Mastech Digital, Inc. (MHH) Bundle
Understanding Mastech Digital, Inc. (MHH) Revenue Streams
Understanding Mastech Digital, Inc.’s Revenue Streams
As of the third quarter of 2024, total consolidated revenues for Mastech Digital, Inc. reached $51.8 million, reflecting an increase of 8% year-over-year from $47.8 million in the same quarter of 2023. This marks the company's third consecutive quarter of revenue growth.
Breakdown of Primary Revenue Sources
The company generates revenue primarily through two segments: Data and Analytics Services and IT Staffing Services.
| Segment | Q3 2024 Revenue | Q3 2023 Revenue | Year-over-Year Growth (%) |
|---|---|---|---|
| Data and Analytics Services | $9.4 million | $8.0 million | 17% |
| IT Staffing Services | $42.4 million | $39.7 million | 7% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the company has shown positive momentum, with the following historical trends:
- Q3 2024: 8% increase compared to Q3 2023
- Q2 2024: 5% sequential growth from Q1 2024
- Q1 2024: 6% increase compared to Q1 2023
Contribution of Different Business Segments to Overall Revenue
In Q3 2024, the revenue contribution from different business segments was as follows:
| Segment | Q3 2024 Revenue Contribution (%) |
|---|---|
| Data and Analytics Services | 18% |
| IT Staffing Services | 82% |
Analysis of Significant Changes in Revenue Streams
During the third quarter of 2024, the company experienced notable changes in its revenue streams:
- Data and Analytics Services segment saw a 17% increase in revenue driven by increased client spending.
- IT Staffing Services segment achieved a 7% revenue growth, supported by a 13% increase in the billable consultant base over the first nine months of 2024.
- Total revenues for the first nine months of 2024 reached $148.2 million, compared to $155.0 million in the first nine months of 2023.
Overall, Mastech Digital, Inc. has demonstrated resilience and growth in its revenue streams, positioning itself strongly within the IT services market as of 2024.
A Deep Dive into Mastech Digital, Inc. (MHH) Profitability
A Deep Dive into Mastech Digital, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Gross Profit | $14.8 million | $12.6 million | 17.5% |
| Gross Margin | 28.5% | 26.3% | 8.4% |
| Operating Profit | $2.4 million | ($49,000) | 5,000% |
| Net Profit | $1.9 million | $125,000 | 1,420% |
| GAAP EPS | $0.16 | $0.01 | 1,500% |
| Non-GAAP EPS | $0.23 | $0.11 | 109% |
Trends in Profitability Over Time
From Q3 2023 to Q3 2024, the company has shown significant improvements in profitability metrics. The gross profit increased from $12.6 million to $14.8 million, reflecting a strong revenue growth and better cost management. The gross margin improved, indicating enhanced operational efficiency. Net income rose sharply, showcasing the company's ability to convert revenues into profits effectively.
Comparison of Profitability Ratios with Industry Averages
| Metric | Mastech Digital (MHH) | Industry Average |
|---|---|---|
| Gross Margin | 28.5% | 25.0% |
| Operating Margin | 4.7% | 5.0% |
| Net Profit Margin | 3.7% | 3.5% |
Analysis of Operational Efficiency
The operational efficiency of the company is reflected in its gross margin trends, which reached a record high of 28.5% in Q3 2024. This increase is attributed to effective cost management strategies and a favorable revenue mix. The company's ability to maintain a gross margin higher than the industry average indicates strong competitive positioning.
Key Financial Data
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Revenues | $51.8 million | $47.8 million |
| Cost of Revenues | $37.1 million | $35.2 million |
| Free Cash Flow | $2.3 million | N/A |
| Cash Balance | $23.9 million | $21.1 million |
| Days Sales Outstanding (DSO) | 55 days | N/A |
Debt vs. Equity: How Mastech Digital, Inc. (MHH) Finances Its Growth
Debt vs. Equity: How Mastech Digital, Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, Mastech Digital, Inc. reported $0 in long-term debt.
Short-term Debt: The company also has $0 in short-term debt, reflecting a clean balance sheet with no bank debt.
Total Debt: The total debt of Mastech Digital, Inc. stands at $0.
Debt-to-Equity Ratio: With total debt at $0 and total shareholders' equity of $86.5 million, the debt-to-equity ratio is 0.00, indicating no reliance on debt financing.
Industry Comparison: The average debt-to-equity ratio in the IT services industry is approximately 0.5. Mastech Digital's ratio is significantly lower, demonstrating a conservative approach to leveraging.
Recent Debt Issuances and Credit Ratings
Mastech Digital, Inc. has not issued any new debt recently and maintains a strong credit profile with no bank debt.
The company has a borrowing availability of approximately $25 million under its revolving credit facility, providing flexibility for future growth opportunities.
Balancing Debt Financing and Equity Funding
Mastech Digital has opted for a strategy focused on equity funding rather than debt financing. As of September 30, 2024, the company had $23.9 million in cash balances, providing ample liquidity for operational needs.
This strategy allows the company to invest in growth initiatives without the burden of interest payments, thereby enhancing financial stability and operational flexibility.
| Financial Metric | Value (as of September 30, 2024) |
|---|---|
| Long-term Debt | $0 |
| Short-term Debt | $0 |
| Total Debt | $0 |
| Total Shareholders' Equity | $86.5 million |
| Debt-to-Equity Ratio | 0.00 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
| Cash Balances | $23.9 million |
| Revolving Credit Facility Availability | $25 million |
Assessing Mastech Digital, Inc. (MHH) Liquidity
Assessing Mastech Digital, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets ($) | Current Liabilities ($) | Current Ratio |
|---|---|---|
| 65,815 | 22,101 | 2.98 |
This indicates that the company has 2.98 times more current assets than current liabilities, suggesting a strong liquidity position.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is also a measure of liquidity. Given that there are no significant inventories reported, the quick ratio mirrors the current ratio:
| Quick Assets ($) | Current Liabilities ($) | Quick Ratio |
|---|---|---|
| 65,815 | 22,101 | 2.98 |
This reinforces the liquidity strength, indicating that the company can readily meet its short-term obligations.
Analysis of Working Capital Trends
Working capital is calculated as current assets minus current liabilities:
| Period | Current Assets ($) | Current Liabilities ($) | Working Capital ($) |
|---|---|---|---|
| September 30, 2024 | 65,815 | 22,101 | 43,714 |
| December 31, 2023 | 56,463 | 19,871 | 36,592 |
The increase in working capital from 36,592 to 43,714 highlights improved liquidity management and financial health.
Cash Flow Statements Overview
For the first nine months of 2024, cash flow trends are as follows:
| Cash Flow Category | Amount ($) |
|---|---|
| Operating Cash Flow | 2.3 million |
| Investing Cash Flow | -4.3 million |
| Financing Cash Flow | 0 |
The negative investing cash flow indicates a significant investment in working capital, which is essential for supporting revenue growth.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds cash balances of 23.9 million with no bank debt and has borrowing availability of approximately 25 million under its revolving credit facility. The Days Sales Outstanding (DSO) stands at 55 days, showcasing efficient collection practices.
Overall, the financial metrics present a robust liquidity position, with sufficient cash reserves and manageable liabilities, indicating that the company is well-positioned to meet its short-term financial obligations.
Is Mastech Digital, Inc. (MHH) Overvalued or Undervalued?
Valuation Analysis
The valuation of Mastech Digital, Inc. can be assessed through various financial ratios and metrics that provide insights into its market position and performance. This analysis will focus on the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio provides a measure of the company's current share price relative to its earnings per share (EPS). As of the most recent quarter, the diluted earnings per share (EPS) was $0.16 for Q3 2024, compared to $0.01 in Q3 2023. Assuming a current stock price of approximately $5.00, the P/E ratio can be calculated as follows:
P/E Ratio = Price per Share / Earnings per Share
P/E Ratio = $5.00 / $0.16 = 31.25
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the total shareholders' equity was $86.5 million. With a total of 12.011 million shares outstanding, the book value per share is:
Book Value per Share = Total Shareholders' Equity / Total Shares Outstanding
Book Value per Share = $86,527 / 12,011 = $7.20
Using the previously mentioned stock price:
P/B Ratio = Price per Share / Book Value per Share
P/B Ratio = $5.00 / $7.20 = 0.69
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is used to evaluate a company’s total value compared to its earnings before interest, taxes, depreciation, and amortization. The enterprise value (EV) can be calculated as:
- Market Capitalization: $5.00 12.011 million shares = $60.06 million
- Plus: Total Debt: $0 (no bank debt reported)
- Less: Cash and Cash Equivalents: $23.9 million
Enterprise Value = Market Capitalization + Total Debt - Cash
EV = $60.06 million + $0 - $23.9 million = $36.16 million
For the EBITDA, for the last twelve months (TTM), we can estimate using the net income and adding back interest, taxes, depreciation, and amortization. The net income for the nine months ended September 30, 2024, was $3.1 million. Assuming a rough EBITDA of $5 million for the TTM, the calculation is:
EV/EBITDA = Enterprise Value / EBITDA
EV/EBITDA = $36.16 million / $5 million = 7.23
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations. The stock price was approximately $4.00 a year ago and has seen a high of about $5.50 in recent months, indicating a trend of growth.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, and thus the dividend yield is 0%. The payout ratio is also not applicable as there are no dividends being distributed.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a hold rating for the stock, suggesting that while it is not currently underperforming, there are no strong buy signals at this time. The average target price is around $5.25, reflecting a slight upside potential based on current valuations.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 31.25 |
| P/B Ratio | 0.69 |
| EV/EBITDA Ratio | 7.23 |
| Stock Price (12 months ago) | $4.00 |
| Current Stock Price | $5.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Mastech Digital, Inc. (MHH)
Key Risks Facing Mastech Digital, Inc.
The financial health of Mastech Digital, Inc. is influenced by various internal and external risk factors that can significantly impact its operations and overall performance.
Industry Competition
The competitive landscape in the digital transformation and IT services sector poses a substantial risk. The company faces competition from both established players and new entrants, which can affect market share and pricing strategies. In the third quarter of 2024, Mastech Digital reported revenues of $51.8 million, reflecting an 8% year-over-year growth . However, profitability can be pressured by competitive pricing and the need to continuously innovate to maintain customer interest and retention.
Regulatory Changes
Changes in regulations related to data privacy, cybersecurity, and labor laws can pose significant challenges. Compliance with these regulations may require additional investments in systems and processes. The company is subject to scrutiny regarding its employment practices, which previously resulted in a $3.1 million reserve for an employment-related claim in 2023 . Such unexpected liabilities can adversely impact financial results.
Market Conditions
Economic fluctuations can affect client budgets, leading to reduced spending on IT services. The company noted a healthier macroeconomic outlook in 2024, which contributed to increased order bookings of $11.1 million in the third quarter . However, any downturn in economic conditions could reverse this trend, leading to decreased revenues.
Operational Risks
Operational risks, including reliance on key personnel and the ability to attract and retain talent, are critical. The company reported a 13% increase in its billable consultant base over the first nine months of 2024, which is essential for sustaining growth . Any challenges in recruitment or retention could hinder service delivery and client satisfaction.
Financial Risks
Financial health is impacted by cash flow management and debt levels. As of September 30, 2024, the company reported $23.9 million in cash balances with no bank debt and approximately $25 million available under its revolving credit facility . However, increases in operational expenses or unforeseen costs could strain cash flow, particularly if revenues fluctuate.
Mitigation Strategies
The company has implemented several strategies to mitigate risks, including enhancing operational efficiencies and investing in technology upgrades. The gross margin for the third quarter of 2024 was a record 28.5%, indicating effective cost management . Additionally, the management is focused on diversifying service offerings to reduce dependency on any single revenue stream.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Presence of established and new competitors | Pressure on pricing and market share | Continuous innovation and customer engagement |
| Regulatory Changes | Changes in data privacy and labor laws | Increased compliance costs and liabilities | Investment in compliance systems |
| Market Conditions | Economic downturn affecting client budgets | Reduced spending on IT services | Focus on diversifying client base |
| Operational Risks | Reliance on key personnel | Potential service delivery issues | Talent acquisition and retention programs |
| Financial Risks | Cash flow management and debt levels | Strain on financial health | Effective cash flow monitoring |
Future Growth Prospects for Mastech Digital, Inc. (MHH)
Future Growth Prospects for Mastech Digital, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its financial performance moving forward:
- Product Innovations: The Data and Analytics Services segment reported revenues of $9.4 million in Q3 2024, representing a 17% increase year-over-year.
- Market Expansions: The IT Staffing Services segment generated $42.4 million in revenue, achieving a 7% year-over-year growth.
- Acquisitions: The company has made strategic acquisitions to bolster its service offerings, enhancing its market position.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, total revenues are projected to reach approximately $200 million, reflecting a robust growth trajectory. The earnings estimates suggest:
- GAAP diluted earnings per share of $0.26 for the full year.
- Non-GAAP diluted earnings per share is expected to be around $0.48.
Strategic Initiatives or Partnerships
Several strategic initiatives and partnerships have been outlined to drive future growth:
- Collaboration with technology partners to enhance service delivery.
- Investment in advanced analytics capabilities to attract new clients.
Competitive Advantages
The company possesses several competitive advantages that position it favorably for growth:
- Strong Financial Position: As of September 30, 2024, the company reported cash balances of $23.9 million and no bank debt.
- Operational Efficiency: The company achieved a record gross margin of 28.5% in Q3 2024, up from 26.3% in Q3 2023.
- Healthy Demand: Order bookings totaled $11.1 million in Q3 2024, reflecting increased spending from existing clients.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $51.8 million | $47.8 million | +8% |
| GAAP Net Income | $1.9 million | $125,000 | +1424% |
| Non-GAAP Net Income | $2.8 million | $1.3 million | +115% |
| Gross Margin | 28.5% | 26.3% | +2.2% |
| Cash Balances | $23.9 million | N/A | N/A |
The company continues to leverage its strong market position and operational efficiencies to capitalize on growth opportunities within the IT services sector.
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Updated on 16 Nov 2024
Resources:
- Mastech Digital, Inc. (MHH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Mastech Digital, Inc. (MHH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Mastech Digital, Inc. (MHH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.