Mastech Digital, Inc (MHH) research, news, and more from GeoInvesting

Company description

Wed, 19 Oct 2011 04:00:00 GMT

Mastech Holdings, Inc., together with its subsidiaries, provides information technology (IT) and specialized healthcare staffing services primarily in the United States. The company offers a range of IT staffing services in the areas of business intelligence, data warehousing, service oriented architecture, Web services, enterprise resource planning, package implementation life cycle, customer resource management, and ebusiness solutions. The company provides its IT services to automotive, consumer products, education, financial services, government, healthcare, manufacturing, retail, technology, telecommunications, transportation, and utilities through its wholesale and retail IT sales channels. Its healthcare staffing business offers specialized healthcare professionals, including surgical nurses, occupational and physical therapists, and locum tenens physicians to hospitals and other healthcare facilities. The company was founded in 1986 and is headquartered in Pittsburgh, Pennsylvania.

Research

Wed, 02 Nov 2022 04:00:00 GMT

Removing MHH From Model Portfolio

On April 18, 2022, we added Mastech Digital Inc (NYSE:MHH) ($15.31; $177.7M market cap) , a leading provider of digital transformation IT services, to our Select Long Disclosures Model Portfolio.

We highlighted MHH, along with Rcm Technologies, Inc. (NASDAQ:RCMT) and Tsr, Inc. (NASDAQ:TSRI), as IT Staffing companies that could benefit from favorable tailwinds in the industry. You can see our full writeups here:

MHH - See full write up here
RCMT - See full write up here
TSRI - See full write up here

Today the company announced its Q3 2022 results:

Sales of $63.1 million vs $59.5 million in the prior year
Non-GAAP EPS of $0.33 vs $0.38 in the prior year

"Both of our business segments came under a bit of stress during the quarter. Our Data & Analytics Services segment was unable to fully deploy the second quarter ramp-up of billable resources, resulting in lower revenues and sub-par utilization. There was also a project cost over-run that impacted our gross margin performance in this segment. Our IT Staffing segment, on the other hand, delivered positive financial results in the third quarter, although we did experience some decline in staffing demand as we've seen customers controlling their staffing spend in anticipation of potential recessionary conditions."

In addition to the above quote, the tone of the press release was extremely negative, underscoring the impact the recession or impending recession is having on customer demand for staffing needs.

If there are any positives from the press release, it is that the company has virtually paid down all the debt it accumulated ($20 million) in 2017 to acquire its data analytics business. It used cash flow to pay down $7.0 million worth of debt in the quarter, bringing its long-term debt to around $2 million.

Also, at a run-rate P/E of 11.5, the stock is still selling at a fairly attractive valuation for long-term GARP investors. We just don’t think shares are timely in the current market environment and we are searching for stocks that have the best GPR (expected consecutive quarters of 30% growth) set-up in the new risky environment we are currently facing. We will continue to watch the company for indications that business conditions are improving

Research

Wed, 27 Apr 2022 14:15:01 GMT

Mastech Digital Inc (NYSE:MHH) ($15.49; $182.0M market cap), a leading provider of digital transformation IT, was one of 3 IT staffing stocks we highlighted last month. The other 2 were Rcm Technologies, Inc. (NASDAQ:RCMT) and Tsr, Inc. (NASDAQ:TSRI).

MHH - See full write up here
RCMT - See full write up here
TSRI - See full write up here

On April 18, 2022, we added MHH to our Select Long Disclosures Model Portfolio. So far, it’s the only one of this trio that we added to that Portfolio. We have a Fireside Chat coming with TSRI coming soon, and will announce the date and time as we get closer to the event which should help us understand the company’s story to help us determine if it deserves to follow suit with MHH into the Long Disclosures.

We are in the process of scheduling a Fireside Chat with RCMT. The company is slated to report its first quarter 2022 earnings after the close today.

Today, the MHH announced Q1 2022 results:

Sales of $59.8 million vs $49.8 million in the prior year; below analyst estimates of $60.3
Non-GAAP EPS of $0.28 vs $0.19 in the prior year; below analyst estimates of $0.35

“2022 is off to a strong start with solid financial results in a quarter that has historically been weak", said Vivek Gupta, the Company's President and Chief Executive Officer. "Both of our business segments had sequential revenue growth, strong year-over-year top-line growth and solid operating profits. Additionally, we brought onboard Ganeshan Venkateshwaran, a seasoned leader with an impressive track record of successes in the digital transformation services space, as the Chief Executive Officer of our Data and Analytics Services segment. Ganeshan joins us with a wealth of knowledge around advanced technologies and digital transformation services to lead the next phase of growth for Mastech InfoTellis."

While the company was able to put together a really nice quarter along with record gross margins, it’s going to be interesting to see how investors react to the company's miss on analyst estimates. It seems like the miss earnings estimates may have come from an increase in SGA expenses, which were $11 million the fourth quarter of 2021 vs. $12 million in the first quarter of 2022.

We attended the company's related earnings conference call at 9AM EST, as the it’s conference calls often contain information arbitrage that’s not included in related press releases. We’re also hoping that they address the increase in operating expenses. We are assuming that the company may have had to get more aggressive on hiring recruiters in an competitive environment, where finding potential employees to fill customer needs is becoming increasingly challenging. Recruiters are hired by staffing companies to find new customers and/or employee candidates for customers.

Research

Mon, 18 Apr 2022 04:00:00 GMT

**Call To Action - Adding MHH to our select long model portfolio

Last week we highlighted Mastech Digital Inc (NYSE:MHH) ($20.79; $240.5M market cap), a leading provider of digital transformation IT, as one of 3 IT Staffing stocks we had in focus (TSRI and RCMT).

MHH - See full write up here
RCMT - See full write up here
TSRI - See full write up here

We know it’s a little risky adding MHH to the Model Portfolio ahead of its Q1 2022 earnings release (April 27th) and prior to our scheduling an interview with management, but we think the InfoArb in the Q4 2021 conference call transcript is telegraphing that the company will have a nice quarter which it will build upon throughout the next several quarters.

Research

Wed, 12 Feb 2020 18:27:07 GMT

Mastech Digital Inc (NYSE:MHH) ($15.49; $182.0M market cap), a leading provider of digital transformation IT, announced new deals worth $23 million for the month of December.

"Considering that Mastech InfoTrellis delivered annual revenues of $24 million just a year ago, these large orders are a testament to the yeoman efforts from Paul Burton and his team during 2019. With significant enhancements to our service offerings, a vastly improved backlog of work on hand and a robust pipeline driven by an energized sales engine, the future looks very promising for our data and analytics business."

The new orders come on the heels of the company just posting strong Q4 2019 results on February 5, 2020.

Research

Mon, 10 Feb 2020 16:12:28 GMT

Mastech Digital, Inc (NYSE:MHH) (Staffing & IT Services) reported non-GAAP EPS of $0.26 vs. $0.16 in the prior year on 13% topline growth, beating both top and bottom line analyst estimates for the quarter. A bullish conference call indicated strong momentum in 2019 should carry over into 2020 with a focus on improving operational efficiencies, which should help improve the bottom line. We will watch closely for sharp pullbacks as possible re-entry points.

Research

Tue, 29 Oct 2019 04:00:00 GMT

Mastech Digital Inc (NYSE:MHH) ($6.80; $77.2M market cap) , a leading provider of digital transformation IT services announced Q3 2019 results:

Sales of $49.5 million vs $44.3 million in the prior year
Non-GAAP EPS of $0.23 vs $0.20 in the prior year

"This clearly has been our best quarter in many ways. I am pleased with the performance of both our business units. Our data and analytics segment reported record revenues, with an expanded pipeline and strong gross margins of 46%. Despite investments made to our operating cost structure, we saw a 15% improvement in our year-on-year operating profits. We continue to grow faster than the industry average in our IT staffing business, with a revenue growth of 10%, operating profit growing at 13% and with expanded gross margins, on a year-on-year basis."

Conference Call Highlights

"Our data and analytics services segment broke the $7 million quarterly revenue barrier for the first time, and I'm confident that they'll be many more barriers that will be broken as we continue our barriers that will be broken as we continue our growth journey.

Our pipeline of opportunities continues to grow nicely continues to grow nicely continues to grow nicely and our project win ratio has improved with our has improved with our has improved with our has improved with our new service offerings."

Research

Wed, 24 Jul 2019 15:16:14 GMT

Removing MHH From Our Select Long Disclosure Screen

After posting strong Q4 2017 results in February of 2018, we re-established a long position in Mastech Digital Inc (NYSE:MHH) ($5.36; $59.0M market cap), a leading provider of digital transformation IT. As previously mentioned, this was our second go around with MHH. We have been following MHH for 7 years, starting in 2012 when we first coded the stock as a GeoBargain and the stock rising over 350% at highs. While shares rose over 100% during this second go around, they have pulled back and will end roughly flat since we re-established the position in February of 2018.

We continue to like management's commitment to the company (helped finance acquisitions through significant personal investment), as well as the company’s shift to a more digital transformation management focus.

MHH remains a deep value play (trading at trailing non-GAAP P/E of 7.5). However, we have decided to move on to other opportunities as the quarterly comps and growth rate have become more challenging. But more importantly, we are focusing our attention on more recurring revenue type of businesses for our longer-term holdings. For more project oriented businesses that experience lumpy revenue, such as MHH, we are more inclined to invest during growth inflection points, unless we see significant inorganic and organic long-term growth opportunities. Furthermore, our recent attempts to reconnect with management through an interview have been unsuccessful. However, we will review Q2 2019 results and keep trying to reach out to management in order to determine if some of the assumptions we are making are incorrect. We believe that shares are cheap enough where we could easily re-establish a position, if warranted.

Research

Tue, 12 Feb 2019 19:06:44 GMT

Mastech Digital Inc (NYSE:MHH) ($6.55; $71.7M market cap), a leading provider of digital transformation IT services, announced Q4 2018 results:

Sales of $44.6 million vs $40.5 million in the prior year
Non-GAAP EPS of $0.16 vs $0.16 in the prior year

"I am very pleased with Mastech Digital's performance in the fourth quarter as well as the full year 2018," commented Vivek Gupta, Mastech Digital's President and Chief Executive Officer. "We continue to make good progress in our mission of becoming a leading provider of digital transformation services. Our data and analytics services segment did well during the fourth quarter in terms of both pipeline growth and project wins. Investments made in our sales organization during the year are starting to bear fruit when we look at fourth quarter activity levels. Our IT staffing services segment delivered great results in the fourth quarter - as revenues grew by 11%; gross margins expanded by 60 basis points; and profitability improved largely as a result of our focus on digital technologies,"

“Demand for the Company's IT staffing services remained strong during the quarter and more than offset the expected higher level of seasonal assignment ends that the Company experiences during the fourth quarter.

“Activity levels increased in the fourth quarter of 2018 when compared to the previous quarter in terms of both pipeline opportunities and project wins.”

We are disappointed with the 4th quarter results but we'll take a closer look at the quarter and a conference call determine what's a gross Outlook for 2019 look like

Conference Call Notes

Thu, 01 Nov 2018 17:29:30 GMT

GeoBargain Mastech Digital Inc (NYSE:MHH) ($6.55; $71.7M market cap), a leading provider of digital transformation IT services, announced Q3 2018 results yesterday. The main takeaway from the quarter is that the legacy business is back on track to consistent growth and that the data analytics segment continues remains strong. While the results for the quarter were covered in yesterday’s email, here are some highlights from the call:

On its data and analytics services segment:

“We continue to see good pipeline demand for our D&A services, and we secured a number of projects with some exciting new logos during the quarter. However, several project wins were delayed until fourth quarter, which had a negative impact on the quarter's revenue levels. As I've stated in our previous calls, our data and analytics services business has inherent lumpiness due mainly project based, and therefore some fluctuation should be expected in revenues from quarter-to-quarter. I continue to be extremely confident in all aspects of this business.

On IT staffing services:

We are firing on all cylinders in this segment. As Jack mentioned, organic revenues grew 10% in Q3 on a year-over-year basis, we are adding nicely to our billable consultant base, gross margins have improved by 110 basis points from Q3 of 2017 and our operating cost structure has stabilized from investments made in 2017.

Research

Wed, 31 Oct 2018 15:04:00 GMT

GeoBargain Mastech Digital Inc (NYSE:MHH) ($6.71; $73.5M market cap) , a leading provider of digital transformation IT services, announced Q3 2018 results:

Sales of $44.3 vs $39.2 million in the prior year
Non-GAAP EPS of $0.20 vs $0.13 in the prior year

“Activity levels remained healthy in our data and analytics business segment and we continue to secure new assignments. However, revenue growth was impacted again in the third quarter due to the inherent lumpiness in this project-based business, as several project start dates were pushed out into the fourth quarter. Demand for the Company's IT staffing services also remained strong during the third quarter, and our billable consultant-base expanded by 11 consultants, despite a material increase in project ends. Additionally, gross margins in the IT staffing services segment increased by 110 basis points in the 2018 third quarter, when compared to the same period last year.”

The stock has come down sharply along with most other stocks over the last month and a half. In this regard, it was nice to see the company come through with solid earnings. Also of note is the fact that it looks like some projects were pushed into the fourth quarter, which should lead to a nice end of the year financial bump for the company. The short-term headwinds we see here are potential negative investor sentiment coming into rate hikes and the Fed’s desire to cool the economy down and what this could mean for employment.

Research

Mon, 10 Sep 2018 14:26:33 GMT

Late last week, we decided to take some Mastech Digital, Inc (NYSE AMEX:MHH) off the table after an incredibly strong run and a recent 2:1 split. On February 8, 2018, we re-established a long position in the stock based on strong Q4 2017 results and a bullish outlook when the stock was trading at a split adjusted price of $5.18. We also added MHH to our favorite stock mock portfolio on March 7, 2018 when the stock was trading at a split adjusted price of $5.95. The stock closed at $10.77 on Friday.

Research

Wed, 25 Jul 2018 16:08:19 GMT

GeoBargain Mastech Digital Inc (NYSE: MHH) ($17.08; $93.3M market cap), a leading provider of digital transformation IT services, announced Q2 2018 results:

Sales of $44.9 million vs $35.1 million in the prior year
Non-GAAP EPS of $0.41 vs $0.23 in the prior year

Quotes from management:

"It feels good to report record earnings for the second consecutive quarter," said Vivek Gupta, President and CEO, Mastech Digital. "While there was a bit of softness in our data and analytics segment due to certain project completions, our pipeline remains very strong. We continue to win important deals in this area that contribute to our digital transformation journey. Our IT staffing segment also continues to impress with significant increase in revenues, gross margins, and net income."

The Board of Directors has approved a 2 for 1 stock split:

“On July 24, 2018, the Company's Board of Directors declared a two-for-one stock split of its common stock. The record date for the stock split is August 13, 2018. Shareholders of record as of the close of business on the record date will receive one new share of common stock of the Company for every share that they own on such date. The distribution of the new shares of common stock will be made on August 24, 2018. The Company expects its common stock to begin trading at the split-adjusted price on August 27, 2018.”

On February 8, 2018, we re-established a long position based on strong Q4 2017 results and bullish outlook when the stock was trading at $10.36. We also added MHH to our favorite stock mock portfolio on March 7, 2018 when the stock was trading at $11.90.

Research

Thu, 26 Apr 2018 17:03:51 GMT

GeoBargain Mastech Digital Inc (NYSE: MHH) ($13.16; $71.8M market cap) is a leading provider of digital transformation IT services announced Q1 2018 results:

Sales of $43.3 million vs $33.1 million in the prior year
Non-GAAP EPS of $0.36 vs $0.09 in the prior year

Quotes from management:

Activity levels at the Company's data and analytics services segment continued at elevated levels, as revenues for the first quarter 2018 increased by 28% as compared to the fourth quarter of 2017. Demand for the Company's IT staffing services remained robust during the quarter and our billable consultant-base expanded by 30 consultants during the quarter. Additionally, gross margins in the IT staffing services segment increased by 120 basis points in the 2018 quarter, when compared to the same period last year.

"I am pleased with the way we have started the year," commented Vivek Gupta, President and CEO, Mastech Digital. "Our data and analytics segment, in particular, has performed well, backed by increased customer demand. This is the second consecutive quarter where we are seeing a sequential revenue growth of nearly 30% in this unit. We kicked off several exciting project-based engagements during the quarter and our pipeline continues to remain healthy.

On February 8, 2018 we stated we had re-established a long position based on strong Q4 2017 results and bullish outlook when the stock was trading at $10.36. We also added MHH to our favorite stockscreen on March 7, 2018 when the stock was trading at $11.90.

Research

Wed, 07 Mar 2018 05:00:00 GMT

**MHH Added To Maj’s Favorite Stock List

GeoBargain Mastech Digital Inc (NYSE: MHH) ($11.90; $64.9M market cap) - On February 8, 2018 we stated we had re-establish a long position based on strong Q4 2017 results and bullish outlook when the stock was trading at $10.36. The company is a leading provider of digital transformation IT services.

We will have more on our MHH thesis shortly.

Research

Thu, 22 Feb 2018 15:44:59 GMT

GB Mastech Digital Inc (NYSE: MHH) ($11.63; $63.4M market cap) is a leading provider of digital transformation IT services. On February 8, 2018 we stated we had re-establish a long position based on strong Q4 2017 results and bullish outlook. Today we are highlighting another investor’s perspective on MHH. We encourage you to read a Seeking Alpha article titled, “Mastech: A Rosy Update” by Rational Alpha. Bullet summary from the article:

Mastech is an off-the-radar, closely-held IT services company that is in the process of transforming itself into a higher growth and margin business, valued at 7x run rate earnings.
The company recently completed a highly accretive acquisition, that boosted not only EPS but also its growth rate and margin profile.
In the coming quarters, investors will get a clearer picture that MHH’s earnings power is $1.50 per share and growing, which should lead to a significant re-rating of the stock.

Conclusion

In conclusion, MHH should generate >$1.50 per share of EPS in 2018. We believe the stock is worth $20+ in 12 months.

Catalysts

The company will meet with investors at the Sidoti conference on March 29th.
Q1 earnings will be the first quarter where the company's new lower tax rate is used in reported EPS.

Research

Thu, 08 Feb 2018 16:48:04 GMT

Re-established A Long Position In GeoBargain MHH

Yesterday, we highlighted Mastech Digital Inc.’s (NYSE Amex:MHH) strong Q4 2017 earnings results. We have re-established a long position in this information technology (IT) and specialized healthcare staffing services company based on this strong quarter and bullish outlook. Shares are trading at an adjusted trailing P/E of 11.3, but we think the company could fetch a P/E of over 20. As we stated yesterday, we have been following MHH for 6 years starting in 2012 when we first coded the stock as a GeoBargain. You can see our full history on the MHH story here. Since this report, the company had consumated 2 acquisitions.

Research

Wed, 07 Feb 2018 18:30:13 GMT

GB Mastech Digital Inc (NYSE: MHH) ($9.50; $51.8M market cap), a leading provider of digital transformation IT services, announced Q4 2017 results:

Sales of $40.5 million vs $32.4 million in the prior year
Non-GAAP EPS of $0.32 vs $0.19 in the prior year

Quotes from management:

"I am very pleased with Mastech Digital's performance in the fourth quarter as well as for the full year 2017," commented Vivek Gupta, Mastech Digital's Chief Executive Officer. "It has been our stated intent to become a leading player in digital transformation services. With the acquisition of the services division of InfoTrellis in July and operating investments during the year, I'm pleased that we are well on course in that journey. Our Data and Analytics segment did particularly well during the fourth quarter as we saw a 26% growth in revenues over the revenues reported in the previous quarter due to higher project wins and reflective of a full quarter of operations by this segment, which was acquired in July 2017. Our IT staffing services segment continued to see strong demand and more notably was able to improve gross margins to 20.4% in the fourth quarter, which is approximately 70-basis points higher than the same quarter of 2016. Overall, it has been a great year for the Company."

We have been following MHH for 6 years, starting in 2012 when we coded the stock as GeoBargain. Shares rose over 300% in the first year on the heels of strong earnings and special dividends. But since 2015, the stock has gradually declined due to some project execution issues and overall softness/maturation of its legacy business. However, a recent acquisition has provided the company with a new growth segment in its industry and seems to be paying off, as evidenced by the strong quarter. We also like that the acquisition was was partially funded by management. It is also worth noting that we are very impressed with the management team, based on our previous interviews with them.

Research

Wed, 01 Nov 2017 14:45:02 GMT

GB Mastech Digital Inc (NYSE: MHH) ($12.75; Market Cap $69.4m), a leading provider of digital transformation IT services, announced its Q3 2017 results:

Revenues of $39.2 million vs. $34.2 million in prior year
Non-GAAP diluted EPS of $0.27 vs. $0.25 in prior year

It is possible that the stock may pullback on these numbers from trigger happy shareholders not impressed with the EPS growth. But, temporary business disruptions as a result from Hurricane season impacted the company. However, the data and analytics segment was down on a year over year basis. Per the conference call the Company hopes the segment will grow possibly at the industry average at around 10%. The company does not plan to give guidance. This is a slight divergence from management's past practice of typically stating they expect to grow at 1.5X the industry average.

Comments from management:

"In July 2017, we completed our acquisition of InfoTrellis' consulting business, which specializes in data management and analytics services. I am pleased to say that this business was operationally accretive to earnings right out of the gate. With an impressive management team and a strong pipeline of prospective opportunities, I feel confident that entering this high-value space will prove to be a pivotal moment in the evolution of Mastech Digital.

Our IT staffing services business continued to grow its billable associate-base for the third consecutive quarter. And we continued to see tangible returns from the investments made in our sales and recruitment organizations since the beginning of 2017.While our revenues were adversely impacted by the disruptions caused by the hurricanes in the states of Florida and Texas, I believe we did an admirable job of performing well with elements of our business that we could control. " said Vivek Gupta, Mastech Digital’s Chief Executive Officer.

We recently highlighted MHH as a slight information arbitrage opportunity based on the 8K/A filed on September 27, 2017 that provided pro forma results from its recent Trellis acquisition. You can see our “Info Arb” research note here.

Research

Mon, 02 Oct 2017 17:24:15 GMT

MHH ($12.96), a provider of IT and healthcare staffing services, issued a dose of information arbitrage through an 8K/A issued on September 27,2017 that provided pro forma results from its recent Info Trellis acquisition. There was no press release issued on this development. For the twelve months ended December 31, 2017, pro forma EPS would have been $1.27 ($0.56 from MHH and $0.71 from Info Trellis). However, for the three months ended March 31, 2017, pro forma combined EPS was only $0.16 ($0.04 from MHH and $0.12 from Info Trellis). While we need to examine the seasonality, there is no question the Info Trellis acquisition is giving a major boost to MHH’s bottom line. Applying a P/E of 15 on the December 31, 2016 trailing EPS of $1.27 would equate to a near term price target of $19.05. (MHH currently trading at a TTM P/E of 23.6)

We used a conservative trailing P/E of 15, since MHH is still having some issues operationally and Q1 2017 pro forma looks like Info Trellis may be doing less than the prior year.

We feel that this acquisition, coupled with recent insider support as management helped finance the acquisition, could ultimately lead to shares trading at a premium industry P/E multiple of closer to 25.

Research

Wed, 26 Jul 2017 14:47:45 GMT

GeoBargain MHH ($8.97) - On July 7, 2017, MHH announced the acquisition of InfoTrellis, a Canada-based Data Management & Analytics company. We stated recently that we had been waiting for a reason to get excited about MHH once again. Our first success we had with MHH was swift but meaningful. We coded MHH as a GeoBargain on December 19, 2012 when the stock was trading at $4.40. MHH had early success, eclipsing $19 in late 2013. However, execution issues on some projects, market conditions and other minor issues have plagued the company’s financial performance for the last few years. With its recent acquisition and management “skin in the game” investment to finance it, we are watching MHH closely once again.

This morning, MHH announced Q2 2017 results:

$35.1 million vs $33.6 million in the prior year
Non-GAAP EPS of $0.23 vs $0.25 in the prior year

Quotes from management:

"I am pleased to see the continuation of higher levels of activity during the quarter and delighted with our 8% growth in consultants-on-billing. We are clearly seeing tangible payback from the investment in our sales and recruitment organizations during the first half of 2017. We are excited to be entering the third quarter with strong momentum and the InfoTrellis acquisition completed as planned."

Research

Fri, 07 Jul 2017 04:00:00 GMT

Time to Get Excited About MHH Once Again?

We have been waiting for a reason to get excited about ex-GeoBargain staffing company Mastech Digital Inc(AMEX:MHH) for some time now. MHH is an information technology (IT) staffing and digital transformation services company. Our first success we had with MHH was swift but meaningful. We coded MHH as a GeoBargain on December 19, 2012 when the stock was trading at $4.40. MHH had early success, eclipsing $19 in late 2013. But execution issues on some projects, market conditions and other minor issues have plagued financial performance for most the last few years.

This morning MHH announced the acquisition of InfoTrellis, stating:

InfoTrellis brings highly specialized capabilities in Data Management & Analytics to Mastech Digital's suite of service offerings
Acquisition will significantly strengthen Mastech Digital's capability to offer consulting and project-based delivery of digital transformation services
Combined entity has augmented scale, expanded global delivery capability, and deeper leadership strength
Total associate headcount to exceed 1,500 globally

While no details on profitability (only revenue) were provided on the acquired company, we are intrigued that:

MHH insiders are participating in the equity portion of the deal to help finance the acquisition at $7.00 (higher than the current closing price).
Only a $35.7 million of the $55 million price tag is due at closing. The rest ($19.3 million) is being deferred over the next two years and is contingent upon the acquired business generating specified EBIT (Earnings Before Interest and Taxes) targets during the two years
following the closing.

We’re going to wait for more details on the acquired company and potentially interview management. We’ve always been impressed with management and their vision over the years.

Research

Mon, 13 Mar 2017 14:34:18 GMT

Closed Our Long Positions In Two GeoBargains

To free up capital for more timely opportunities, we have decided to exit our positions in two long-tenured GeoBargains, but continue to believe long-term shareholders will likely be rewarded. The management teams of both companies have a history of returning capital to shareholders as well as confidence that growth will resume in the near future. For these reasons, we have still decided to leave both as GeoBargains.

$RCMT ($5.13) engages in the design, development, and delivery of business and technology solutions to commercial and government sectors. We coded RCMT as a GeoBargain on December 16, 2014 when the stock was trading at $4.78 (adjusted for special dividends and stock splits). Shares had a brief run reaching a high of $9.25 in late 2014. It seems management's plan of returning to growth, initially stymied by the oil crisis, has been taking much longer than anticipated. However, its latest earnings release suggests growth for 2017:

“We believe that the foundation laid in 2016 will set RCM up for significantly improved operational performance in 2017, particularly as we progress throughout the year.”

“We are very excited about our business as we head into 2017 and expect to see significant growth in annual operating income.”

A potential positive to RCMT would be growth coming back from its oil and gas customers

$MHH ($6.26) provides information technology (IT) and specialized healthcare staffing services primarily in the United States. We coded MHH as a GeoBargain on December 19, 2012 when the stock was trading at $4.40. Similar to RCMT, MHH had early success, eclipsing $19 in late 2013. In conjunction with its recent Q4 2016 results, management stated:

“With investments made in 2016 to enhance both our sales and recruitment capabilities, I'm confident in our abilities to accelerate growth in 2017."

As for MHH, there is the added caveat of potential adverse effects from regulatory changes made by the Trump administration that could lead to less companies hiring workers outside the United States. A positive catalyst is that management is on the hunt for acquisitions.

We can see both stocks not moving higher until the management teams prove they have turned the corner back to sustainable growth trends.

With both companies trading at TTM P/E of 12, we certainly feel that multiple expansion is likely once the companies prove that they are indeed back on a growth path. We plan to interview RCMT in the coming days.

Research

Wed, 08 Feb 2017 16:01:28 GMT

MHH ($7.10) (Staffing) reported Q4 2016 results:

Sales of $32.4 million vs $32.5 million in the prior year
Non-GAAP EPS of $0.19 vs $0.31 in the prior year

Quotes from management:

"While our fourth quarter operating results were challenged on a year-over-year basis, due in part to several favorable cost adjustments in the 2015 quarter and increased investment in our business, I was pleased with our consultants-on-billing performance and the continued progress with respect to our digital transformation efforts. With investments made in 2016 to enhance both our sales and recruitment capabilities, I'm confident in our abilities to accelerate growth in 2017."

While 2016 was a disappointing year, the company believes the company it is in better position to obtain sustainable growth than it was in the prior year. One of the main reasons the company believes it is poised for growth in 2017 is due to an increase in talent pool and the digital transformation efforts the company embarked on in 2016. In September 2016, the company changed its name from Mastech Holdings to Mastech Digital to:

“reinforce the message that it is fully committed to the word digital which includes the SMAC, Automation and IoT technologies. (SMAC is an acronym for Social, Mobility, Analytics and Cloud.) “

With a trailing P/E of 8.4, we think investors have priced in an expectation of weak growth. So, MHH is certainly a deep value play which could be on the brink of accelerated growth and an expansion of valuation multiples. MHH has been one of our longest tenured GeoBargains ( December 2012), rising over 350% out of the gate, before underperforming since 2015.

Big Caveat:

Trump Risk- MHH sources some of its staffing pool from India

Research

Wed, 26 Oct 2016 15:20:21 GMT

MHH ($7.88) reported Q3 2016results:

Sales of $34.3 million vs $34.6 million in the prior year period
Non-GAAP EPS of $0.25 vs $0.25 in the prior year

Quotes from management:

“we rebranded the Company, which included our name change to Mastech Digital, a new logo and the launch of a refreshed corporate website - all reflective of our ongoing transformation into a digital technologies company. As our digital services gain further traction over the next several quarters, we expect that the pace at which we grow our business will accelerate as well."

Comments & Business Outlook

Wed, 27 Jul 2016 14:38:25 GMT

MHH ($6.41) reported Q2 2016 results:

Sales of $33.6 million vs $29.3 million in the prior year
Non-GAAP EPS of $0.25 vs $0.18 in the prior year

Comments from management:

"We were able to organically grow our consultant-base during the quarter by 7%; our gross margins improved nicely from a quarter ago; and we completed a number of personnel moves aimed at strengthening our leadership capabilities and improving our operational effectiveness. Additionally, we have begun our journey of re-positioning Mastech to capitalize on opportunities in the vast area of digital technologies."

Research

Wed, 27 Jul 2016 14:38:16 GMT

MHH ($6.41) reported Q2 2016 results:

Sales of $33.6 million vs $29.3 million in the prior year
Non-GAAP EPS of $0.25 vs $0.18 in the prior year

Comments from management:

"We were able to organically grow our consultant-base during the quarter by 7%; our gross margins improved nicely from a quarter ago; and we completed a number of personnel moves aimed at strengthening our leadership capabilities and improving our operational effectiveness. Additionally, we have begun our journey of re-positioning Mastech to capitalize on opportunities in the vast area of digital technologies."

While this was a strong quarter, MHH will likely need to experience greater synergies from its Hudson acquisition or consummate another acquisition to maintain strong quarterly growth moving forward. With trailing non-GAAP EPS of $0.97, MHH certainly has deep value (trailing P/E of 7.2), but multiple expansion may be difficult if growth trends flaten. We will look to interview management again to gain more color on growth opportunities.

Research

Wed, 27 Apr 2016 15:47:37 GMT

MHH ($7.70) - GeoBargain MHH is a national provider of IT staffing services. MHHannounced its Q1 2016 results:

Sales of $31.7 million vs $27.1 million in the prior year
Non-GAAP EPS of $0.16 vs $0.11 in the prior year

Quotes from management:

"While it's encouraging to see an expansion in our consultant-base during the first quarter of 2016 after several quarters of decline, we will work to strengthen our organization by seeking to add talent in all facets of our business. Additionally, we will continue to assess cost savings opportunities in areas where we are not achieving the desired paybacks. I'm confident that we can return the Company to a growth trajectory, without materially altering our "industry advantaged" operating cost structure."

MHH only has 1 possibly 2 favorable quarterly comparisons left in which we believe year over year results could show significant growth fueled by the Hudson acquisition closed on June 16, 2015. MHH will need to experience greater synergies from its Hudson acquisition to maintain strong quarterly growth moving forward, unless they consummate another acquisition, which is not totally out of the question.

Research

Wed, 03 Feb 2016 15:58:16 GMT

MHH ($6.76) reported fourth quarter 2015 results:

Sales of $32.5 million vs $28.5 million in the prior year
EPS of $0.31 vs $0.18 in the prior year

While It seems the legacy business is still having some difficulties which we have highlighted in past, the full contribution from the recent Hudson acquisition has boosted results. MHH has 3 favorable quarterly comparisons left where we believe year over year results should show significant growth fueled by the acquisition. The key for longer term success will be if management can overcome some of the obstacles they have faced in growing the core business. Quotes from management suggest that they are keying in on driving core business growth:

"While our fourth quarter operating results and year-over-year comparables indicate that we have done an excellent acquisition in Hudson IT, I am disappointed with our performance in driving new starts during the fourth quarter. While our consultant-base decline did reflect a high level of assignment ends, we had ample opportunities on the starts side to mitigate this negative impact. As we enter 2016, our primary operational objective is to address these start issues and return the Company to a consistent growth trajectory with respect to our billable consultant base."

Research

Wed, 28 Oct 2015 15:40:26 GMT

Still Long GeoBargain MHH

On June 24, 2015, we stated we were once again taking a closer look at IT Staffing company Mastech (MHH) due to its recent acquisition of Hudson Global, mentioning that we would perform further due diligence in coming weeks. Our initial analysis showed that the Hudson acquisition could add roughly $7.5 million in revenues and $0.07 in non-GAAP EPS per quarter, setting the stage for MHH to report at least 4 strong quarters of sales and earnings growth. In our October 6, 2015 e-mail, we stated we were making a pre-earnings bet on MHH. Today, MHH reported strong Q3 2015 results:

Revenues totaled $34.6 million, compared to $28.6 million in the 2014 third quarter
Non-GAAP diluted earnings per share were $0.25 versus $0.21 in the 2014 third quarter

We are maintaining our long position as we digest the quarter and potential caveats.

On the Q3 2015 conference call, management described a full employment market for IT professionals in the U.S. MHH is losing more consultants to clients and other opportunities. The company is adapting by putting more consultants on employment contracts in an effort to retain talent. Management also described tightening macro conditions for IT talent globally. Colleges and Universities are not putting out enough graduates to meet demand and the offshore market for IT professionals is maturing. The shortage of IT talent will inevitably lead to higher costs for consultants. Some of that cost will be offset by higher billing rates where possible.

Research

Tue, 06 Oct 2015 04:00:00 GMT

Looking to build MHH and BGSF
We will look to build a small to medium size positions in Mastech Holdings Inc Common St (AMEX:MHH) ($7.84) and Bg Staffing Inc Common Stock (AMEX:BGSF) ($13.35) prior to the Q3 results, which are slated to be reported at the end of October.

On June 24, 2015 we stated we were taking a closer look once again at IT Staffing company MHH due to its recentacquisition of Hudson Global, mentioning that we would perform further due diligence. Our initial analysis shows that the Hudson acquisition could add roughly $7.5 million in revenues and $0.07 in non-GAAP EPS per quarter, setting the stage for MHH to report at least 4 strong quarters of sales and earnings growth.

The major wildcard in the story is the health of MHH’s legacy business, which has been tempered with growth challenges since Q2 2014 revolving around recruitment and project management issues. It appears the company may have addressed the challenges that were affecting its organic growth.

Management's commentary in its recent Q2 2015 call indicates that the company’s growth is set to accelerate in the second half of 2015. Resolving the issues with the legacy business combined with the acquisition of a company that carries higher margins than the legacy business could give MHH an advantage on two fronts, especially if management's previous guidance to grow its sales at 1.5x the industry average is back on the table.

We are nibbling at shares of BGSF, another IT Staffing company in our crosshairs, which was brought to our attention byTaglich Brothers, whose past recommendations have panned out for us on a number of occasions. We believe BGSF presents a unique opportunity, similar to Educational Development Corpora (NASDAQ:EDUC) in that it is paying a high dividend yield ( 7%) and is in the midst of a strong growth phase. BGSF is growing organically and through acquisitions. Its recent acquisition of Vision Technology Services will add roughly $30 million in sales and $3.9 million in EBITDA. Based on Q2 2015 numbers BGSF’s EBITDA run rate was $4.1 million. The company reported strong Q2 numbers on August 3, 2015 , and that was prior to the acquisition.

Sales of $49.8 million vs $42.8 million in the prior year
EPS of $0.20 vs $0.04 in the prior year

We plan to interview management shortly to

learn more about growth catalysts
address seasonality issues
determine if the the level of Sales EPS levels achieved in Q2 2015 are sustainable.

Both companies appear to be on track to achieve a 12 month forward EPS run rate of at least $1.00, resulting in forward P/E’s of 7.8 for MHH and 13.3 for BGSF. We can see both companies trading at north of $15 if our run rate analysis is correct.

Comments & Business Outlook

Wed, 29 Jul 2015 04:00:00 GMT

Second Quarter 2015 Results

Revenues totaled $29.3 million, compared to $27.7 million in the 2014 second quarter;
Non-GAAP diluted earnings per share were $0.18 versus $0.21 in the 2014 second quarter;

Commenting on the Company's second quarter 2015, Kevin Horner, Mastech's Chief Executive Officer, stated, "I am excited about several key components of our second quarter performance. We were able to organically grow consultants on billing during the quarter; our gross margins improved nicely from a quarter ago as we continued to take a disciplined approach with respect to profit content on new assignments; and we successfully closed our acquisition of Hudson IT in mid-June. Hudson IT brings a retail client-base and a relationship selling model to Mastech which, when coupled with our centralized recruiting model, represents a real opportunity to accelerate growth in the second half of 2015."

Jack Cronin, Mastech's Chief Financial Officer, stated, "With an agreement to expand and extend our credit facility with PNC Bank in place, we comfortably funded our $17 million acquisition of Hudson IT. At June 30, 2015 we had bank debt, net of cash balances on hand, of $13.4 million and had approximately $8.3 million of borrowing capacity available to us under our revolving credit line. Required principle payments on our outstanding borrowings over the next twelve months are a manageable $1.8 million."

Research

Wed, 24 Jun 2015 14:36:49 GMT

Mastech Holdings - MHH - GeoTeam Closely Tracking Recent Developments

Prior to rebuilding a long position we need to interview management in order to determine:

If margins can improve to levels they were at before recent operational problems were encountered.
Why it believes a recent acquisition will be accretive to earnings, given that the parent company has a history of losing money and is expected to lose money through 2016.

After rising 317% within the first year as a GeoBargain, MHH shares slowly retraced to current levels. Shares of MHH have not been a timely investment over the last several quarters. Financial results were impacted by poor execution on some of the company’s projects. You can see more on this issue from the company’s comments in its Q2 2014 releasehere. In our 10/23/2014 email we stated :

“...we would begin to slowly rebuild a small position in shares of MHH and stated it's possible that a bullish position in MHH will require some investor patience for two quarters while management proves it can begin to deliver growth again.”

Management claims to have addressed the issues that were impacting its operations and is optimistic about its prospects moving forward. More importantly, MHH recently closed the acquisition of a subsidiary of Hudson Global (HSON), which is expected to immediately be accretive to earnings. Here are some quotes from the Q1 2015 release:

“This acquisition will provide Mastech with an impressive list of direct retail client relationships. We plan to maintain this relationship-focused business and all of its sales and recruiting staff. Additionally, we believe that there will be opportunities to leverage the advantages of Mastech's high-volume, low cost recruiting engine to enhance client value. I am very excited about this opportunity, which is expected to be immediately accretive to earnings and is estimated to increase Mastech's revenue run-rate by close to 30 percent."

Here's a statement regarding improving business and restructuring:

“With our leadership changes and organizational realignments in place, I am starting to see clear improvements in the business as we enter the second quarter."

We first coded MHH as a GeoBargain on 12/19/2012 when the stock was trading at $4.40 (adjusted for 4 for 5 split and $2.00 special dividend). At its highs, MHH's peak return was over 350%.

As we disclosed in our morning email, we do not currently have a long position in MHH ($8.95). However, we are closely tracking recent developments.

Acquisition Activity

Tue, 16 Jun 2015 04:00:00 GMT

PITTSBURGH, June 16, 2015 /PRNewswire/ -- Mastech Holdings, Inc. (NYSE MKT: MHH), a national provider of Information Technology staffing services, announced today the completion of its previously announced agreement to acquire Hudson Global's U.S. IT staffing business. The planned acquisition was announced on May 11, 2015, subject to customary closing conditions.

As previously disclosed, the financial terms of the acquisition included a $17 million cash purchase price paid at closing, with the seller retaining working capital. The cash purchase price was paid with a combination of cash balances on hand and borrowings under the Company's existing credit facility. Mastech expects the transaction to be immediately accretive to earnings.

Commenting on the acquisition, Kevin Horner, Mastech's Chief Executive Officer, stated, "After several months of working towards a successful closing with the Hudson IT team , I am more excited than ever about the long-term potential of our combined company. Given Hudson's impressive stable of direct retail clients and talented sales and recruitment team, I'm confident that this transaction will prove to be a rewarding experience for our shareholders, our collective clients and our employees as well."

Raptor Partners LLC acted as Company's financial advisor on the transaction and Pepper Hamilton LLP acted as its legal advisor.

Acquisition Activity

Mon, 11 May 2015 04:00:00 GMT

PITTSBURGH, May 11, 2015 /PRNewswire/ -- Mastech Holdings, Inc. (NYSE MKT: MHH), a national provider of Information Technology staffing services, announced today that its wholly-owned subsidiary, Mastech, Inc. has entered into a definitive asset purchase agreement to acquire Hudson Global's U.S. IT staffing business. The transaction is subject to customary closing conditions and expected to close in the second quarter of 2015.

The financial terms of the agreement include a $17 million cash purchase price paid at closing, with the seller retaining working capital. The cash purchase price will be paid with a combination of cash balances on hand and borrowings under the Company's existing credit facility. Mastech expects the transaction to be immediately accretive to earnings.

Commenting on the planned acquisition, Kevin Horner, Mastech's Chief Executive Officer, stated, "I'm extremely excited about this opportunity, which will materially increase our scale and enhance our abilities to service our collective clients. As I have mentioned on numerous occasions, a selective acquisition is an important component of our long-term growth strategy. With its impressive list of direct retail clients, domestic recruitment focus and adept management talent, Hudson's U.S. IT Staffing business is a compelling fit for Mastech, and I believe it will serve to strengthen our overall business model."

Raptor Partners LLC acted as Company's financial advisor on the transaction and Pepper Hamilton LLP acted as its legal advisor

Comments & Business Outlook

Mon, 11 May 2015 04:00:00 GMT

First Quarter 2015 Results

Revenues totaled $27.1 million compared to $28.7 million in the 2014 first quarter;
EPS of $0.09 (excluding severance costs) versus $0.20 per diluted share in the 2014 first quarter

Comments on the Proposed Acquisition of Hudson Global's U.S IT Staffing Business:

Earlier today, Mastech announced that it signed a definitive asset purchase agreement to acquire Hudson Global's U.S. IT staffing business. Commenting on the proposed acquisition, Kevin Horner stated, "This acquisition will provide Mastech with an impressive list of direct retail client relationships. We plan to maintain this relationship-focused business and all of its sales and recruiting staff. Additionally, we believe that there will be opportunities to leverage the advantages of Mastech's high-volume, low cost recruiting engine to enhance client value. I am very excited about this opportunity, which is expected to be immediately accretive to earnings and is estimated to increase Mastech's revenue run-rate by close to 30 percent." Subject to the completion of customary closing conditions, the acquisition is expected to close in the second quarter of 2015.

Comments & Business Outlook

Wed, 28 Jan 2015 05:00:00 GMT

Fourth Quarter 2014 Results

Revenues from continuing operations for the fourth quarter of 2014 totaled $28.5 million vs $28.4 million in the corresponding quarter last year.
Consolidated net income from continuing operations for the fourth quarter 2014 totaled $782,000 or $0.18 per diluted share, compared to $961,000 or $0.22 per diluted share, during the same period last year.

While demand for the Company's staffing services continues to be robust, supply-side pressures are impacting both attrition levels and consultant compensation increases. These pressures are impacting average assignment durations and are having some adverse effect on gross margins. Gross margins from continuing operations in the fourth quarter of 2014 were 18.3%, which was in-line with third quarter 2014's performance, but below our gross margins reported a year earlier.

Commenting on the Company's fourth quarter 2014 performance, Kevin Horner, Mastech's Chief Executive Officer stated, "Despite strong performance in October and November, December proved to be an extremely challenging month in our fourth quarter. Weaker sales and recruiting activity levels, driven by the holiday season, combined with an abnormally high level of assignment ends, negatively impacted our billable consultant base. Historically we plan for a higher level of project ends at year-end. However, this year we faced a number of unexpected resignations and client hires, which reflects a tightening of supply in the marketplace. During the quarter, we tweaked our offshore leadership which will enhance the Company's prospects for future growth. Our expectations for 2015 are to achieve growth levels in excess of our industry average and to continue to invest in our business organically and by acquisition should an attractive opportunity arise."

Comments & Business Outlook

Wed, 22 Oct 2014 04:00:00 GMT

Third Quarter 2014 Results

Revenues from continuing operations for the third quarter of 2014 totaled $28.6 million vs $28.2 million in the prior year period.
Consolidated net income from continuing operations for the third quarter 2014 totaled $879,000 or $0.20 per diluted share, which was in-line with last quarter's performance and compared to $999,000 or $0.23 per diluted share during the same period last year.

Demand for our IT staffing services remained in-line with activity levels of a quarter ago. Our ratio of new assignment wins-to-activity levels improved during the recent quarter and, accordingly, we were able to increase our billable consultant-base by approximately 4-percent. Gross margins in the third quarter of 2014 were 18.3% compared to 18.9% reported a year earlier. Compensation increases in excess of bill rate increases and slightly lower margins on new assignments in our wholesale channel impacted overall margins during the quarter.

Kevin Horner, Mastech's Chief Executive Officer stated, "I'm pleased to report that we have essentially recovered all of our billable consultant headcount that was lost in the surprise project termination during the previous quarter. As I communicated in our last earnings call, third quarter's revenue and gross profit performance would be impacted by this unexpected project termination. As a result of this recovery, we were able to achieve 4% sequential growth in both revenues and billable consultants during the third quarter. Additionally, we continued to invest for growth during the quarter by ramping-up the production side of our business with the aggressive hiring of recruitment resources at both of our facilities in India and sales staff in the U.S. While these hires constrained our bottom-line results in the third quarter, they will allow us to better service the demand side of our business going forward."

Comments & Business Outlook

Wed, 23 Jul 2014 04:00:00 GMT

Second Quarter 2014 Results

Revenues from continuing operations for the second quarter of 2014 totaled $27.7 million, which represented a 6% increase over the corresponding quarter last year.
Consolidated net income from continuing operations for the second quarter 2014 totaled $893,000 or $0.20 per diluted share, compared to $765,000 or $0.18 per diluted share, during the same period last year.

Kevin Horner, Mastech's Chief Executive Officer stated, "We are disappointed with our performance in the second quarter when compared to our historical trend lines. The challenges that we faced in second quarter plainly illustrate a pressing need to accelerate the scale of our recruitment engine. With demand likely to remain at healthy levels during the second half of the year, we will look to aggressively ramp-up our off-shore recruiter hiring."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our financial position at June 30, 2014 remains strong, with no short-term borrowings outstanding and cash balances on hand of $1.2 million. During the quarter, our Days Sales Outstanding ("DSO") measurement improved by 6-days from last quarter and now stands at 50-days. In July, we expanded and extended for three years our credit facility with PNC Bank, which will continue to provide us the financial flexibility to capitalize on future market opportunities."

Comments & Business Outlook

Wed, 23 Apr 2014 04:00:00 GMT

First Quarter 2014 Results

First quarter 2014 revenues of $28.7 million compared to $24.0 million in the prior year.
First quarter 2014 EPS of $0.20 compared to $0.13 in the prior year period.

Kevin Horner, Mastech's Chief Executive Officer stated, "We are pleased to deliver strong year-over-year financial results in our traditionally challenging first quarter, as we were able to increase our billable consultant-base by approximately 3%. Operationally, we continue to strive for productivity gains in both our sales and recruitment organizations."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our financial position at March 31, 2014 remains strong, with short-term borrowings, net of cash balances on hand, of $1.1 million and over $15 million of available borrowing capacity under our existing credit facility. During the quarter we invested $2.6 million in operating working capital. This level of investment was in part due to an up-tick in our Days Sales Outstanding measurement during the quarter related to billing process changes at a major client. We are confident that DSO's will revert back to more normal levels in the second quarter of 2014."

Comments & Business Outlook

Wed, 29 Jan 2014 05:00:00 GMT

Fourth Quarter 2013 Results

Revenues from continuing operations for the fourth quarter of 2013 totaled $28.5 million and represented a 21% increase over the corresponding quarter last year.
Consolidated net income from continuing operations for the fourth quarter 2013 totaled $961,000 or $0.22 per diluted share, compared to $744,000 or $0.18 per diluted share, during the same period last year. The earnings per share numbers for both periods have been adjusted to reflect the Company's November 2013 five-for-four stock split.
Non-GAAP EPS for the fourth quarter 2013 were $0.26 vs $0.18 in the prior year period.

Demand for the Company's staffing services was solid during the fourth quarter, despite some activity disruptions due to the holiday season. Accordingly, the Company was able to grow its billable consultant-base for the 4th consecutive quarter and nine of the last ten quarters. Gross margins from continuing operations in the fourth quarter of 2013 were 19.1%, in-line with gross margins reported a year earlier.

Commenting on the Company's fourth quarter 2013 performance, Kevin Horner, Mastech's Chief Executive Officer stated, "We are pleased to deliver financial results that included strong revenue growth, the continued expansion of our billable consultant-base and increases in operating profits. While income from operations grew at a respectable 23% in the fourth quarter of 2013 from a year earlier, these results included additional operating expenses related to the early vesting of equity shares via the attainment of performance targets and the decision to institute a year-end 'appreciation bonus' for our tenured employees, linked to and paid on the same day as we paid the $0.50 per share cash dividend to our shareholders. These incremental increases in operating expense during the quarter totaled $257,000 and impacted earnings by $0.04 per diluted share."

Special Dividend

Wed, 30 Oct 2013 04:00:00 GMT

PITTSBURGH, Oct. 30, 2013 /PRNewswire/ -- Mastech Holdings, Inc. (NYSE MKT: MHH), a national provider of Information Technology staffing services, announced today that its Board of Directors has approved a five-for-four (25 percent) stock split and declared a special cash dividend of $0.50 per post-split share of common stock. The record date for the stock split is November 15, 2013. Shareholders of record as of such date will receive one new share of common stock for every four shares that they own. The distribution of the new shares will be made on November 29, 2013. The cash dividend will be paid on December 20, 2013 to shareholders of record at the close of December 9, 2013.

As a result of the Board's review of the Company's current financial position, business outlook, and share trading patterns, the Board determined that both a stock split and the payment of a special dividend are in the best interest of the Company and its shareholders.

Commenting on the Board's decision to approve the stock split and declare this special dividend, Kevin Horner, Mastech's Chief Executive Officer stated, "These actions reflect our confidence about the future, the recent divestiture of the healthcare business and our commitment to return capital to our shareholders, as appropriate."

Research

Wed, 23 Oct 2013 04:00:00 GMT

Alert sent to members on 10/23/2013

GeoBargain MHH provides information technology (IT) and specialized healthcare staffing services primarily in the United States. Shares are healthily up in early trading. Today, the company reported strong third quarter 2013 results, including record EPS of $0.29.

Revenues for the third quarter of 2013 totaled $28.3 million, which represented a 24% increase over the corresponding quarter last year and an 8% improvement over second quarter 2013 results.
Consolidated net income from continuing operations for the third quarter 2013 totaled $999,000 or $0.29 per diluted share, compared to $561,000 or $0.17 per diluted share, during the same period last year.

MHH’s gross margins saw a slight decline in the third quarter 2013, but the company was able to grow EPS at a higher rate than revenue, based on the company’s operating leverage. MHH was able to keep its SG&A at nearly the same level as last year even though revenues were 24% higher.

We highlighted the company’s ability to get more from less in our 1/23/2013 article “Mastech Holdings (MHH) GeoNugget: A Unique Value + Growth Proposition.” The stock was trading at $6.67 at the time of our article - gains of 80% at current prices.

In our 7/24/2013 email, when we highlghted MHH’s second quarter 2013 results, we stated that although MHH only had one more “easy” year-over-year quarterly EPS comparison left in 2013, we felt that when investors looked to value MHH, they would focus on the longer term outlook of the company - growing revenues at a rate of 1.5x the industry average of 9% and the continued shareholder friendly initiatives that it has undertaken. We stated we think that the stock is worth $20.00 when applying a P/E of 25 on trailing EPS of $0.80. However, broad valuation multiple expansion for microcap stocks has been a challenge over the last three years. Thus, a more realistic valuation would be to assign a P/E of 15 on trailing EPS, which would translate to a price target to $12.00.

While MHH shares have already reached our more conservative price target of $12.00 based on a P/E of 15 on trailing twelve month(TTM) EPS of $0.80, MHH’s trailing EPS is now $0.92 giving us a near term price target of 13.80. In order for us to apply a price target on future earnings we will need to interview managment again. Our more aggressive target of $20.00 is now raised to $23.00 based on a multiple of 25 on TTM EPS.

Another valuation metric we used when trying to value shares of MHH was Price-to-Sales. In our article we mentioned that MHH was trading at a Price-to-Sales multiple of 0.21, considerably less than its closest competitor Igate Corporation (NASDAQ:IGTE), which was trading at 0.88 at that time. This valuation metric comparison is still favorable as MHH is trading at a Price-to-Sales ratio of around 0.4, while IGTE is trading at a price to sales multiple of 1.6.

We believe the staffing sector could get hot based on the possible benefit from Obamacare. Please see an article from Time magazine titled “Why Temp Agencies Are Learning to Love the Affordable Care Act” for more details. We will begin to research other companies that may be poised to benefit as the staffing sector continues to heat up.

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Comments & Business Outlook

Wed, 23 Oct 2013 04:00:00 GMT

Third Quarter 2013 Results

Revenues from continuing operations for the third quarter of 2013 totaled $28.3 million, which represented a 24% increase over the corresponding quarter last year and an 8% improvement over second quarter 2013 results.
Consolidated net income from continuing operations for the third quarter 2013 totaled $999,000 or $0.29 per diluted share, compared to $561,000 or $0.17 per diluted share, during the same period last year.

Kevin Horner, Mastech's Chief Executive Officer stated, "We are pleased to deliver financial results that include record earnings for the quarter, strong revenue growth and the expansion of our billable consultant-base. These impressive financial achievements reflect our continued commitment to drive operational efficiencies and enhance our value proposition to the clients that we serve. Also during the quarter we completed the sale of our healthcare business which generated a net gain of $442,000 for the Company and more importantly allows us to focus squarely on our core competency – Information Technology Staffing Services."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our financial position at September 30, 2013 remains strong, with cash on hand of $1.6 million and over $15 million of available borrowing capacity under our existing credit facility. During the quarter we repaid all outstanding bank debt with funds generated from continuing operations and from the sale of our healthcare business. Our debt-free balance sheet and access to sufficient capital gives us the flexibility to capitalize on future value-creation opportunities."

Acquisition Activity

Wed, 31 Jul 2013 04:00:00 GMT

PITTSBURGH, July 31, 2013 /PRNewswire/ -- Mastech Holdings, Inc. (NYSE MKT: MHH), a national provider of Information Technology and Specialized Healthcare staffing services, announced today that it has entered into a definitive asset purchase agreement with Accountable Healthcare Staffing, Inc. to sell substantially all of the assets of its Healthcare Staffing segment. The closing is subject to customary closing conditions and is expected to occur during the third quarter of 2013.

Under the terms of the agreement, which has been unanimously approved by Mastech's Board of Directors, total consideration to be paid by the buyer totals $1.15 million. Consideration consists of approximately $1.0 million of cash at closing, plus the assumption of certain liabilities. Total assets to be sold exclude cash balances on hand, accounts receivables, and other current assets, which approximated $1.5 million as of June 30, 2013, net of current liabilities retained by the Company.

Commenting on the agreement, D. Kevin Horner, Mastech's Chief Executive Officer stated, "This divestiture will allow Mastech to focus entirely on its core IT Staffing business. Given Accountable Healthcare's highly regarded reputation in and commitment to the healthcare staffing market, we are excited about the opportunities that the transaction presents to our dedicated healthcare professionals. I'm convinced that this is a great next step for all stakeholders – customers, employees and shareholders – of both organizations."

Accountable Healthcare Staffing Chairman and CEO, Robert Adamson commented, "The acquisition of Mastech Holdings' healthcare units adds a team with deep industry experience to Accountable and will accelerate our growth in both the travel nurse and per diem segments of our business."

Comments & Business Outlook

Wed, 24 Jul 2013 04:00:00 GMT

Second Quarter 2013 Results

Revenues for the second quarter of 2013 totaled $28.9 million, which represented a 14% increase over the corresponding quarter last year and a 7% improvement over first quarter 2013 results.
Gross profit in the second quarter of 2013 was $5.5 million compared to $4.8 million in the second quarter of 2012.
Consolidated net income for the second quarter 2013 totaled $789,000 or $0.23 per diluted share, compared to $458,000 or $0.14 per diluted share, during the same period last year.

Demand for our IT staffing services was solid in the current quarter and largely in-line with activity levels of a quarter ago. Market conditions in the healthcare staffing business were steady; however, higher than expected assignment ends in our travel nursing business negatively impacted revenues during the quarter. Gross margins in the second quarter of 2013 were 18.9%, which were slightly below gross margins of 19.1% reported a year earlier, but represented an improvement over first quarter 2013 gross margins of 18.1%.

Kevin Horner, Mastech's Chief Executive Officer stated, "We are pleased to deliver another quarter of both operational progress and sequential improvement to our financial results. During the quarter, we were able to increase our IT billable consultant-base by 9% and sequentially grew revenues by 7% despite some headwinds in our travel nursing business. Operationally, we are now generating a return on our focused investments made to our recruiting organization. Commercially, we are beginning to see gross margin expansion as our sales organization takes a more disciplined approach in securing new assignments."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our financial position at June 30, 2013 remains strong, with over $14 million of available borrowing capacity under our existing credit facility. During the quarter we continued to invest in operating working capital to support revenue growth. At June 30, 2013 our "Days Sales Outstanding" measurement stood at 52 days, which is an indication of our high-quality accounts receivables and predictable cash conversion metrics."

Investor Presentations

Fri, 07 Jun 2013 04:00:00 GMT

GeoBargain $MHH will be presenting at the Sidoti's Micro Investor Conference in New York today. Here is a copy of the investor presentation that MHH will be presenting. Two of the key highlights from the presentation is that MHH expects to grow revenues at + 1.5 times the industry average, which is forcasted for 9% in 2013 and that the company expects operating margins of +6% of revenues which would be a nice increase from first quarter 2013 levels of 3.5%.

Comments & Business Outlook

Wed, 24 Apr 2013 04:00:00 GMT

First Quarter 2013 Results

Revenues for the first quarter of 2013 totaled $27.0 million, which represented a 10% increase over the corresponding quarter last year and a 2% improvement over fourth quarter 2012 results.
Consolidated net income for the first quarter 2013 totaled $575,000 or $0.17 per diluted share, compared to $352,000 or $0.10 per diluted share, during the same period last year. It is important to note that the 2013 quarter had one less billable day than last year's corresponding quarter.

Demand for our IT staffing services was solid for much of the quarter. Market conditions in the healthcare staffing business were generally steady and we were able to achieve sequential revenue growth for the eleventh consecutive quarter. Overall gross margins in the first quarter of 2013 were 18.1%, which were slightly below gross margins of 18.2% reported a year earlier.

Kevin Horner , Mastech's Chief Executive Officer stated, "We are pleased with our operational performance and the financial results that we delivered in our historically challenging first quarter. We were able to increase our IT billable consultant-base during the quarter by over 4% and grew revenues in our healthcare segment despite seasonal headwinds in our surgical nursing business. Operationally, we continued to see improvements in our recruitment performance metrics and believe that these favorable trends will translate into elevated levels of client satisfaction."

Commenting on the Company's financial position, Jack Cronin , Chief Financial Officer, stated, "Our financial position at March 31, 2013 remains strong, with short-term borrowings, net of cash balances on hand, essentially unchanged from our year-end 2012 position of $2.0 million. Additionally, we had approximately $13.2 million of available borrowing capacity under our existing credit facility with PNC Bank. During the quarter, cash generated from operations was sufficient to fund our continued investment in operating working capital and the other cash needs of our business.

Comments & Business Outlook

Tue, 29 Jan 2013 05:00:00 GMT

Fourth Quarter 2012 Results

Revenues for the fourth quarter of 2012 totaled $26.4 million, which represented a 11% increase over the corresponding quarter last year and a 3% improvement over third quarter 2012 results.
Consolidated net income for the fourth quarter 2012 totaled $728,000 or $0.22 per diluted share, compared to $253,000 or $0.07 per diluted share, during the same period last year. Results in the 2011 fourth quarter included severance charges equal to $0.05 per diluted share.

Demand for our IT staffing services remained solid during the fourth quarter when considering the normal year-end industry trends. Market conditions in the healthcare staffing business remained largely positive and we were able to achieve sequential revenue growth for the tenth consecutive quarter. Overall gross margins in the fourth quarter of 2012 were 19.0%, which were in-line with the previous quarter's performance and slightly below the 19.3% gross margins reported a year earlier.

Kevin Horner , Mastech's Chief Executive Officer stated, "We are pleased with the results that the Mastech team delivered during the quarter and for the full year 2012. For the year, we organically grew our revenues and consultant-base by approximately 14%, more than doubled our profitability in terms of diluted earnings per share, and continued to invest in our organization to better position Mastech to drive superior results in 2013 and beyond. Additionally, I believe that we were strategic in initiating several corporate transactions during 2012 which resulted in material increases in shareholder value."

Commenting on the Company's financial position, Jack Cronin , Chief Financial Officer, stated, "Our balance sheet remains strong despite returning over $9.0 million to our shareholders in 2012, by executing on our share repurchase program and declaring a special $2.00 per share cash dividend. We enter 2013 well positioned with the capital resources necessary to support our growth objectives. At December 31, 2012, we had short-term borrowings, net of cash balances on hand, of $2.0 million and have access to approximately $12.5 million of borrowing capacity under our existing credit facility with PNC Bank."

Deal Flow

Wed, 08 Feb 2012 05:00:00 GMT

PITTSBURGH, Feb. 7, 2012 /PRNewswire/ -- Mastech Holdings, Inc. (NYSE Amex: MHH), a national provider of Information Technology and Specialized Healthcare staffing services, announced today that it is commencing a modified "Dutch auction" tender offer to repurchase up to 608,000 shares of its common stock, representing approximately 17% of Mastech's outstanding shares. The 608,000 shares represent the remaining shares available for purchase under Mastech's stock repurchase program, which was previously announced on December 23, 2010. The closing price of Mastech's common stock on the NYSE Amex on February 6, 2012 was $4.57.

Under the tender offer, shareholders will have the opportunity to tender some or all of their shares at a price within the range of $4.65 to $5.50 per share. The low end of this range is greater than the closing price of Mastech's common stock on the NYSE Amex on February 6, 2012. Based on the number of shares tendered and the prices specified by the tendering shareholders, Mastech will determine the lowest per share price within the range that will enable it to buy 608,000 shares, or such lesser number of shares that are properly tendered.

If more than 608,000 shares are properly tendered at or below the determined price per share, Mastech will first purchase shares tendered by those shareholders owning fewer than 100 shares without pro ration, and then purchase all other shares on a pro rata basis, at the determined price per share. The number of shares subject to this tender offer may, at the discretion of Mastech, be increased by up to 2% of Mastech's outstanding shares, or approximately 71,382 shares, without amending or extending the tender offer.

Comments & Business Outlook

Wed, 08 Feb 2012 05:00:00 GMT

Fourth Quarter 2011 Results

Revenues for the quarter were $23.9 million and represented an 18% increase over the corresponding quarter last year and a 2% improvement over third quarter 2011 results.
Consolidated net income for the fourth quarter 2011 totaled $253,000 or $0.07 per diluted share, compared to $304,000 or $0.08 per diluted share, in the same period last year. The 2011 fourth quarter results included severance expense equal to $0.05 per diluted share, related to the elimination of several executive positions during the quarter.

Demand for our IT staffing services remained solid during the fourth quarter when considering the normal year-end industry trends. Market conditions in healthcare staffing remained largely positive and we were able to achieve sequential revenue growth for the sixth consecutive quarter.

Kevin Horner, Mastech's Chief Executive Officer, stated, "We are pleased with the results that we delivered during the quarter and for the full year 2011. For the year, we organically grew our revenues and consultant-base by over 20%, increased profitability by approximately 67% and rationalized our management cost structure to better position us to continue to outperform our industry peers."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our balance sheet remains strong. We enter 2012 positioned with the financial flexibility to support our growth objectives and to capitalize on inorganic value creation opportunities. At December 31, 2011, cash on hand totaled $5.8 million; we had no outstanding debt; and have access to a credit facility with a maximum borrowing capacity of $19 million."

Comments & Business Outlook

Wed, 19 Oct 2011 04:00:00 GMT

Third Quarter 2011 Results

Revenues for the quarter were $23.5 million which represented a 24% increase over the corresponding quarter last year of $18.6 million
Consolidated net income for the third quarter 2011 totaled $441,000 or $0.12 per diluted share, compared to $187,000 or $0.05 per diluted share, in the same period last year.

Despite a significant amount of economic uncertainty during the third quarter, our business activity levels remained stable. Demand for our IT staffing services was higher than the previous quarter and our healthcare staffing business continued to achieve sequential revenue growth for the fifth consecutive quarter.

Kevin Horner, Chief Executive Officer of Mastech stated, "I'm pleased to report that during the quarter we grew total revenues by 6.2% sequentially and delivered an earnings per share performance that was $0.02 per diluted share better than second quarter 2011's results. This solid performance reflects operating leverage opportunities in our cost structure and improvements in operating efficiencies, as selling, general and administrative expenses declined to 16.7% of revenues."

Commenting on the Company's financial position, Jack Cronin, Chief Financial Officer, stated, "Our balance sheet remains strong with $5.6 million of cash on hand and no outstanding debt. During the quarter we amended our credit facility with PNC Bank which was set to expire on October 15, 2011. The amended facility increases our maximum borrowing capacity to $19 million and extends the term of the agreement through August 31, 2014."