |
|||||
Income before income taxes |
$ 8,072 |
$ 3,850 |
$ 9,388 |
$ 5,776 |
For more information, contact:
Manager, Investor Relations
+1-888-330-5497
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