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Mastech Holdings Inc (NASDAQ: MHH) delivered a strong earnings performance for Q4 2024, surpassing analysts’ expectations with an EPS of $0.23 compared to the forecasted $0.115. The company also reported revenues of $50.75 million, exceeding the anticipated $49.24 million. With a beta of 0.56 and an overall Financial Health score of "FAIR" according to InvestingPro, the company shows moderate market sensitivity. Despite these positive results, Mastech’s stock declined by 7.3% in pre-market trading, reflecting broader market uncertainties and investor caution.
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Key Takeaways
- Mastech Holdings beat earnings expectations with a significant EPS and revenue surprise.
- Despite strong financial results, the stock price fell by 7.3% in pre-market trading.
- The company achieved a record gross margin of 29% in Q4 2024.
- Mastech is focusing on AI-driven digital modernization to drive future growth.
- The macro environment is creating uncertainty, affecting enterprise decision-making.
Company Performance
Mastech Holdings reported a robust performance in Q4 2024, with a 10.2% year-over-year increase in consolidated revenues, reaching $50.7 million. The company maintained stable full-year revenues at $198.9 million, consistent with 2023 figures. With a strong current ratio of 2.98 and a low debt-to-equity ratio of 0.05, Mastech maintains a solid financial position. The focus on AI-driven digital modernization and data integration has positioned Mastech as a competitive player in the technology sector.
Financial Highlights
- Revenue: $50.7 million (10.2% YoY increase)
- Earnings per share: $0.23 (exceeded forecast of $0.115)
- Gross margin: 29% (company record)
- Non-GAAP Net Income: $2.8 million ($0.23 per diluted share)
Earnings vs. Forecast
Mastech Holdings significantly outperformed expectations with an EPS of $0.23 against a forecast of $0.115, resulting in a surprise percentage of nearly 100%. This marks a notable achievement for the company, indicating effective cost management and strategic execution.
Market Reaction
Despite the earnings beat, Mastech’s stock fell by 7.3% in pre-market trading. The decline suggests investor concerns about macroeconomic uncertainties and the company’s lack of specific financial guidance for 2025. However, InvestingPro data shows the stock has gained nearly 28% over the past six months, with analyst price targets ranging from $17 to $18.25. The stock remains within its 52-week range of $7.15 to $16, highlighting a cautious market sentiment.
Outlook & Guidance
Mastech Holdings has not provided specific financial guidance for 2025, focusing instead on strategic refinement and potential government sector opportunities. According to InvestingPro analysis, net income is expected to grow this year, and analysts predict the company will return to profitability. The company plans minimal capital expenditures and continues to explore AI-driven initiatives to enhance its market position.
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Executive Commentary
CEO Neeraj Patel emphasized the transformative potential of AI, stating, "We believe that 2025 will be the year we begin our transformation, one that helps enterprises reimagine themselves and transition into AI-first organizations." He also highlighted the importance of sustainable growth: "Growth is only meaningful when it is sustainable and profitable."
Risks and Challenges
- Macro (BCBA:BMAm) environment uncertainty could impact enterprise investment decisions.
- Booking (NASDAQ:BKNG) challenges and delays reported in Q4 may affect future revenue streams.
- The absence of specific financial guidance creates uncertainty for investors.
- The competitive landscape in AI-driven technology requires continuous innovation.
- Potential market saturation in existing service offerings.
Q&A
During the earnings call, analysts inquired about the booking challenges faced in Q4 2024, which were below expectations at $11 million. The management acknowledged booking delays across various client verticals and discussed potential share repurchases and M&A opportunities as part of their strategic considerations for 2025.
Full transcript - Mastech Holdings (MHH) Q4 2024:
Conference Operator: Greetings, and welcome to the MasTec (NYSE:MTZ) Digital Q4 twenty twenty four 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. It is now my pleasure to introduce your host, Jenna Lacy, Manager of Legal Affairs for MasTec Digital.
Thank you, Ms. Lacy. You may begin.
Jenna Lacy, Manager of Legal Affairs, MasTec Digital: Thank you, operator, and welcome to MasTec Digital’s fourth quarter twenty twenty four conference call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastecdigital.com. With me on the call today are Neeraj Patel, MasTec Digital’s Chief Executive Officer and Zack 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 statements 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 2023 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, 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.mastekdigital.com. As a reminder, we will not be providing guidance during this call, nor will we provide any guidance in any subsequent one on one meetings or calls. I will now turn the call over to Nirav for his comments.
Neeraj Patel, Chief Executive Officer, MasTec Digital: Thanks, Jenna, and good morning, everyone. Today is my forty fifth day with MasTec Digital, and it’s a privilege to address you today as MasTec Digital’s Chief Executive Officer. Let me start by giving you a bit of my background and experience. I have well over twenty five years of experience as a technology executive with a track record of scaling large and mid sized organizations. I have held several prominent leadership roles throughout my career.
Prior to joining MasTec Digital, I served for over four years as President and CEO of Bristlecone, an AI powered pure play supply chain transformation company. And before that, I spent over nineteen years at Cognizant (NASDAQ:CTSH) playing many executive roles scaling multibillion dollar businesses across its key industry segments and serving enterprise clients globally. It’s been an incredible and busy first forty five days since stepping into my role at MasTec Digital. I’m about halfway through my first one hundred days. And in addition to focusing on the execution of our plans, I have spent a considerable amount of time listening to our customers, partners, employees and investors.
It is important for me to hear their perspectives and understand the expectations they have of us for the future. What is clear to me is that we have a strong foundation and culture that is deeply rooted in customer focus. But what’s also clear to me is that we are at an inflection point, both in terms of speed of change brought by the AI revolution across our enterprise customers and the changing landscape of technology service providers in this rapidly evolving AI first world. I believe that winning in the future will require organization like ours to have a sharper execution focus and a founder’s mindset for unlocking growth. We cannot ignore the evolving landscape shaping our industry.
We are seeing the uncertainties created from a changing macro environment leading to greater caution and slower decision making. Companies are carefully assessing interest rates, liquidity and market conditions to ensure their technology investments are both strategic and sustainable. That being said, I have no doubt that the AI revolution is real. Across industries, AI automation and data driven decision making are no longer just concepts. They are being actively embraced and internalized.
Organizations are moving beyond exploration, building proof of concepts, integrating AI into core processes and in many cases rapidly scaling these capabilities to drive competitive advantage. While the path forward may not be linear, the appetite for AI driven solutions remain strong. Emerging AI models like OpenAI, Cloud, Lama and DeepSeek are reinforcing the fact that AI is reshaping how enterprises work, optimize and innovate. While Jack will provide a detailed update, I wanted to share a few thoughts on our performance in the fourth quarter of twenty twenty four. We have made meaningful progress delivering revenue and margin growth with data and analytics seeing particularly strong acceleration.
This performance reinforces our conviction that AI driven digital modernization is the next frontier and that we are well positioned to capture this momentum. I sum up the fourth quarter in two words, execution and transition. We believe that 2025 will be the year we begin our transformation, one that helps enterprises reimagine themselves and transition into AI first organizations. This is just the beginning of that journey. Looking ahead, we believe our long term success will be driven by three principles that define who we are and where we are going.
First, we believe we must lead with a sense of urgency. The window to establish ourselves as a leading technology provider that helps enterprises reimagine and transform into AI enterprises will not stay open forever. In this space, speed is not just an advantage, it is the difference between leading and lagging. Second, we believe we must build a compelling and relevant portfolio of offerings. Differentiation will be key.
We are not just creating innovative solutions, but solutions that are essential to how businesses operate in the AI era. We believe our data modernization and staffing solutions must work together to drive deeper client engagement. It’s not enough to participate. We believe we must integrate our strengths into a seamless high value offering that sets us apart. Third, we believe we must execute with discipline.
Growth is only meaningful when it is sustainable and profitable. We intend to drive efficiency across the organization, operate with accountability and ensure that every investment we make and every position we take creates lasting value for our customers, employees and shareholders. I recognize that building confidence in the leadership takes time and that it must be earned through clear execution and transparency. My commitment to you is simple. I plan to be direct about where we are, clear about where we need to go and decisive about how we get there.
MasTec Digitals is not starting from scratch. We believe we have the right foundation, the right talent and the right market opportunity. What we need is the runway to refine our strategy, sharpen our execution and create a growth story that is truly our own. Thank you for your time and trust. I will now hand
Zack Cronin, Chief Financial Officer, MasTec Digital: it over to Jack. Thanks, Neera, and good morning, everyone. Our fourth quarter twenty twenty four financial results reflected the positive momentum that we experienced over the last nine months of 2024. Consolidated revenues during the fourth quarter totaled $50,700,000 a year over year increase of 10.2% compared to the corresponding quarter of 2023. Our Data and Analytics Services segment reported revenues of $10,300,000 in Q4 twenty twenty four, which were 26.2 higher on a year over year basis and 9.4% sequentially higher than our revenue performance in the previous quarter.
Order bookings in Q4 twenty twenty four totaled $11,000,000 which was somewhat below our expectations. In the fourth quarter of twenty twenty four, our IT staffing services segment had revenues of $40,500,000 achieving year over year revenue growth of 6.8%. During the quarter, our global consultant base declined by 63 consultants, which is generally in line with previous years due to seasonal high assignment ends. As expected, this will have some impact on our Q1 twenty twenty five revenue results. Consolidated gross profit dollars totaled $14,700,000 in Q4, which exceeded the corresponding quarter of 2023 by $3,400,000 or a 30% increase driven by higher revenue volumes as well as increasing gross margin percent.
Our Q4 twenty twenty four gross margin percent was a company record 29% as both of our business segments had significant margin expansion from the previous year. In our Data and Analytics Services segment, gross margins as a percent of revenue increased by four eighty basis points to 49.5% in Q4 twenty twenty four compared to 44.7% in the fourth quarter of twenty twenty three. This increase reflected higher utilization and better project delivery. In our IT staffing services segment, gross margins were up three fifty basis points in Q4 or compared to Q4 twenty twenty three due to an increase in direct hire revenues, a favorable medical claim experience in our self insured healthcare program and higher margins on new assignments. GAAP net income for the fourth quarter of twenty twenty four totaled $300,000 or $0.02 per diluted share compared to a net loss of $5,400,000 or negative $0.46 per share in Q4 of twenty twenty three.
Non GAAP net income for Q4 of twenty twenty four was $2,800,000 or $0.23 per diluted share compared to $1,300,000 or $0.11 per diluted share in the twenty three fourth quarter. SG and A expense items not included in non GAAP financial measures, net of tax benefits are detailed in our fourth quarter earnings release for all periods presented and are available on our website. Highlights of our full year 2024 results included the following: 2024 revenues were $198,900,000 which was largely in line with our full year 2023 revenues. Gross margins in 2024 totaled 27.9% compared to 25.4% in 2023. Our data and analytics services gross margin percent increased by five sixty basis points on a year over year basis.
And in our IT staffing services segment, our gross margin percent increased by 160 basis points. GAAP diluted earnings per share in 2024 was a profit of $0.28 versus a loss of 0.61 in 2023. Non GAAP diluted earnings per share in 2024 totaled a profit of $0.71 compared to a profit of $0.44 in 2023, an increase an improvement of 61%. At 12/31/2024, our liquidity and overall financial position remains solid. Today, we have no bank debt outstanding.
We have $27,700,000 of cash balances on hand. We have cash availability of $22,600,000 under our revolving credit facility and our days sales outstanding measurement at 12/31/2024 totaled fifty two days, which was well within our targeted range. Devin, that completes our prepared comments. We’d like to open it up for questions now.
Conference Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Lisa Thompson with Sachs Investment Research. Please proceed with your question.
Lisa Thompson, Analyst, Sachs Investment Research: Good morning.
Zack Cronin, Chief Financial Officer, MasTec Digital: Good morning.
Lisa Thompson, Analyst, Sachs Investment Research: So we’re all looking forward to an exciting 2025. I know there’s a lot of possibilities out there. Could you talk a little bit about what you’re thinking is of how you’re going to approach increasing staffing and DNA? Is there going to be any strategy changes besides the obvious of trying to incorporate AI into your whole service offerings? How is that going to work?
Neeraj Patel, Chief Executive Officer, MasTec Digital: Sure, Lisa. Thank you for the question. Nirav here, I’ll take that one. Look, I’m taking a very, very structured approach, Lisa, to defining our long term strategy. And I sort of I’ve just stepped into my role and my immediate priority is to deeply learn about our business and engage with our teams, customers and partners, and to really have a chance to assess our starting point in terms of our challenges and opportunities.
What I can say with confidence that MasTec has a very, very strong foundation. Our focus will be on accelerating growth, driving excellence and enhancing our offerings. But I am going to take a little bit of a structured approach in defining this strategy and I look forward to be sharing more specific details sometime later half of this year as we refine our plans and execution roadmap.
Lisa Thompson, Analyst, Sachs Investment Research: Okay. I’m also curious that there’s a lot of talk about government efficiency now. Do you see any opportunities in there? If there ever is an entity that needs data modernization, I think that would be the one.
Zack Cronin, Chief Financial Officer, MasTec Digital: Clearly, government opportunities are something that especially in D and A that we look at for sure. So I guess the answer to your question is yes.
Lisa Thompson, Analyst, Sachs Investment Research: Okay. All right. Could you do you happen to have offhand how many employees you ended the year with?
Zack Cronin, Chief Financial Officer, MasTec Digital: Yes, I do. We ended the year with total employees of both segments of eighteen sixteen. And just as a point of reference, last year we had we ended the year 2023 with sixteen forty eight.
Lisa Thompson, Analyst, Sachs Investment Research: Okay. So that’s a pretty big increase.
Zack Cronin, Chief Financial Officer, MasTec Digital: Yes, not bad.
Lisa Thompson, Analyst, Sachs Investment Research: All right. Yes, yes. And do you have any thoughts about spending this year? Is it going to be pretty much steady or is there any investment you need to do?
Zack Cronin, Chief Financial Officer, MasTec Digital: Spending like on SG and A cost or spending on like CapEx?
Lisa Thompson, Analyst, Sachs Investment Research: Well, either, but mostly SG and A.
Zack Cronin, Chief Financial Officer, MasTec Digital: Okay. SG and A, yes, our objective in SG and A is to continue to maintain our SG and A expense at the same percentage that we had in 2024 for 2025. So that’s the objective. And it’s going to be a little bit by quarter to quarter. I would say that probably in the first half of twenty twenty five, we’re going to probably not reach that goal, because I think we are going to be hiring some of the missing pieces related to a new growth strategy.
But by the end of the year with what we believe would be increases in revenue as well as maybe some cost savings initiatives, we should come in at that objective.
Lisa Thompson, Analyst, Sachs Investment Research: Okay.
Zack Cronin, Chief Financial Officer, MasTec Digital: And from a CapEx standpoint, we don’t have a whole lot of capital expenditures. I mean, we’re maybe it’s certainly under $1,000,000 So that will still hold clearly under $1,000,000 Okay.
Lisa Thompson, Analyst, Sachs Investment Research: And you’re still thinking 28% tax rate?
Zack Cronin, Chief Financial Officer, MasTec Digital: Well, the 28% tax rate, it encompasses, like a 123 R expense true up based on the gains that our employees enjoy from exercising their shares versus the company expense related to those shares. So in the last year, let’s say the last year and a half, our true up was negative, which negatively impacts the tax rate. That’s why we were 28%. In fourth quarter, our stock price was a little bit higher and a lot of the exercises came in at gains that were greater than the $123 expense, the compensation expense. And actually our tax rate was actually lower than 25%.
So a lot of that depends on some of these unusual true ups that we have to make from a tax perspective.
Lisa Thompson, Analyst, Sachs Investment Research: Okay, great. Thank you. That’s all my questions right now.
Zack Cronin, Chief Financial Officer, MasTec Digital: Thanks,
Conference Operator: Thank you. Our next question comes from the line of Mark Redick with Sidoti and Company. Please proceed with your question.
Mark Redick, Analyst, Sidoti and Company: Hey, good morning.
Zack Cronin, Chief Financial Officer, MasTec Digital: Good morning.
Neeraj Patel, Chief Executive Officer, MasTec Digital: Good morning.
Mark Redick, Analyst, Sidoti and Company: I wanted to touch a little bit on some of the commentary around the bookings during the quarter and maybe if you could spend maybe a little bit of time sort of giving us a picture on sort of how that progressed either whether it was whether by monthly or were there changes in the demand pre post election? Did the bookings look different based on client verticals? Anything that you can sort of share there as to maybe what you were seeing during the fourth quarter? And then maybe any thoughts as to maybe how the year has begun as far as client activity would be really helpful.
Zack Cronin, Chief Financial Officer, MasTec Digital: Sure, Mark. I’ll take a stab at that. When we looked at our pipeline at the beginning of Q4 and looking at our pipeline, we had a range of where we thought we would land in total bookings and the $11,000,000 came short of that. And we had some project delays, because there is a little bit in particular in D and A, there is a little bit of uncertainty in the marketplace. I mean, we saw a few clients where we thought they were going to give us bookings in Q4 and they delayed those.
And so there is we clearly see some uncertainty in the marketplace. What’s the driver of that uncertainty? I mean, we can guess, is it a tick up in inflation? Is it political concerns, unknowns? But whatever the reason, our clients seem to be less eager to
Neeraj Patel, Chief Executive Officer, MasTec Digital: give bookings
Zack Cronin, Chief Financial Officer, MasTec Digital: deals immediately. They seem to have a longer cycle sales cycle on that before they let a booking transpire.
Mark Redick, Analyst, Sidoti and Company: Okay. And is there and I know it’s a bit granular, but I was just sort of curious, is there anywhere in particular whether it’s certain types of clients or do you think that’s sort of more of an across the board kind of situation right now?
Zack Cronin, Chief Financial Officer, MasTec Digital: I would say across the board. I would say across the board. I mean, we’ve had some bookings on financial service clients. We’ve had Q4 bookings on healthcare clients. It’s just that we didn’t get the amount that we expected given the robust pipeline that we had.
Mark Redick, Analyst, Sidoti and Company: Okay. And then one of the things I did want to highlight in your in the press release was around the extension of the share repurchase program, which was initially scheduled to end earlier this month and has now been extended to February of twenty six. I just wondered if you could share any thoughts there. I can understand that, but how you’ve been there for like forty five days. I can understand that you get to have some time to sort of work through some of the prioritizations.
But I was just sort of wondering if you could share any thoughts on that share repurchase extension there.
Zack Cronin, Chief Financial Officer, MasTec Digital: Yes. I mean, the Board made that decision, right? And we had this program for two years prior. And during those that two year period, we experienced a number of extended blackout periods where we weren’t able to repurchase our shares. They were corporate related transactions and events.
We think most of that is behind us and we have 423,000 shares remaining in the share buyback program, we would like to capitalize on some of those. So I do think that you’re going to see less blackout periods and more buyout volume in 2025 compared to last year.
Mark Redick, Analyst, Sidoti and Company: Great. And then the last thing for me as far as potential uses of cash, obviously, a very strong balance sheet to work with. At the moment, I was wondering if you could talk about any thoughts on potential acquisitions and maybe what that pipeline may look like now whether valuations have changed in the last few months or we’ve seen a few small deals in this space, but maybe sort of comment on maybe what you’re seeing out there?
Neeraj Patel, Chief Executive Officer, MasTec Digital: Sure, Mark. This is Dheeraj here. I’ll take that first. So Mark, I think, look, like I said that we are certainly in the phase where we are sort of starting to think through our go forward strategy and we are sort of trying to really get a little bit more clarity on that. And I think like I said earlier, right, I just stepped in on my role.
And in terms of my go forward strategy, my immediate priority is really to listen and learn. And I think, I am taking a fairly structured approach of thinking through our long term approach strategy, which kind of will include elements of organic and inorganic plays and so forth. But to me, I think getting the direction for the company in terms of where we are headed lays an important emphasis before we would sort of activate or execute on any of those transactions. But please feel free to chime in, Jack, if you want to share your thoughts.
Zack Cronin, Chief Financial Officer, MasTec Digital: No. The only thing that I would say, Mark, is M and A is part of our growth strategy for sure. It always has been. It’s just that when you’re changing leadership, it’s hard to to decide exactly what you want to purchase. So I think No, that’s Yes.
I think once Nirav gets Go ahead, Martin.
Mark Redick, Analyst, Sidoti and Company: No, I was just going to say we’re certainly looking forward to working with Nirav going forward and looking forward to your vision for the company going forward. And that’s about it for me today.
Neeraj Patel, Chief Executive Officer, MasTec Digital: Thank you, Mark. I’m equally excited and looking forward to working with you.
Lisa Thompson, Analyst, Sachs Investment Research: You.
Conference Operator: There appear to be no further questions at this time. I’d like to turn the floor back over to Mr. Patel for closing remarks.
Neeraj Patel, Chief Executive Officer, MasTec Digital: Thank you, Devin. If there are no additional questions, I thank you for your time and I look forward to talking with you in early May for our Q1 twenty twenty five earnings call.
Conference Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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