MHH - Earnings call transcript Q1 2021

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Operator

Greetings, and welcome to the Mastech Digital Inc. Quarter One 2021 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure Legal your Incorporated. Affairs my Lacey, Jennifer now of Manager for is to host introduce Ford It Mastech Digital you Ms. Thank

Ford Lacey.

You begin. may

Jennifer Ford Lacey

quarter operator, conference you and to Digital's Thank welcome call. first Mastech XXXX

would at are are it Chief I and everyone to we Exchange include on anticipates, as expressions foregoing markets currently the the update Mastech statements not Chief operate. These Commission the and forward-looking Securities statements Officer. our available on risks in that limiting and yet information liquidity our change. to Executive like to Mastech that about intended Jack on to statements are expects, costs, website copy actual strategies, earnings plans, from If are annual statements. uncertainties are www.sec.gov. report statements statements website you identify events XXXX certain InfoTrellis company's and based and obligation There today assume plans, and can circumstances which to made the no With including those cause filed are XX-K These remind Cronin, concerning that differ Without the with could received these obtained me business, these we from in materially call intentions, projections, and have forward-looking cash statements not during believes, listed on its Form be and as www.mastechdigital.com. us Digital's Burton, beliefs words as the our similar Chief available call of Executive; forward-looking Officer; a Financial forward-looking our Paul flows, announcement, this the at financial growth Gupta, historical well our facts statements. and Vivek

measures our Additionally, supplement management results certain a on basis. to to financial presented GAAP non-GAAP financial elected provide has

measures key non-GAAP greater income metrics in provide with respect will we net will the provide measures share to at Reconciliations non-GAAP which GAAP management are the of their website in transparency announcement we from be operating our which per non-GAAP believe comparable diluted business. can included and to obtained used www.mastechdigital.com. financial earnings earnings by Specifically, data, our these

we we this guidance be guidance in quarter during As of any provide first to providing a a turn meetings over will review I or our will nor subsequent call not will one-on-one Jack reminder, the call XXXX results. for now calls.

Jack Cronin

Jen, Thanks good morning and everyone.

The with increased COVID-XX materially macroeconomic impact first to quarter geography the some geography. dissipating quarter to its a pandemic with industry, that of during the the rate increase on generally to and levels had Activity strong respect industry very indication is environment. from

instance, had our significant staffing from QX uptick IT a segment levels. services activity in For

services didn't the our see While half Data segment Analytic improvement approachable latter quarter. of the into and market

recovery results, XXXX the the you our financial impact review I see this business QX segments. in pandemic of As from uneven will our two

revenues million, in compared $XX.X million first XXXX quarter quarter of First totaled the XXXX. to $XX.X

fourth contributed Project Our revenues to hurt $X.X the during delay Data essentially the revenues continue of Analytics services from flat XXXX. segment and million, quarter. quarter of

quite second the an which finish revenue to the half in rallied to of million, $XX strong pipeline. bookings However, is quarter of solid close indication and

inflection that and quarter. of the profit of that activity the performance second pent which the the offset experienced levels improvement declines pandemic in first in The XXXX. Gross quarter projects of we percent believe points QX we're of Asia, XXXX. point demand of million when in of QX we by record revenue to first In to $XX.X and us. all basis approach by a saw grew services of to very essentially Gross This Europe as XXXX over still increased during quarter totaled growth relates And $XX.X markets we are earnest. important marketplace half our impacted that for in XXXX. Additionally, parts in XX as the million, uncertainty this increased fourth up activity we as base XXXX will IT segment, staffing headcount a our global getting close billable from released be consultant margins, X%. compared remains we

to quarter, additional as expense we traction gain future and made the SG&A staff approximately investment $X in revenues largely operations continues leadership recovery to in COVID-XX the During in million, of sales, anticipated globally. efforts capture

XXXX demand, non-GAAP in intangible of revenue growth offering, to his measures, or $X.XX service QX in diluted amortization Non-GAAP share decision income early broadened and per of not stock-based $X.X first diluted in front financial detailed to for diluted acquired QX which in touch share $X.XX of on diluted or earnings or first our on in prepared was per the Paul Our are $X.XX asset QX million, net net share, website. or improving later per and XXXX and GAAP acceptance benefits, the for to of tax customer curve compared compared of invest $X.X remarks. in available our release, or expected of million, share, income XXXX. SG&A per D&A items was quarter $X.X million compensation which $X.XX billion an is net expense $X.X reflects included our will XXXX. quarter

under cash March of XX, outstanding million. million addressing cash on balances XXXX $XX credit $X.X of revolving we availability hand our financial at lastly, approximately facility, So our borrowings no position had and

AmberLeaf our finance should October $XX.X reduced I we million that $X.X Vivek to borrowed quarter call turn debt by his I’ll acquisition the of at debt now the quarter, over balance million end. term for in million that to this comments. includes $XX XXXX. note to the the During we

Vivek Gupta

we Paul have revenue to headed. Jack operating more hiring Nevertheless, our Data at continue be pushed delays the the about margins. that and segment where Thank Analytics say took results its performance this segment financial of to and quarter. for for a believe of Data of first despite our minute profit future invest detailed the services XXXX. you projects our will lumpiness. And last we Good and the quarter the morning, Analytics we impacted for review could on everyone. in for project revenues out Clearly, bit are ultimately toll

Now saw the XXXX, IT respect QX let news strong me in the From a we our good outset to services of with staffing increase share with you segment. segment. in the demand

despite the to year-over-year lower payroll for result of compared QX uptick, increase we the were first approximately year's of were in X% as to record during Gross higher with by a operating year-over-year sustained. gross higher income have the As performance in the on down to headcount this segment the allowed the impact XXXX historically were tax for a our more margin which decline year's staffing strong and billing expenses $XXX,XXX, due XXXX a a these On load. Revenues top margins performance were business despite New X% revenue the a from as X% decline still in basis quarter, than on in quarter last is revenues of represents line revenues. headcount consultants a the slightly should of last QX Year. XXXX. pronounced a the us QX demand XXXX. increases XXXX able benefit by QX quarter lower the first consultants, and increased if X% quarter should compared X% our first sequentially slightly or XX by costs. I to performance entering QX over trends demand to are improvement XXXX, operating reiterate that segment This

half the of first of we unwind the implemented During austerity XXXX. some the during measures did quarter,

Additionally, support Analytics you will see will increased prudently prudently quarters comments expenses now anticipated to our growth. I and for see his segment segment. call turn to the the for services Data coming our as over the on in Paul

Paul Burton

performance represented mixed a and for Thanks, Data segments. Vivek. our QX Analytics

bookings close the and which basically was onset of which some a performance other our during it for clear we in that compared in that being in QX of now expect AmberLeaf on impacted QX to early to a to the the nearly excluding substantially flat strong for award XXXX, of sluggish the one re-establish of our deliver Center a clients QX. see to we we was the last unfavorably recover result insignificant received of trajectory strong to we're revenue pandemic. and however, which XXXX released. This new is on clients. have believe growth as a demand the verbal we we're Excellence strong prior we second, will performance up well our able XX we and that future, with revenue the posted value the deal hand, Data pandemic, being bodes suggests very will and While a to quarter indication reason This pent services the in Revenue XXXX, the XXXX, part, to was signed multiyear of were from second by QX QX Analytic year, bookings Significantly, on million no and Analytics. Data bookings when half reduced for us

For been. is Moreover, the America are stronger which last have instance, pipeline release and along Asia, of trends are all revenue accretive many are challenges respects, a extremely for we we deals the in positioned in baseline demand and North believe as well already sign our we to has growing. geographies we're faced and of Jack Europe Notwithstanding that these coming These positive quarters. ever with seeing we expected close year, mentioned, performance. our very in in the than strong

have and the the with in pipeline. first of are cloud the more to service process cloud, our We engagements broadened our encompass offerings in delivering

and our the first offering services business, several managed and our prospects line developed have promising closed customer deal have pipeline. of experience We with for in more

RFP data recently second closed managed of award our also have this further, services a received an have line developed in offerings. for our and first deal governance for deal offering we We

close We well. in as expect deal this to QX

believe is new the as we to seeing they skills pandemic limited focus relevant travel, compete Finally, deliver in of success and development set yield first we've directly which business over this offerings year. offering cloud. had move as on the initiated our area chosen needed we application at imperative, us, XXXk for have modernization, least them. is application commercial the to each Overall, offshore to it And their closed again, year in particularly the have application with portfolios revenue strategic to enterprises is we the This are offering. to to offering deal opportunity last an we to we

and must applications and very pedigree skills and Data Data leverage application for alluded be this our digital especially client’s infrastructure and to to. with applications, we're of our enabled and positioned to the is well ourselves especially, well well to are differentiate the digital infrastructure as move equipped continues that to well just I cloud and offering Analytics in clients and modernize smartly age they poised We germane with in modernization our cloud. speed. we Analytics the migrate applications. this with the us capabilities. cloud the our as in to market outcome, and needs infrastructure and traction we offerings And as smart, meet operating these believe, to as serve Additionally, agility capability We seeing deliver because

We the about concludes call confident remarks Vivek back to my hand This future. I'll the are and prepared Vivek? now.

Vivek Gupta

now the you Thanks, for can open Paul. questions. session Operator

Operator

Our first ahead. Vogel question Sidoti go and Josh Instructions] Company. is [Operator with Please with

Josh Vogel

questions. Hi, I for everyone, a got my here taking thanks you. couple for

SG&A. hoping could you bit first little talk more I about wanted, The a one.

And you You at the were do over I'm line curious, planned talked structure personnel investments that and about in how the year? QX the the these you future place much targeted? have cost opportunities? and is in that of balance for what feel point where the growth the

Vivek Gupta

this is Vivek. Josh,

question me your this me break the try Let or into let parts. answers two and

I'm these the staffing then about And talk talk piece to about two IT are different. the ask analytics Let going because me slightly piece. Paul to data

hurt producers, when were this the have able well. we this came we increasing capitalize able were tighten that And pandemic. which front, we to because demand year, Because will calls, my cost a business of people on starts is terms which us served for sales the far to And in in mentioned cut pace so things right it a as we do we were we to keep down QX, that On the hoping as costs the demand to keep the very last quarter big in go to I've would we are the not in SG&A picking up. bone. way, have will capacity SG&A which cut our structure didn't we that, amount the there previous through in our having But earnings as ourselves recruiters we did with sustain. of going what forward,

increase keeps large pace that the not been doing we've And about fairly rev if very a done we we are If it some bit incremental quarters increase, demand So, engine being said, little will with slows more I last down slow up the talking are will be but And a demand. they we already position. think will the have we keep increasing, down, will in prudently the successfully we progress. good year. obviously we pretty and as as as a

part, Now, regards as Paul I'm Paul? that to data the to question. analytics going take ask

Paul Burton

for Thanks that.

As sales of about to Jack Center saw and What multiyear, mentioned, another people my meet the seeing with we operations close a that that installed in soon. demand. of capability the hopefully to remarks, significant as requiring, order Excellence to in we we're of and are deal imminently, mentioned is closure in SG&A. one our award SG&A invested we deals number dollars base million prepared I And significant expect a forthcoming

comfortable felt anticipate, of the forward And these seeing more demand the we pipeline. investing in coming So along. we deals

and So capture with the question. in that going and hope added forward. SG&A, this to answers demand respect hopefully specifically to Analytics your Data seven people business meet I we

Josh Vogel

there. the insights Yes, I appreciate

helpful. should D&A So, equation or closer we SG&A that XX. think to just back looking you ahead XXXX the level. to What be an bid like know little any should term sub revenue we, of you. higher insights should about bit and When XX% about to an go about year do cost to be under XXXX should were on forward of think a need XX% last XX, rate when you you the or how side be a going for run that projects. sort when of of certainly the basis, I maybe year invest like range XX% would annual closer full just to Understanding we XX% you certain and side Thank the still on

Vivek Gupta

has it think ask where SG&A XX% below I rest. the to year of could the it going should feel Jack? you the the for a be he but if on Josh, I'm what mark, know rest Jack

Jack Cronin

Yes, as would And higher say staffing ahead new that to Because going than, historical it to be to we be it's offerings, said, I we etcetera. develop service clearly our seem Paul Josh, continue trend. always would good a properly, little curve the the a if we'd plus curve, minus of say, likely obviously growth XXXX, XX% for you of is or bit be projected which thing, revenue range. so I the

Josh Vogel

you. for Great, question. did. that's your Oh, helpful. Thank yeah, Thank you it Yes,

mute guess, Paul. little I a Sorry A I wasn't around button were project unmuting. still easing D&A. that surprising delays for headwinds guess it's impacting With still question, COVID,

in a You strong did about pipeline talk latter the half.

around table they in any that? pressure up projects just the year? curious. letting the level off you the going delayed are not were that confidence of there. Just some, I seeing they But last Are are And thoughts was your materialize? or Are to any off

Paul Burton

yes. Yes,

across can have relationships they're clients over respect are we've would dimensions our significant building, terrible look to amount delay. the two and and come we a we that expect, I So project back, the we of without been back, with coming that at core business, with seeing the as time, business

or just ad So say, us, deals And of hoc as now business is, to deals to to the shall expected. that however, come those, a transactionally, come back. piece performing of those transactional that the business we aspect There perhaps. are is starting

the pattern geographies. of So, end, project saw is before demand to are we're there little COVID. to to and in uncertainty And that we a for out think, return, bit there the still part certain delays, I coming before pandemic, starting most see, a an

business, know, going our of to core starting And quarter-over-quarter as expected. is to suffering little we transactional and And as right I demand is overall is that strongly, return pattern wild a now. is bit accounts, well. are from that back pandemic volatile, But terms example, terribly coming as the core a a normal think the For more demand, of the India card bit a forward. exactly in our

expect. seeing, I way the come things would So we back am

Josh Vogel

-- into, offerings ramp those there and starting like Curious sales commentary ultimately cloud of projects? around data application in to types that hear, you're engagement, offerings That's that service you're pre good can you talk engagement great you development. of how new when getting the cycle about governance, ramped newer to to, that compared be fully terms pandemic and signings like up,

Paul Burton

are networks, servers, move is they can't realizing there want if typical to agility, are Clients up to the stand they stand or all There be by the that they ago. would continues years to type and have things that a done with businesses significant up move speed, infrastructure -- any realizing of do cloud.

significant So seeing the terms move the moving to speed online. why of advantage cloud to that's bringing offers the technology cloud. in And we're a capabilities

terms different. cycles, to have the cloud as for three move it's the And something with they the actually clients offerings. respect six cycle, of to cloud, cloud, significantly move In the sales to to to We're seeing months cloud. sales

move part of it posture. to, into return and out number so to we And to a for of coming beginning we significant the say when has ready. of I And up, seeing is shall spike we're normal certain work, And as really go there's that premise, along, off well application cloud resembling are clients as a pandemic portfolios it picked bodes the the application make and which modernization to application, cloud, that amount say future. something modernization to the work come of most offerings offerings, a for

take can those come they're starting a for and into and as six engagements, three we're well. application longer, and to modernization sales large, engagements quite cloud can pieces, So cycle say would broken be see month I which to but

Josh Vogel

more Jack. for and maybe in just hop the maybe really helpful. queue, one Thank That's I'll you. And

make Just I then about like sitting north Around thinking how XXXX. wanted consultants, to just now the $XX second are to of, still XX Are F which And mid-XXs levels, somewhere bill in XXs? billable Talk doing they $XX? math to also just sure mid or is in we closer the comments the right. was could around quick rates are you tracking? the the

Jack Cronin

in the, correctly, And XXXX, we're in the bit QX. It bill a down consultants bit average the is still rate But Yes, that are mid-XXs. little the about still came thinking range. in little above. we you're in billable a the mid-XX range.

Josh Vogel

I’ll my for the in great. taking questions, get queue. Sounds everyone. Thanks back

Jack Cronin

Sure.

Operator

is Thompson Lisa Investment question. next Research. with proceed question Zacks from Our Please your with

Lisa Thompson

Good Morning.

Jack Cronin

Good Morning

Lisa Thompson

So my that I'm does if revenue should scientific algorithm highly increase consultants mean X%, up using sequentially you X%? staffing, be

Jack Cronin

this a So to make pans there Lisa, quite like quarter, need in because a the of think terms I how don't would comparison that leave happen don't I is this it But I quarter revenue out. want of to statement the revenue definitely up be things with in say X%. like QX. that yes, I should still to and lot just

Lisa Thompson

XX, ads? Okay, tracking since this amount is and it's the of already April quarter same

Vivek Gupta

quite really the and month that's minuses pluses of we and contracts because end often yet. the the, lot do haven't when the on contracts of how reached for. month a That's day the the customers last Actually, the we signed the actually of end

say happened to wait thing in happen of for know this. eventually have the the what will we look positive. final So April like. don't is I to looking what we But it before end can

Lisa Thompson

Okay.

AmberLeaf possibly not in tell what you Or contributed quarter? talking could anymore? the So us you're

Vivek Gupta

pass Paul. to question to going over this I'm actually

Paul Burton

hi. Yes,

AmberLeaf separately. you that result So AmberLeaf can that opened acquisition. a as we're new But up logos we're the tell anymore. on as opportunities P&Ls What of a I not into quarter. separate see integrated not continue fully first business X, we certainly tracking the them effective running P&L And is the channel eight is in was to January

Lisa Thompson

back Okay. XX number? And almost that of to your million, XX, going is bookings record a

Paul Burton

not a QX record not number, record a it's a that's second a be It may No, number. number of number, best but was XXXX. record

Lisa Thompson

said quickly and services, bit could were you you you you first then things through bit meant if all went interested, you a the you was new little that a that more marriage about wondering was when about I also little the the data working And talk I means? the Can engagement, what cloud governance. talk on. Okay. what

Paul Burton

manage the don't to on clients what so seeing is necessarily cloud, and in as cloud we're they environment, the is, etcetera. migrate to have staff to order move cloud, the sustain data skills Yes, their into

over so this and team an up off-shore, a run the of period business services if them for stand is And to to project, will, opportunity you there managed run them a time. extended essentially for

talk environment, standing migration about about, we're team and cloud over certain their when into sustaining around tasks and data putting and doing services, maintaining So up we managed infrastructure talking the cloud time. a

data, about applications we're moving data has to services we're finding what has So in or certain say, terms in that's of in it, the talking standards their managed moving there hygiene of course, clients cloud. meet are to but data respect follow is cleanliness. With we to again, that we when see to are all as and the what their cloud shall their governance, out of,

of amount out, it to data a straighten work cloud. their tremendous straight out that's and the help clients available moved there's as to gets So

for So it's applications. appropriate

And one second so closed that. taken an deal And there's that to around we on close the have expect we've soon. that and deal around offering

Lisa Thompson

great. Okay,

as get gross will assume margins that improve your margins, I you in AmberLeaf continue to So business, also out. figured

Paul Burton

the hold yes. the to margins Yes, expect of improve and balance year. gross I throughout

Lisa Thompson

you. all Thank great. Okay, questions. my That's

Vivek Gupta

Thank you, Lisa.

Operator

next Global proceed Kinstlinger Alliance question Please Brian is Our question. Partners. with with with your

Brian Kinstlinger

about for in my Hi, delays, talk contracts longer question. good begin? it signed, it or is signed it morning, both? Or Thanks in getting contracts guys. cycles, is delays new When sales to you meaning getting is taking delays

Vivek Gupta

as as after execution Typically contracts It’s the signed, we contract soon possible getting Brian. the former that. delays It’s in the are signed? once start

of have the say, And may start certain that's the period. by the hand. less in can last frequent. contract You this customer minute delay can But a the date you

Brian Kinstlinger

program with in about started? not, discussion will do expect when with there assuming was may that you said, I those So a think Has start? that that Excellence Or late large XQ, timing. be winning contract, the Center if of I

Vivek Gupta

question. see ask to that Paul going I'm I answer to

Paul Burton

on contract billing signed, on That really start effective April start it's contract X, April that did X. and it will that so that on

Brian Kinstlinger

finally, can a target popular then right the landscape market business. I analytics a mean, talk Right. maybe And obviously about buzzword, and it's it's you now. competitive data

even the last is about landscape talk So competitive year. higher with or pricing and lower, or

Paul Burton

migrated Thanks is infused is migrated improving, or in pricing so or of we're relatively for into especially analytics, big cloud, Price a area is is cloud, continues or and intelligence areas. to the modernized as skills other relates Vivek. Analytics, as to the are Analytics with The Pricing applications be the there the to Data to in improving. intelligence, happen. with compared applications. they're scarce seeing shortage this and and to skills and that being as for Data business is into opportunity What it this market they're there cloud a or, are ported

any And this erosion so dilution in depending don't project the gross I get or see would we're or year things expect pricing pricing margin about. to on hold expect talking better. to business. in and skill improve I I this actually and the

Brian Kinstlinger

Great, thank you.

Operator

Instructions] Okay, your Please Sidoti Vogel proceed question next Company. Josh with with [Operator with and is question. our

Josh Vogel

Thank you.

any around just run me targeting commentary? think Just staffing we year And the the and Thank different think How rates business term any now. Can are We're much of I be longer a to about quick it's one in if you sort about there? do remind model. business you. are through you delivery MAS-REMOTE? your was profiler a bill margin remote. mass

Vivek Gupta

since timed. up, of offering placements We doing there launched of remote. quarter last them. customers the it well XX% in an the placements in from is was have thirds remote been were we half our signing MAS-REMOTE almost when really Even two are that have But in of locations. we been expectation our June. then, Josh, Sure, we've And

are And the So whole in the Once roughly form back of one expected that. very all days But to one full, thing be are is a the cities not completely two kind come the shape when in some location is make may is because the of remote can interesting do customer are to different often and always so removed pandemic a I that the thing. thirds, office they five altogether, control or third the comfortable living consultants far under say they out remain actually will it third remaining different locations. states. different

get changes in able better well. they lower quality attract on of time to clients benefit come cost will So and in requirement kind at are the which there And I'm where them, see is they over the forward of locations, if in majority the for It’s gross are to about, talking candidates demand to get other compromise your lower margins, are, gross and are pricing okay the better about from etcetera, candidates be. be range. To a margins them as continue us, not even is of locations. willing you're just are price going candidates their we the the the to that coming point to if same tend depending locations, remote that then, to the that that the cost that today the any as And point question make having well. able this they to trend this answer of still

I answers So this your don't know if question.

Josh Vogel

targets? you. Thank could And year just one this that one you contingent its remind does. Can definitely last AmberLeaf hits years, paid me that in be future for No, consideration if Jack. the math

Jack Cronin

Well, total? about on we X.X a value a have statistical million. probability fair our Yes, model. they based value sheet balance that is the And that's on

is But earned fair sheet. balance believe X.X the the years. what that's likely But in we out and on be. to that's the is two million. contract So value And splits that

a XXXX. fiscal of second is course, is year The first fiscal XXXX. And year year

and happen probably you're earn payments would their of your to I April of mean, and So if if out, they make flow in April vacation. cash XXXX assess trying XXXX.

Josh Vogel

Yes, guys. again, perfect. Thanks

Jack Cronin

Josh. Sure

Operator

would back call And question-and-answer Vivek to gentlemen, session. closing reached remarks. and for Gupta turn the I the our of like Ladies have end to we

Vivek Gupta

you, operator. Thank

July. So if to sharing I for in XXXX forward we there would second And with call all late our thank are no Thank quarter our joining you. you results further today. look questions, like to you

Operator

This concludes today's conference.

you disconnect at may your this participation. Thank lines time. You your for

Mastech Digital (MHH) 28 Apr 212021 Q1 Earnings call transcript