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MD

Mastech Digital, Inc. (MHH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue was $49.1M, up 2% sequentially vs $48.3M in Q1 and down 0.9% YoY vs $49.5M in Q2 2024; revenue exceeded Wall Street consensus of $47.9M by ~$1.2M* .
  • Non-GAAP diluted EPS was $0.15, up from $0.06 in Q1 and above the $0.12 consensus by $0.03*; GAAP diluted EPS was $0.01, reflecting ~$0.9M of severance and finance/accounting transition costs .
  • Gross margin improved to 28.1%, +147 bps QoQ vs 26.7% on pricing discipline and IT Staffing margin expansion; D&A bookings slowed to $5.8M amid cautious client decision cycles .
  • Liquidity remains strong: $27.9M cash, no bank debt, DSO 53 days; management emphasized positioning customers for “AI-first organizations,” highlighting the expanded Informatica partnership .

Estimates marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and disciplined pricing: consolidated gross margin rose to 28.1% (+147 bps QoQ); IT Staffing margin increased on higher bill rates and focused execution .
  • Strategic focus on AI-driven data modernization: “positioning Mastech Digital as a trusted partner for enterprises to reimagine themselves and transition into AI-first organizations” .
  • Strong liquidity and balance sheet: $27.9M cash, no bank debt, $22.2M revolver availability; DSO at 53 days .

What Went Wrong

  • D&A softness: bookings of $5.8M in Q2 vs $11.7M in Q1; segment gross margin of 45.2% declined from 49.2% YoY, and segment operating loss of $(154)K .
  • GAAP earnings muted: diluted EPS $0.01 was impacted by severance and finance & accounting transition expenses (combined ~$0.9M in Q2) .
  • Demand remains measured: “ongoing measured client activity and cautious decision-making” led to muted IT Staffing demand vs prior year levels .

Financial Results

Consolidated P&L and Margins (Quarterly)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$50.747 $48.317 $49.097
Gross Profit ($USD Millions)$14.715 $12.892 $13.820
Gross Margin %29.0% 26.7% 28.1%
Operating Income ($USD Millions)$0.065 $(1.853) $0.027
Net Income ($USD Millions)$0.297 $(1.439) $0.135
GAAP Diluted EPS ($)$0.02 $(0.12) $0.01
Non-GAAP Diluted EPS ($)$0.23 $0.06 $0.15

Q2 2025 vs Prior Year, Prior Quarter, and Consensus

MetricQ2 2024Q1 2025Q2 2025 ActualQ2 2025 Consensus
Revenue ($USD Millions)$49.534 $48.317 $49.097 $47.928*
GAAP Diluted EPS ($)$0.12 $(0.12) $0.01 N/A
Non-GAAP Diluted EPS ($)$0.19 $0.06 $0.15 $0.12*

Estimates marked with * retrieved from S&P Global.

Segment Breakdown

Segment MetricQ4 2024Q1 2025Q2 2025
D&A Revenue ($USD Millions)$10.284 $8.960 $8.589
D&A Gross Margin %49.5% 44.1% 45.2%
D&A Operating Income ($USD Millions)$1.809 $(0.128) $(0.154)
IT Staffing Revenue ($USD Millions)$40.463 $39.357 $40.508
IT Staffing Gross Margin %23.8% 22.7% 24.5%
IT Staffing Operating Income ($USD Millions)$0.989 $0.334 $1.750

KPIs

KPIQ4 2024Q1 2025Q2 2025
Cash & Equivalents ($USD Millions)$27.742 $24.665 $27.933
DSO (Days)52 56 53
D&A Bookings ($USD Millions)~$11.0 $11.7 $5.8
DebtNo bank debt No bank debt No bank debt

Non-GAAP Adjustments (Q2 2025)

AdjustmentAmount ($USD Thousands)Notes
Amortization of acquired intangibles649 Excluded from non-GAAP EPS
Stock-based compensation714 Excluded from non-GAAP EPS
Severance expense232 Excluded from non-GAAP EPS
Finance & accounting transition expense688 Excluded; part of India transition

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q2 2025Not providedNot providedMaintained no formal guidance
MarginsFY/Q2 2025Not providedNot providedMaintained no formal guidance
OpExFY/Q2 2025Not providedNot providedMaintained no formal guidance
Tax RateFY/Q2 2025Not providedNot providedMaintained no formal guidance
Segment-specificFY/Q2 2025Not providedNot providedMaintained no formal guidance
DividendsFY/Q2 2025Not discussedNot discussedN/A

Management reiterated policy of not providing guidance: “we will not be providing guidance during this call nor will we provide guidance in any subsequent one-on-one meetings or calls” .

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call transcript was not available in our document catalog as of this analysis; themes draw from Q2 press release narrative and prior transcripts.

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesEmphasis on D&A margin expansion and bookings; strategic pivot toward AI/data-led solutions . Q1: expanded Informatica partnership to accelerate AI-led transformation; double-digit D&A YoY growth .CEO reiterates “AI-first organizations” positioning and readiness for long-term growth .Stable-to-positive strategic emphasis
Macro/client cautionQ4: bookings below expectations due to caution in spending . Q1: muted IT Staffing demand; deliberate client decision-making .Measured client activity and cautious decision-making continue; early signs of stabilization .Gradual stabilization
Pricing/bill ratesQ1: average bill rate trending 84.5–85.5% vs ~79% YoY on higher rates .IT Staffing revenue quality enhanced via higher bill rates and margins from disciplined pricing .Positive pricing discipline sustained
Segment performanceQ4: D&A strong revenue and margin; IT Staffing seasonal headcount drop . Q1: D&A bookings strong; IT Staffing demand muted .Q2: IT Staffing +3% revenue QoQ; D&A bookings softer at $5.8M .Mixed: Staffing improving, D&A softer
Liquidity/capital allocationQ4: cash $27.7M; buyback program extended (423k shares remaining) . Q1: buybacks paused due to blackout; intent to get active .Cash $27.9M; no debt; revolver availability $22.2M .Strong liquidity maintained

Management Commentary

  • CEO tone: “beginning to see early signs of stabilization… preparing the organization for long-term growth while positioning Mastech Digital as a trusted partner… to transition into AI-first organizations” .
  • Segment commentary: IT Staffing margins strengthened on disciplined pricing; D&A bookings slowed due to “slower client decision-making cycles and a cautious approach to discretionary spending” .
  • CFO liquidity update: “$27.9 million of cash… no bank debt… borrowing availability of $22.2 million… DSO 53-days” .
  • Non-GAAP policy and exclusions reiterated (amortization of intangibles, stock-based comp, severance, finance & accounting transition costs) .

Q&A Highlights

Note: No Q2 transcript available; highlights reflect Q1 call.

  • D&A margin pressure in Q1 from lower utilization and a one-time reserve on a fixed-bid project (~2 pts impact) .
  • Bill rates: trending 84.5–85.5% vs 79% prior year, reflecting skills mix and pricing strength .
  • Staffing headcount: billable headcount ended at 991 in Q1 .
  • Buyback program: 423k shares remaining; intent to be more active post blackout periods .
  • Industry traction: broad-based with notable momentum in healthcare/life sciences .

Estimates Context

  • Q2 2025 revenue beat: Actual $49.1M vs consensus $47.9M* (approx. +$1.2M*).
  • Q2 2025 EPS beat: Non-GAAP diluted EPS $0.15 vs $0.12* consensus (beat of $0.03*).
  • Coverage depth: two estimates on revenue and EPS for Q2 2025*.
MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD)$47,928,000*$49,097,000
EPS Normalized ($)$0.12*$0.15
Primary EPS ($)$0.12*$0.15*

Estimates marked with * retrieved from S&P Global.

Implication: Estimate models likely need modest upward revision for IT Staffing margin assumptions and normalized EPS trajectory; D&A bookings softness may temper top-line revisions despite pricing strength .

Key Takeaways for Investors

  • Sequential improvement with revenue +2% and gross margin +147 bps QoQ, driven by disciplined pricing in IT Staffing and margin execution .
  • Clear EPS beat on normalized basis ($0.15 vs $0.12*), while GAAP EPS ($0.01) reflects restructuring and finance transition costs; ongoing India finance migration targets ~$1.2M annual savings post-transition .
  • D&A bookings ($5.8M) highlight macro caution; expect uneven near-term demand even as AI-first strategy and Informatica partnership underpin mid-term growth avenues .
  • Strong balance sheet (no debt, $27.9M cash) supports buybacks and investment in transformation initiatives; DSO within range at 53 days .
  • Near-term trading: narrative likely driven by margin resilience and EPS beat vs low estimate count; watch for confirmation of stabilization in bookings and continued bill-rate strength .
  • Medium-term thesis: synergizing D&A and staffing around AI-led modernization can expand wallet share with Global 2000, but execution hinges on converting partnerships into bookings and sustaining utilization .
  • Risk watch: client caution persisting, D&A margin variability, and timing of finance transition benefits; absence of formal guidance requires closer tracking of quarterly bookings and segment margins .

Appendix: Source Documents

  • Q2 2025 8-K and press release with full financial tables and narrative .
  • Q1 2025 press release and 8-K .
  • Q1 2025 earnings call transcripts (themes, Q&A) .
  • Q4 2024 press release (trend context and segment KPIs) .
  • Informatica partnership press release (AI-first strategy execution) .

Estimates marked with * retrieved from S&P Global.