Sign in

You're signed outSign in or to get full access.

MD

Mastech Digital, Inc. (MHH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered resilient top-line growth with consolidated revenues up 3.2% year-over-year to $48.3M, and gross margin up 80bps to 26.7% as IT Staffing margin expansion offset softer Data & Analytics utilization .
  • Versus consensus, revenue modestly beat while EPS missed: Revenue $48.3M vs $47.7M*; Non-GAAP diluted EPS $0.06 vs $0.10*; GAAP diluted EPS was a loss of ($0.12), driven by $1.4M severance expense .
  • Both segments grew YoY: Data & Analytics (D&A) +11% to $9.0M with $11.7M bookings; IT Staffing +2% to $39.4M, despite a 15 consultant decline, with bill rates rising to 84.5–85.5% from 83.5% in Q4 and 79% YoY .
  • Liquidity remained strong: $24.7M cash, no bank debt, and $23.7M revolver availability; DSO at 56 days, within target .
  • Near-term catalysts: buyback program extension with 423k shares remaining, and an expanded Informatica partnership to accelerate AI-led data modernization initiatives .

What Went Well and What Went Wrong

What Went Well

  • IT Staffing gross margin improved to 22.7% from 21.6% YoY; consolidated gross margin rose to 26.7% (+80bps YoY) on pricing discipline and mix .
  • D&A bookings were healthy at $11.7M, and segment revenue grew 11% YoY to $9.0M, reflecting enterprise demand for AI-driven modernization .
  • Management expanded its strategic partnership with Informatica to co-develop industry accelerators and a joint AI/Data outcomes lab, strengthening differentiation in enterprise AI/data programs .
    • “Together, we are equipping enterprises to modernize their data ecosystems, unlock AI-driven insights, and accelerate digital transformation outcomes at scale.” — CEO Nirav Patel .

What Went Wrong

  • EPS missed consensus as GAAP diluted EPS was ($0.12) and Non-GAAP was $0.06 vs $0.10*; severance expense of $1.4M weighed on earnings .
  • D&A gross margin fell to 44.1% (from 46.4% YoY) due to lower utilization and a one-time reserve adjustment on a fixed-bid project (~200bps impact) .
  • Demand in IT Staffing was muted with billable consultant base down by 15 in Q1; macro uncertainty has clients acting with caution, muting contingent workforce projects .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$51.839 $50.747 $48.317
GAAP Diluted EPS ($)$0.16 $0.02 ($0.12)
Non-GAAP Diluted EPS ($)$0.23 $0.23 $0.06
Gross Margin %28.5% 29.0% 26.7%
Operating Income ($USD Millions)$2.439 $0.065 ($1.853)

Segment Breakdown

Segment MetricQ3 2024Q4 2024Q1 2025
Data & Analytics Revenue ($USD Millions)$9.398 $10.284 $8.960
Data & Analytics Gross Margin %50.7% 49.5% 44.1%
Data & Analytics Operating Income ($USD Millions)$1.145 $1.809 ($0.128)
IT Staffing Revenue ($USD Millions)$42.441 $40.463 $39.357
IT Staffing Gross Margin %23.6% 23.8% 22.7%
IT Staffing Operating Income ($USD Millions)$1.951 $0.989 $0.334

KPIs

KPIQ3 2024Q4 2024Q1 2025
D&A Order Bookings ($USD Millions)$11.1 ~$11.0 $11.7
Billable Consultant Base Change (IT Staffing)N/A(63) (15)
Billable Consultant Count (IT Staffing)N/AN/A991
DSO (Days)55 52 56
Cash Balance ($USD Millions)$23.885 $27.742 $24.665
Borrowing Availability ($USD Millions)~$25.0 ~$22.6 $23.7

Actual vs Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)Actual: $51.839 ; Consensus*: $49.386*Actual: $50.747 ; Consensus*: $51.961*Actual: $48.317 ; Consensus*: $47.728*
Primary EPS ($)Actual: $0.23 ; Consensus*: $0.125*Actual: $0.23 ; Consensus*: $0.18*Actual: $0.06 ; Consensus*: $0.10*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial GuidanceOngoingNone providedNone providedMaintained policy (no guidance)
Share Repurchase ProgramThrough Feb 8, 2026Authorization extended; 500k original authorization423k shares remaining; will get active on buybackExtended; program remains in place

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
AI/Data Modernization StrategyPositive momentum and record gross margins; solid D&A bookings ($11.1M) Expanded Informatica partnership; D&A revenue +11% YoY; bookings $11.7M Strengthening strategic positioning
Macro Demand/Client CautionHealthier macro in Q3; Q4 bookings below expectations due to caution Clients acting with caution; muted contingent workforce demand Mixed; caution persists
D&A Margin DynamicsElevated gross margin and bookings in Q3; strong margins in Q4 Lower utilization and one-time reserve reduced margin by ~200bps Near-term margin pressure
IT Staffing Bill RatesSequential growth and expanding gross margins Bill rates up to 84.5–85.5% vs 83.5% in Q4 and 79% YoY Pricing power improving
Liquidity/Capital ReturnCash $23.9M; no debt Cash $24.7M; no debt; buyback extension; 423k shares available Consistently strong

Management Commentary

  • CEO tone: “We have kicked off 2025 on a strong note… both of our key operating segments delivered YoY revenue growth… expanded partnership with Informatica… to accelerate AI-led transformation initiatives for clients globally.” .
  • Macro stance: “We are mindful of prevailing macroeconomic market conditions… decision-making becoming more deliberate… we’re approaching the months ahead with measured caution.” .
  • CFO (liquidity): “On March 31, 2025, we had $24.7M cash, no bank debt, and $23.7M availability under our revolver. DSO was 56 days.” .
  • Earnings drivers: “Consolidated gross margins improved 80bps YoY… GAAP net loss ($1.4M) included $1.4M severance; Non-GAAP diluted EPS was $0.06.” .
  • D&A margin color: “Gross margins… impacted by lower utilization and a one-time reserve adjustment on a fixed-bid project… ~2 percentage points.” .

Q&A Highlights

  • D&A margin headwinds: One-time reserve on a fixed-bid project and lower utilization reduced D&A gross margin by ~200bps in Q1 .
  • Informatica partnership detail: Co-develop industry accelerators and pursue joint solution-building; expected to enhance differentiation and deal flow .
  • Buybacks: 423k shares remain authorized; prior blackout periods limited repurchases; management expects to be more active going forward .
  • Consultant metrics: IT Staffing billable headcount ended at 991; demand was broad-based with notable traction in healthcare/life sciences .
  • Bill rates: Trending between 84.5–85.5% vs 83.5% in Q4 and 79% YoY, reflecting higher rates on new assignments and skill mix .

Estimates Context

  • Q1 2025: Revenue beat consensus ($48.3M vs $47.7M*), while EPS missed ($0.06 vs $0.10*). GAAP diluted EPS was ($0.12), impacted by $1.4M severance .
  • Recent trend: Q3 2024 beat on both revenue and EPS; Q4 2024 beat EPS but missed revenue; Q1 2025 showed resilient revenue vs softer EPS as margins faced one-time and utilization headwinds .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue resiliency with YoY growth in both segments, aided by pricing discipline; watch for normalization in D&A utilization to restore margins .
  • EPS miss was largely driven by severance; adjusted profitability (Non-GAAP EPS $0.06) remains intact as margins expanded YoY at the consolidated level .
  • Strengthened Informatica partnership is a strategic lever to drive high-quality enterprise AI/data pipeline; monitor conversion to bookings and margin mix .
  • IT Staffing bill rates are rising; as macro spend reopens, staffing can rebound quickly, providing near-term operating leverage .
  • Liquidity is robust (cash $24.7M, no debt), with buyback capacity (423k shares) offering capital return optionality; management signaled increased repurchase activity .
  • Near-term risk: client caution and one-time D&A project reserve; medium-term thesis hinges on AI-first modernization demand and execution on transformation initiatives .
  • Monitoring list: D&A margin recovery, bookings cadence, consultant count trajectory, and evidence of Informatica partnership-driven deal wins .