Earnings call transcript: Mastech Holdings misses Q1 2025 EPS forecast

Mastech Holdings Inc. reported its first-quarter 2025 financial results, revealing a notable miss on earnings per share (EPS) forecasts. The company posted an EPS of $0.06, significantly below the anticipated $0.17. Despite this, revenue slightly exceeded expectations at $48.3 million, compared to the forecasted $48.2 million. The market reacted to these results with a 3.41% drop in Mastech’s stock price, closing at $8.51, reflecting investor concerns over the earnings shortfall. According to InvestingPro analysis, the company maintains strong fundamentals with a healthy current ratio of 3.22 and more cash than debt on its balance sheet, suggesting financial stability despite the earnings miss.

Key Takeaways

• Mastech’s Q1 2025 EPS of $0.06 fell short of the $0.17 forecast.
• Revenue reached $48.3 million, slightly above expectations.
• The stock price fell by 3.41% following the earnings announcement.
• Mastech is focusing on AI-driven digital modernization solutions.
• The company is cautiously optimistic about future opportunities.

Company Performance

Mastech Holdings reported a mixed performance for Q1 2025. While the company’s revenue showed a modest increase, the significant miss on EPS was a key concern for investors. The company is navigating a challenging macroeconomic environment, with clients reassessing their technology spending. Despite these challenges, Mastech remains committed to its strategic focus on AI and data modernization capabilities. InvestingPro data indicates the stock is currently trading below its Fair Value, with analysts maintaining positive forecasts for net income growth this year. InvestingPro subscribers have access to 8 additional key insights about Mastech’s financial health and growth potential.

Financial Highlights

• Revenue: $48.3 million, a 3.2% year-over-year increase.
• EPS: $0.06, missing the forecast of $0.17.
• Gross Profit: Increased by 6.3%.
• Gross Margins: Improved by 80 basis points.
• Non-GAAP Net Income: $800,000.

Earnings vs. Forecast

Mastech Holdings’ EPS of $0.06 was significantly below the forecasted $0.17, marking a notable miss. The revenue, however, slightly exceeded expectations at $48.3 million compared to the $48.2 million forecast. This earnings miss contrasts with the company’s historical performance, where it often met or exceeded expectations. The magnitude of the miss suggests potential challenges in cost management or revenue generation.

Market Reaction

The market responded negatively to Mastech’s earnings miss, with the stock price dropping by 3.41% to $8.51. This decline places the stock closer to its 52-week low of $7.15, reflecting investor concerns about the company’s ability to meet future earnings expectations. The broader market trends and sector performance also suggest a cautious investor sentiment, impacting Mastech’s stock. InvestingPro metrics reveal an attractive PEG ratio of 0.2 and a beta of 0.81, suggesting lower volatility relative to the market. The stock has shown resilience with a significant 7.86% return over the last week, despite being down 28.25% over the past six months.

Outlook & Guidance

Mastech did not provide specific financial guidance for the upcoming quarters. However, the company expressed cautious optimism about future opportunities, with plans to unveil a go-forward strategy later in the year. The focus remains on AI-driven solutions and digital modernization, which are expected to drive long-term growth.

Executive Commentary

CEO Niraj Patel emphasized the strategic importance of the current period, stating, "We believe we are standing at an inflection point and how we choose to act in the near term will shape our trajectory for years to come." CFO Kanaz Sudevarman highlighted the role of operational excellence and financial discipline in unlocking future potential.

Risks and Challenges

• Macroeconomic pressures may lead to reduced client spending on technology.
• The competitive landscape in AI and digital solutions poses challenges.
• Potential delays in client decision-making could impact revenue growth.
• Managing costs effectively amidst revenue shortfalls is crucial.
• Maintaining investor confidence following the earnings miss is essential.

Q&A

During the earnings call, analysts inquired about the details of the Informatica partnership and the impact of a one-time margin adjustment in the Data and Analytics segment. Questions also focused on client demand trends and industry verticals, with Mastech providing insights into average bill rates and ongoing transformation initiatives.

Full transcript - Mastech Holdings (MHH) Q1 2025:

Conference Operator: and welcome to MasTec Digital Corporation First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Is now my pleasure to introduce your host, Jenna Lacey, Manager of Legal Affairs for MasTec Digital.

Thank you, Ms. Lacey. You may begin.

Jenna Lacey, Manager of Legal Affairs, MasTec Digital: Thank you, operator, and welcome to MasTec Digital’s first quarter twenty twenty five conference call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.magtechdigital.com. With me on the call today are Niraj Patel, Magtech Digital’s Chief Executive Officer and Kanaz Sudevarman, 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 foreboding, 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 those forward looking statements, including those posted in the company’s 2024 annual report on Form 10 ks 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.mattekdigital.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 Yarav for his comments.

Niraj Patel, Chief Executive Officer, MasTec Digital: Thanks, Jenna, and good morning, everyone. I’m very pleased with the progress made over my first one hundred days, and I’m 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 have 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 trajectory for years to come. Let me start with a summary of our Q1 performance before handing it over to Kanan to share more details.

We have kicked off 2025 on a strong note, delivering solid results in the first quarter. I’m pleased to report that we achieved year over year revenue growth across both of our key operating segments. Notably, our data and analytics segment delivered double digit growth compared to the same period last year. I believe this performance underscores 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 globally.

This collaboration not only enhances our data modernization capability, but also reinforces our commitment to delivering differentiated high impact solutions in an AI first world. It deepens 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 client 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.

I’m pleased to share 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 forward strategy later this year, one that we believe will position Maastricht Digital as a leading partner to some of the largest Global 2,000 enterprise customers that are transitioning into AI first organization. Our focus remains on synergizing our data modernization and IT staffing solutions to offer cohesive high value services that meet 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 continues to shape how and when our clients choose to accelerate their technology spending. We have a served and 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, pausing major decisions in light of ongoing volatility, a trend we are seeing reflected in our customer conversations as well. Despite these headwinds, we believe the long term outlook for AI driven solutions remain promising.

Organizations continue to recognize the transformative potential of AI and are investing in technologies that drive efficiency and innovation at scale. At MasTec 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 plans.

I will now hand it over to our Chief Financial and Operations Officer, Kannan Sujanpram. Thanks, Nirav, and good morning, everyone. Today marks a little over a month since I joined Maastik 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 twenty five years of experience in finance and operations across global technology and services organizations.

Prior to joining Maastricht Digital, I served as the Chief Financial Officer of Omega Healthcare, where I helped drive enterprise wide transformation, strengthened execution discipline and delivered strong financial outcomes. Earlier in my career, I held senior leadership roles in finance, operations and transformation at Cognizant and Sutherland. It has been a fast paced and energizing few first weeks since I joined Maastricht Digital. A key part of my initial focus has been to ensure a smooth transition from my predecessor, Jack Cronin. I’m thankful to Jack 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, I’m committed to driving agility, discipline and scale across our financial and operation functions, ensuring we execute with precision today while laying the groundwork for long term value creation. We are aligning our teams, our systems, our processes to not only keep pace with change, 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 leadership team with a shared ambition to scale and create impact. Now on to the first quarter financial results.

Our first quarter twenty twenty five financial results reflected a cautionary macroeconomic environment. We saw client spending patterns impacted by the level of economic uncertainty that we are seeing today. Despite these headwinds, our sharp focus on key client relationships resulted in a year on year revenue growth in both our business segments and an order bookings performance in our Data and Analytics segment, which was in line with our expectations during the first quarter of twenty twenty five. Consolidated revenues during the first quarter of twenty twenty five totaled to INR48.3 million, a year over year increase of 3.2% compared to corresponding quarter of 2024. Our Data Analytics Services segment reported revenues of INR9 million in Q1 of twenty twenty five, which were 11.1 percentage higher than Q1 twenty twenty four revenue.

Additionally, first quarter twenty twenty five order bookings totaled INR11.7 7,000,000, which exceeded last year’s Q1 performance of 9,600,000.0. First quarter 20 20 5 revenues in our IT Staffing Services segment totaled 39,400,000.0, 1 point 6 percentage higher revenues than what was achieved during the first quarter of twenty twenty four. Despite some growth in Q1 twenty twenty five, demand in our IT Staffing segment was somewhat muted during the quarter as our billable consultant base declined by 15 consultants. Consolidated gross profit dollars increased by 6.3% in Q1 twenty twenty five compared to the corresponding quarter of twenty twenty four. Consolidated gross margins improved 80 basis points over the first quarter of twenty twenty four, largely driven by increases in our IT Staffing business.

GAAP net income for the first quarter of twenty twenty five totaled a net loss of $1400000.0.00 $12 per diluted share compared to a net loss of 200,000.0 or $01 per diluted share in the first quarter of twenty twenty four. Non GAAP net income for Q1 twenty twenty five was 800,000.0 or $06 per diluted share compared to 800,000.0 or $06 diluted share in the twenty twenty four first quarter as well. SG and A expense items not included in non GAAP financial measures, net of tax benefits are detailed in our first quarter twenty twenty five earnings release for all periods presented, which are available in our website. During the first quarter of twenty twenty five, our liquidity and overall financial position remained solid. On 03/31/2025, we had INR24.7 million cash balance on hand, no bank debt outstanding and cash availability of INR23.7 million under our revolving credit facility.

Our day sales outstanding DSO measurement on 03/31/2025 totaled 56, which is well within our targeted range and is in line with our DSO measurement a year ago. Operator, we will now open the call for questions.

Conference Operator: Thank Our first question is from Lisa Thompson with Zacks Investment Research. Please proceed.

Lisa Thompson, Analyst, Zacks Investment Research: Good morning. It’s great talking to you two. First, I have a few questions about, first, data and analytics. It looks like it dropped off sequentially quite 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?

Niraj Patel, Chief Executive Officer, MasTec Digital: Sure. In terms of gross margins in the D and A, it has been impacted by lower utilization and a onetime reserve adjustment on a fixed bid project during Q1 twenty twenty five, that is a one timer, and the reduction has been roughly about two percentage points, and we do see it as a onetime.

Lisa Thompson, Analyst, Zacks Investment Research: Okay. That’s good to hear. And can you go a little bit into your relationship within 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 just have sales in there that are working together now?

Niraj Patel, Chief Executive Officer, MasTec Digital: Yeah. Hi. Is Lisa. I’ll take that 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 as 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 with our customers. We are not just embedding the tools going forward. I think what we are going to think about it is co develop industry specific accelerators and possibly also launch an outcomes lab where many of our clients could actually come together with us in building up a joint solution as they think about modernizing their estate to an AI first world. So I think we see this really translating into both higher quality deal flows 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 settle on our partnership that we already had prior to this announcement.

Lisa Thompson, Analyst, Zacks Investment Research: So are you are the projects gonna have people from each company?

Niraj Patel, Chief Executive Officer, MasTec Digital: Yes. The way I think, Lisa, just to comment on it, I think we are still working through the details specifics of the partnerships, but the way we have visualized this whole partnership is the fact that we will commit resources from both sides, but more importantly, we will actually jointly pursue the solution building with our clients. So think about that as we were going forward in the market and expanding and making and realizing their whole AI first dreams come real, we now have together with us Informatica as a partnership that we think we can build jointly solutions on go forward. Look, 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 just makes it even more stronger as we approach the clients for more an integrated unified solutions that they look forward for in future.

Lisa Thompson, Analyst, Zacks Investment Research: Great. Thank you for that. My so my last question is, did you get a a chance to do any stock buybacks this quarter?

Niraj Patel, Chief Executive Officer, MasTec Digital: Yeah. So as you know, in 02/19/2025, the Board did authorize an extension of the share repurchase program by an additional year to 02/08/2026. We still have 423,000 shares that are available for repurchase. Nothing has been done in the last quarter. But you would notice that in the initial period when it was launched, we experienced a number of extended blackout periods, which we weren’t able to repurchase our shares.

And these were mostly corporate related transactions immigrants. 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 buyback.

Lisa Thompson, Analyst, Zacks Investment Research: Okay, great. Thank you for clarifying that. That’s all my questions. Thank you.

Conference Operator: Our next question is from Mark Riddick with Sidoti and Company. Please proceed.

Niraj Patel, Chief Executive Officer, MasTec Digital: Hey. Good morning. Good morning. Hey, Mark.

Lisa Thompson, Analyst, Zacks Investment Research: So I

Mark Riddick, Analyst, Sidoti and Company: was wondering actually, first, can we start with the where do we finish on consultant count for the quarter?

Niraj Patel, Chief Executive Officer, MasTec Digital: Yeah. So our billable headcount in staffing landed up at 991.

Mark Riddick, Analyst, Sidoti and Company: Okay. Okay. Great. And then I was wondering if could talk a little bit about as far as maybe what you you saw through the quarter with with client demand and and feedback trends. And maybe you could talk a little bit about the pacing through the through the quarter by month.

Maybe we can sort of get a sense of what impact headlines had on on on client demand throughout the quarter.

Niraj Patel, Chief Executive Officer, MasTec Digital: I we do not see lumpiness in that sense between the month, March, but the kind 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, which kind of highlights our continued relevance for the enterprise customers. And with the Informatica conversation that we have been having, we only believe that it would be a catalyst and enable us to accelerate our AI led IT transformation in that sense. But in terms of just the month on month, we haven’t seen any lumpiness.

Mark Riddick, Analyst, Sidoti and Company: Okay. Great. And can you 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 standouts that that that we should be aware

Niraj Patel, Chief Executive Officer, MasTec Digital: It should be broad based, Mark, but we do see a prior traction in our health care licenses practice. But other than that, it has been largely broad based.

Mark Riddick, Analyst, Sidoti and Company: Okay. And then so I I I think so we it was it’s been a few months now and and and turbulent months as far as the macro, I suppose. But maybe you can talk a little bit about maybe showing your your your initial thoughts in in in leading the company and if there are any areas that either were have been surprising on a positive or negative light or or or maybe just initial views that would provide insight as to sort of your your your views as to the company and and where it can go?

Niraj Patel, Chief Executive Officer, MasTec Digital: Most definitely, Mark. This is Neera here. So look, we 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, the long term demand drivers for AI driven transformations and data modernization remain very strong.

Clients might be, I would call, reprioritizing spend, but they’re not necessarily pausing their transformation agendas 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 each of these initiatives will need to be back 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 grab both sets of offerings. If you think about it, 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, our AI, data and analytics capabilities really fit beautifully well as well. So we think we are going with what I call cautious optimism as we approach the next few months. Great.

Mark Riddick, Analyst, Sidoti and Company: And then last one for me. It seems as though that we’ve had a pickup in bill rate. I think both, it it seems that

Niraj Patel, Chief Executive Officer, MasTec Digital: would be

Mark Riddick, Analyst, Sidoti and Company: both sequentially and and year over year, but maybe you could talk a little bit about that and and and what you’re seeing there.

Niraj Patel, Chief Executive Officer, MasTec Digital: Sure. Yes. Our average bill rate is right now trending between 84 and a half and 85 and a half, which is up from 83 to 83.5 last quarter and up actually from 79 last year at the same time. The increase in 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. But that’s subject that we are seeing.

Mark Riddick, Analyst, Sidoti and Company: Excellent. Thank you very much.

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

Niraj Patel, Chief Executive Officer, MasTec Digital: It is for us, this has been an exciting time with me coming in about thirty days back and Nero fitting in for the I would say, fifty days, one hundred days. It’s been an exciting journey, and we are still looking forward to making an impression when it comes to the market and looking at our strategies going forward. So thanks for that. And Nirav, over to you. Yes.

Thank you. Thank you, guys. Appreciate your support through the process, and we look forward to seeing you all in the next quarter.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.

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