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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Mastech Digital Inc | AMEX:MHH | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.26 | 3.21% | 8.36 | 8.6199 | 8.27 | 8.27 | 5,248 | 21:15:00 |
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
PENNSYLVANIA
|
26-2753540
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
1305 Cherrington Parkway, Building 210, Suite 400
Moon Township, Pennsylvania
|
15108
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange
on which registered
|
||
Common Stock, par value $.01 per share
|
MHH
|
NYSE American
|
Large accelerated filer | ☐ |
Accelerated file
r
|
☒
|
|||
Non-accelerated
filer
|
☐ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Page
|
||||||||
PART 1
|
3 | |||||||
Item 1.
|
3 | |||||||
(a)
|
3 | |||||||
(b)
|
4 | |||||||
(c)
|
5 | |||||||
(d)
|
6 | |||||||
(e)
|
7 | |||||||
(f)
|
8 | |||||||
Item 2.
|
20 | |||||||
Item 3.
|
28 | |||||||
Item 4.
|
28 | |||||||
PART II
|
29 | |||||||
Item 1.
|
29 | |||||||
Item 1A.
|
29 | |||||||
Item 2.
|
30 | |||||||
Item 6.
|
31 | |||||||
32 |
ITEM 1.
|
FINANCIAL STATEMENTS
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Revenues
|
$ | 53,658 | $ | 47,583 | $ | 103,433 | $ | 98,008 | ||||||||
Cost of revenues
|
39,343 | 34,927 | 76,314 | 72,633 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
14,315 | 12,656 | 27,119 | 25,375 | ||||||||||||
Selling, general and administrative expenses:
|
||||||||||||||||
Operating expenses
|
10,986 | 9,042 | 21,921 | 19,285 | ||||||||||||
Revaluation of contingent consideration liability
|
(1,982 | ) | — | (1,982 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total selling, general and administrative expenses
|
9,004 | 9,042 | 19,939 | 19,285 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations
|
5,311 | 3,614 | 7,180 | 6,090 | ||||||||||||
Interest income (expense), net
|
(159 | ) | (198 | ) | (354 | ) | (477 | ) | ||||||||
Other income (expense), net
|
15 | 41 | (22 | ) | 94 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes
|
5,167 | 3,457 | 6,804 | 5,707 | ||||||||||||
Income tax expense
|
1,429 | 488 | 1,872 | 869 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income
|
$ | 3,738 | $ | 2,969 | $ | 4,932 | $ | 4,838 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$ | .33 | $ | .26 | $ | .43 | $ | .43 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted
|
$ | .31 | $ | .25 | $ | .41 | $ | .41 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
11,442 | 11,271 | 11,425 | 11,199 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted
|
12,002 | 11,948 | 11,999 | 11,849 | ||||||||||||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Net income
|
$ | 3,738 | $ | 2,969 | $ | 4,932 | $ | 4,838 | ||||||||
Other comprehensive income (loss):
|
||||||||||||||||
Net unrealized gain (loss) on interest-rate swap contracts
|
— | 26 | 35 | (68 | ) | |||||||||||
Foreign currency translation adjustments
|
(95 | ) | (38 | ) | (114 | ) | (305 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total pretax net unrealized (loss)
|
(95 | ) | (12 | ) | (79 | ) | (373 | ) | ||||||||
Income tax expense (benefit)
|
— | 7 | 9 | (18 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other comprehensive (loss), net of taxes
|
(95 | ) | (19 | ) | (88 | ) | (355 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive income
|
$ | 3,643 | $ | 2,950 | $ | 4,844 | $ | 4,483 | ||||||||
|
|
|
|
|
|
|
|
June 30,
2021
|
December 31,
2020 |
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 5,302 | $ | 7,677 | ||||
Accounts receivable, net of allowance for uncollectible accounts of $393 in 2021 and $413 in 2020
|
26,402 | 22,036 | ||||||
Unbilled receivables
|
12,182 | 10,098 | ||||||
Prepaid and other current assets
|
3,416 | 1,346 | ||||||
|
|
|
|
|||||
Total current assets
|
47,302 | 41,157 | ||||||
Equipment, enterprise software, and leasehold improvements, at cost:
|
||||||||
Equipment
|
2,107 | 1,931 | ||||||
Enterprise software
|
2,842 | 2,730 | ||||||
Leasehold improvements
|
589 | 563 | ||||||
|
|
|
|
|||||
5,538 | 5,224 | |||||||
Less – accumulated depreciation and amortization
|
(3,651 | ) | (3,253 | ) | ||||
|
|
|
|
|||||
Net equipment, enterprise software, and leasehold improvements
|
1,887 | 1,971 | ||||||
Operating lease
right-of-use
|
5,595 | 3,286 | ||||||
Deferred income taxes
|
463 | 796 | ||||||
Non-current
deposits
|
595 | 396 | ||||||
Goodwill, net of impairment
|
32,510 | 32,510 | ||||||
Intangible assets, net of amortization
|
20,344 | 21,930 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 108,696 | $ | 102,046 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$ | 4,400 | $ | 4,400 | ||||
Accounts payable
|
4,638 | 2,589 | ||||||
Accrued payroll and related costs
|
12,461 | 12,374 | ||||||
Current portion of operating lease liability
|
1,435 | 1,079 | ||||||
Other accrued liabilities
|
789 | 1,051 | ||||||
Deferred revenue
|
437 | 478 | ||||||
|
|
|
|
|||||
Total current liabilities
|
24,160 | 21,971 | ||||||
|
|
|
|
|||||
Long-term liabilities:
|
||||||||
Long-term debt, less current portion, net
|
10,716 | 12,875 | ||||||
Contingent consideration liability
|
900 | 2,882 | ||||||
Long-term operating lease liability, less current portion
|
4,419 | 2,325 | ||||||
Long-term accrued income taxes
|
165 | 165 | ||||||
Long-term payroll tax liabilities
|
2,295 | 2,295 | ||||||
|
|
|
|
|||||
Total liabilities
|
42,655 | 42,513 | ||||||
Commitments and contingent liabilities (Note 6)
|
||||||||
Shareholders’ equity:
|
||||||||
Preferred Stock, no par value; 20,000,000 shares authorized; none outstanding
|
— | — | ||||||
Common Stock, par value $.01; 250,000,000 shares authorized and 13,084,433 shares issued as of June 30, 2021 and 13,039,893 shares issued as of December 31, 2020
|
131 | 130 | ||||||
Additional
paid-in-capital
|
27,172 | 25,509 | ||||||
Retained earnings
|
43,552 | 38,620 | ||||||
Accumulated other comprehensive income (loss)
|
(627 | ) | (539 | ) | ||||
Treasury stock, at cost; 1,646,420 shares as of June 30, 2021 and as of December 31, 2020
|
(4,187 | ) | (4,187 | ) | ||||
|
|
|
|
|||||
Total shareholders’ equity
|
66,041 | 59,533 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders’ equity
|
$ | 108,696 | $ | 102,046 | ||||
|
|
|
|
Common
Stock |
Additional
Paid-in
Capital |
Accumulated
Retained Earnings |
Treasury
Stock |
Accumulated
Other Comprehensive Income (Loss) |
Total
Shareholders’ Equity |
|||||||||||||||||||
Balances, December 31, 2020
|
$ | 130 | $ | 25,509 | $ | 38,620 | $ | (4,187 | ) | $ | (539 | ) | $ | 59,533 | ||||||||||
Net income
|
— | — | 1,194 | — | — | 1,194 | ||||||||||||||||||
Other comprehensive gain, net of taxes
|
— | — | — | — | 7 | 7 | ||||||||||||||||||
Stock-based compensation expense
|
— | 621 | — | — | — | 621 | ||||||||||||||||||
Stock options exercised
|
— | 101 | — | — | — | 101 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2021
|
$ | 130 | $ | 26,231 | $ | 39,814 | $ | (4,187 | ) | $ | (532 | ) | $ | 61,456 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income
|
— | — | 3,738 | — | — | 3,738 | ||||||||||||||||||
Employee common stock purchases
|
— | 181 | — | — | — | 181 | ||||||||||||||||||
Other comprehensive (loss), net of taxes
|
— | — | — | — | (95 | ) | (95 | ) | ||||||||||||||||
Stock-based compensation expense
|
— | 757 | — | — | — | 757 | ||||||||||||||||||
Stock options exercised
|
1 | 3 | — | — | — | 4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2021
|
$ | 131 | $ | 27,172 | $ | 43,552 | $ | (4,187 | ) | $ | (627 | ) | $ | 66,041 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Common
Stock |
Additional
Paid-in
Capital |
Accumulated
Retained Earnings |
Treasury
Stock |
Accumulated
Other Comprehensive Income (Loss) |
Total
Shareholders’ Equity |
|||||||||||||||||||
Balances, December 31, 2019
|
$ | 127 | $ | 21,939 | $ | 28,759 | $ | (4,187 | ) | $ | (358 | ) | $ | 46,280 | ||||||||||
Net income
|
— | — | 1,869 | — | — | 1,869 | ||||||||||||||||||
Other comprehensive (loss), net of taxes
|
— | — | — | — | (336 | ) | (336 | ) | ||||||||||||||||
Stock-based compensation expense
|
— | 456 | — | — | — | 456 | ||||||||||||||||||
Stock options exercised
|
1 | 555 | — | — | — | 556 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, March 31, 2020
|
$ | 128 | $ | 22,950 | $ | 30,628 | $ | (4,187 | ) | $ | (694 | ) | $ | 48,825 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income
|
— | — | 2,969 | — | — | 2,969 | ||||||||||||||||||
Employee common stock purchases
|
— | 105 | — | — | — | 105 | ||||||||||||||||||
Other comprehensive (loss), net of taxes
|
— | — | — | — | (19 | ) | (19 | ) | ||||||||||||||||
Stock-based compensation expense
|
— | 612 | — | — | — | 612 | ||||||||||||||||||
Stock options exercised
|
2 | 765 | — | — | — | 767 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balances, June 30, 2020
|
$ | 130 | $ | 24,432 | $ | 33,597 | $ | (4,187 | ) | $ | (713 | ) | $ | 53,259 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, |
||||||||
2021
|
2020
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 4,932 | $ | 4,838 | ||||
Adjustments to reconcile net income to cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
1,996 | 1,741 | ||||||
Interest amortization of deferred financing costs
|
41 | 52 | ||||||
Stock-based compensation expense
|
1,378 | 1,068 | ||||||
Deferred income taxes, net
|
333 | (188 | ) | |||||
Revaluation of contingent consideration liability
|
(1,982 | ) | — | |||||
Operating lease assets and liabilities, net
|
141 | (23 | ) | |||||
Loss on disposition of fixed assets
|
— | 2 | ||||||
Working capital items:
|
||||||||
Accounts receivable and unbilled receivables
|
(6,450 | ) | 1,144 | |||||
Prepaid and other current assets
|
(2,070 | ) | 323 | |||||
Accounts payable
|
2,049 | (954 | ) | |||||
Accrued payroll and related costs
|
87 | 3,209 | ||||||
Other accrued liabilities
|
(236 | ) | 392 | |||||
Deferred revenue
|
(41 | ) | (29 | ) | ||||
|
|
|
|
|||||
Net cash flows provided by operating activities
|
178 | 11,575 | ||||||
|
|
|
|
|||||
INVESTING ACTIVITIES:
|
||||||||
Recovery of (payment for)
non-current
deposits
|
(199 | ) | 20 | |||||
Capital expenditures
|
(326 | ) | (155 | ) | ||||
|
|
|
|
|||||
Net cash flows (used in) investing activities
|
(525 | ) | (135 | ) | ||||
|
|
|
|
|||||
FINANCING ACTIVITIES:
|
||||||||
(Repayments) borrowings on revolving credit facility, net
|
— | (4,551 | ) | |||||
(Repayments) on term loan facility
|
(2,200 | ) | (6,250 | ) | ||||
Proceeds from the issuance of common shares
|
181 | 107 | ||||||
Proceeds from the exercise of stock options
|
105 | 1,321 | ||||||
|
|
|
|
|||||
Net cash flows (used in) financing activities
|
(1,914 | ) | (9,373 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
(114 | ) | (305 | ) | ||||
|
|
|
|
|||||
Net change in cash and cash equivalents
|
(2,375 | ) | 1,762 | |||||
Cash and cash equivalents, beginning of period
|
7,677 | 2,981 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period
|
$ | 5,302 | $ | 4,743 | ||||
|
|
|
|
1.
|
Description of Business and Basis of Presentation:
|
2.
|
Revenue from Contracts with Customers
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
Data and Analytics Services Segment
|
||||||||||||||||
Time-and-material
|
$ | 5,917 | $ | 3,685 | $ | 11,771 | $ | 7,812 | ||||||||
Fixed-price Contracts
|
3,033 | 3,087 | 5,973 | 6,320 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal Data and Analytics Services
|
$
|
8,950
|
|
$
|
6,772
|
|
$
|
17,744
|
|
$
|
14,132
|
|
||||
|
|
|
|
|
|
|
|
|||||||||
IT Staffing Services Segment
|
||||||||||||||||
Time-and-material
|
$ | 44,708 | $ | 40,811 | $ | 85,689 | $ | 83,876 | ||||||||
Fixed-price Contracts
|
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal IT Staffing Services
|
$
|
44,708
|
|
$
|
40,811
|
|
$
|
85,689
|
|
$
|
83,876
|
|
||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenues
|
$
|
53,658
|
|
$
|
47,583
|
|
$
|
103,433
|
|
$
|
98,008
|
|
||||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
United States
|
$ | 51,532 | $ | 46,777 | $ | 99,474 | $ | 96,127 | ||||||||
Canada
|
1,018 | 734 | 2,282 | 1,595 | ||||||||||||
India and Other
|
1,108 | 72 | 1,677 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
$ | 53,658 | $ | 47,583 | $ | 103,433 | $ | 98,008 | ||||||||
|
|
|
|
|
|
|
|
3.
|
Business Combinations
|
(in thousands)
|
Amounts
|
|||
Cash purchase price at closing
|
$ | 9,664 | ||
Working capital adjustments
|
— | |||
Estimated payout of contingent consideration (1)
|
2,882 | |||
|
|
|||
Total Fair Value of Consideration
|
$ | 12,546 | ||
|
|
(1) |
Based on a valuation conducted by an independent third party, the fair value of contingent consideration at the closing date was determined to be $2,882,000. During the three month period ended June 30, 2021, the Company revalued the contingent consideration liability related to the AmberLeaf acquisition after determining that relevant conditions for payment of such liabilities were unlikely to be fully satisfied. The revaluation resulted in a $2.0 million reduction to the contingent consideration liability.
|
(in thousands)
|
Amounts
|
|||
Cash balances on hand
|
$ | — | ||
Increase in term loan debt facility
|
10,000 | |||
Revolving line of credit
|
(336 | ) | ||
|
|
|||
Cash Paid at Closing
|
$ | 9,664 | ||
|
|
(in thousands)
|
Amounts
|
|||
Cash on hand
|
$
|
319
|
|
|
Working capital assets, net of liabilities
|
1,153 | |||
Identifiable intangible assets:
|
||||
Client relationships
|
2,970 | |||
Covenant
not-to-compete
|
440 | |||
Trade name
|
490 | |||
Technology
|
770 | |||
|
|
|||
Total identifiable intangible assets
|
|
4,670
|
|
|
Goodwill
|
|
6,404
|
|
|
|
|
|||
Net Assets Acquired
|
$
|
12,546
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2021
Actual |
2020
Pro Forma |
2021
Actual |
2020
Pro Forma |
|||||||||||||
(Amounts in thousands, except per share data)
|
||||||||||||||||
Revenue
|
$ | 53,658 | $ | 50,217 | $ | 103,433 | $ | 103,851 | ||||||||
Net income
|
$ | 3,738 | $ | 3,245 | $ | 4,932 | $ | 5,582 | ||||||||
Earnings per share—diluted
|
$ | .31 | $ | .27 | $ | .41 | $ | .47 |
4.
|
Goodwill and Other Intangible Assets, net
|
As of June 30, 2021
|
||||||||||||||||
(Amounts in thousands)
|
Amortization
Period (In Years) |
Gross Carrying
Value |
Accumulative
Amortization |
Net Carrying
Value |
||||||||||||
IT Staffing Services:
|
||||||||||||||||
Client relationships
|
12 | $ | 7,999 | $ | 4,028 | $ | 3,971 | |||||||||
Covenant-not-to-compete
|
5 | 319 | 319 | — | ||||||||||||
Trade name
|
3 | 249 | 249 | — | ||||||||||||
Data and Analytics Services:
|
||||||||||||||||
Client relationships
|
12 | 19,641 | 5,684 | 13,957 | ||||||||||||
Covenant-not-to-compete
|
5 | 1,201 | 668 | 533 | ||||||||||||
Trade name
|
5 | 1,711 | 1,041 | 670 | ||||||||||||
Technology
|
7 | 1,979 | 766 | 1,213 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total Intangible Assets
|
$
|
33,099
|
|
$
|
12,755
|
|
$
|
20,344
|
|
|||||||
|
|
|
|
|
|
|||||||||||
As of December 31, 2020
|
||||||||||||||||
(Amounts in thousands)
|
Amortization
Period (In Years) |
Gross Carrying
Value |
Accumulative
Amortization |
Net Carrying
Value |
||||||||||||
IT Staffing Services:
|
||||||||||||||||
Client relationships
|
12 | $ | 7,999 | $ | 3,694 | $ | 4,305 | |||||||||
Covenant-not-to-compete
|
5 | 319 | 319 | — | ||||||||||||
Trade name
|
3 | 249 | 249 | — | ||||||||||||
Data and Analytics Services:
|
||||||||||||||||
Client relationships
|
12 | 19,641 | 4,866 | 14,775 | ||||||||||||
Covenant-not-to-compete
|
5 | 1,201 | 548 | 653 | ||||||||||||
Trade name
|
5 | 1,711 | 869 | 842 | ||||||||||||
Technology
|
7 | 1,979 | 624 | 1,355 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total Intangible Assets
|
$
|
33,099
|
|
$
|
11,169
|
|
$
|
21,930
|
|
|||||||
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||||||||||||
2021
|
2022
|
2023
|
2024
|
2025
|
||||||||||||||||
(Amounts in thousands)
|
||||||||||||||||||||
Amortization expense
|
$ | 3,168 | $ | 2,987 | $ | 2,772 | $ | 2,693 | $ | 2,553 |
5.
|
Leases
|
June 30, 2021
|
December 31, 2020
|
|||||||
( in thousands)
|
||||||||
Assets:
|
||||||||
Long-term operating lease
right-of-use
|
$ | 5,595 | $ | 3,286 | ||||
|
|
|
|
|||||
Liabilities:
|
||||||||
Short-term operating lease liability
|
$ | 1,435 | $ | 1,079 | ||||
Long-term operating lease liability
|
4,419 | 2,325 | ||||||
|
|
|
|
|||||
Total liabilities
|
$ | 5,854 | $ | 3,404 | ||||
|
|
|
|
Amount as of
June 30, 2021 |
||||
(in thousands)
|
||||
2021 (For remainder of year)
|
$ | 795 | ||
2022
|
1,689 | |||
2023
|
1,641 | |||
2024
|
900 | |||
2025
|
630 | |||
Thereafter
|
756 | |||
|
|
|||
Total
|
6,411 | |||
Less: Imputed interest
|
(557 | ) | ||
|
|
|||
Present value of operating lease liabilities
|
$ | 5,854 | ||
|
|
6.
|
Commitments and Contingencies
|
7.
|
Employee Benefit Plan
|
8.
|
Stock-Based Compensation
|
9.
|
Credit Facility
|
10.
|
Income Taxes
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
Income before income taxes:
|
||||||||||||||||
Domestic
|
$ | 5,566 | $ | 3,028 | $ | 7,447 | $ | 5,353 | ||||||||
Foreign
|
(399 | ) | 429 | (643 | ) | 354 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes
|
$ | 5,167 | $ | 3,457 | $ | 6,804 | $ | 5,707 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
Current provision (benefit):
|
||||||||||||||||
Federal
|
$ | 901 | $ | 186 | $ | 1,259 | $ | 514 | ||||||||
State
|
211 | 86 | 304 | 186 | ||||||||||||
Foreign
|
(26 | ) | 229 | (16 | ) | 339 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total current provision (benefit)
|
1,086 | 501 | 1,547 | 1,039 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Deferred provision (benefit):
|
||||||||||||||||
Federal
|
293 | 11 | 287 | (93 | ) | |||||||||||
State
|
70 | — | 68 | (30 | ) | |||||||||||
Foreign
|
(57 | ) | (77 | ) | (99 | ) | (159 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total deferred provision (benefit)
|
306 | (66 | ) | 256 | (282 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Change in valuation allowance
|
37 | 53 | 69 | 112 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total provision for income taxes
|
$ | 1,429 | $ | 488 | $ | 1,872 | $ | 869 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2021 |
Three Months Ended
June 30, 2020 |
|||||||||||||||
Income taxes computed at the federal statutory rate
|
$ | 1,085 | 21.0 | % | $ | 725 | 21.0 | % | ||||||||
State income taxes, net of federal tax benefit
|
277 | 5.4 | 220 | 6.3 | ||||||||||||
Excess tax benefit from stock options/restricted shares
|
19 | 0.4 | (582 | ) | (16.8 | ) | ||||||||||
Difference in income tax rate on foreign earnings/other
|
11 | 0.2 | 72 | 2.1 | ||||||||||||
Change in valuation allowance
|
37 | 0.7 | 53 | 1.5 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,429 | 27.7 | % | $ | 488 | 14.1 | % | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Six Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2020 |
|||||||||||||||
Income taxes computed at the federal statutory rate
|
$ | 1,429 | 21.0 | % | $ | 1,198 | 21.0 | % | ||||||||
State income taxes, net of federal tax benefit
|
381 | 5.6 | 356 | 6.2 |
11.
|
Derivative Instruments and Hedging Activities
|
Derivatives in ASC Topic 815 Cash Flow Hedging
Relationships
|
Amount of
Gain / (Loss) recognized in OCI on Derivatives |
Location of
Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) |
Amount of
Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) |
Location of
Gain / (Loss) reclassified in Income (Expense) on Derivatives |
Amount of
Gain / (Loss) recognized in Income (Expense) on Derivatives |
|||||||||||||||
(Effective
Portion)
|
(Effective
Portion)
|
(Effective
Portion)
|
(Ineffective Portion/Amounts
excluded from
effectiveness testing)
|
|||||||||||||||||
For the Three Months Ended June 30, 2021:
|
||||||||||||||||||||
Interest-Rate Swap Contract
|
$ | — | Interest Expense | $ | — | Interest Expense | $ | — | ||||||||||||
For the Six Months Ended June 30, 2021:
|
||||||||||||||||||||
Interest-Rate Swap Contract
|
$ | 35 | Interest Expense | $ | 34 | Interest Expense | $ | — | ||||||||||||
For the Three Months Ended June 30, 2020:
|
||||||||||||||||||||
Interest-Rate Swap Contract
|
$ | 26 | Interest Expense | $ | (34 | ) | Interest Expense | $ | — | |||||||||||
For the Six Months Ended June 30, 2020:
|
||||||||||||||||||||
Interest-Rate Swap Contract
|
$ | (68 | ) | Interest Expense | $ | (42 | ) | Interest Expense | $ | — |
June 30, 2021
|
December 31, 2020
|
|||||||||||
Derivative Instruments
|
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
||||||||
Interest-Rate Swap Contracts
|
Other Current
Liabilities |
$ | — |
Other Current
Liabilities |
$ | 35 |
12.
|
Fair Value Measurements
|
• |
Level 1—Inputs are observable quoted prices (unadjusted) in active markets for identical assets and liabilities.
|
• |
Level 2—Inputs are observable, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are directly or indirectly observable in the marketplace.
|
• |
Level 3—Inputs are unobservable that are supported by little or no market activity.
|
Fair Value as of June 30, 2021
|
||||||||||||||||
(Amounts in thousands)
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Interest-Rate Swap Contracts
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Contingent
C
onsideration
L
iabilities
|
$ | — | $ | — | $ | (900 | ) | $ | (900 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Fair Value as of December 31, 2020
|
||||||||||||||||
(Amounts in thousands)
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Interest-Rate Swap Contracts
|
$ | — | $ | (35 | ) | $ | — | $ | (35 | ) | ||||||
Contingent
C
onsideration
L
iabilities
|
$ | — | $ | — | $ | (2,882 | ) | $ | (2,882 | ) | ||||||
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
Twelve Months Ended
December 31, 2020
|
|||||||
(Amounts in thousands)
|
||||||||
Beginning balance
|
$ | 2,882 | $ | — | ||||
Contingent consideration liability incurred
|
— | 2,882 | ||||||
Payments made
|
— | — | ||||||
Revaluations
|
(1,982 | ) | — | |||||
|
|
|
|
|||||
Ending balance
|
$ | 900 | $ | 2,882 | ||||
|
|
|
|
13.
|
Shareholders’ Equity
|
14.
|
Earnings Per Share
|
15.
|
Business Segments and Geographic Information
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
Revenues:
|
||||||||||||||||
Data and Analytics Services
|
$ | 8,950 | $ | 6,772 | $ | 17,744 | $ | 14,132 | ||||||||
IT Staffing Services
|
44,708 | 40,811 | 85,689 | 83,876 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
$ | 53,658 | $ | 47,583 | $ | 103,433 | $ | 98,008 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross Margin %:
|
||||||||||||||||
Data and Analytics Services
|
46.7 | % | 52.2 | % | 46.2 | % | 49.5 | % | ||||||||
IT Staffing Services
|
22.7 | % | 22.4 | % | 22.1 | % | 21.9 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total gross margin %
|
26.7 | % | 26.6 | % | 26.2 | % | 25.9 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment operating income:
|
||||||||||||||||
Data and Analytics Services
|
$ | 769 | $ | 1,173 | $ | 1,163 | $ | 2,082 | ||||||||
IT Staffing Services
|
3,353 | 3,110 | 5,621 | 5,350 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal
|
4,122 | 4,283 | 6,784 | 7,432 |
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
Amortization of acquired intangible assets
|
(793 | ) | (669 | ) | (1,586 | ) | (1,342 | ) | ||||||||
Revaluation of contingent consideration liability
|
1,982 | — | 1,982 | — | ||||||||||||
Interest expenses and other, net
|
(144 | ) | (157 | ) | (376 | ) | (383 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes
|
$ | 5,167 | $ | 3,457 | $ | 6,804 | $ | 5,707 | ||||||||
|
|
|
|
|
|
|
|
June 30,
2021 |
December 31,
2020 |
|||||||
(Amounts in thousands)
|
||||||||
Total assets:
|
||||||||
Data and Analytics Services
|
$ | 57,492 | $ | 55,792 | ||||
IT Staffing Services
|
51,204 | 46,254 | ||||||
|
|
|
|
|||||
Total assets
|
$ | 108,696 | $ | 102,046 | ||||
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(Amounts in thousands)
|
(Amounts in thousands)
|
|||||||||||||||
United States
|
$ | 51,532 | $ | 46,777 | $ | 99,474 | $ | 96,127 | ||||||||
Canada
|
1,018 | 734 | 2,282 | 1,595 | ||||||||||||
India and Other
|
1,108 | 72 | 1,677 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues
|
$ | 53,658 | $ | 47,583 | $ | 103,433 | $ | 98,008 | ||||||||
|
|
|
|
|
|
|
|
16.
|
Recently Issued Accounting Standards
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Revenues (Amounts in millions)
|
Three Months Ended
June 30, 2021 |
Three Months Ended
June 30, 2020 |
||||||
Data and Analytics Services
|
$ | 9.0 | $ | 6.8 | ||||
IT Staffing Services
|
44.7 | 40.8 | ||||||
|
|
|
|
|||||
Total revenues
|
$ | 53.7 | $ | 47.6 | ||||
|
|
|
|
Gross Margin
|
Three Months Ended
June 30, 2021 |
Three Months Ended
June 30, 2020 |
||||||
Data and Analytics Services
|
46.7 | % | 52.2 | % | ||||
IT Staffing Services
|
22.7 | 22.4 | ||||||
|
|
|
|
|||||
Total gross margin
|
26.7 | % | 26.6 | % | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions)
|
Three Months Ended
June 30, 2021 |
Three Months Ended
June 30, 2020 |
||||||
Data and Analytics Services Segment
|
||||||||
Sales and Marketing
|
$ | 1.4 | $ | 1.2 | ||||
Operations
|
0.8 | 0.4 | ||||||
Amortization of Acquired Intangible Assets
|
0.6 | 0.5 | ||||||
Revaluation of Contingent Consideration
|
(2.0 | ) | — | |||||
General & Administrative
|
1.3 | 0.7 | ||||||
|
|
|
|
|||||
Subtotal Data and Analytics Services
|
$ | 2.1 | $ | 2.8 | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions)
|
Three Months Ended
June 30, 2021 |
Three Months Ended
June 30, 2020 |
||||||
IT Staffing Services Segment
|
||||||||
Sales and Marketing
|
$ | 1.9 | $ | 1.7 | ||||
Operations
|
2.2 | 2.0 | ||||||
Amortization of Acquired Intangible Assets
|
0.2 | 0.2 | ||||||
General & Administrative
|
2.6 | 2.3 | ||||||
|
|
|
|
|||||
Subtotal IT Staffing Services
|
$ | 6.9 | $ | 6.2 | ||||
|
|
|
|
|||||
Total S,G&A Expenses
|
$ | 9.0 | $ | 9.0 | ||||
|
|
|
|
• |
Sales expense increased by $0.4 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.2 million reflected AmberLeaf sales expense and $0.2 million was due to austerity measures implemented in the 2020 period, which have been unwound in 2021.
|
• |
Operations expense increased $0.6 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.4 million reflected investments made to the delivery organization of our Data and Analytics Services segment, including the impact of the AmberLeaf acquisition. Operations expense in our IT Staffing Services segment increased by $0.2 million and related to increases in staff and related variable expenses – both reflecting higher activity levels in 2021.
|
• |
Amortization of acquired intangible assets was $0.1 million higher in the 2021 period due to the AmberLeaf acquisition.
|
• |
Revaluation of contingent consideration totaled a credit of $2.0 million in the 2021 period and related to the AmberLeaf acquisition. No contingent consideration existed on the Company’s balance sheet in the corresponding 2020 period.
|
• |
General and administrative expense increased by $0.9 million in the 2021 period compared to the corresponding 2020 period. General and administrative expense in our Data and Analytics Services segment increased by $0.6 million due to executive leadership staff increases and higher stock-based compensation expense. In our IT Staffing Services segment, higher stock-based compensation expense and additional administrative staff (from the austerity-impacted levels of 2020) were responsible for a $0.3 million increase from 2020.
|
Revenues (Amounts in millions)
|
Six Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2020 |
||||||
Data and Analytics Services
|
$ | 17.7 | $ | 14.1 | ||||
IT Staffing Services
|
85.7 | 83.9 | ||||||
|
|
|
|
|||||
Total revenues
|
$ | 103.4 | $ | 98.0 | ||||
|
|
|
|
Gross Margin
|
Six Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2020 |
||||||
Data and Analytics Services
|
46.2 | % | 49.5 | % | ||||
IT Staffing Services
|
22.1 | 21.9 | ||||||
|
|
|
|
|||||
Total gross margin
|
26.2 | % | 25.9 | % | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions)
|
Six Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2020 |
||||||
Data and Analytics Services Segment
|
||||||||
Sales and Marketing
|
$ | 3.2 | $ | 2.5 | ||||
Operations
|
1.6 | 0.9 | ||||||
Amortization of Acquired Intangible Assets
|
1.2 | 1.0 | ||||||
Revaluation of Contingent Consideration
|
(2.0 | ) | — | |||||
General & Administrative
|
2.3 | 1.5 | ||||||
|
|
|
|
|||||
Subtotal Data and Analytics Services
|
$ | 6.3 | $ | 5.9 | ||||
|
|
|
|
S,G&A Expenses (Amounts in millions)
|
Six Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2020 |
||||||
IT Staffing Services Segment
|
||||||||
Sales and Marketing
|
$ | 3.7 | $ | 3.7 | ||||
Operations
|
4.2 | 4.4 | ||||||
Amortization of Acquired Intangible Assets
|
0.4 | 0.4 | ||||||
General & Administrative
|
5.3 | 4.9 | ||||||
|
|
|
|
|||||
Subtotal IT Staffing Services
|
$ | 13.6 | $ | 13.4 | ||||
|
|
|
|
|||||
Total S,G&A Expenses
|
$ | 19.9 | $ | 19.3 | ||||
|
|
|
|
• |
Sales expense increased by $0.7 million in the 2021 period compared to the corresponding 2020 period. The entire $0.7 million increase reflected investments in the sales organization of our Data and Analytics Services segment, of which $0.5 million pertained to the AmberLeaf acquisition. Sales expense in our IT Staffing Services segment was flat on a year-over-year basis.
|
• |
Operations expense increased by $0.5 million in the 2021 period compared to the corresponding 2020 period. Approximately $0.7 million reflected investments made to the delivery organization of our Data and Analytics Services segment, including the AmberLeaf acquisition. Operations expense in our IT Staffing Services segment declined by $0.2 million and largely related to reductions in staff although we started to
re-hire
in the second quarter to due increased demand.
|
• |
Amortization of acquired intangible assets was $0.2 million higher in the 2021 period due to the AmberLeaf acquisition.
|
• |
Revaluation of contingent consideration totaled a credit of $2.0 million in the 2021 period and related to the AmberLeaf acquisition. No contingent consideration existed on the Company’s balance sheet in the corresponding 2020 period.
|
• |
General and administrative expense increased by $1.2 million in the 2021 period compared to the corresponding 2020 period. General and administrative expense in our Data and Analytics Services segment increased by $0.8 million due to executive leadership staff increases and higher stock-based compensation expense. In our IT Staffing Services segment, higher stock-based compensation expense and additional administrative staff (from the austerity-impacted levels of 2020) were responsible for a $0.4 million increase from 2020.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
• |
hired additional personnel in both the first and second quarters of 2021;
|
• |
enhanced our management review control processes associated with complex accounting matters beginning in the first quarter and substantially completed in the second quarter of 2021; and
|
• |
started the systems implementation process in the second quarter of 2021 to move the Data and Analytics subsidiary responsible for material weakness #2 above, to our Oracle Cloud ERP System, which is expected to be completed in the fourth quarter of 2021.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total
Number of Shares Purchased |
Average
Price per Share |
Total Number
of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |
Maximum
Number of Shares that May Yet Be Purchased Under this Plan or Programs (1) |
||||||||||||
April 1, 2021 — April 30, 2021
|
— | — | — | — | ||||||||||||
May 1, 2021 — May 31, 2021
|
— | — | — | — | ||||||||||||
June 1, 2021 — June 30, 2021
|
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Total
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(1) |
As of June 30, 2021, the Company does not have a publicly announced repurchase program in place.
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ITEM 6.
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EXHIBITS
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MASTECH DIGITAL, INC. | ||||
August 6, 2021 |
/s/ VIVEK GUPTA
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Vivek Gupta
Chief Executive Officer
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/s/ JOHN J. CRONIN, JR.
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John J. Cronin, Jr.
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Chief Financial Officer
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(Principal Financial Officer)
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1 Year Mastech Digital Chart |
1 Month Mastech Digital Chart |
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