Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mastech Digital Inc (MHH, Financial) reported a sequential revenue growth of 2% in Q1 2024 over Q4 2023.
- The company's bookings in Q1 2024 totaled $9.6 million, surpassing last year's Q1 bookings by $1.2 million.
- Gross margins improved across both IT staffing and data and analytics services, with data and analytics margins increasing significantly from 38.5% in Q1 2023 to 46.4% in Q1 2024.
- Mastech Digital Inc (MHH) has a strong financial position with $19.4 million in cash, no bank debt, and $24.2 million available under its revolving credit facility.
- The company's days sales outstanding improved, soundly within the target range of 60 to 65 days, indicating efficient operations and cash flow management.
Negative Points
- Mastech Digital Inc (MHH) experienced a 15% year-over-year decline in revenue in Q1 2024 compared to Q1 2023.
- GAAP net income for Q1 2024 was a loss of $161,000, a decrease from a net income of $261,000 in Q1 of the previous year.
- Despite improvements, the company faces ongoing pricing pressures, particularly in the IT staffing segment.
- There was a noted cautious approach to SG&A expenses, which only decreased by 3% despite increased activity levels, indicating potential overhead challenges.
- The company did not provide guidance for future quarters, which may contribute to uncertainty for investors and analysts.
Q & A Highlights
Q: Good morning. It's great to hear some optimism for change. My first question is about the staffing increase. You said you increased the consultants by 6%. Does that mean that Q2 might be up 6% sequentially?
A: Vivek Gupta - Mastech Digital Inc - President, Chief Executive Officer, Director: Hi, Lisa. While as you know, we don't give guidance, what I can say is that the revenue in Q2 should be better than the revenue of Q1 as a result of this increased headcount.
Q: And how has the headcount trended this quarter?
A: Vivek Gupta - Mastech Digital Inc - President, Chief Executive Officer, Director: Well, so far, we've just finished the first month. And again, I can say that it has been positive. We've had some net growth in April, so it's a good sign.
Q: As far as expenses go, I had thought they would be down a little bit, but they didn't seem to come down that much. Can you talk about what to expect going forward?
A: Jack Cronin - Mastech Digital Inc - Chief Financial Officer: Yeah, they came down 3%, Lisa. But again, our activity levels have increased in Q1 over Q4. We're being very conservative about increasing our expenses. So even if market conditions continue to get better and there's more opportunity out there, we're still going to be conservative would be in adding SG&A costs, but I think they would trend up a bit.
Q: Okay. Looking at where you're going and sequentially it looks like you should be back to profits by at least Q3, if not Q2. Does that make sense?
A: Jack Cronin - Mastech Digital Inc - Chief Financial Officer: That makes sense.
Q: Is there anything else we should know about what's going on in D&A as far as the types of projects you're booking?
A: Vivek Gupta - Mastech Digital Inc - President, Chief Executive Officer, Director: Sure, Lisa. What I can say is that traditionally, as you know, we were doing the D. and M. businesses, bone in MDM, their master data management technologies, and we were doing a lot of that. And over a period of time, over the last couple of years, we've started venturing into the broader data modernization areas. And I'm happy to say that more and more of new business is coming in that data modernization space.
Q: Okay. And I guess my final question is you didn't mention anything about stock buybacks. What's the thinking there and what was the activity.
A: Jack Cronin - Mastech Digital Inc - Chief Financial Officer: we were in the market for just about every day that we could have been in the market. Our volume, our share volume has been very low in Q1, which materially impacted the amount of purchases that we can make. We ended up repurchasing a little over 9,000 shares at an average price of $8.70. We plan on being in the market in June once we get out of the earnings blackout period.
Q: I was hoping you could give us an example of how client interactions and sentiment have changed this year.
A: Vivek Gupta - Mastech Digital Inc - President, Chief Executive Officer, Director: Hi, Tim. So last year, we saw that the customers were holding back and they were not willing to give large projects out. They were not willing to spend large amounts of money. The money was being diverted towards keeping the lights on rather than building the business as we say. And we've seen that towards the end of 2023 and more in the beginning of 2024. Customers are now beginning to open up their wallets and they're willing to sign projects much larger projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
