Lisa Thompson

Lisa Thompson inquired about Mastech Digital's consultant and total employee headcount, the completion of one-time expenses and severance costs, projected cost savings from the EDGE program in 2026, and the company's strategic growth plans for 2026 and 2027, including revenue and profit objectives, as well as the market's cooperation for growth in IT consulting and staffing.

Answer

Kannan Sugantharaman, CFO and COO, reported 840 billable consultants and 1,488 total employees as of December 2025. He confirmed the finance and accounting transition is complete, with no material future severance costs expected. He explained that the EDGE program's efficiencies were largely delivered by Q4 2025, freeing capacity for outsized investments in talent, competency building, and AI/analytics market expansion in 2026. Nirav Patel, CEO, emphasized that growth is paramount, outlining a strategy focused on specific industry segments (health sciences, financial services, retail/consumer) and Global 2000 customers, offering AI-first solutions (transforming, accelerating, reimagining with AI). He acknowledged a volatile macro backdrop but noted no radical shifts in Q1 2026, with clients showing reasonable confidence and continued focus on modernization.

Lisa Thompson inquired about Mastech Digital's consultant and total employee headcount, the completion of one-time expenses and severance costs, projected cost savings from the EDGE program in 2026, and the company's strategic growth plans for 2026 and 2027, including revenue and profit objectives within the current IT consulting and staffing market.

Answer

Kannan Sugantharaman, CFO and COO, reported 840 billable consultants and 1488 total employees as of December 25, confirming the finance and accounting transition is complete with no material future severance costs expected. He explained that the EDGE program's efficiencies were largely delivered by Q4 2025, freeing capacity for disproportionate investments in talent, competency building, and market expansion in AI and analytics for 2026. Nirav Patel, CEO, emphasized growth as paramount, detailing a strategy focused on serving Global 2000 customers in health sciences, financial services, and retail with AI-first offerings, and reorienting commercial and delivery models for sustainable growth. He acknowledged market volatility but noted no radical shifts or weakened underlying demand drivers in Q1 2026.

Lisa Thompson inquired about the sequential revenue decline and lower margins in the Data and Analytics segment, the practical details of the expanded partnership with Informatica, and whether Mastech Digital executed any stock buybacks during the quarter.

Answer

Chief Financial and Operations Officer Kannan Sugantharaman attributed the Data and Analytics margin decline to lower utilization and a one-time reserve adjustment on a project, which he does not expect to recur. CEO Nirav Patel explained the Informatica partnership has become more strategic, evolving to include co-development of industry accelerators and a joint innovation lab. Kannan Sugantharaman also confirmed that no stock was repurchased in Q1 due to blackout periods, but stated the company plans to become active on the buyback program going forward.

Lisa Thompson inquired about Mastech Digital's strategic approach to growing its staffing and Data & Analytics (D&A) segments, particularly with AI integration. She also asked about potential opportunities in the government sector, the year-end employee count, and future spending plans for SG&A and CapEx.

Answer

CEO Nirav Patel explained that he is taking a structured approach to defining a long-term strategy and will share more details in the latter half of the year, while confirming the company is exploring government opportunities. He also provided the year-end employee count of 1,816. CFO John Cronin added that the goal is to maintain the current SG&A-to-revenue percentage for 2025, though it may be higher in the first half, and that CapEx will remain under $1 million. He also clarified how stock-based compensation affects the tax rate.

Lisa Thompson of Zacks Investment Research inquired about Mastech Digital's cash flow reporting, return on equity given its large cash balance, the business outlook for the seasonally slower fourth quarter, and the potential impact of the recent U.S. election on client decision-making.

Answer

CFO John Cronin clarified that free cash flow was highlighted to explain distortions from working capital changes between growth and de-growth periods. He also noted the company's 13% ROE is calculated without leverage and could rise significantly with M&A. CEO Vivek Gupta acknowledged Q4 seasonality from holidays but was optimistic that the post-election reduction in uncertainty would serve as a tailwind for the business.

Lisa Thompson inquired about the sustainability of recent SG&A expense reductions, whether new consultants were involved in streamlining operations, and the future outlook for gross margins, specifically if the Data & Analytics segment could surpass 50%.

Answer

CEO Vivek Gupta explained that the SG&A tightening was a deliberate management effort separate from billable consultants, with the goal of having SG&A grow slower than revenue over time. Regarding gross margins, he stated the intention is to maintain the current 28% level, acknowledging the uncontrollable variable of medical claim experiences. While aiming for D&A margins over 50% is a goal, he noted it's hard to predict.

Lisa Thompson posed several accounting questions, including the exact dollar amount of the one-time tax benefit recorded in Q4 2025, details on the $105 million lease extension payment for the Newport Beach facility (what was received and if it was cash upfront), and whether changes in U.S. depreciation rules impacted Tower Semiconductor's financial model or depreciation expectations going forward.

Answer

CFO Oren Shirazi explained that the Q4 tax benefit was approximately $10 million, resulting from a 2% effective tax rate instead of the estimated 15%-17%. He confirmed the $105 million upfront cash payment secured an additional three and a half years of lease for the Newport Beach facility, extending it to the end of 2030, and that it was included in Q4 cash flow operations. Shirazi stated that the changes in U.S. depreciation rules had no impact on the company.

Lisa Thompson asked CFO Oren Shirazi for the exact dollar amount of the one-time tax benefit in Q4 2025, clarification on what was received for the $105 million lease extension prepayment, and if changes in U.S. depreciation rules impacted Tower's financial model or depreciation expectations.

Answer

CFO Oren Shirazi stated that the one-time tax benefit in Q4 2025 was approximately $10 million, resulting from a lower effective tax rate compared to the estimated 15-17%. He explained that the $105 million prepayment secured an additional three and a half years of lease for the Newport Beach facility, extending it until the end of 2030, and confirmed it was paid upfront in cash in Q4 2025. Mr. Shirazi also confirmed that changes in U.S. depreciation rules had no impact on Tower's model or depreciation expectations.

Lisa Thompson from Zacks Small Cap Research asked whether RF mobile revenue could match RF infrastructure for the year, the reasons for the mobile segment's strong comeback, and for clarification on the trend in the 'other income' line.

Answer

CEO Russell Ellwanger stated that RF infrastructure revenue will be "substantially bigger" than RF mobile for the year, though mobile run rates are returning to high levels. He attributed the mobile recovery to a combination of inventory correction and market share gains by Tower's customers. CFO Oren Shirazi clarified that the 'other income' line should be baselined around $10.6 million going forward, as the higher Q2 figure included a one-time gain from currency hedging transactions.

Lisa Thompson sought clarification on how much of Tower's product is physically shipped to the U.S. and thus subject to tariffs, as opposed to being billed to U.S.-based headquarters. She also asked if quarterly operating expenses would remain above the $40 million level for the rest of the year.

Answer

CFO Oren Shirazi clarified that while 42% of revenue is billed to U.S.-headquartered customers, a very small portion of the physical product is actually shipped to the U.S., limiting direct tariff exposure. He also stated that operating expenses are expected to remain flat at the current level of approximately $40 million per quarter for the remainder of the year.

Lisa Thompson asked if the sequential revenue growth from Q1 to Q4 2025 would be comparable to the 18% seen in 2024 and which capacity additions would be the largest contributors to second-half revenue.

Answer

CFO Oren Shirazi reiterated guidance for year-over-year growth and a stronger second half but declined to provide a specific Q1-to-Q4 growth target. He identified the SiGe and SiPho capacity expansions from the $350 million investment plan, along with Agrate capacity, as the primary drivers for H2 2025 growth.

Lisa Thompson of Zacks Small-Cap Research inquired about the company's tax rate, asking for expectations for Q4 2024 and for the full year 2025, especially considering the company's varied operational activities across different countries.

Answer

CFO Oren Shirazi explained that there is no large, one-time tax payment expected in Q4. He noted that a one-time tax benefit in Q1 2024 lowered the year-to-date average, but the normalized rate is typically between 10% and 14%, depending on the geographic mix of income. He stated that modeling a tax rate in the 10% to 14% range for the coming year would be reasonable.

Lisa Thompson inquired about the launch details and reception of the new YouCam AI Chat app, the impact of the Wanna acquisition on the Key Customer count, and the company's future M&A strategy regarding new verticals.

Answer

CEO Alice H. Chang explained that the YouCam AI Chat app launched globally on Apple and Google Play stores with eight-language support. EVP & CSO Pin-Jen Chen (Louis) clarified that the Wanna acquisition added over a dozen Key Customers, but this was offset by churn among other beauty clients. He added that the M&A priority is expanding the company's total addressable market (TAM) in areas like luxury retail, rather than acquiring direct competitors.

Lisa Thompson asked for details about the new web-based version of the B2C apps, inquiring about differences in user behavior, whether it is bundled with mobile subscriptions, the competitive landscape, and the pricing model.

Answer

CEO Alice H. Chang and EVP Pin-Jen Chen explained that the web-based service is a separate offering targeting a different user demographic that prefers larger screens and does not significantly overlap with the mobile app user base. They confirmed it is not bundled and uses a credit-based subscription model, which offers higher gross margins by avoiding app store fees.

Lisa Thompson asked about the rollout timeline for the new AI assistant, the future trajectory of licensing revenue, the drivers of Q2 gross margin, the company's advertising strategy for its mobile apps, and the competitive positioning against broader AI e-commerce platforms.

Answer

CEO Alice Chang projected that the new PerfectGPT AI assistant would likely be adopted first by prestige beauty groups, with pilots expected by year-end. EVP & CSO Pin-Jen Chen stated that licensing revenue is expected to remain under $1 million per quarter and become immaterial over time. He attributed the slight gross margin decline to the faster growth of the lower-margin B2C app business. Both executives emphasized that while they use paid advertising, the primary focus for app growth remains organic. They positioned their AI as a specialized, value-add service for beauty that complements general e-commerce platforms.

Lisa Thompson of Zacks Investment Research inquired about the capacity of the new $2 million financing facility, the outlook for Q2 sequential revenue growth, and sought clarification on a potential Q4 2022 revenue spillover into Q1 2023. She also asked about the delay in Amazon opening its Seller Central platform and the record date for the Toggle3D spin-out.

Answer

CEO Evan Gappelberg explained that the financing facility is based on purchase orders and is effectively unlimited by the lender, providing non-dilutive capital. He stated that Q2 is looking strong and that 40% sequential growth 'could be' possible. Gappelberg clarified that the full $700k from a Q4 Amazon order did not slip into Q1. He noted that Amazon is delaying the full Seller Central launch to ensure the technology is 'perfect' for millions of users. Regarding Toggle3D, he confirmed it would go public in the first half of June but did not provide a specific record date.

Lisa Thompson of Zacks Investment Research asked for clarification on Q4 gross margins, the expected revenue growth trajectory for 2023, and the timeline for recognizing significant revenue from the ARway platform.

Answer

CEO Evan Gappelberg advised against using 2022 figures as a guide for 2023, stating that significant AI advancements will drive gross margins toward a target of 90% by the end of the year. He projected accelerating sequential revenue growth starting in Q2 2023. Regarding ARway, Gappelberg mentioned that while small pilot revenues are currently being generated, the company is on the cusp of closing larger six-figure enterprise deals with major brands.

Lisa Thompson of Zacks Investment Research questioned the significant increase in the bad debt reserve for the quarter, seeking clarification on its cause, the likelihood of recovering the funds, and the outlook for future provisions.

Answer

Co-CEO Xi Zeng clarified that the increased provision was not due to developer bankruptcies but stemmed from a strategic shift away from subsidies to focus on gross profit, compounded by market factors like COVID-19 and new regulations. He stated that the collection of accounts receivable is proceeding normally and the company is proactively managing risk by reducing cooperation with developers showing signs of financial distress.

Lisa Thompson from Zacks Investment inquired about the implementation timeline and business impact of supply chain financing, the outlook for Q2 gross margins and net loss, the revenue and margin levels required for breakeven, and the confidence level in the success of the new SaaS business.

Answer

CFO Pan Jiaorong clarified that supply chain financing collaborations are already active with seven banks, totaling approximately RMB 2 billion, and are expected to positively impact the business long-term by focusing on high-quality projects with strong risk controls. Co-CEO Zeng Xi added that Q2 profitability is projected to improve, driven by new revenue from SaaS and rapid growth in the resale property business. While he did not provide a specific breakeven target, he expressed confidence in future gross margin expansion and the success of their strategic investments in high-growth areas, despite market competition and innovation uncertainties.

Lisa Thompson of Zacks Investment inquired about the company's financial outlook for 2021, specifically asking for projections on gross margins and operating expenses following its strategic shift. She also requested an update on the current state of the Chinese real estate market.

Answer

CFO Pan Jiaorong, with additional comments from Co-CEO Zeng Xi, explained that gross margins are expected to improve significantly from the 8.3% reported in Q4. This will be driven by the new, high-margin (60-80%) SaaS solution, while the traditional commission business maintains a 15-20% margin. They project a minimal increase in total operating expenses, within 10% for 2021. Mr. Pan also confirmed the Chinese real estate market has returned to normal, with high transaction volumes, but noted that government price controls are squeezing developer profits, creating demand for the company's cost-saving digital solutions.