Mastech Digital, Inc

First quarter 2025 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, 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, Dana Lacey, manager of legal affairs for MadPic Digital. Thank you Ms. Lacey, you may begin.

Thank you operator and welcome to MadPic Digital's first quarter 2025 conference call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at .madpicdigital.com. With me on the call today are the OPL's MadPic Digital Chief Executive Officer and Conductive Envoy, our Chief Financial and Operations 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 core billing, the words believe, anticipate, plan, expect, 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 those forward looking statements, including those purchased in the company's 2024 annual report of Form 10K, filed with the Securities and Exchange Commission and available on its website at .fbc.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 eluded earnings brochures for shared data, which we believe will provide greater transparency with the effective key metrics used by management in operating the business. Record affiliations 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 .digital.com. As a reminder, we will not be providing guidance during this call nor will we provide guidance in any subsequent -on-one meetings or calls. I will now share the call of our chair, Specialist Thomas.

Thanks, Jenna, and good morning everyone. I am very pleased with the progress made over my first hundred days and I am energized by the meaningful conversations I continue to have throughout the business with our customers, employees, and stakeholders. The insights I have gathered have only reinforced what I said last quarter. I believe we are standing at an inflection point and how we choose to act in the near term will shape our strategy for years to come. Let me start with a summary of our Q1 performance before handing it over to Cannon to share more details. We've ticked off 2025 on a strong note, delivering solid results in the first quarter. I am pleased to report that we achieved -over-year revenue growth across both of our key operating segments. Notably, our data and analytics segments delivered double-digit growth compared to the same period last year. I believe this performance underposed the growth demand for AI-driven digital modernization and highlights our continued relevance to enterprise customers, validating our strategic focus on data-driven solutions. A key example of this focus is the recent announcement of our expanded partnership with Informatica, a leader in enterprise data management services, which we believe will enable us to accelerate AI-led transformation initiatives for clients locally. This collaboration not only enhances our data modernization capability, but also reinforces our commitment to delivering differentiated, high-impact solutions in an AI-perch world. It defends our industry focus and establishes a joint AI and data innovation platform that we expect will accelerate outcomes for our clients. Our IT staffing segment has also delivered resilience and growth, supported by strategic client engagements and disciplined execution, despite a decline in overall business activity levels. These results reflect our continued commitment to our teams of leading with a sense of urgency to meet the high needs, building a truly differentiated portfolio, and executing with financial discipline while laying a strong foundation for our ongoing transformation journey. Central to this journey are the transformation initiatives we have set in motion. And please research that these efforts are beginning to show early signs of progress in our quarterly performance. We remain on track with our commitment of unveiling a Go Power strategy later this year, one that we believe will position MaFTAc Digital as a leading partner to some of the largest Global 2000 enterprise customers that are transitioning into AI-first organizations. Our focus remains on synergizing our data modernization and IT staffing solutions to offer productive high-value services that need the evolving needs of our clients. We are investing in talent, technology, and processes to enhance our capabilities and drive sustainable growth. While transformation is a complex endeavor, we believe our disciplined approach and clear vision will continue moving us in the right direction and build on our strong foundation to unlock new opportunities. At the same time, we are mindful of the prevailing macroeconomic market conditions which continue to shape how and when our clients choose to accelerate their technology spending. We have observed a cautious approach across the board with decision-making becoming more deliberate. As noted by my industry peers, this period is characterized by considerable turbulence. Companies are reassessing strategies and in some cases causing major decisions in light of ongoing volatility, a trend we are seeing reflected in our customer conversations as well. Despite these events, we believe the long-term outlook for AI-driven solutions remains promising. Organizations continue to recognize the transformative potential of AI and are investing in technologies that drive efficiency and innovation at scale. At MaaSREC Digital, we remain committed to supporting our clients through this shift to an AI-first world. That said, we recognize that the near-term volatility may continue to bring uncertainty. While we are optimistic about the future, we are approaching the months ahead with measured caution. We plan to stay focused on delivering for our clients and executing steadily against our clients. I will now hand it over to our Chief Financial and Operations Officer, Karen Susan Brown. Thanks, Peter, and good morning, everyone. Today marks a little over a month since I joined MaaSREC Digital, and it's a privilege to introduce myself as the company's Chief Financial and Operations Officer. Let me start with my background. I bring in over 25 years of experience in finance and operations across global technology and services organizations. Prior to joining MaaSREC Digital, I served as the Chief Financial Officer of Omega Healthcare, where I helped write enterprise-wide translations, strengthen execution disciplines, and deliver strong financial outcomes. Earlier in my career, I held senior leadership roles in finance, operations, and transformation at Hortense and Sutherland. It has been a fast-paced and energizing few first weeks since I joined MaaSREC Digital. A key part of my initial focus has been to ensure a smooth transition from my predecessor, Jack Cronan, and thankfully that for the solid foundation he has helped build, one that we can now leverage as we gear up for the next phase of growth. Partnering closely with leaders and committed to driving agility, discipline, and scale across our financial and operations functions, ensuring we execute with precision today while laying the groundwork for long-term validation. We are allowing our teams, our systems, our processes to not only keep pace with teams, but to position ourselves as a more responsive and resilient organization in an AI-first world. I firmly believe that operational excellence, financial discipline, and cross-functional collaboration will be the key enablers in unlocking our future. It's a privilege to share the journey alongside a deeply committed leader should team with a shared ambition to scale and create impact. Now, on to the first quarter financial results. Our first quarter 2025 financial results reflected a cautionary macroeconomic environment. We saw client-sending patterns impacted by the level of economic uncertainty that we are seeing today. Despite these segments, our sharp focus on key client relationships resulted in a -on-year revenue growth in both our business segments and an auto-bookings performance in our data and analytics segments which was in line with our expectations during the first quarter of 2025. From consolidated revenues during the first quarter of 2025 totalled to 48.3 million, a -over-year increase of .2% compared to the corresponding quarter of 2024. A data analytics services segment recorded revenues of 9 million in Q1 of 2025, which was .1% higher than Q1 2024 revenues. Additionally, first quarter 2025 auto-bookings totalled 11.7 million, which exceeded last year's Q1 performance of 9.6 million. First quarter 2025 revenues in our IT staffing services segment totalled 39.4 million, .6% higher revenues than what was achieved during the first quarter of 2024. Despite some growth in Q1 2025, demand in our IT staffing segment was somewhat music during the quarter as our billable uncertainty declined by 15% in 2020. Consolidated gross profit dollars increased by .3% in Q1 2025 compared to the corresponding quarter of 2024. Consolidated gross margins improved 80 basis points over the first quarter of 2024, largely driven by CCC in our IT staffing business. Gap net income for the first quarter of 2025 totalled a net loss of 1.4 million, 12 cents per die with a share, compared to a net loss of 0.2 million, or 1 cent per die with a share in the first quarter of 2024. Non-gap net income for Q1 2025 was 0.8 million, or 6 cents per die with a share, compared to 0.8 million, or 6 cents die with a share in the 2024 first quarter as well. As DNA expense items not included in non-gap financial measures, NATO Act benefits are detailed in our first quarter 2025 earnings release for all periods presented which are available in our Best Buy. During the first quarter of 2025, our liquidity and overall financial positions remained solid. On March 31, 2025, we had 24.7 million cash balance on hand, low bank debt outstanding, and cash availability of 23.7 million under our evolving credit facility. Our day sales outstanding DSO measurement on March 31, 2025 totalled 56 days, which is well within our targeted range and isn't aligned with our DSO measurement a year ago. Operator, we will now open the call for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keyboard. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pose for questions. Our first question is from Lisa Thompson with Bax Investment Research. Please proceed.

Good morning. It's great talking to you too. First, I have a few questions about first data and analytics. It looks like it dropped off sequentially, played a bit, and the margin was quite a bit lower compared to last year throughout the quarters. Can you tell us a little bit about what's going on there?

Sure. In terms of gross margins in the DNA, it has been impacted by lower utilization and a one-time reserve adjustment on a fixed-risk project during Q1 2025. That is a one-timer and the reduction has been roughly about 2% based on and we do see it as a one-time.

Okay, that's good to hear. Can you go a little bit into your relationship with Informatica? You said that you had one before. What was it before compared to what it is now? And in practice, how does this work? Do you have salesmen that are working together now?

Yeah, hi. This is Lisa, leader of the Alpica

question. So, you know, we've always had a long-standing relationship with Informatica where we have continued to work with them as a strategic partner for us. We thought about it in the past. I think what the expanded partnership with Informatica now really takes our relationship at an even more strategic level for both in terms of growth and I think what we can do jointly together. We are not just embedding the tools going forward. I think what we are going to think about it is core development specific accelerators and possibly also launch an outcome flat where many of our clients could actually come together with us in building up a joint solution. As they think about, you know, modernizing their estate to an AI-first world. So, I think we see this really translating into both high-quality resources and stronger differentiation in our competitive pursuits going forward. So, I think we feel very, very great about the fact that we were able to further set up our partnership that we already

had prior to this announcement.

So, are you, as a project, going to have people from each company?

Yes,

the way I think Lisa, just to comment on it, I think we are still working through the details of the specifics of the partnerships, but the way we have visualized this whole partnership is the fact that we will commit, you know, resources from both sides, but more importantly we will actually jointly pursue the solution building with our clients. So, think about that as you are going forward in the market and expanding and making, realizing that whole AI-first team comes real. We now have together with us Informatica as a partnership that we think we can build jointly solutions and go forward. Both our organizations already have a tremendous amount of differentiation and depth in the market for what we do for our clients. I think bringing us together as a project just makes it even more stronger as we approach the clients for more integrated, unified solutions that they look forward in

the future.

Great. Thank you for that. So, my last question is did you get a chance to do any stock buybacks this quarter?

Yeah. So, as you know in February 9, 1925 the board did authorize an extension of the Shire Repurchase Program by an additional year to February 8, 2026. We still have 123,000 shares that are available for repurchase. Nothing has been done in the last quarter, but you will notice that in the initial period when it was launched we experienced a number of extended blackout periods which were in the early stages. So, we were able to repurchase our shares and these were mostly corporate related transactions in the end and now that should be behind us. So, I don't think that you're going to see such blackout periods in the future and so we will get active on the buybacks.

Okay, great. Thank you for clarifying that. That's all my questions. Thank you.

As a reminder this is Star 1 on your telephone keypad if you would like to

ask a question. Our next question is from Mark Riddick with Sudodi & Company. Please proceed.

Hey, good morning. Good morning, Jay Ma.

So, I was wondering actually first who we start with where do we finish on consultant count for the quarter?

Yeah,

so our bill is our consultant stocking landed up at 991.

Okay. Okay. Great. And then I was wondering if you could talk a little bit about as far as maybe what you saw through the quarter with clients in the end and feedback trends and maybe you could talk a little bit about the pacing through the quarter by month. Maybe we can show that there is a sense of what impact headlines had on clients and then throughout the quarter.

I think we do not see lumpiness in that sense between the month, March, but the end of projects we are willing, we continue to remain very active in engaging with our clients and we are seeing growth in demand in the AI driven digital modernization. This kind of highlights our continued relevance for the enterprise customers and with the information that we have been having we only believe that it will be a catalyst and enable us to accelerate our AI led IT transformation and that's in fact in terms of just the month on month we haven't seen any lumpiness.

Okay. Great. And can you speak to whether or not you've seen much in the way of any particular customer industry verticals that have been more active than others in any particular standout that we should be aware of?

It's a broad-based mark, but we do see a large fraction in our healthcare life changes practice, but other than that it has been largely broad-based.

Okay. And then so I think so it's been a few months now and in terms of the macro I suppose, but maybe talk a little bit about maybe showing your initial thoughts in leading the company and if there are any areas that either have been surprising on a positive or negative light or maybe just initial views that would be helpful. And provide insights as to sort of your views as to the company and where it can go.

Most definitely Mark. This is Neera here. So look we remain I would say from a market condition standpoint we remain very cautiously optimistic right. We think I mean there are no questions that the macro environment continues to present uncertainty right. But that said you know the long-term demand drivers for AI driven transformations and data modernization remain very strong. You know clients might be I would call reprioritizing spend, but they're not necessarily pausing their transformation agenda altogether. So we are continuing to stay very very close to their evolving needs and focusing on sort of what I call delivering high impact ROI aligned solutions and increasingly so as we look in the near term I think you know each of these initiatives will need to be backed with a very strong set of ROI that the CFOs of these customer organizations are very carefully assessing and approving. So we think we are in a great place in terms of where our offerings have that relevancy to really be kind of first in line to have both sets of offerings. So I think if you think about it you know we operate in our talent business which usually tends to pick up pretty well as soon as the spends open up and equally important on what I call long-term transformation initiatives are AI data and analytics capabilities really fit beautifully well as well. So we think we are going with what I call cost-share optimism as we approach the next few months.

Great and then last one for me it seems as though we've had a pick up in Bill Ray. I think both it seems to be both sequentially in here over here but maybe you can talk a little bit about that and what you're seeing there.

Sure, yes. Our average bill rate is right now trending between 84.5 and 85.5 which is up from 83.5 last quarter and up actually from 79 last year at the same time. So I think the second season bill rate has primarily been on account of the higher rates on new assignments and pretty much reflective of the type of skills that we have employed in the recent past. Mark, that's the pick up you're seeing.

Excellent. Thank you very much.

With no further questions in the queue I would like to hand the conference back over to management for closing remarks.

It is for us this

is been an exciting time with me coming in about 30 days back and you know fishing in for the you know you say 50 to 100 days. It's been an exciting journey and we are so looking forward to making an impression when it comes to the market and looking at our strategies going forward. So thanks for that and you know. Thank you guys and appreciate your support through the process and we look forward to seeing you all in the next quarter.

Thank you.