News Release

PITTSBURGH, July 28, 2021 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Highlights:

• Consolidated revenues totaled $53.7 million, a 13% increase over the second quarter 2020, with sequential growth of 8% compared to the first quarter of 2021;
• The Company's Data and Analytics Services segment reported its second consecutive quarter of strong bookings as client demand increased in the second quarter of 2021;
• The IT Staffing Services segment added an additional 89 consultants-on-billing, an increase of 8% during the quarter, as demand for its services remained strong;
• Consolidated gross margins increased slightly during the quarter on a year-over-year basis and were 100 basis points higher than in the first quarter of 2021;
• GAAP diluted earnings per share were $0.31 in the second quarter of 2021 versus $0.25 in the second quarter of 2020; the second quarter of 2021 included a $2.0 million pre-tax gain related to a reduction in a contingent consideration liability;
• Non-GAAP diluted earnings per share were $0.29 in the second quarter of 2021 versus $0.33 in the second quarter of 2020, and represented an improvement of $0.10 over the first quarter of 2021.

Second Quarter Results: 

Revenues for the second quarter of 2021 totaled $53.7 million, compared to $47.6 million during the corresponding quarter last year. Gross profits in the second quarter of 2021 were $14.3 million, compared to $12.7 million in the second quarter of 2020. GAAP net income for the second quarter of 2021 totaled $3.7 million or $0.31 per diluted share, compared to $3.0 million or $0.25 per diluted share during the same period last year. Non-GAAP net income for the second quarter of 2021 was $3.4 million or $0.29 per diluted share, compared to $3.9 million or $0.33 per diluted share in the second quarter of 2020.

Activity levels at the Company's Data and Analytics Services segment improved during the quarter as bookings and pipeline opportunities were strong and sequential revenues grew by 2% during the quarter. Project delays, which impacted the segment's first six-month 2021 results, have shown signs of abatement with a number of material orders received during the second quarter. Demand for the Company's IT Staffing Services segment continued to be very strong, with an 8% expansion in billable-consultant headcount during the quarter. Thus far in 2021, the billable-consultant headcount has already increased by 18% from our year-end 2020 headcount, which has more than offset the billable headcount decline experienced during the pandemic-impacted 2020 fiscal year.

Vivek Gupta, the Company's President and Chief Executive Officer stated, "We continued to see further recovery in our Data and Analytics Services segment during the second quarter and our IT Staffing Services segment saw a strong increase in new engagements. Strong bookings, pipeline opportunities and "near term" workable orders secured during the second quarter bode well for our Data and Analytics business as we enter the second half of 2021."

Further commenting on the Data & Analytics segment, Paul Burton, the Chief Executive of the Company's Data & Analytics Services segment, said, "I believe we are on the verge of a meaningful recovery in the D&A marketplace. Customer conversations are becoming less cautionary and more aggressive about investing in projects that have been on the back burner for the last 12 to 18 months.  As business leaders seek out projects with strong returns on investment and short payback periods, I believe D&A projects will again become a priority for many companies."

Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial Officer, stated, "At June 30, 2021 we had cash balances on hand of $5.3 million, outstanding bank debt of approximately $15 million, no borrowings under our revolving credit facility, and cash availability of $26.1 million."

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 $2.0 million to $900,000, after the Company determined that relevant conditions for the payment of such liability were unlikely to be fully satisfied. We believe that providing non-GAAP financial measures that exclude these adjustments to expense are useful for investors to understand the effects of these items on our total operating expenses and facilitate comparison of our results with other periods.

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.

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SOURCE Mastech Digital, Inc.

For more information, contact: Donna Kijowski, Manager, Investor Relations, Mastech Digital, Inc., 888.330.5497