Zacks Small Cap Analysis – MHH: Mastech Digital Sees Demand Enchancment Throughout the Board – Cyber Tech

By Lisa Thompson

NYSE:MHH

READ THE FULL MHH RESEARCH REPORT

Whereas Q1 confirmed one other double-digit decline in revenues, Mastech (NYSE:MHH) has seen clients loosening their purse strings after 4 quarters of austerity. In that interval, the IT wants have collected for these clients and they’re beginning to spend once more. The corporate noticed a 6% enhance in advisor headcount throughout Q1, which has continued to extend up to now in Q2, portending a sequential enhance in revenues for staffing. D&A had one other robust reserving quantity at $9.6 million which was a $1.2 million enchancment over Q1 2023. Gross margins improved yr over yr and sequentially for the D&A phase, whereas staffing margins improved sequentially however had been flat yr over yr. We count on a sequential enhance in revenues and earnings all through 2024.

Mastech’s enterprise worth is now $83 million– or 0.4 instances EV/2024 Estimated Gross sales. Its friends commerce at a mean of two.3xs. The inventory trades at 12.3 instances 2025 non-GAAP EPS on a PE foundation.

Q1 2014 Outcomes Present a Sequential Income Enchancment

Q1 2024 resulted in whole revenues of $46.8 million down 15.0% from $55.1 million in Q1 2023. The IT staffing enterprise declined to $38.8 million from $45.7 million a yr in the past however an enchancment from the $37.0 million in This autumn 2023. IT staffing was 83% of revenues and ended the quarter with 1,004 billable consultants in comparison with 1,125 the yr earlier than. D&A additionally declined yr over yr to $8.1 million from $9.4 million in Q1 2023. Its revenues had been flat sequentially.

Complete gross margin improved yr over yr. Gross margin was flat in staffing at 21.6%, whereas enhancing significantly in D&A to 46.4% after a nasty Q1 in 2023. Margins had been up sequentially for each companies.

SG&A was down barely to $12.5 million in comparison with $13.0 million a yr in the past. We count on that greenback quantity to remain regular with some enhance as revenues enhance.

The working loss was $406,000 versus a revenue of $532,000 final yr. Different revenue was $124,000 in comparison with an expense of $53,000 a yr in the past. Within the quarter there was a tax reversal of $282,000, in comparison with paying taxes of 46% final yr. For the complete yr, the tax charge is predicted to equal roughly 28%.

The GAAP loss was $161,000 in comparison with a revenue of $261,000 final yr. On a non-GAAP foundation, it was $763,000 down 46%. GAAP loss per share was $0.01 in comparison with EPS of $0.02 a yr in the past. On a non-GAAP foundation, EPS was $0.06 versus $0.12. The share depend was 11.6 million, flat with final yr.

Steadiness Sheet

The corporate ended the quarter with $19.4 million in internet money ($1.63 per share), a fast ratio of two.8xs, working capital of $37.6 million, and no debt. The corporate has a constructive free money movement and appreciable debt capability. It at the moment has a borrowing availability of $24.2 million underneath its revolving credit score facility.

In the course of the fourth quarter, Mastech bought 9,000 shares of frequent inventory underneath the share repurchase program at a mean value of $8.70. Its authentic inventory buyback plan was for 500,000 shares to be executed over the following two years with an extension attainable. It’s restricted to purchasing 25% of the day by day quantity every day and for the time being that’s solely a mean of about 4,300 shares per day making the method gradual. Its regular blackout interval ends two days after an earnings announcement and begins once more when the quarter ends. The low buying and selling quantity of MHH inventory provides much less alternative to purchase again inventory. The corporate is amenable to purchasing any blocks which will current themselves on the market.

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