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MD

Mastech Digital, Inc. (MHH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered mixed results: non-GAAP diluted EPS of $0.29 beat S&P Global consensus of $0.17, while revenue of $48.5m missed consensus of $49.5m; margin execution and cost actions helped earnings despite soft top-line. $0.29 ; $48.5m ; consensus figures marked with asterisks below are from S&P Global*
  • Demand remained muted amid macro/geopolitical uncertainty; IT Staffing pricing discipline yielded a company-record 24.8% gross margin and an all-time high average bill rate of $86.60, offsetting lower billable headcount. 24.8% and $86.60
  • Data & Analytics (D&A) revenues declined 15.8% YoY and bookings were subdued at $6.1m; near-term visibility remains limited, though long-term drivers are “firmly intact.” $7.9m vs $9.4m; $6.1m bookings
  • Transformation program “EDGE” (Efficiencies Driving Growth and Expansion) is underway to optimize operations and fund reinvestment; company repurchased 192,112 shares (~$1.5m), ended quarter with $32.7m cash, no debt, and $20.8m of revolver availability. EDGE, buyback, cash/no debt/availability

What Went Well and What Went Wrong

What Went Well

  • Record IT Staffing gross margin (24.8%) and all-time high bill rate ($86.60) reflect disciplined pricing and mix management despite lower consultant count. “Record” margin and $86.60
  • Non-GAAP profitability improved: non-GAAP diluted EPS rose to $0.29 (vs $0.15 in Q2 and $0.23 in Q3’24) as cost actions and mix offset revenue softness. $0.29, $0.15, $0.23
  • Balance sheet resilience and capital return: $32.7m cash, no bank debt, $20.8m availability; 192,112 shares repurchased (~$1.5m). Liquidity and buyback

Management quote:

  • “We have launched EDGE – Efficiencies Driving Growth and Expansion – … optimizing our organization and operating model … to unlock capacity for reinvestment in strategic growth areas.” — Nirav Patel, President & CEO

What Went Wrong

  • Revenues declined 6.4% YoY and 1% sequentially to $48.5m, missing S&P Global consensus; macro uncertainties elongated decision cycles and dampened client activity. $48.5m and YoY/seq deltas
  • D&A segment down 15.8% YoY to $7.9m; bookings only $6.1m with limited near-term visibility. $7.9m and $6.1m
  • Consolidated gross margin (27.8%) contracted 70 bps YoY and 30 bps QoQ; GAAP earnings affected by $2.0m of severance and finance & accounting transition costs in the quarter. 27.8% and basis-point deltas, $2.0m costs

Financial Results

Consolidated results (chronological: oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$51.839 $48.317 $49.097 $48.496
GAAP Diluted EPS ($)$0.16 ($0.12) $0.01 $0.08
Non-GAAP Diluted EPS ($)$0.23 $0.06 $0.15 $0.29
Gross Margin (%)28.5% 26.7% 28.1% 27.8%
Income from Operations ($USD Millions)$2.439 ($1.853) $0.027 $0.820

Actual vs S&P Global consensus (Q3 2025)

MetricActualConsensus*Surprise
Revenue ($USD Millions)$48.496 $49.468*-$0.972m
Primary EPS / Non-GAAP Diluted EPS ($)$0.29 $0.165*+$0.125
  • Notes: S&P Global “Primary EPS” aligns with the company’s non-GAAP diluted EPS in this quarter. Items marked with an asterisk are Values retrieved from S&P Global.

Segment breakdown

MetricQ3 2024Q2 2025Q3 2025
Data & Analytics Revenue ($USD Millions)$9.398 $8.589 $7.910
Data & Analytics Gross Margin (%)50.7% 45.2% 46.0%
Data & Analytics Segment Op Income ($USD Millions)$1.145 ($0.154) $0.313
IT Staffing Revenue ($USD Millions)$42.441 $40.508 $40.586
IT Staffing Gross Margin (%)23.6% 24.5% 24.8%
IT Staffing Segment Op Income ($USD Millions)$1.951 $1.750 $3.178

KPIs (Q3 2025)

KPIQ3 2025
Average bill rate (IT Staffing)$86.60
IT Staffing gross margin24.8%
D&A bookings$6.1m
Billable consultant headcount change (YoY)-11.6%
Cash & cash equivalents$32.7m
Bank debtNone
Revolver availability$20.8m
DSO55 days
Share repurchases192,112 shares; ~$1.5m

Non-GAAP adjustments (Q3 2025): Severance expense $1.084m; Finance & accounting transition expense $0.937m; amortization of acquired intangibles $0.650m; stock-based comp $0.729m; income tax adjustments ($0.874m). These drove non-GAAP net income to $3.467m and non-GAAP EPS to $0.29.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company outlookN/ANo formal guidance provided (policy) No formal guidance provided (no guidance in Q3 release) Maintained: no guidance

Note: Company reiterates policy of not providing formal guidance per prior calls; Q3 materials included no guidance commentary.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025)Previous Mentions (Q1 2025)Current Period (Q3 2025)Trend
Macro/demandMeasured activity; early signs of stabilization Muted activity; cautious decision-making Ongoing macro/geopolitical uncertainty; elongated decisions Stable-to-slightly softer
Pricing/margins (Staffing)Pricing strength; margin expansion GM up vs 2024; disciplined execution Record 24.8% GM; all-time high bill rate $86.60 Improving
D&A demand/visibilitySofter activity; bookings $5.8m Bookings $11.7m; growth YoY Bookings $6.1m; visibility limited Soft
AI/technology initiativesPreparing to help clients transition to AI-first AI-first strategy; expanded Informatica partnership Long-term D&A/AI drivers intact despite near-term caution Intact LT thesis
Operating model/Cost actions—Finance & accounting transition (cost cutting) EDGE transformation; continued F&A transition Executing transformation

Management Commentary

  • “EDGE … focuses on driving higher revenue quality, process simplification and automation, and disciplined spend management to unlock capacity for reinvestment in strategic growth areas.” — Nirav Patel, President & CEO
  • “Our continued focus on disciplined pricing … delivered Company-record gross margins of 24.8% and a Company all-time high average bill rate of $86.60, despite our billable consultant headcount reducing by 11.6% year-over-year.” — Nirav Patel
  • “On September 30, 2025, we had $32.7 million of cash balances on hand, no bank debt, and borrowing availability of $20.8 million … DSO … 55-days.” — Kannan Sugantharaman, CFO/COO
  • “D&A… revenues declined 15.8% YoY… bookings… $6.1 million … near-term visibility remains limited; long-term demand drivers remain firmly intact.” — Management commentary

Q&A Highlights

  • The Q3 2025 earnings call transcript was not available as of this writing. The company hosted its call on Nov 12, 2025 at 9:00 a.m. ET; dial-in and webcast details are in the press release.

Estimates Context

  • Revenue missed S&P Global consensus by ~$1.0m (actual $48.496m vs $49.468m*) while non-GAAP EPS beat by $0.125 (actual $0.29 vs $0.165*). The revenue shortfall reflected softer D&A activity and fewer billable consultants; the EPS beat was driven by pricing/mix and cost actions (with non-GAAP excluding $2.0m in severance and finance transition costs). Actuals ; drivers
  • Given margin execution and EDGE initiatives, we expect EPS estimates to drift higher while top-line estimates may edge down or stay conservative until D&A bookings and Staffing consultant count re-accelerate. Margin/pricing ; D&A bookings

Items marked with an asterisk are Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mixed quarter: top-line softness but stronger margins drove an EPS beat; focus on margin sustainability and early signs of demand improvement into 2026. Actuals
  • Staffing remains the ballast: record 24.8% GM and $86.60 bill rate show pricing power; watch consultant headcount trends as a leading indicator of revenue reacceleration. Metrics
  • D&A softness persists: bookings $6.1m and limited near-term visibility argue for conservative revenue assumptions in that segment. Bookings/visibility
  • Transformation (EDGE) is the 2026 story: expect operating simplification and cost discipline to support margin resilience; non-GAAP adjustments reflect active restructuring. EDGE and adjustments
  • Balance sheet optionality: $32.7m cash, no debt, and repurchases (~$1.5m) provide downside protection and capital return flexibility. Liquidity/repurchase
  • No guidance: maintain scenario-based models; management historically does not provide formal guidance. Policy
  • Near-term trading lens: likely to hinge on margin durability vs. revenue trajectory; catalysts include any uptick in D&A bookings and Staffing headcount additions, plus updates on EDGE milestones. Drivers

References:

  • Q3 2025 press release and financials
  • Q3 2025 Form 8-K including Exhibit 99.1
  • Q2 2025 press release and financials
  • Q1 2025 press release and financials
  • Guidance policy (prior call)

Items marked with an asterisk in estimate tables are Values retrieved from S&P Global.