Mastech Digital, Inc

Greetings, and welcome to the MazTek Digital, Inc. fourth quarter 2023 earnings conference 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 zero 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 MazTek Digital. Thank you. You may begin.

Thank you, Operator, and welcome to MazTech Digital's fourth quarter 2023 earnings conference call. If you have not yet received a copy of our earnings announcement, it can be obtained on our website at www.maztechdigital.com. With me on the call today are Vivek Gupta, MazTech Digital's Chief Executive Officer, 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 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 fourth quarter and full year 2023 results.

Thanks, Jen, and good morning, everyone. Our fourth quarter of 2023 financial results were impacted by economic uncertainty and our current and prospective clients' responses to these challenging market conditions. Fourth quarter revenues totaled $46.1 million, representing a 20% year-over-year revenue decline. Both of our business segments contributed to this decline. Our data and analytic services segment reported revenues of $8.2 million, in Q4 2023, compared to $9.1 million in the 2022 fourth quarter, as customers continued to reduce resources on existing projects, albeit at a lower rate in Q4 when compared to Q2 and Q3 of 2023. Also, Q4 order bookings totaled $19 million, which was one of our best performances since we acquired the data and analytics services segment. Accordingly, we achieved a modest pickup in revenues on a sequential basis over the third quarter of 2023. Fourth quarter 2023 revenues in our IT staffing services segment totaled $37.9 million compared to $48.1 million in the fourth quarter of 2022. During the quarter, our billable consultant base declined, again, at a slower rate when compared to Q2 and Q3 of 2023. And in a quarter where consultant headcount declines are the norm in the industry as clients historically seek to complete existing projects and end resources prior to the start of the new year. Consolidated gross profits as a percent of revenues in Q4 2023 totaled 24.6 percent compared to 24.8 percent in Q4 2022. In our data and analytic services segment, gross margins improved materially to 44.7 percent compared to 37 percent in the fourth quarter of 2022. This improvement reflects higher utilizations in the 2023 quarter and reduced margins on several significant assignments in the fourth quarter of 2022. In our IT staffing services segment, gross margins were down compared to Q4 of 2022, largely due to a year-over-year reduction in direct higher revenues and unusually high medical claim expenses related to our self-insured health care program. Gap net income for Q4 2023 totaled a loss of $5.4 million, or negative 46 cents per diluted share, compared to a profit of $1.5 million, or 13 cents per diluted share, in Q4 2022. These GAAP numbers do include a $5.3 million goodwill impairment charge. Non-GAAP net income for Q4 2023 was $1.3 million profit, or 11 cents per diluted share, compared to $2.8 million, or 23 cents per diluted share, in the fourth quarter of 2022. SG&A expense items not included in non-GAAP financial measures, net of tax benefits, are detailed in our fourth quarter 2023 earnings release for all periods presented, which is available on our website. Addressing our full year 2023 results, revenues were $201.1 million, which were down 17% on a year-over-year basis. Again, both business segments contributed to this decline. Gross margins for the full year 2023 totaled 25.4 percent compared to 26.1 percent in 2022. Our data and analytic services segment gross margin percent increased by 200 basis points year over year on improved utilization and our IT staffing services segment gross margin percent declined by 140 basis points due to lower direct higher revenues and higher healthcare expenses. GAAP diluted earnings per share was a loss of 61 cents in 2023 compared to a profit of 72 cents in 2022. Non-GAAP diluted earnings per share totaled a profit of $0.44 in 23 compared to a profit of $1.13 in 22. Throughout 2023, our liquidity and overall financial position remained solid. Today, we're 100% debt-free with no borrowings outstanding under our P&C facility. Also, we have $21.1 million of cash balances on hand and have cash availability of another $22.5 million under our revolving credit facility. I should also point out that our day sales outstanding measurement on December 31, 2023, improved to 53 days from 59 days a year earlier. Thus, despite challenging economic conditions, we've prudently managed our accounts receivable credit risk and incurred no bad debt expense in 2023. I'll now turn the call over to Bhavik for his comments.