Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Mastech Digital, Inc. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Affairs your for my Manager Jennifer now Legal of Mastech is to host, introduce Lacey, It Digital, Inc. you. Thank

begin. may You

Jennifer Lacey

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

received If you it be from obtained copy our website www.mastechdigital.com. earnings can at a our have announcement, of yet not

Analytics are the the appointed business and Digital's Michael Services our Gupta, recently Chief company's Chief Executive me on Vivek our Officer With Officer; Executive Financial of Officer Chief Data call today Mastech Jack Cronin, segment. Fleishman,

and foregoing, I everyone in this limiting expressions forward-looking intentions would operate. forward-looking statements call Without our include words we liquidity the are the that that forward-looking about are statements certain and our plans, markets expects, concerning and intended These to flows, strategies, facts projections, beliefs and the which like remind statements. as made as financial growth anticipates, the believes, are plans, during not statements. business, well statements identify similar to costs cash historical

statements statements, us actual obligation annual and listed currently statements Commission and filed including these the we company's on in its XXXX available and available differ from the Securities to materially www.sec.gov. are report forward-looking uncertainties XX-K Form cause Exchange are events to that as risks on no those with update these could to and information website assume based at These change. circumstances There on

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

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

calls. not will in subsequent nor or we we be during guidance reminder, any a one-on-one provide guidance will meetings As providing this call,

the call quarter turn a now of will our Jack full for review over I results. to and XXXX fourth year

Jack Cronin

morning, quarter Fourth XXXX segments good customer of a Digital, and economic difficult our quarter conditions Jen, as clearly a by inflationary was recession. regarding impacted and Mastech including Thanks, uncertainty, negatively everyone. possible concerns we saw business both for

the million, revenue compared QX to representing XX.X quarter for Revenues totaled X% XXXX. million decline in a $XX

Our data and million revenues $X.X $XX.X fourth XXXX to in quarter. analytics of the services XXXX in segment million contributed compared QX

expectations As result, bookings of below second half the in order utilization were of our the and year a in norm. came rates well as short historical

staffing quarter our compared segment QX in combined to Customer the high which million when lower ends assignment seasonal during demand revenues. resulted million in the in services XXXX totaled IT quarter $XX.X with our of $XX fourth revenues of levels XXXX. declined

in XXXX. to XXXX was increases compared D&A million quarter. gross utilization margin to in Consolidated million of fourth XXXX several term compensation today's attributable the due in fourth the Gross the in largely to profits entirely and compared a% totaled was XX.X% as assignments, revenue to fourth related of margins was $XX.X quarter margins environment. XXXX of $XX.X long on quarter in QX Services our lower and decline segment inflationary to reduced XX.X% This

on which not XXXX. QX XXXX GAAP earnings measures or in our per QX -- our million net expense of quarter $X.X Non share GAAP $X.X the million compared $X.XX fourth in XXXX. website. financial $X.XX non quarter or income detailed QX XXXX items $X.XX per in was diluted income share quarter available is $X.X in included of million share in million compared tax share XXXX was benefits diluted diluted or SG&A fourth per $X.XX net per the $X.XX release, $X diluted to net are of GAAP fourth for to or

$XXX.X were services which in revenues both Highlighting million, XX% and during had our IT our growth XXXX up revenue segments XXXX X% Services were XXXX. revenue of D&A staffing achieved as year-over-year X% growth. year revenue growth business results, full had

profits X% were share $X.XX in diluted non $X.XX earnings XXXX. $X.XX to earnings in million up in XXXX. compared Consolidated compared And gross compared GAAP $X.XX diluted to XXXX, $XX.X million per XXXX, GAAP share in grew to XXXX. $XX.X per XXXX to in in were

facility. financial of XXX% are Today, During have approximately XXXX, our availability position $XX revolving we our liquidity million free, cash and credit we overall strong. debt under remained

XX, Additionally, XX year in December provide loan our an up to XX outstanding us credit improved measurement ago. day feature capacity sales term additional $XX from M&A to days And our can facility's million a XXXX for at accordion activity. days

now to the over for call Vivek comments. turn I his

Vivek Gupta

financial Thank for everyone. the detailed results morning, our XXXX. review you Jack operating for of Good

Let a me a half taking to and the results saying obvious, start with we our XXXX. inflation didn't rates the curve first recession, our of Concerns of respect end over possible the led impacted an financial which the way clearly conservative acceleration in fourth the many year. started up to quarter by clients XXXX spending, interest demand of posture in our have high

the X% future revenue year strong. performance X% we and businesses profitability. despite profit XXXX, remain fourth quarter's growth, our I achieved gross that prospects However, solid underwhelming their for full believe And expansion the and fundamentally

of positives a me number XXXX. heading point into Let out

I a and board Analytics our Data a Fleishman, business, Chief to new introduce minutes. First, few we who Officer Michael you on for will have Services Executive in

share shares over program stock up our of Board has years. company's the repurchase Directors to authorized common of next a two XXX,XXX the Second, of

As other in upon release, regulatory earnings described repurchases and will dependent be our market conditions considerations. requirements

activity. further high finally, free of receivables should our the have we outstanding business XX model we historically year of progresses. stronger. days. days and even sales accounts to generates debt, up sheet that And as additional We cash approximately bank that strengthen M&A million balance fifth, quality sheet with has have balance we an borrowing flows measurement Third, never $XX million Fourth, to for $XX access availability have currently been have a no our

Michael with is a to Analytics Fleishman, Let and Officer to of Michael's me now to an Chief addition Michael plan revenue impressive a he our that strong difference and team be maker our and thunder, I Executive growth. more have in Data business the our will effectively I very segment. new Mr. our execute believe accelerate but ability say Services steal to won't background I introduce you management

to Over Michael. you,

Michael Fleishman

sales XXXX roles as Difficulty] well as it have India. XX software [Technical outsourced I pursue portfolio as a enterprise IT sales on consulting services of IBM's a several as IBM, traditional IBM with close owning background. where sales being capability Thanks positions over have I years to GM, majority across my XX IT services. time. the held little leadership Hardware, of of experience (ph) and of the P&L at services, both that and as strong in out roles well delivery providers across I leadership left to [wellness] with

marquee transformation North growth majority I America The modernization. well had excellent on in at for houses capitalized globally growth plus Mastech, base my digital that and modernization, data America, North and saw I across as their driving competitive both last year, I especially capital Cognizant. joining with company Warehouses, lake because with across multiple not of company’s spent in for warehousing. their nor lakes ran markets years late fully data on XX of I joined of logos management with. Mastech been levels verticals, capabilities differentiation data sales as have strong opportunity in data across a Before a customer strong for was the

of with that not company to opportunity the to have our front Mastech's significant space where has by it's to opportunity of them a differentiation and capabilities, and to much were of Mastech. so think in primary dream demand why a and the I of just exceed is mobility trillion a I expected work for growth but market mention $X Mastech's not XXXX. front for customer mine, upward a base us competitive the the joined dream many existing capability reasons leaders strengths deliver to in

the to Vivek. turn call I'll back you,

Vivek Gupta

Thank our questions concludes take you, We Michael. Operator, can prepared now. remarks. this

Operator

you. Thank

We question-and-answer. be Instructions] now [Operator a Thank conducting you. will

your the Please Zacks question Our question. Thompson line Lisa first comes Investment Research. proceed of with with from

Lisa Thompson

morning. Good

Vivek Gupta

Lisa. morning, Good

Lisa Thompson

Welcome, Michael.

have you background Sounds from exciting hear excellent this very for it's position you. like an and to

Michael Fleishman

you. It's excited be heard from. Thank to

Lisa Thompson

your one go know into revenue, not fell call through what staffing guess the it's business last could detail IT I So after with seems quickly. cycles. like apart a I time everything first number And of you question like your quarter's it if is, I record little wondering was happened?

Vivek Gupta

and So the happened the mentioned Lisa, the of drop into in call continued impacted QX. that because it in IT got I staffing QX last that revenue earnings in

they we So we much we also expected that have ends this demand higher a we the And had and number impacted side. had seasonally of that that then are on starts staffing the drop there low than in in QX from quarters. a always were expect than other that point this view, But ends usual. than quarter even quarter ends QX. an time more of in is seasonally more

same which really number that So kind equation higher our enough starts of and staffing impacting ended that it's business. up ends and is of not

positive better but We've the demand in better. saw only this had share seems into be that The the five note what be can than is to to we QX. I demand that, quarter, weeks this seems quarter

this optimistic, are but how out. quarter. guess the panning it's But market is too early still we for I So that's

Lisa Thompson

your to to So people -- in is find needs? off you laid easier Silicon this? side Valley? it there being ideal bright everybody obviously, Are for having any Is the

Vivek Gupta

because the or now, that, elsewhere go seeing being now, other are extent, able But we Yes, IT many fully also demand. the us of is let And there have be have what's light are to large customers companies conditions larger available greater companies. for so need to recessionary of happening right pool of to cautious, In in right? there numbers which IT resources. some a to leverage

but fish up, becoming little the demand definitely to now larger from. -- needs is is right a to So pool there pick the

Lisa Thompson

it's to revenues to That sense. -- feel just Is next totally to flow right. it you do a is down you just for economy? through because year think going All makes be going this the year? of How

Vivek Gupta

attitude no, or we not taking Lisa, are approach. that

few as I said, the We only weeks. are it's -- first

see we going of seeing than year preparing are are signs for for shrinkage. preparing out. is up. have how we still growth any pan picking We But to some the rather demand But to

we XXXX controlling very very adversely in job We'll we And the and demand. quick keep So close couple a costs. and we got did COVID in quarters impacted eye our take did hit we will, with first on the a of our as action course, us decent pretty of be careful a when costs.

shrinkage that eye we this a if So than we'll needs for preparing and on done. But growth rather keep year. in to be some see actually this keen are

Lisa Thompson

you be M&A? do more question And I are guess, is, going the and likely last likely economy given to the less the logical to opportunities, or

Vivek Gupta

to of lot answer, honest the a and I bringing has is that, organization, changes have definitely It for we quarters, settle the the going year back M&A, we little just but idea Michael board give and Michael the is think that to the is a the we be it's on organization little in a the of not later shelved of him I think to Lisa, later But have because bit the -- it. go into are to come down. year, ourselves still cards. just may on time there's

the of back to acquisition. will strategy We inorganic get

Lisa Thompson

my All guess right. the consultants end how final question many quarter has did been, I with? you

Vivek Gupta

have look a Jack, can at you that?

Jack Cronin

at Results end quarter? the the Yes. of

Vivek Gupta

Sure. Yes.

Jack Cronin

We had X,XXX.

Vivek Gupta

my questions. -- my all That's right. That's you. Thank all Thanks. Great.

Jack Cronin

you. Thank

Operator

comes question proceed with question. with The Timothy of Our line Corporation. Please Capital next Management your Call from the

Timothy Call

morning. Good

you AmberLeaf potential your was or they do acquisitions same additive your acquisitions ever acquisitions be million disciplines Given of one Would to that And $X roughly acquisitions exceedingly the you history high? would last for the be of large? and for or the still million, accretive company? immediately accretive multiple have the to acquisitions borrowings consider are and $XX

Vivek Gupta

to adequate could of million plus I don't they'll So of large Jack function total think pricing need are have $XX even think have, is of or it of company it that that It I for one maybe could one. multiple may out But right we be need depend would chest kind may kind there We we a Tim, out not war what mentioned, in two of there. it But what or command. we need. targets we which be we able of what now kind this of be it think, we find what all about us. a front all smaller companies acquisitions, any and acquisition, is

Timothy Call

flow stock cash debt. balance and the And in Do zero free interim your expect of given sheet and year? million in actually upcoming you to repurchase $X the cash some

Vivek Gupta

want Jack, do you take to that?

Jack Cronin

repurchase Board approved program. XXX,XXX Yes, the a share

goal of our our back is clearly, to yes, some shares. So buy

Timothy Call

price. terrific [indiscernible]

another, or way one but good acquisition you it an know and So well how your is. know company

Thank very much. makes interim. So you the that sense in

Vivek Gupta

Tim. Thanks,

Operator

with your from Please next [Operator of the with line question proceed comes Sidoti. Instructions] Marc Our Riddick question.

Marc Riddick

everyone. morning good Hi,

Vivek Gupta

Hi, Marc.

Marc Riddick

aboard. welcome Michael,

Looking forward you to forward. working going with

Michael Fleishman

Thanks, Marc.

Marc Riddick

to if demand wanted dynamic of The a working client sort bill give of about little or pricing that projects as way around of slowdown. of I could then talk basics. are going also around the that activity demand you just maybe pacing are whether that little bit a little and with? And sense wondering time? of things or if I could some So are you a of the you a by not away of matter you're a the bit delayed that And of period clients seeing bit talked color what rates -- the about for getting was talk you some about demand then around you the

Vivek Gupta

Marc. Sure,

there sort questions of are mini in Let me embedded multiple questions. -- your

by address one me and one. Let try those

So on not build what in shall front, time. we've say, actually rate this major, any at pressure seen the point we

to last few command resources. what and steadily to over contrary, increase to is the fact always I'm that rate to kind In of quarters And also and pricing market talking function need that is of staffing the more for pay our been what the the side. we it bill a on the is offering we've our able

So we've there maintain margins manage been able the gross our and accordingly. pricing to

it how that's So is.

in chance minute. demand, In And talk data maybe going the data a between it's to Michael and give analytics terms about part different a of I'm analytics. and staffing slightly to

economy Staffing. staffing there close for is between the is actually the of pretty on a time on -- – between reaction pretty the time the correlation the the But side, and small. the state demand actually And difference two

right the easing is the we still about -- It's was worry the there And high. So saw. going quarters recession -- to couple what's it's a extent drop that that's there but a was in just maybe probably now. extremely the of there, ago lesser what's demand

we are that we over in the will hopeful demand quarters. few So a see pickup next

ball, least crystal happen. a what's has to early going nobody but course, are Of at that's indications

dynamics So on that's all And staffing data side. side, analytics slightly the are different. on the the

on So to would you that? like Michael, comment

Michael Fleishman

Sure.

recession the lines. of leery their or customers a should the while So fear impacts causing I but a to recession little potential until rather, some they the be a so not much is see actual slowdown, say, bottom to

into into they years some a not talking and had seeing minimum. transformation their are we So cuts recession for That a being customers budgets XXXX. least modernization, IT or in That small data multi-year said, what whether all still in you're which spend of couple XXXX percentage transformation our over is have locked of in modernization budget budget digital modernization, spend ongoing at a application customers' digital of transformation. initiatives, legacy for will play digital a at by be a impacted lot

example. they because pay The services to in that. the was That's the an [indiscernible] I've it for market that IT the experienced inability for professionals XXXX, Mastech People What we fulfill to retain space. in attrition of been seen our the higher XX.X%, in demand in we driving to attrition skills for had for same that high. that was and to rates having over one attrition issue average XXXX actually versus is well cut the as to because so X%. ability XXXX digital the having more previous have is say differentiation are get opportunity the to professionals waiting years. the transformation of to IT because actually it's in competitive IT attrition across pay around less rates has is, And as actually

that's that we're in I'm I So the answers question. space. more D&A to happy your go hope into not, seeing detail. If what

Marc Riddick

you timing No, was that's wondering the given talk targeting about on joining if of sort if just was the as would certainly understandable timing touched helpful. could this wondering you bit I Thank certainly we as already of little prioritization and/or you within there particular that's and you acquisitions you you. think prioritization take at might you about And on far that of was to sort I that's advantage of any able and whether firm. then, environment I changed imagine D&A. just the a that if talk all if views remains and I confirm acquisitions the of wondering just general out the has could But be that pricing overall you have of?

Vivek Gupta

regarding change strategy acquisitions. So our I in think don't any the our there's Marc, thinking,

it. tune fine probably will We

said, a then Michael I tune of giving down requirements our and initiate settle little we'll As time search. bit just the fine to and

has to no been. now change thinking So right is what our really there

analytics acquisitions that multiple IT data staffing will remains That's times on side before the side. Our the something said be unchanged. I've and not on and

Marc Riddick

then sort through at are the so Okay, great. to would thoughts you there in with year the or of least the where finishing year be headcount like are you the just near as that And just any to over any confirm, X,XXX, thoughts to that if term go? at to can as where

Vivek Gupta

to a the So difficult guidance and at number I it plan or And to reduce. grow But Marc, it's we said, all, stay as number obviously, entire any working give is towards. not first that give organization don't is -- let of to QX. we have that's what this always difficult the the -- demand, not few dramatic weeks, predict first with we the but in saw directionally next few are But to what in encouraged also also pan a than we it's better seen in are going it's how increase out. quarters what

directionally that and the are be hopeful over grow to we us of sort year. tells we able that's will So

Marc Riddick

as vice seen behavior curious or up it whether negative of I maybe a client there for any more to to comes stand Okay. you've then or verticals. thing are cautious any they any -- that were Are when than not there sort in either Thank particular groups you. any And little were the versa? last differences me, was or others

Vivek Gupta

time entertainment it's positive unlike and hospitality when behavior. it was the their and interesting. it's the I guess, verticals side. focused, on extreme COVID are side similar it's healthcare This actually around, was in on times the This fairly there Yes, the XXXX time, -- negative

control and I on not out be big do board. One side, where we these is And make verticals the a are initiatives. that And everybody more. day hear all that to just been caution on organizations. seems two every side, cautious. extent new the technology cautious spend across little the clearly, one the to being think industries is trying equally investments almost any services, the But think other being I other and stand and InfoTech a maybe financial news the lesser services. IT the But banking financial from big to is, has

Marc Riddick

Okay. mean, sort of me. little I'm last as a talk the for curious of sort if touch authorization to to of of implementation thinking us the share then you. could I a I the Board's about to take of program, maybe the of little bit Thank the advantage imagine bit timing the And sort around that sort to a maybe me came repurchase one bit can talk and the maybe and -- of there? opportunity, of about the wanting how you sort sort little you but

Vivek Gupta

Jack, So repurchase take that? you – would The

Jack Cronin

As far timing? as the

Vivek Gupta

Yes.

Jack Cronin

the Well, I is effect. program in mean,

I can a only purchase, up to volume. time. at I our little to it's XX% by think we're volume daily think our we any be going constrained execute we So it can of bit And daily because

to going most we're we into So volume the when think it's market appropriate. the get and monitor

Marc Riddick

I said clarified so two was know... press have should I release but I the sorry, think it, wanted I'm But a just to it period, year Right.

Jack Cronin

year period. Yes, Right. it's two a

a was extended had the two last -- we it. I year program, we and share think period repurchase it did a time So we

But correct. So we two can extend it. it's year always a period, you're

Marc Riddick

very you much. Thank great. Okay,

Vivek Gupta

Thanks, Marc.

Operator

for time. comments. [Operator over the Gupta, now I appears closing turn this it no Instructions] have we questions floor Mr. to further at back you would

Vivek Gupta

with are Thank today. in you first would XXXX call joining no early forward Thank sharing results I you If we thank our further quarter to questions, you, look there like May. operator. you. And for to our

Operator

does today's this conclude Ladies teleconference. and gentlemen,

may a your you day. Thank time. You for lines this have disconnect participation at and wonderful your

Mastech Digital (MHH) 8 Feb 232022 Q4 Earnings call transcript