Mastech Digital, Inc

Greetings and welcome to the Maztec Digital, Inc. Fourth Quarter 2020 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Jennifer Ford Lacy, Manager of Legal Affairs for Maztec Digital Incorporated. Thank you, Ms. Fortlacy. You may now begin.

Thank you, Operator, and welcome to Mass Tech Digital's fourth quarter 2020 conference call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.masstechdigital.com. With me on the call today are Vivek Gupta, Mass Tech Digital's Chief Executive Officer, Paul Burton, Chief Executive for Mass Tech Infotelis, and Jack Cronin, our Chief Financial Officer. I would like to remind everyone that statements made during this call that are not historical facts are forward-looking statements. These forward-looking statements include our financial growth and liquidity projections, as well as statements about our plans, strategies, intentions, and beliefs concerning the business, cash flows, costs, and markets in which we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements, including those listed in the company's 2019 annual report on Form 10-K filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Additionally, management has elected to provide certain non-GAAP financial measures to supplement our financial results presented on a GAAP basis. Specifically, we will provide non-GAAP net income and non-GAAP diluted earnings per share data which we believe will provide greater transparency with respect to the key metrics used by management in operating the business. Reconciliations of these non-GAAP financial measures to their comparable gap measures are included in our earnings announcement, which can be obtained from our website at www.massheaddigital.com. As a reminder, we will not be providing guidance during this call, nor will we provide guidance in any subsequent one-on-one meetings or calls. I will now turn the call over to Jack for a full review of our fourth quarter, sorry, for a review of our fourth quarter and a full year 2020 results. Jack?

Thanks, Jen, and good morning, everyone. 2020 was a year of extraordinary challenges. We are confronted with the COVID-19 pandemic, its enormous impact on the global economy, and its devastating disruption to our day-to-day lives. With the rollout of global vaccination programs, we are now hopeful that a recovery is in sight. We are also extremely proud of how our organization and dedicated employees responded and adapted to these unprecedented times. This adaptability and focus is the foundation upon which our financial results for 2020 were built. With that backdrop, let me now comment on our Q4 2020 financial performance. Revenues for the fourth quarter of 2020 totaled $48.7 million compared to $50.4 million in the fourth quarter of 2019. Our data and analytic services segment contributed record revenues during the quarter, albeit with the help of the Amberleaf acquisition. And our IT staffing services segment achieved a 3% increase in consultants on billing during the quarter. This was the second consecutive quarter of expanding our headcount in the IT staffing services segment. While there is still uncertainty in the marketplace, we are seeing positive signs of improvement in activity levels in both of our business segments. Gross profits in Q4 of 2020 totaled $13.1 million compared to $12.8 million in the same quarter of 2019. Thus, we had a 2% increase in gross margins despite a 3% decline in revenues. Our gross margins of 26.8% reflected an increase of 180 basis points over Q4 of 2019. Gap net income for Q4 2020 was $2 million or 17 cents per diluted share compared to $2.3 million or 20 cents per diluted share in the fourth quarter of 2019. It should be noted that the 2020 quarter included $650,000 of pre-tax transaction expenses associated with the Amberleaf acquisition. Non-gabinet income for Q4 of 2020 was $3.4 million or 29 cents for diluted share compared to $2.9 million for $0.26 per diluted share in the 2019 quarter. Fourth quarter SG&A expense items not included in non-GAAP financial measures net of tax benefits were one, the amortization of acquired intangible assets, two, stock-based compensation, and three, acquisition transaction expenses. which are detailed in our Q4 earnings release and available on our website. Addressing our full-year results, 2020 revenues totaled $194.1 million, a slight improvement compared to $193.6 million in 2019. Gross profits in 2020 were $51.5 million compared to $48 million in 2019, a 7% increase on essentially flat revenues. Gross margins as a percent of revenue were a record 26.6% in 2020, which reflects an increase of 180 basis points over 2019. We believe that many companies in today's marketplace would be envious of such a growth, of such of gross margin performance. Gap net income for 2020 totaled $9.9 million, or 83 cents per diluted share, compared to $11.1 million, or 99 cents per diluted share, in 2019. Again, it should be noted that the 2020 year included $650,000 of pre-tax acquisition transaction expenses and the 2019 period benefited by $6.1 million of pre-tax gains from the revaluation of the contingent consideration liability. Factoring in these two items, GAAP net income in 2020 clearly outperformed 2019. Non-GAAP net income for 2020 totaled $13.9 million, or $1.16 per diluted share, compared to $9.3 million, or $0.82 per diluted share, in 2019. The $1.16 earning per share number was a record performance made particularly noteworthy because of the incredibly challenging macroeconomic environment experienced in 2020. Again, a detailed reconciliation of our non-GAAP financial measures compared to the comparable GAAP measures is included in our Q4 earnings release. Addressing our financial position, despite the challenges of COVID-19, we made material improvements in 2020. First, we protected our cash conversion metrics with respect to our largest asset, accounts receivables. During the year, we maintained a healthy DSO measurement of 60 days and ended 2020 with no additions to our bad debt reserve. Additionally, we lowered debt levels and increased our cash balances on hand, even while incurring additional debt to support the Amberleaf acquisition. At December 31st, 2020, we had borrowing capacity under our revolving credit facility of approximately $22 million. In summary, our financial performance in 2020 was solid. It wasn't close to the high expectations that we had when we entered the year. And I can tell you that our entire organization is excited about the prospects and opportunity that lie before us for 2021. I now turn the call over to Vivek for his comments.