Mastech Digital, Inc

Greetings. Welcome to the Mass Tech Digital Inc. Q2 2023 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. Please note this conference is being recorded. It is now my pleasure to introduce your host, Jenna Ford Lacey, Manager of Legal Affairs for Mass Tech Digital Inc. Thank you, Ms. Ford Lacey. You may begin.

Thank you, Operator, and welcome to MassTech Digital's second quarter 2023 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, MassTech Digital's Chief Executive Officer, Jack Cronin, our Chief Financial Officer, and Michael Fleischman, our Chief Executive Officer of the company's data and analytics services business segments. I would like to remind everyone that statements made during this call are not historical facts or forward-looking statements. These are 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 the markets in which we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify certain 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 2022 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 key metrics used by management in operating the business. Reconciliations of these non-GAAP financial measures to their comparable GAAP measures are included in our earnings announcement, which can be obtained from our website at www.masstechdigital.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 review of our second quarter 2023 results.

Thanks, Jen, and good morning, everyone. Second quarter 2023 was another challenging quarter for MassTech Digital. Revenues totaled $52.2 million, representing a 16% year-over-year revenue decline. Both of our business segments were impacted by customer concerns regarding slow economic growth, high inflation, and the possibility of a U.S. recession. which has lowered demand for our services in the near term. Our data and analytic services segment contributed revenues of $8.8 million in the second quarter of 2023, compared to $11.2 million in the 2022 second quarter, as customers reduced resources on existing projects in light of continued economic uncertainty. Order bookings, however, increased to $10.1 million in the second quarter of 2023, compared to $8.4 million in the first quarter of this year. Additionally, our pipeline of opportunities continued to improve, with the caveat that customers are taking a little longer to actually start new projects once awarded. Second quarter 2023 revenues in our IT staffing services segment totaled $43.4 million compared to $50.9 million in the second quarter of 2022. Demand continued to be soft in the current quarter, particularly with respect to financial services clients. Gross margins in the second quarter of 2023 was 26.1% compared to 27% in the second quarter of 2022. In our data and analytic services segment, gross margins improved by 200 basis points compared to the second quarter of 22 gross margins. This favorable margin variance was largely due to higher utilization rates in the 2023 quarter as we continued to drive better efficiency in our delivery processes. In our IT staffing services segment, gross margins were down 110 basis points compared to Q2 2022 due to reductions in direct hire revenues and higher than usual medical claims related to our self-insured healthcare program. In the second quarter of 2023, we recorded a pre-tax settlement reserve of $3.1 million on an outstanding employment related claim. No lawsuit has been filed to date and we are currently in negotiations to settle this matter. Gap net loss for the second quarter of 2023 was $2.2 million or a loss of 19 cents per diluted share compared to a $2.4 million net income or 20 cents per diluted share in the second quarter of 2022. The settlement reserve noted above had the effect of reducing GAAP diluted earnings per share by 19 cents per share. Non-GAAP net income for Q2 2023 was $1.3 million or 11 cents per diluted share compared to $3.6 million, or 30 cents per diluted share, in the second quarter of 2022. SG&A expense items not included in second quarter non-GAAP financial measures, net of tax benefits, or one, stock-based compensation, two, the amortization of acquired intangible assets, and three, the 2023 settlement reserve, on an outstanding employment-related claim. A description of these items is included in our second quarter 2023 earnings release, which is available on our website. Also, it should be noted that both gap net income and non-gap net income in the second quarter of 2023 included $600,000 of professional service expense related to the outstanding employment claims. Addressing our financial position, on June 30th, 2023, we had $18.6 million of cash balances on hand. We had no bank debt outstanding and borrowing availability of $23.9 million under our revolving credit facility. Our day sales outstanding measurement was 56 days at quarter end, which is well below our target range of 60 to 65 days. and were five days better than our measurement at March 31, 2023. During the second quarter of 2023, we executed on our share repurchase program, purchasing approximately 62,000 shares of MassTech Digital common stock at an average price of $9.15 per share. I'll turn the call over to Vivek for his comments.