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Mastech Digital(MHH) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter 2023 revenues totaled 46.1million,representinga2046.1 million, representing a 20% year-over-year revenue decline, with both business segments contributing to this decline [100] - Non-GAAP net income for Q4 2023 was 1.3 million or 0.11perdilutedshare,comparedto0.11 per diluted share, compared to 2.8 million or 0.23perdilutedshareinQ42022[78]GAAPnetincomeforQ42023wasalossof0.23 per diluted share in Q4 2022 [78] - GAAP net income for Q4 2023 was a loss of 5.4 million or negative 0.46perdilutedshare,comparedtoaprofitof0.46 per diluted share, compared to a profit of 1.5 million or 0.13perdilutedshareinQ42022,includinga0.13 per diluted share in Q4 2022, including a 5.3 million goodwill impairment charge [102] - Full year 2023 revenues were 201.1million,down17201.1 million, down 17% year-over-year [79] - GAAP diluted earnings per share for 2023 was a loss of 0.61, compared to a profit of 0.72in2022[80]Grossmarginsforthefullyear2023totaled25.40.72 in 2022 [80] - Gross margins for the full year 2023 totaled 25.4%, compared to 26.1% in 2022 [104] Business Segment Data and Key Metrics Changes - IT Staffing Services segment revenues in Q4 2023 totaled 37.9 million, down from 48.1millioninQ42022,withamodestsequentialrevenueincreaseoverQ32023[4][5]DataandAnalyticsServicessegmentreportedrevenuesof48.1 million in Q4 2022, with a modest sequential revenue increase over Q3 2023 [4][5] - Data and Analytics Services segment reported revenues of 8.2 million in Q4 2023, down from 9.1millioninQ42022,ascustomersreducedresourcesonexistingprojects[76]GrossmarginsintheDataandAnalyticsServicessegmentimprovedto44.79.1 million in Q4 2022, as customers reduced resources on existing projects [76] - Gross margins in the Data and Analytics Services segment improved to 44.7% in Q4 2023, compared to 37% in Q4 2022 [72] Market Data and Key Metrics Changes - The company experienced a decline in billable consultant base, but at a slower rate compared to previous quarters in 2023 [4] - Q4 order bookings totaled 19 million, marking one of the best performances since acquiring the Data and Analytics Services segment [101] Company Strategy and Development Direction - The company engaged Pimenta, Inc. as a strategic advisory consultant to provide direction for improving business performance and growth [109][94] - Management is optimistic about positioning the business for improved financial performance in 2024, despite the challenges faced in 2023 [85] Management Comments on Operating Environment and Future Outlook - Management noted that macroeconomic headwinds significantly impacted financial performance, with concerns over recession, inflation, and geopolitical events affecting client spending [107] - Positive indicators of increased customer demand were observed in both business segments, with expectations for sequential revenue growth in Q1 2024 [41][108] Other Important Information - The company remains debt-free with 21.1millionincashandanadditional21.1 million in cash and an additional 22.5 million available under its revolving credit facility [105] - Day sales outstanding improved to 53 days from 59 days a year earlier, indicating effective management of accounts receivable [81] Q&A Session Summary Question: Status of share buyback program - Management confirmed commitment to the share buyback program, having bought back approximately 60,000 shares in Q4 2023, and indicated plans for more purchases in Q1 2024 [16][112] Question: Update on Engineering Staffing Services - Management reported a month-on-month increase in headcount for Engineering Staffing Services and emphasized focus on expanding opportunities in this area [28][30] Question: Goals and strategies leading to CEO resignation - Management clarified that misalignment in goals and strategies led to the CEO's resignation, with a focus on scaling the business quickly [24][45] Question: Pricing environment and bill rates - Management noted that while pricing pressures existed, they were able to increase bill rates due to strong client relationships and quality of service [34][62]