MHH - Earnings call 3 2023 | Mastech Digital, Inc.

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Operator

Greetings, and welcome to the Mastech Digital Q3 2023 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Ford Lacey, Manager of Legal Affairs for Mastech Digital. Thank you, Ms. Ford. Lacy

begin. may You

Jennifer Lacey

and Mastech operator, XXXX Third Conference Call. welcome you, Digital's to Quarter Thank

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

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

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

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

John Cronin

everyone. Jen, and Thanks, good morning,

Our to economic third results quarter and financial to challenging prospective impacted market current continue conditions. by clients XXXX and uncertainty be these our responses

Third a representing this quarter XX% to revenue $XX.X our revenues million, Both business segments decline. year-over-year of contributed totaled decline.

Generally, customers our Staffing In the in new to QX million Our Consolidated year-over-year XXXX contract of direct when the This reductions the improved in Data margins Xrd up quarter revenues segment utilization global compared gross continued the hire of delayed XXXX XX.X% segment, in cost in held quarter be largely improvement XXXX for per Services project were Analytics quarters. In performance profit quarter, third income XX.X% Data percent XXXX of reflected quarter down order in in net XXXX basis million segment income resulting revenues gross in third QX compared reduce conditions. GAAP margins resources per market the third our our challenging $XX.X points revenues. XX XXXX, gross XXXX. $X.XX albeit QX at despite of revenue our the gross We $XXX,XXX the in profit best diluted consultant X share of percent our gross well revenues or quarter XXXX impact a for XXXX. X higher last during was of compared experienced Non-GAAP declined compared overrun segment, to quarter as Services the Analytics profit QX to as a third improved the Staffing in rate to quarter slower quarters. to previous as than the our due QX $XXX,XXX IT of a significantly IT $X XXXX. XXXX. bookings XXXX. million over million over XXXX in in and in of and per on projects million in diluted existing soft $X in share signing $X.XX XXXX. to quarter. reported third continue to the of share XXXX as $X.X Services the quarter. QX was $X.X and $X.XX diluted or projects to to year $XX.X QX compared of net experienced compared to quarter Services in last to diluted share or per a $XX.X of during totaled Demand third or million $X.XX compared million and

Our last the quarter's non-GAAP benefits on were our available non-GAAP QX with hand, not SG&A is website. Addressing million income revenues. net financial third line measures, revolving our and included credit XXXX third per approximately earnings numbers results and on $XX amortization net earnings in in XXXX had in of on million XX, XXXX tax of included we is balances release, presented items cash share compensation description non-GAAP quarter bank under for and debt periods outstanding lower position assets. financial acquired of all quarter availability expense for our XXXX, September facility. A of $XX no stock-based our intangible items despite diluted which of borrowing

XX the day much measurement better Vivek which now comments. is for was turn call range our days to our days his quarter XX ago. I'll XX than Our a better measurement day of quarter DSO targeted and outstanding end, over to sales than at X

Vivek Gupta

of to third for demand the Thank everyone. same client in in first our continued experienced you, dynamics we spending resulting a morning, services. that lower quarter, Good Jack. macroeconomic our The impact half headwinds the during XXXX

approach and to with segment clients taking a spending new continued respect conservative Our more staffing see IT initiatives. services projects to on new

by on order Data and projects starts will orders. prospects Services clients Our project and was in his remarks. prepared impacted reducing booking Michael on Analytics discuss resources also and delaying segment new existing our performance

is yet another has domestic is East that the data event U.S. conflict GDP in growth a the in the for created the additional recent Middle economy. global point recent geopolitical uncertainty in positive While economy,

as reduce uncertain to continuing mitigating are pursue in economic We a action expenses conditions. aggressively steps these SG&A our to

Our which $XXX,XXX in previous million the approximately from a the of third operating quarter. expenses XXXX, is quarter $XX.X reduction totaled of

me sound reiterate under a facility when credit believe in world. several financial footing we strongly Let conditions company access the on our capital our our will I'm remains businesses long-standing market balance with with $XX relationships that both the of recover confident a improve. sheet, of solid top companies that to million that and

Data related segment. turn now me the our Let to and to Over Services call Michael for you, Michael. his Analytics comments over to

Michael Fleishman

good and Vivek, everybody. Thanks, morning,

uncertain clearly impacting spending projects. clients see clients' conditions resources are our continue we behavior reducing as mentioned, As economic Vivek to existing on

a sizable controls. award of believe a of scheduled levels financial past XXXX million capabilities QX since our progress our news, margins. We when the predictable management increased our of XXXX, prospects projects, delays a activity assignments good our the transforming a analytics our margins good While emphasis coupled additional This all pipeline smaller performance to rise master higher which that constituting teams. execution in resulted data believe year-over-year. as both company our X in projects our back the broader that opportunities There now the suite remained we strong a business XXX increase emphasis, on XXXX, are basis In in margin bookings $X.X key is our commence clarity third our disappointing Vivek's in quarter of a financial total to XXXX and this the October. Behind utilization modernization rate third to $X.X clients closing, million with XX.X%, in In which gross this modernization belief a quarter, have growth expense awarded organization expand economy is percentage in to that bookings of and margins that data elevated with to XXXX turn Vivek. of in of QX are once project in to for master is we making XXX% to foundation entire from year-over-year. of occurs. I'll we segments data processes our been numbers, more continues over would third tighter by services. points of firm pipeline during agree of October management point quarter and opportunities I QX however, bit to data our are in compared tighter delivery implemented gross and were approximately as a global well various and delivery Also, I the continued poised component around pipeline call data broaden much gross regard, like with versus of say over improvement with is XXXX giving to as

Vivek Gupta

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

Operator

Instructions]. [Operator

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

Lisa Thompson

right. all So

few So questions. I have a

back buy First stock off, -- did any this you quarter? do

Vivek Gupta

you not. Jack, did We comment this? can on

John Cronin

we And share businesses during in potential settled a QX, period great to behind clearly, relative that quarter. shares employment our fourth that extended we that the intrinsic us to blackout think claim likely is and an was price Sure, is outstanding But had for didn't sure. our negotiation you're In we period. the shares the in value and see buy QX. the -- buy we reason

Lisa Thompson

All right.

working? for Are -- why get the leads second you still that? on was is which And the with to it good, happened how to sheet? is claim? balance Or What Sounds paid that question. what the going

John Cronin

the is It's settled. quarter. settled It in at terms we second confidential the -- claim was reported and a It's the that conditions Yes. settlement. economic

balance have within that happen You'll recovery -- if you looked at insurance see next XX of you we expected would days. sheet, that is to the still the

additional agreement for But and So is that settled. us. it's some will finalized generate cash the flow

Lisa Thompson

Like -- for Okay. the that expenses have quarter, in lawyers. besides you the what Good. actual did what payment? And

John Cronin

claim all fully have of we a in as far legal was We couple quarter. did thousand For the expense. claim, XXXX. as of of were that dollars in the hundred reserved QX But reserved second

Lisa Thompson

Okay.

take next because $XXX,XXX of So lawyers. expenses quarter's that I off maybe could the

John Cronin

Yes. Yes.

Lisa Thompson

Okay.

Analytics, That's good Or X-year right. just $X.X contracts Data revenue stuff. estimate you're revenue to [indiscernible] that that adding replace All said a as sequentially? then in signed the that's be as you that to losing? million additional going Is going is what and Okay. And you to contract. far

Michael Fleishman

with Vivek, if that's that okay I'll take one. you,

Vivek Gupta

on Yes, going was to it I go ahead. to you anyway. Yes, pass

Michael Fleishman

questions. great Lisa,

that Two X contract. contracts a multiple $X.X was in as sized combination There's there X those decent years in a a multiyear are and were million some $X multiyear it's $X couple million-plus contracts of over So million. there. -- of them of in of

the logo we business, a revenue and will in not name to One is it see new XXXX, X-year from a new large $X net can't was of the new disclose over. the it's account, a carry so but That and and was logo. that new logo, to so it's million. of the ones was it I of all north of a revenue

of we're And has that that the was One on other a ones your we renewal, larger Does renewal growth a but account sizable all then continue, accounts. other has potential. accounts, but multiyear the question? answer will feel and new existing that net or expansion revenue --

Lisa Thompson

increasing the out? part I you'll asked, have where mean that that would Except all netting for that sequentially revenues,

Michael Fleishman

With for linear them that those for a all one one, them renewal. deals because of was of except closed

that So opportunity one the will revenue be flat for that year-on-year closed.

closed the of that opportunities XXXX growth in October for All XXXX. were or sequential for other

Lisa Thompson

And compensate lost? have you for might would they anything

Michael Fleishman

Yes. Yes. That Yes, statement. correct that a correct. is is

Operator

Instructions]. [Operator

from Company. Sidoti the with & comes Marc line question next Reddick of Our

Marc Riddick

Where the if did and I on of up us on wanted you give maybe utilization couple to just can things on. a just update? head a to bring count maybe could date us on fill to we quarter finish you in start

Vivek Gupta

Mark. I'll Jack ask Sure, to headcount? the that number, Again, Sure. for answer

John Cronin

than XXX was in Well, that previous but consultants. the Q in a publish billable we want staffing the billable that that quarter, experienced QX QX consultant previous third and to down The better was what was every it the quarter materially the don't of XX from the consultants say And Yes. XXXX. that's number beginning of and from loss we I quarter, quarter.

So there is some number. in hope that and improvement

Marc Riddick

as share And rates well? maybe utilization anything and could on bill Okay. you then

John Cronin

Yes.

is $XX a little from Our our bill that's -- the it a quarter. close $XX from -- very number It the last being utilization per that, was relatively over over and staffing, and second hour, very, was was analytics. number. Utilization important a little quarter well, to rate flat data pretty in was flat

generally in utilization [ business, billing As ]. staffing hour, it's on the far as hour pay the

lot important in D&A is have improved our But and dramatically improved And a in less utilization has margins that been the so that business. business, of utilization.

and our think I'm I QX utilization, you XX% correct approached approaching can Michael, XX% we me of wrong, XXXX. So if we're in --

Michael Fleishman

yes, So is that correct.

a in very XXXX. for be has to heavy continued us Our utilization focus

right around improved has XX% since October end. Our January utilization through year of this

for target target forecast a confidence. year have about a of We of our decent utilization is level year with pretty for current the XX% the

Marc Riddick

And reduce bit commentary that was end helpful. if around that. Okay. if those to this could you efforts SG&A we prepared -- and commentary seeing That's wondering little efforts timing around a I I and provide you remarks, could talk a up in could was wondering that we little look to might maybe potential greater

Vivek Gupta

Mark. Sure

the every the looking obvious discretionary this. SG&A basics. at and controlling actually, So or in item eliminate can And SG&A to really spend in spend if the back to line the the see we defer target is is

looked been doing at that we've So this we've quarter. and every

merit decent all a and which a we to how the this almost third we is from time. barring in quarter seeing there. exceptional increases, And We've looking have pretty it. deferred needed done we've the probably In hiring, fact, frozen that sharpen at is row time can job that had been we one,

of We commission eliminated suppliers, of have performers, a have contracts travel also our some accruals down. then or our company lot come And with actually controlled renegotiated eliminated bonus events. and low nonperformers internal

diligently this point and that come that continuous and a as at result element a we've basis, of it's lot every looking a So to focus. of on

Marc Riddick

whether showing as wondering any was are we verticals if Okay. as any customer better things far bases? particular thinking customer call-outs And than about others? improvement among be your any you I any there's signs had on that could that Or base, there if behavior you like differentiated maybe among should are industry particular particular of any share thoughts

Vivek Gupta

industry impacted that. any be now, And So Mark. can bit, But whenever which a that, bad to right yes, verticals are due of them. And industry constantly revenues good more is reducing it's to in we that's of much has unfortunately, we was one bad we all the the good our that see to if that a good looking it's shrinks than I picking bad, are it's on is, question, seem anything very as any almost balanced. see Services, be verticals news. course, others. as how at obviously, concentration the And it vertical little well. course, which of evenly -- to industry concentration that capitalize up all of would guess, focus a result of But signs from is Financial shrunk and because

we I of can had where consultant actually we've for net head had marginal positive first month, thing any are. But that is XX we've not losing you So the only you're that's October. a and signs, count loss. looking tell had no a month after billable And if virtually the actually billable for increase. months after decent We've lost we've head month, count,

out, the can are that's thing make that but Now have a in and demand this we we turns the one does rest uptick all see that not positive quarter of we to know but news let's trend, hanging positive we month seen. the a on how slight see a

John Cronin

Yes.

we in did on quarter, half the But a mean half services was year, have decline the headcount, in head billable services. our decline had banking happened net other of wasn't projects delaying clients QX. financial services year. a in I count of in some issues the head as global because Another while nearly of the it had as In projects? lot And lot we count first a of ending done of in happened the third of first starts and positive that financial pronounced. decline financial maybe it

was loss quarter to to compared improvement positive. our previous a third quarters in the X X the quarters. something the with made that for -- count was that of one reasons head last that significant respect So And we

Operator

Instructions]. [Operator

of Our comes next Ross from question with the line Davison Battinton Capital.

Unknown Analyst

you a a you're why speak a gives about post The down think end, say seeing the And right, hoping probably bookings just anything quite if of you have from of the even kind of for going QX was seeing -- to still had can you're and quarter question you little I Michael. sort could and think $X.X in sequentially. of I down about kind was confidence that QX. what million booked was I decline a bit why what you forward? And you're with bit I that

Michael Fleishman

Ross. Thanks, Sure.

was business data months this to focusing we customers are to almost year which And for a transformation more several to increased MDM sales of internally before, processes saw our creating One, from slip, our services that economic versus deals in primary we're focusing it build siloed we As on that building cycle, I approval closed making this are as up October. in on in $XXX,XXX traditionally some modernization and to weakness average their that we X have what mentioned a XX had that bookings X-month of and not to pipeline due The very excess constraints we've scratch. on signatures X which pipeline. reasons. in is contract applied been with deals all takes business, on

closed had in in The we that other And our good from have as deals remarks. as before, bookings blunt pipeline is, data a performance. October. we services, deal slipped not the we're growth represent $X.X because prepared perfectly around building also that modernization is of have you, approximately pipeline weakness news why to saw my with QX. I slipped pipeline to when QX mentioned perspective, mentioned QX I our modernization which into That million continue The still or already we data all the see in does didn't in reason weakness you out, is is, be enough from

Unknown Analyst

a business your the existing with with it understand in I sense the that off view, makes falling of then is more Or mostly guess, any business at of I sense. you're that And just the a -- lot respect you rate? focus, day economic to declining then And is helpful. it that mean, is precipitous at in work? had is situation? your broadening super And do -- that it's I reality think which Yes, there falling guess, at [indiscernible] that another is you off just I MDM, the

Michael Fleishman

Yes.

it's rate don't a off at at I all. no, precipitous feel So that falling

much services with spend transformation look exceeds a matter you we're if that's that, MDM, really digital the that don't the it, I your way, data versus trillion by total of the broader one which percentage total look MTM your of and problem that you at off. data -- of sliver [indiscernible] through transformation small and reasons feel into forecasted a modernization at the a As of $X space digital very, the major larger which is why the far of now falling because spend is It's it's only a MDM. focusing XXXX, on cap very sliver fact, company digital is transformation, spend modernization. at very, around XXXX. by When much and transforming

decreasing that that And our the existing off is or MDM customer shape in or way, so for It's it's not more any or market in basically saturated we're even MDM form. falling declining base.

The in our other the partnership is thing MDM Traditionally, we're with doing within that remarks strong prepared mention expanding incredibly we I space. we've been didn't that IBM. were base the

our good this as few others data capabilities very year continue platinum status remain within and into broadening broadening across in we're We out also MDM, RCO strong as partnership partners, well modernization. just with addition out partnerships made to to a We Informatica. but other IBM

So are data up MDM in giving either. focusing not monetization, we only doing on on we're not more

that to too. on are focus growing continuing We area,

Operator

time. further the I'd to over questions back There Mr. like for are this at to floor no Gupta comments. closing turn

Vivek Gupta

operator. you, Thank

forward for are there to and early quarter our like you. today, our fourth we you February. in XXXX sharing you I no would look to further if call with joining results So Thank questions, thank

Operator

This concludes today's teleconference.

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

Mastech Digital (MHH) 1 Nov 232023 Q3 Earnings call transcript