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Mastech Digital Reports Strong Second Quarter 2020 Results, Despite COVID-19PITTSBURGH, July 29, 2020 /PRNewswire/ -- Mastech Digital, Inc. (NYSE American: MHH), a leading provider of Digital Transformation IT Services, announced today its financial results for the second quarter ended June 30, 2020.  Second Quarter 2020 Highlights:
Mastech's Response to COVID-19: Vivek Gupta, the Company's President and Chief Executive Officer, stated, "I am pleased to say that the revenue decline was smaller than anticipated; and that our proactive actions, such as moving our entire workforce to a work-from-home model, instituting balanced austerity measures, and resisting temporary pricing pressures, allowed us to largely eliminate any negative impact on our gross margins and operating profits during the second quarter of 2020. Additionally, I believe our approach to date in responding to the crisis will serve us well in preparation for a future economic recovery." Second Quarter Results: Revenues for the second quarter of 2020 totaled $47.6 million compared to $48.5 million during the corresponding quarter last year. Gross profits in the second quarter of 2020 were $12.7 million, higher than the $12.1 million in the same quarter of 2019, despite lower revenues in the 2020 period. Gross margins in the second quarter of 2020 were a record 26.6% or 170-basis points higher than gross margins in the second quarter of 2019. GAAP net income for the second quarter of 2020 totaled $3.0 million or $0.25 per diluted share, compared to $6.0 million or $0.53 per diluted share during the same period last year. It should be noted that the second quarter of 2019 results benefited from a $6.1 million pretax revaluation of a contingent consideration liability. Non-GAAP net income for the second quarter of 2020 was $3.9 million or $0.33 per diluted share, compared to $2.2 million or $0.20 per diluted share in the second quarter of 2019. Activity levels at the Company's Data and Analytics Services segment held up well during the quarter despite some project delays. This segment did have a strong quarter of new bookings, which gives some indication that clients are willing to move forward with high-priority projects. Demand for the Company's IT Staffing Services segment was certainly below levels experienced a year ago. However, as the second quarter progressed, the demand did pick-up, albeit at a somewhat slower pace. Commenting on the Company's financial position, Jack Cronin, Mastech Digital's Chief Financial Officer, stated, "During the second quarter, we reduced bank debt by $7.4 million; increased our cash balances by over $2 million; improved our leverage ratios and increased our cash availability under our credit facility to $17.3 million from $15.2 million a quarter ago. As we stated at the start of this crisis, maintaining our strong liquidity position is a top priority for us during these uncertain times." Lastly, the quarter saw the launch of a new Remote Staffing service offering branded as MAS-REMOTE. This service allows Mastech Digital to offer to its customers the best technology talent in the U.S. - which is often not available within their geographic locations, but can be found elsewhere in the country. About Mastech Digital, Inc.: Mastech Digital (NYSE American: MHH) is a leading provider of Digital Transformation IT Services. The Company offers Data Management and Analytics Solutions, Digital Learning, and IT Staffing Services with a Digital First approach. A minority-owned enterprise, Mastech Digital is headquartered in Pittsburgh, PA with offices across the U.S., Canada, EMEA, India and ASEAN. Use of Non-GAAP Measures: This press release contains non-GAAP financial measures to supplement our financial results presented on a GAAP basis. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables. We believe that providing non-GAAP net income and non-GAAP diluted earnings per share offers investors useful supplemental information about the financial performance of our business, enables comparison of financial results between periods where certain items may vary independent of business performance, and allows for greater transparency with respect to key metrics used by management in operating our business. Additionally, management uses these non-GAAP financial measures in evaluating the Company's performance. Specifically, the non-GAAP financial measures contained herein exclude the following expense items: Amortization of acquired intangible assets: We amortize intangible assets acquired in connection with our June 2015 acquisition of Hudson IT and our July 2017 acquisition of the services division of InfoTrellis, Inc. We exclude these amortization expenses in our non-GAAP financial measures because we believe it allows investors to make more meaningful comparisons between our operating results and those of other companies within our industry and facilitates a helpful comparison of our results with other periods. Stock-based compensation expenses: We incur material recurring expense related to non-cash, stock-based compensation. We exclude these expenses in our non-GAAP financial measures because we believe that it provides investors with meaningful supplemental information regarding operational performance. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under ASC 718, we believe that providing non-GAAP financial measures that exclude these expenses allows investors to make more meaningful comparisons between our operating results and those of other companies within our industry and facilitates comparison of our results with other periods. Contingent consideration liability revaluation: In connection with the InfoTrellis acquisition, the Company may have been required to pay future consideration that was contingent upon the achievement of specific earnings before interest and tax objectives ("EBIT"). As of the acquisition date, the Company recorded a contingent consideration liability representing the estimated fair value of such contingent consideration that was expected to be paid. In the second quarter of 2019 this contingent consideration liability was reduced by $6.1 million to zero, after determining that relevant conditions for payment of such liability was unlikely to be satisfied. We believe that providing non-GAAP financial measures that exclude these adjustments to expense are useful for investors to understand the effects of these items on our total operating expenses and facilitate comparison of our results with other periods. Forward-Looking Statements: Certain statements contained in this release are forward-looking statements based on management's expectations, estimates, projections and assumptions. Words such as "expects," "anticipates," "plans," "believes," "scheduled," "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements, which include but are not limited to (i) projections of revenues, earnings, and cash flow, and (ii) the effects of the COVID-19 pandemic and the regulatory, social and business responses thereto. These statements are based on information currently available to the Company and it assumes no obligation to update the forward-looking statements as circumstances change. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, including, without limitation, the level of market demand for its services, the highly competitive market for the types of services offered by the Company, the impact of competitive factors on profit margins, market conditions that could cause the Company's customers to reduce their spending for its services, and the Company's ability to create, acquire and build new lines of business, to attract and retain qualified personnel, reduce costs and conserve cash, and other risks that are described in more detail in the Company's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2019. For more information, contact: Donna Kijowski
SOURCE Mastech Digital, Inc. 
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