Mastech Digital, Inc

Greetings and welcome to the Mass Tech Digital Q3 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 1 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Ford Lacey, Manager of Legal Affairs for Mass Tech Digital. Thank you, Ms. Lacey Ford. You may begin.

Thank you, operator, and welcome to MazTech Digital's third 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.maztechdigital.com. With me on the call today are Vivek Gupta, MazTech 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 segment. 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 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 the 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.maztechdigital.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 third quarter 2023 results.

Thanks, Jen, and good morning, everyone. Our third quarter 2023 financial results continue to be impacted by economic uncertainty and our current and prospective clients' responses to these challenging market conditions. Third quarter revenues totaled $47.8 million, representing a 24% year-over-year revenue decline. Both of our business segments contributed to this decline. Our data and analytic services segment reported revenues of $8 million in Q3 2023 compared to $10.1 million in 2022 third quarter as customers continued to reduce resources on existing projects and order bookings experienced delays in signing new projects during the quarter. Q3 2023 revenues in our IT staff and services statement totaled $39.8 million compared to $53.1 million in the third quarter of 2022. Demand continued to be soft in Q3 2023 as our global consultants declined during the quarter, albeit at a slower rate than experienced in the previous two quarters. Consolidated gross profit as a percent of revenues in Q3 2023 improved to 26.3% compared to 25.8% in the third quarter of 2022, resulting in our best gross profit performance over the last five quarters. In our data and analytics services segment, gross profits as a percent of revenue improved significantly over Q3 of 2022. This improvement reflected higher utilization in the 2023 quarter and the impact of a $300,000 project cost overrun in the third quarter of 2022. In our IT staffing services segment, gross margins were down 80 basis points compared to the third quarter of 2022, largely due to year-over-year reductions in our direct higher revenues. Generally, contract gross margins held up well when compared to last year despite challenging market conditions. Gap net income for Q3 2023 was $125,000 or one cent per diluted share compared to $2.4 million or 20 cents per diluted share in Q3 2022. Non-GAAP net income for the third quarter of 2023 was $1.3 million or 11 cents per diluted share compared to $4 million or 33 cents per diluted share in the third quarter of 2022. Our third quarter non-GAAP 2023 net income and earnings per diluted share results were in line with last quarter's numbers despite lower revenues. SG&A expense items not included in Q3 2023 non-GAAP financial measures, net of tax benefits, or stock-based compensation, and the amortization of acquired intangible assets. A description of non-GAAP items for all periods presented is included in our third quarter 2023 earnings release, which is available on our website. Addressing our financial position, on September 30th, 2023, we had approximately $16 million of cash balances on hand, no bank debt outstanding, and borrowing availability of $25 million under our revolving credit facility. Our day sales outstanding measurement was 55 days at quarter end, which is much better than our targeted range of 60 to 65 days and one day better than our DSO measurement a quarter ago. I'll now turn the call over to Vivek for his comments.