Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
001-34099
 
 
MASTECH DIGITAL, INC.
(Exact name of registrant as specified in its charter)
 
 
 
PENNSYLVANIA
  
26-2753540
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
1305 Cherrington Parkway, Building 210, Suite 400
Moon Township, Pennsylvania
  
15108
(Address of principal executive offices)
  
(Zip Code)
Registrant’s
 telephone number, including area code:
(412) 787-2100


Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Common Stock, par value $.01 per share
  
MHH
  
NYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
Non-accelerated filer
   ☒    Smaller reporting company   ☒
     Emerging growth company   ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s Common Stock, par value $.01 per share, outstanding as of October 31, 2024 was 11,705,973.



Table of Contents

MASTECH DIGITAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

 

    

Page

PART 1

    FINANCIAL INFORMATION    3

Item 1.

    Financial Statements:    3
   (a)    Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023    3
   (b)    Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023    4
   (c)    Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2024 and December 31, 2023    5
   (d)    Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2024 and 2023    6
   (e)    Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2024 and 2023    7
   (f)    Notes to Condensed Consolidated Financial Statements (Unaudited)    8

Item 2.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations    19

Item 3.

    Quantitative and Qualitative Disclosures About Market Risk    26

Item 4.

    Controls and Procedures    27

PART II

    OTHER INFORMATION    27

Item 1.

    Legal Proceedings    27

Item 1A.

    Risk Factors    27

Item 2.

    Unregistered Sales of Equity Securities and Use of Proceeds    28

Item 5.

    Other Information    29

Item 6.

    Exhibits    30
   SIGNATURES    31

 

 

2

Table of Contents
PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2024
    
2023
    
2024
    
2023
  
Revenues
    $ 51,839     $ 47,779     $ 148,196     $ 155,046  
Cost of revenues
      37,068       35,213       107,314       115,354  
  
 
 
    
 
 
    
 
 
    
 
 
  
Gross profit
      14,771       12,566       40,882       39,692  
Selling, general and administrative expenses:
         
Operating expenses
      12,332       12,615       37,156       38,937  
Employment-related claim, net of recoveries
      —        —        —        3,100  
  
 
 
    
 
 
    
 
 
    
 
 
  
Total selling, general and administrative expenses
      12,332       12,615       37,156       42,037  
  
 
 
    
 
 
    
 
 
    
 
 
  
Income (loss) from operations
      2,439       (49 )      3,726       (2,345 ) 
Interest income (expense), net
      163       148       447       232  
Other income (expense), net
      (30 )      55       (74 )      (32 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Income (loss) before income taxes
      2,572       154       4,099       (2,145 ) 
Income tax expense (benefit)
      697       29       994       (358 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Net income (loss)
    $ 1,875     $ 125     $ 3,105     $ (1,787 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Earnings (loss) per share:
         
Basic
    $ .16     $ .01     $ .27     $ (.15 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Diluted
    $ .16     $ .01     $ .26     $ (.15 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Weighted average common shares outstanding:
         
Basic
      11,695       11,597       11,654       11,618  
  
 
 
    
 
 
    
 
 
    
 
 
  
Diluted
      12,011       11,968       11,949       11,618  
  
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
3
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands)
(Unaudited)
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2024
    
2023
    
2024
    
2023
  
Net income (loss)
    $ 1,875     $ 125     $ 3,105     $ (1,787 ) 
Other comprehensive income (loss):
         
Foreign currency translation adjustments
      (44 )      (88 )      (71 )      (95 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Total other comprehensive gain (loss), net of taxes
      (44 )      (88 )      (71 )      (95 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Total comprehensive income (loss)
    $ 1,831     $ 37     $ 3,034     $ (1,882 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
4
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
(Unaudited)
 
    
September 30,
2024
    
December 31,
2023
  
ASSETS
     
Current assets:
     
Cash and cash equivalents
    $ 23,885     $ 21,147  
Accounts receivable, net of allowance for credit losses of $286 in 2024 and $528 in 2023
      26,061       22,556  
Unbilled receivables
      7,993       7,259  
Prepaid and other current assets
      7,876       5,501  
  
 
 
    
 
 
  
Total current assets
      65,815       56,463  
Equipment, enterprise software, and leasehold improvements, at cost:
   
Equipment
      3,631       3,012  
Enterprise software
      4,185       4,185  
Leasehold improvements
      750       753  
  
 
 
    
 
 
  
     8,566       7,950  
Less – accumulated depreciation and amortization
      (6,483 )      (6,037 ) 
  
 
 
    
 
 
  
Net equipment, enterprise software, and leasehold improvements
      2,083       1,913  
Operating lease
right-of-use
assets, net
      4,147       5,106  
Deferred income taxes
      607       793  
Deferred financing costs, net
      213       284  
Non-current
deposits
      452       457  
Goodwill, net of impairment
      27,210       27,210  
Intangible assets, net of amortization
      10,958       13,001  
  
 
 
    
 
 
  
Total assets
    $ 111,485     $ 105,227  
  
 
 
    
 
 
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
     
Current liabilities:
     
Accounts payable
    $ 4,636     $ 4,659  
Accrued payroll and related costs
      14,717       12,354  
Current portion of operating lease liability
      1,257       1,236  
Other accrued liabilities
      632       938  
Deferred revenue
      859       684  
  
 
 
    
 
 
  
Total current liabilities
      22,101       19,871  
  
 
 
    
 
 
  
Long-term liabilities:
     
Long-term operating lease liability, less current portion
      2,857       3,843  
Long-term accrued income taxes
      —        69  
  
 
 
    
 
 
  
Total liabilities
      24,958       23,783  
Commitments and contingent liabilities (Note 5)
     
Shareholders’ equity:
     
Preferred Stock, no par value; 20,000,000 shares authorized; none outstanding
      —        —   
Common Stock, par value $.01; 100,000,000 shares authorized and 13,429,314 shares issued as of September 30, 2024 and 13,312,568 shares issued as of December 31, 2023
      134       133  
Additional
paid-in-capital
      37,473       35,345  
Retained earnings
      55,520       52,415  
Accumulated other comprehensive income (loss)
      (1,715 )      (1,644 ) 
Treasury stock, at cost; 1,723,341 shares as of September 30, 2024 and 1,714,119 shares as of December 31, 2023
      (4,885 )      (4,805 ) 
  
 
 
    
 
 
  
Total shareholders’ equity
      86,527       81,444  
  
 
 
    
 
 
  
Total liabilities and shareholders’ equity
    $ 111,485     $ 105,227  
  
 
 
    
 
 
  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
5
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands)
(Unaudited)
 
    
Common
Stock
     
Additional
Paid-in

Capital
     
Accumulated
Retained
Earnings
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Total
Shareholders’
Equity
  
Balances, December 31, 2023
    $ 133      $ 35,345      $ 52,415     $ (4,805 )    $ (1,644 )    $ 81,444  
Net (loss)
      —         —         (161 )      —        —        (161 ) 
Other comprehensive (loss), net of taxes
      —         —         —        —        (28 )      (28 ) 
Stock-based compensation expense
      —         550        —        —        —        550  
Shares repurchased
      —         —         —        (80 )      —        (80 ) 
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, March 31, 2024
    $ 133      $ 35,895      $ 52,254     $ (4,885 )    $ (1,672 )    $ 81,725  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Net income
      —         —         1,391       —        —        1,391  
Employee common stock purchases
      —         136        —        —        —        136  
Other comprehensive gain, net of taxes
      —         —         —        —        1       1  
Stock-based compensation expense
      —         461        —        —        —        461  
Stock options exercised
      1        321        —        —        —        322  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, June 30, 2024
    $ 134      $ 36,813      $ 53,645     $ (4,885 )    $ (1,671 )    $ 84,036  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Net income
      —         —         1,875       —        —        1,875  
Other comprehensive (loss), net of taxes
      —         —         —        —        (44 )      (44 ) 
Stock-based compensation expense
      —         542        —        —        —        542  
Stock options exercised
      —         118        —        —        —        118  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, September 30, 2024
    $ 134      $ 37,473      $ 55,520     $ (4,885 )    $ (1,715 )    $ 86,527  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
 
    
Common
Stock
     
Additional
Paid-in

Capital
     
Accumulated
Retained
Earnings
    
Treasury
Stock
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Total
Shareholders’
Equity
  
Balances, December 31, 2022
    $ 133      $ 32,059      $ 59,553     $ (4,187 )    $ (1,555 )    $ 86,003  
Net income
      —         —         261       —        —        261  
Other comprehensive gain, net of taxes
      —         —         —        —        5       5  
Stock-based compensation expense
      —         835        —        —        —        835  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, March 31, 2023
    $ 133      $ 32,894      $ 59,814     $ (4,187 )    $ (1,550 )    $ 87,104  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Net (loss)
      —         —         (2,173 )      —        —        (2,173 ) 
Employee common stock purchases
      —         150        —        —        —        150  
Other comprehensive (loss), net of taxes
      —         —         —        —        (12 )      (12 ) 
Stock-based compensation expense
      —         842        —        —        —        842  
Shares repurchased
      —         —         —        (572 )      —        (572 ) 
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, June 30, 2023
    $ 133      $ 33,886      $ 57,641     $ (4,759 )    $ (1,562 )    $ 85,339  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Net income
      —         —         125       —        —        125  
Other comprehensive (loss), net of taxes
      —         —         —        —        (88 )      (88 ) 
Stock-based compensation expense
      —         824        —        —        —        824  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balances, September 30, 2023
    $ 133      $ 34,710      $ 57,766     $ (4,759 )    $ (1,650 )    $ 86,200  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
6
MASTECH DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
    
Nine Months Ended
September 30,
  
    
2024
    
2023
  
OPERATING ACTIVITIES:
     
Net income (loss)
    $ 3,105     $ (1,787 ) 
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
     
Depreciation and amortization
      2,670       2,943  
Bad debt expense
      (92 )      —   
Interest amortization of deferred financing costs
      71       55  
Stock-based compensation expense
      1,553       2,501  
Deferred income taxes, net
      185       (405 ) 
Operating lease assets and liabilities, net
      27       68  
Loss on disposition of fixed assets
      21       1  
Long term accrued income taxes
      (69 )      (36 ) 
Working capital items:
     
Accounts receivable and unbilled receivables
      (4,147 )      10,044  
Insurance recovery
      —        (2,200 ) 
Prepaid and other current assets
      (2,399 )      (2,081 ) 
Accounts payable
      (18 )      370  
Accrued payroll and related costs
      2,377       1,192  
Other accrued liabilities
      (305 )      (323 ) 
Deferred revenue
      175       203  
  
 
 
    
 
 
  
Net cash flows provided by (used in) operating activities
      3,154       10,545  
  
 
 
    
 
 
  
INVESTING ACTIVITIES:
     
Recovery of (payment for)
non-current
deposits
      1       119  
Capital expenditures
      (826 )      (213 ) 
  
 
 
    
 
 
  
Net cash flows provided by (used in) investing activities
      (825 )      (94 ) 
  
 
 
    
 
 
  
FINANCING ACTIVITIES:
     
(Repayments) on term loan facility
      —        (1,100 ) 
Proceeds from the issuance of common shares
      136       150  
Purchase of treasury stock
      (80 )      (572 ) 
Proceeds from the exercise of stock options
      440       —   
  
 
 
    
 
 
  
Net cash flows provided by (used in) financing activities
      496       (1,522 ) 
  
 
 
    
 
 
  
Effect of exchange rate changes on cash and cash equivalents
      (87 )      (105 ) 
  
 
 
    
 
 
  
Net change in cash and cash equivalents
      2,738       8,824  
Cash and cash equivalents, beginning of period
      21,147       7,057  
  
 
 
    
 
 
  
Cash and cash equivalents, end of period
    $ 23,885     $ 15,881  
  
 
 
    
 
 
  
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
7
MASTECH DIGITAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024 AND 2023
(Unaudited)
 
1.
Description of Business and Basis of Presentation:
Basis of Presentation
References in this Quarterly Report on Form
10-Q
to “we”, “our”, “Mastech Digital”, “Mastech” or “the Company” refer collectively to Mastech Digital, Inc. and its wholly owned operating subsidiaries, which are included in these Condensed Consolidated Financial Statements (the “Financial Statements”).
Description of Business
We are a provider of Digital Transformation IT Services to mostly large and
medium-sized
organizations.
Our portfolio of offerings includes data management and analytics services, digital learning services and IT staffing services.
With our 2017 acquisition of the services division of Canada-based InfoTrellis, Inc. (“InfoTrellis”), we added specialized capabilities in delivering data and analytics services to our customers, which became our Data and Analytics Services segment. This segment offers project-based consulting services in the areas of data management, data engineering and data science, with such services delivered using
on-site
and offshore resources. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition expanded our Data and Analytics Services segment’s capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise applications across sales, marketing and customer service organizations.
Our IT staffing services segment combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies. Our digital technologies include data management, analytics, cloud, mobility, social and artificial intelligence. We work with businesses and institutions with significant IT spending and recurring staffing service needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements.
The
COVID-19
pandemic had a material impact on activity levels in both of our business segments in 2020. This impact was reduced in 2021 due to the global
roll-out
of vaccination programs and signs of improving economic conditions.
COVID-19
related concerns were less impactful on our business in 2022 and 2023. Still, the proliferation of
COVID-19
variants could disrupt global markets during 2024 and beyond.
Accounting Principles
The accompanying Financial Statements have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and disclosures required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and the accompanying notes. Actual results could differ from these estimates. These Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, included in our Annual Report on Form
10-K
filed with the SEC on March 15, 2024. Additionally, our operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that can be expected for the year ending December 31, 2024, or for any other period.
Principles of Consolidation
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.
 
8
Critical Accounting Policies
Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form
10-K
for the year ended December 31, 2023, for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the nine months ended September 30, 2024.
Segment Reporting
The Company has two reportable segments, in accordance with Accounting Standards Committee (“ASC”) Topic 280 “Disclosures About Segments of an Enterprise and Related Information”: Data and Analytics Services and IT Staffing Services.
 
2.
Revenue from Contracts with Customers
The Company recognizes revenue on
time-and-material
contracts over time as services are performed and expenses are incurred.
Time-and-material
contracts typically bill at an agreed-upon hourly rate, plus
out-of-pocket
expense reimbursement.
Out-of-pocket
expense reimbursement amounts vary by assignment, but on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.
The Company recognizes revenue on fixed price contracts over time as services are rendered and uses a cost-based input method to measure progress. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized. Under the cost-based input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods or services to the customer. Estimated losses are recognized immediately in the period in which current estimates indicate a loss. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which may be refundable.
The Company’s
time-and-material
and fixed price revenue streams are recognized over time as the customer receives and consumes the benefits of the Company’s performance as the work is performed.
In certain situations, related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied.
We do not sell, lease or otherwise market computer software or hardware, and, essentially, 100% of our revenue is derived from the sale of data and analytics, IT staffing and digital transformation services. We expense sales commissions in the same period in which revenues are realized. These costs are recorded within sales, general and administrative expenses.
Each contract the Company enters is assessed to determine the promised services to be performed and includes identification of the performance obligations required by the contract. In substantially all contracts, we have identified a single performance obligation for each contract either because the promised services are distinct, or the promised services are highly interrelated and interdependent and therefore represent a combined single performance obligation.
Our Data and Analytics Services segment provides specialized capabilities in delivering data management and analytics services to its customers globally. This business offers project-based consulting services in the areas of Master Data Management, Enterprise Data Integration, Big Data, Analytics and Digital Transformation, which can be delivered using onsite and offshore resources.
Our IT Staffing Services segment combines technical expertise with business process experience to deliver a broad range of services in digital and mainstream technologies. Our digital technology stack includes data management and analytics, cloud, mobility, social and automation. Our mainstream technologies include business intelligence / data warehousing; web services; enterprise resource planning & customer resource management; and
e-Business
solutions. We work with businesses and institutions with significant IT spend and recurring staffing needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. In late 2023, we expanded our service offerings to include engineering staffing services. Substantially all our revenue is recognized over time.
 
9
The following table depicts the disaggregation of our revenues by contract type and operating segment:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Data and Analytics Services Segment
                              
Time-and-material
Contracts
    $ 6,123      $ 5,888      $ 18,417      $ 19,027  
Fixed-price Contracts
      3,275        2,150        7,924        7,179  
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal Data and Analytics Services
   
$
9,398
 
   
$
8,038
 
   
$
26,341
 
   
$
26,206
 
  
 
 
     
 
 
     
 
 
     
 
 
  
IT Staffing Services Segment
                              
Time-and-material
Contracts
    $ 42,374      $ 39,741      $ 121,788      $ 128,840  
Fixed-price Contracts
      67        —         67        —   
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal IT Staffing Services
   
$
42,441
 
   
$
39,741
 
   
$
121,855
 
   
$
128,840
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total Revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
For the three months ended September 30, 2024, the Company had two clients (CGI = 14.0% and Allegis = 11.7%) that each exceeded 10% of total revenues. For the nine months ended September 30, 2024, the Company had the same two clients (CGI = 15.4% and Allegis = 10.6%) that each exceeded 10% of total revenues. For the three months ended September 30, 2023, the Company had one client (CGI = 21.1%) that exceeded 10% of total revenues. For the nine months ended September 30, 2023, the Company had the same one client (CGI = 23.7%) that exceeded 10% of total revenues.
The Company’s top ten clients represented approximately 56% and 52% of total revenues for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company’s top ten clients represented approximately 54% and 54% of total revenues, respectively.
The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
 
3.
Goodwill and Other Intangible Assets, net
Goodwill of $8.4 million related to our IT Staffing Services segment resulted from the 2015 acquisition of Hudson Global Resources Management’s U.S. IT staffing business. Goodwill related to our Data and Analytics Services segment includes our 2017 acquisition of the services division of InfoTrellis, which totaled $27.4 million, and our 2020 acquisition of AmberLeaf, which totaled $6.4 million. The Company recorded a $5.3 million goodwill impairment related to the Data and Analytics Services segment in 2023 and a $9.7 million goodwill impairment in 2018. The impairments were primarily attributable to declines in revenue levels and lower future revenue projections.
 
10
A reconciliation of the beginning and ending amounts of goodwill by operating segment for the periods ended September 30, 2024 and December 31, 2023 is as follows:
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
IT Staffing Services:
      
Beginning balance
    $ 8,427      $ 8,427  
Goodwill recorded
      —         —   
Impairment
      —         —   
  
 
 
     
 
 
  
Ending Balance
    $ 8,427      $ 8,427  
  
 
 
     
 
 
  
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Data and Analytics Services:
      
Beginning balance
    $ 18,783      $ 24,083  
Goodwill recorded
      —         —   
Impairment
      —         (5,300 ) 
  
 
 
     
 
 
  
Ending Balance
    $ 18,783      $ 18,783  
  
 
 
     
 
 
  
The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of September 30, 2024 and December 31, 2023:
 
    
As of September 30, 2024
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 6,194      $ 1,805  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        11,003        8,638  
Covenant-not-to-compete
      5        1,201        1,113        88  
Trade name
      5        1,711        1,613        98  
Technology
      7        1,979        1,650        329  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 22,141      $ 10,958  
     
 
 
     
 
 
     
 
 
  
 
    
As of December 31, 2023
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 5,694      $ 2,305  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        9,776        9,865  
Covenant-not-to-compete
      5        1,201        1,047        154  
Trade name
      5        1,711        1,539        172  
Technology
      7        1,979        1,474        505  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 20,098      $ 13,001  
     
 
 
     
 
 
     
 
 
  
Amortization expense for the three and nine month periods ended September 30, 2024 and 2023 totaled $657,000 and $2.0 million, respectively and is included in selling, general and administrative expenses in the Consolidated Statement of Operations. For the three and nine month periods ended September 30, 2023 amortization expense was $693,000 and $2.1 million, respectively.
 
11
The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2024 through 2028 is as follows:
 
    
Years Ended December 31,
  
    
2024
     
2025
     
2026
     
2027
     
2028
  
    
(Amounts in thousands)
  
Amortization expense
    $ 2,693      $ 2,553      $ 2,413      $ 2,025      $ 1,637  
 
4.
Leases
The Company rents certain office facilities and equipment under noncancelable operating leases. As of September 30, 2024, approximately 93,000 square feet of office space is utilized for our sales and recruiting offices, delivery centers, and corporate headquarters. All of our leases are classified as operating leases. The average initial lease term is 4.4 years. Several leases have an option to renew, at our sole discretion, for an additional term. Our present lease terms range from 1.9 to 5.0 years with a weighted average of 3.3 years. Leases with an initial term of twelve months or less are not recorded on the balance sheet.
The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:
 
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Assets:
      
Long-term operating lease
right-of-use
assets
    $ 4,147      $ 5,106  
  
 
 
     
 
 
  
Liabilities:
      
Short-term operating lease liability
    $ 1,257      $ 1,236  
Long-term operating lease liability
      2,857        3,843  
  
 
 
     
 
 
  
Total liabilities
    $ 4,114      $ 5,079  
  
 
 
     
 
 
  
Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:
 
    
Amount as of
September 30, 2024
  
    
(in thousands)
  
2024 (for remainder of year)
    $ 359  
2025
      1,466  
2026
      1,464  
2027
      786  
2028
      259  
Thereafter
      196  
  
 
 
  
Total
    $ 4,530  
Less: Imputed interest
      (416 )
 
  
 
 
  
Present value of operating lease liabilities
    $ 4,114  
  
 
 
  
The weighted average discount rate used to calculate the present value of future lease payments was 5.5%.
We recognize rent expense for these leases on a straight-line basis over the lease term. Rental expense for the three and nine months ended September 30, 2024 totaled $0.4 million and $1.1 million, respectively. Rental expense for the three and nine months ended September 30, 2023 totaled $0.4 million and $1.2 million, respectively.
Total cash paid for lease liabilities for the three and nine months ended September 30, 2024 totaled $0.4 million and $1.1 million, respectively. Total cash paid for lease liabilities for the three and nine months ended September 30, 2023 totaled $0.4 million and $1.2 million,
respectively. 
There were no new leases entered into during the three and nine months ended September 30, 2024. New leases entered into during the three and nine months ended September 30, 2023 totaled $1.7 million and $1.7 million, respectively. New leases are considered
non-cash
transactions.
 
12
5.
Commitments and Contingencies
In December 2022, the Company received a demand letter from the attorney of a former employee who resigned from his employment with the Company in November 2022. Among other allegations in the letter, this former employee asserted various employment-related claims against the Company, including a claim of wrongful termination. The Company settled this claim in the third quarter of 2023 and paid a $3.1 million settlement, net of recoveries. For the three and nine months ended September 30, 2023, the Company incurred $225,000 and $1.2 million, respectively, of professional service fees related to this matter which was included in Selling, General and Administrative expenses in the Consolidated Statement of Operations. There were no professional service fees related to this matter incurred in the three and nine months ended September 30, 2024.
In the ordinary course of our business, the Company is involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, the Company’s management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.
 
6.
Employee Benefit Plan
The Company provides an Employee Retirement Savings Plan (the “Retirement Plan”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), that covers substantially all U.S. based salaried and
W-2
hourly employees. Employees may contribute a percentage of eligible compensation to the Retirement Plan, subject to certain limits under the Code. The Company did not provide for any matching contributions for the three and nine months ended September 30, 2024 and 2023.
 
7.
Stock-Based Compensation
In 2008, the Company adopted a Stock Incentive Plan. This Stock Incentive Plan was amended and restated effective as of May 14, 2024 (as amended from time to time, the “Plan”) and provides that up to 5,400,000 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), shall be allocated for issuance to directors, officers, employees and consultants of the Company. Grants under the Plan may be made in the form of stock options, stock appreciation rights, performance share awards, restricted stock awards shares or stock awards.
During the three months ended September 30, 2024, the Company granted 10,518 restricted share units and zero stock options under the Plan. During the three months ended September 30, 2023, the Company granted no shares under the Plan.
During the nine months ended September 30, 2024, the Company granted 40,130 restricted share units and 525,000 stock options at an average strike price of $8.41 under the Plan. During the nine months ended September 30, 2023, the Company granted 19,924 restricted share units and 125,000 stock options at an average strike price of $11.24 under the Plan. As of September 30, 2024 there were 372,000 shares of Common Stock available for grants under the Plan.
Stock-based compensation expense for the three months ended September 30, 2024 and 2023 was $542,000 and $824,000, respectively, and for the nine months ended September 30, 2024 and 2023 was $1.6 million and $2.5 million, respectively. Stock-based compensation expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
During the three and nine months ended September 30, 2024, the Company issued 17,281 and 87,924 shares, respectively, related to the grant of restricted share units and the exercise of stock options. During the three and nine months ended September 30, 2023, the Company issued zero and 17,804 shares, respectively, related to the grant of restricted share units and the exercise of stock options.
In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The Employee Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and was approved by the Company’s shareholders to be qualified. On May 15, 2019, the Company’s shareholders approved the Employee Stock Purchase Plan. Under the Employee Stock Purchase Plan, 600,000 shares of Common Stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Employee Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of Common Stock on the first day of the offering period, or (ii) the fair market value per share of Common Stock on the last day of the offering period.
The Company’s eligible full-time employees are able to contribute up to 15% of their base compensation into the Employee Stock Purchase Plan, subject to an annual limit of $25,000 per person. Employees are able to purchase Company Common Stock at a 15% discount to the lower of the fair market value of the Company’s Common Stock on the initial or final trading dates of each
six-month
offering period. Offering periods begin on January 1 and July 1 of each year. The Company uses the Black-Scholes option pricing model to determine the fair value of Employee Stock Purchase Plan share-based payments. The fair value of the
six-month
“look-back” option in the Company’s Employee Stock Purchase Plan is estimated by adding the fair value of 15% of one share of stock to 85% of the fair value of an option on one share of stock. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption, matching the Treasury yield terms to the
six-month
offering period. The Company utilized historical company data to develop its dividend yield and expected volatility assumptions.
 
13
During the three months ended September 30, 2024 and 2023, there were no shares issued under the Employee Stock Purchase Plan. During the nine months ended September 30, 2024 and 2023, there were 21,329 shares and 17,890 shares issued under the Employee Stock Purchase Plan at a share price of $6.38 and $8.40, respectively. Stock-based compensation expense related to the Employee Stock Purchase Plan for the three months ended September 30, 2024 and 2023 totaled $11,000 and $10,000, respectively. Stock-based compensation expense related to the Employee Stock Purchase Plan for the nine months ended September 30, 2024 and 2023 totaled $65,000 and $78,000, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023. As of September 30, 2024, there were 445,590 shares available for purchases under the Employee Stock Purchase Plan.
 
8.
Credit Facility
On July 13, 2017, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, as administrative agent, swing loan lender and issuing lender, PNC Capital Markets LLC, as sole lead arranger and sole book-runner, and certain financial institution parties thereto as lenders (the “Lenders”). The Credit Agreement, as amended, provides for a total aggregate commitment of $53.1 million, consisting of (i) a revolving credit facility (the “Revolver”) in an aggregate principal amount not to exceed $40 million and (ii) a $13.1 million term loan facility (the “Term Loan), as more fully described in Exhibit 10.1 to the Company’s Form
8-Ks
filed with the SEC on July 19, 2017, April 25, 2018, October 7, 2020, Exhibit 10.2 to the Form
8-K/A
filed with the SEC on January 4, 2022 and Exhibits 10.11 and 10.12 to the Company’s Form
10-K
filed with the SEC on March 15, 2024. Additionally, the facility includes an accordion feature for additional borrowing of up to $20 million upon satisfaction of certain conditions.
The Revolver expires in December 2026 and includes swing loan and letter of credit
sub-limits
in the aggregate amount not to exceed $6.0 million for swing loans and $5.0 million for letters of credit. Borrowings under the Revolver may be denominated in U.S. dollars or Canadian dollars. The maximum borrowings in U.S. dollars may not exceed the sum of 85% of eligible U.S. accounts receivable and 60% of eligible U.S. unbilled receivables, less a reserve amount established by the administrative agent. The maximum borrowings in Canadian dollars may not exceed the lesser of (i) $10.0 million; and (ii) the sum of 85% of eligible Canadian receivables, plus 60% of eligible Canadian unbilled receivables, less a reserve amount established by the administrative agent.
Amounts borrowed under the Term Loan were required to be repaid in consecutive quarterly installments of $1.1 million through and including the maturity date of October 1, 2024. In August 2022, the Company prepaid $7.6 million of the outstanding term loan with excess cash balances. The final term loan payment of $1.1 million was made on January 3, 2023, taking the outstanding balance to zero.
Borrowings under the Revolver and the Term Loan, which may be made at the Company’s election, bear interest at either (a) the higher of PNC’s prime rate or the federal funds rate plus 0.50%, plus an applicable margin determined based upon the Company’s senior leverage ratio or (b) the Secured Overnight Financing Rate (“SOFR”), plus an applicable margin determined based upon the Company’s senior leverage ratio. The applicable margin on the base rate is between 0.50% and 1.25% on Revolver borrowings and between 1.75% and 2.50% on Term Loan borrowings. The applicable margin on the SOFR is between 1.50% and 2.25% on Revolver borrowings and between 2.75% and 3.50% on Term Loan borrowings. A 20 to
30-basis
point per annum commitment fee on the unused portion of the Revolver is charged and due monthly in arrears. The applicable commitment fee is determined based upon the Company’s senior leverage ratio.
The Company pledged substantially all of its assets in support of the Credit Agreement. The Credit Agreement contains standard financial covenants, including, but not limited to, covenants related to the Company’s senior leverage ratio and fixed charge ratio (as defined under the Credit Agreement) and limitations on liens, indebtedness, guarantees, contingent liabilities, loans and investments, distributions, leases, asset sales, stock repurchases and mergers and acquisitions. As of September 30, 2024, the Company was in compliance with all applicable provisions of the Credit Agreement.
In connection with securing the commitments under the Credit Agreement and the April 20, 2018, October 1, 2020, December 29, 2021 and December 29, 2023 amendments to the Credit Agreement, the Company paid a commitment fee and incurred deferred financing costs totaling $1,039,000, which were capitalized and are being amortized as interest expense over the life of the Credit Facility. Deferred financing costs of $213,000 and $284,000 (net of amortization) as of September 30, 2024, and December 31, 2023, respectively, are presented as long-term assets in the Company’s Consolidated Balance Sheets.
As of September 30, 2024, and December 31, 2023, the Company’s outstanding borrowings under the Revolver totaled zero dollars; and unused borrowing capacity available was approximately $24.7 million and $22.5 million, respectively. There were no outstanding borrowings under the Term Loan at September 30, 2024, and December 31, 2023. On May 9, 2024, the Company issued two standby Letters of Credit for $162,000 each from PNC Bank to a Vietnam client to secure certain performance and advance payment guarantees made to the client on an existing fixed price Data and Analytics Services assignment. The letters of credit are scheduled to expire on March 21, 2026.
 
14
9.
Income Taxes
The components of income (loss) before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Income (loss) before income taxes:
            
Domestic
    $ 1,748      $ (211 )     $ 2,047      $ (3,205 ) 
Foreign
      824        365        2,052        1,060  
  
 
 
     
 
 
     
 
 
     
 
 
  
Income (loss) before income taxes
    $ 2,572      $ 154      $ 4,099      $ (2,145 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
The Company has foreign subsidiaries which generate revenues from
non-U.S.-based
clients. Additionally, these subsidiaries provide services to the Company’s U.S. operations. Accordingly, the Company allocates a portion of its income (loss) to these subsidiaries based on a “transfer pricing” model and reports such income (loss) as foreign in the above table.
The provision (benefit) for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Current provision (benefit):
            
Federal
    $ 351      $ (88 )     $ 227      $ (271 ) 
State
      77        (9 )       64        25  
Foreign
      216        93        517        238  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total current provision (benefit)
    $ 644      $ (4 )     $ 808      $ (8 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Deferred provision (benefit):
            
Federal
      44        25        140        (377 ) 
State
      8        7        27        (91 ) 
Foreign
      1        4        19        64  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total deferred provision (benefit)
      53        36        186        (404 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Change in valuation allowance
      —         (3 )       —         54  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total provision (benefit) for income taxes
    $ 697      $ 29      $ 994      $ (358 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes for the three and nine months ended September 30, 2024 and 2023 were as follows (amounts in thousands):
 
    
Three Months Ended
September 30, 2024
    
Three Months Ended
September 30, 2023
  
Income taxes computed at the federal statutory rate
    $ 540        21.0 %    $ 33        21.0 % 
State income taxes, net of federal tax benefit
      120        4.6       (2 )       (1.2 ) 
Excess tax expense (benefit) from stock options/restricted shares
      25        1.0       —         —   
Worthless stock deduction
      —         —        —         —   
Difference in income tax rate on foreign earnings/other
      12        0.5       1        0.9  
Change in valuation allowance
      —         —        (3 )       (1.9 ) 
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 697        27.1 %    $ 29        18.8 % 
  
 
 
     
 
 
    
 
 
     
 
 
  
 
15
 
  
Nine Months Ended
September 30, 2024
 
 
Nine Months Ended
September 30, 2023
 
Income taxes computed at the federal statutory rate
    $ 861        21.0 %    $ (450 )       (21.0 )% 
State income taxes, net of federal tax benefit
      101        2.5       (74 )       (3.5 ) 
Excess tax expense (benefit) from stock options/restricted shares
      156        3.8       40        1.9  
Worthless stock deduction
      (248 )       (6.1 )      —         —   
Difference in income tax rate on foreign earnings/other
      124        3.0       72        3.4  
Change in valuation allowance
      —         —        54        2.5  
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 994        24.2 %    $ (358 )       (16.7 )% 
  
 
 
     
 
 
    
 
 
     
 
 
  
We evaluate
 deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires us to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative, using a “more likely than not” standard. Our assessment considers, among other things, the nature of cumulative losses, forecast of future profitability, the duration of statutory carry-forward periods and tax planning alternatives. On September 30, 2024, our valuation allowance was comprised of net operating losses in Ireland and the United Kingdom and totaled $
466,000
. During the quarter ended March 31, 2024, we secured a worthless stock deduction for our dissolved Singapore entity, which allowed us to recognize a current tax deduction during the 2024 period and, accordingly, we reversed $
162,000
of our valuation allowance against outstan
din
g deferred tax assets. As of December 31, 2023, our valuation allowance balance totaled $
628,000
.
 
10.
Shareholders’ Equity
On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of the Company’s common stock over a
two-year
period. Repurchases under the program may occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques, or by any combination of such methods, and the program may be modified, suspended or terminated at any time at the discretion of the Board of Directors. During the three months ended September 30, 2024, the Company did not purchase any shares under this program. During the nine months ended September 30, 2024, the Company repurchased 9,222 shares of common stock at an average price of $8.70 per share under this program.
Additionally, the Company makes stock purchases from time to time to satisfy employee tax obligations related to its Stock Incentive Plan. The Company did not purchase any shares to satisfy employee tax obligations during the three and nine months ended September 30, 2024 and 2023.
 
11.
Earnings (Loss) Per Share
The computation of basic earnings (loss) per share is based on the Company’s net income (loss) divided by the weighted average number of common shares outstanding. Diluted earnings (loss) per share reflect the potential dilution that could occur if outstanding stock options were exercised. The dilutive effect of stock options was calculated using the treasury stock method.
For the three and nine months ended September 30, 2024, there were 1,005,000 and 1,057,000 anti-dilutive stock options excluded from the computation of diluted earnings per share. For the three months ended September 30, 2023, there were 1,473,000 anti-dilutive stock options excluded from the computation of diluted earnings per share. For the nine months ended September 30, 2023, all stock options and restricted shares were anti-dilutive and excluded from the computation of diluted (loss) per share.
 
12.
Business Segments and Geographic Information
Our reporting segments are: 1) Data and Analytics Services; and 2) IT Staffing Services.
The Data and Analytics Services segment was acquired through the July 13, 2017, acquisition of the services division of Canada-based InfoTrellis, Inc. This segment is a project-based consulting services business with specialized capabilities in data management and analytics. The business is marketed as “Mastech InfoTrellis” and utilizes a dedicated sales team with deep subject matter expertise. Mastech InfoTrellis has offices in the United States, Canada, the United Kingdom, and a global delivery center in Chennai, India. Project-based delivery reflects a combination of
on-site
resources and offshore resources. Assignments are secured on both a time and material and fixed price basis. In October 2020, we acquired AmberLeaf, a Chicago-based customer experience consulting firm. This acquisition expanded our capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise application across sales, marketing and customer service organizations.
 
16
The IT Staffing Services segment offers staffing services in digital and mainstream technologies, engineering services and uses digital methods to enhance organizational learning. These services are marketed using a common sales force and delivered via our domestic and global recruitment centers. While the vast majority of our assignments are based on time and materials, we do have the capabilities to deliver our digital transformation services on a fixed price basis.
Below are the operating results of our reporting segments.
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2024
    
2023
    
2024
    
2023
  
    
(Amounts in thousands)
    
(Amounts in thousands)
  
Revenues:
         
Data and Analytics Services
    $ 9,398     $ 8,038     $ 26,341     $ 26,206  
IT Staffing Services
      42,441       39,741       121,855       128,840  
  
 
 
    
 
 
    
 
 
    
 
 
  
Total revenues
    $ 51,839     $ 47,779     $ 148,196     $ 155,046  
  
 
 
    
 
 
    
 
 
    
 
 
  
Gross Margin %:
         
Data and Analytics Services
      50.7 %      45.8 %      48.9 %      43.1 % 
IT Staffing Services
      23.6 %      22.4 %      23.0 %      22.0 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Total gross margin %
      28.5 %      26.3 %      27.6 %      25.6 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Segment operating income (loss):
         
Data and Analytics Services
    $ 1,145     $ (832 )    $ 1,435     $ (2,393 ) 
IT Staffing Services
      1,951       1,476       4,334       5,227  
  
 
 
    
 
 
    
 
 
    
 
 
  
Subtotal
      3,096       644       5,769       2,834  
Amortization of acquired intangible assets
      (657 )      (693 )      (2,043 )      (2,079 ) 
Employment-related claim, net of recoveries
      —        —        —        (3,100 ) 
Interest income (expense), FX gains (losses) and other, net
      133       203       373       200  
  
 
 
    
 
 
    
 
 
    
 
 
  
Income (loss) before income taxes
    $ 2,572     $ 154     $ 4,099     $ (2,145 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Below is a reconciliation of segment total assets to consolidated total assets:
 
    
September 30,
2024
     
December 31,
2023
  
    
(Amounts in thousands)
  
Total assets:
      
Data and Analytics Services
    $ 45,735      $ 45,681  
IT Staffing Services
      65,750        59,546  
  
 
 
     
 
 
  
Total assets
    $ 111,485      $ 105,227  
  
 
 
     
 
 
  
Below is geographic information related to our revenues from external customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
    $ 51,839      $ 47,779      $ 148,196      $ 155,046  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
17
13.
Recently Issued Accounting Standards
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU
2023-07,
“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require disclosure of incremental segment information on an annual and interim basis. Additional disclosures include significant segment expenses that are part of segment profit or loss; the title and position of the chief operating decision maker; and how the chief operating decision maker uses segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments in this ASU are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
In December 2023, the FASB issued ASU
2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU enhance the transparency and usefulness of income tax disclosures. Additional disclosures include specific rate reconciliation categories; additional disclosure for reconciling items that meet a quantitative threshold; and federal, state and foreign income taxes paid by individual jurisdiction. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setti
ng
organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s consolidated financial statements.
 
 
18

Table of Contents
ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 15, 2024.

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about future events, future performance, plans, strategies, expectations, prospects, competitive environment and regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words, “may”, “will”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend” or the negative of these terms or similar expressions in this quarterly report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under “Risk Factors”, “Forward-Looking Statements” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2023. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update forward-looking statements, and the estimates and assumptions associated with them, after the date of this quarterly report on Form 10-Q, except to the extent required by applicable securities laws.

Website Access to SEC Reports:

The Company’s website is www.mastechdigital.com. The Company’s Annual Report on Form 10-K for the year ended December 31, 2023, current reports on Form 8-K and all other reports filed with the SEC, are available free of charge on the Investors page. The website is updated as soon as reasonably practical after such reports are filed electronically with the SEC.

Critical Accounting Policies

Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the nine months ended September 30, 2024.

2024 Primentor, Inc. Consulting Agreement

On January 12, 2024, we entered into a consulting services agreement with Primentor, Inc., a California corporation; Phaneesh Murthy (“Murthy”), the owner of Primentor; Srinjay Sengupta (“Sengupta”), a consultant of Primentor; and Sunil Wadhwani and Ashok Trivedi (together the “Founders”), each co-founder and directors of the Company. Under the terms of the consulting services agreement, Primentor will provide the Company with strategic advisory and management consulting services, as well as any other business and organizational strategy services as the Board of Directors of Company may reasonably request from time to time.

The initial term of the consulting services agreement is for a three-year period commencing January 12, 2024, and the Company may request to renew the term for additional successive one-year terms, in which case Primentor and the Company will negotiate to agree upon the scope of the additional services and the amount of additional consulting fees.

As compensation to Primentor, Murthy and Sengupta for providing the services requested by the Company, the Company will provide the following compensation:

 

  1)

Consulting fees to Primentor of $990,000 in year one; $270,000 in year two; and $120,000 in year three, plus reimbursement for any reasonable and documented out-of-pocket expenses incurred by Primentor’s personnel in rendering the services;

 

  2)

Stock options to purchase up to 192,500 shares of the Company’s common stock to each, Murthy and Sangupta, at an exercise price of $8.34 per share, with vesting occurring equally on an annual basis over a three-year period; and

 

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  3)

Murthy and Sangupta will each receive from the Founders, for no additional consideration, an aggregate number of shares of common stock of the Company held by the Founders that is equal to 1.1% of the total number of shares of common stock of the Company outstanding at the time of a triggering event, as defined in the consulting services agreement.

The foregoing description of the consulting agreement is qualified in its entirety by reference to the full text of the Consulting Agreement (including the form of stock option agreements attached as exhibits thereto), which was filed by the Company as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on January 19, 2024.

Employment-Related Claims Against the Company

In December 2022, the Company received a demand letter from the attorney of a former employee who resigned from his employment with the Company in November 2022. Among other allegations in the letter, this former employee has asserted various employment-related claims against the Company, including a claim of wrongful termination. For the year ended December 31, 2023, the Company settled this claim for $3.1 million, net of recoveries, under the terms of a confidential settlement agreement. In addition to the settlement amount, we incurred approximately $0.9 million in professional services fees related to this matter during 2023.

For the three and nine months ended September 30, 2023, the Company incurred $225,000 and approximately $1.2 million, respectively, of professional services fees related to this matter. Additionally, the Company recorded a $3.1 million loss reserve, net of recoveries, with respect to a settlement reserve. These expenses are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. For the three and nine months ended September 20, 2024, no expenses related to this matter were incurred.

Overview:

We are a provider of Digital Transformation IT Services to mostly large and medium-sized organizations.

Our portfolio of offerings includes data management and analytics services, other digital transformation services, such as digital learning services, and IT Staffing Services.

We operate in two reporting segments – Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand “Mastech InfoTrellis” and are delivered largely on a project basis with on-site and off-shore resources. These data and analytics capabilities and expertise were acquired through our acquisition of InfoTrellis and enhanced and expanded subsequent to the acquisition. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition enhanced our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as other digital transformation services.

Both business segments provide their services across various industry verticals, including financial services, government, healthcare, manufacturing, retail, technology telecommunications and transportation. In our Data and Analytics Services segment, we evaluate our revenues and gross profits largely by service line. In our IT Staffing Services segment, we evaluate our revenues and gross profits largely by sales channel responsibility. This analysis within both our reporting segments is multi-purposed and includes technologies employed, client relationships, and geographic locations.

Data and Analytics:

We provide information regarding our new bookings in our Data and Analytics Services segment, which represents the estimated value of client engagements, including those acquired through acquisitions, as well as renewals and extensions to existing contracts, because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. New bookings can vary significantly quarter to quarter, depending, in part, on the timing of the signing of a small number of large engagements. Among other factors, the types of services and solutions to be delivered, the duration of the engagement and the pace and level of client spending impact the timing of the conversion of new bookings to revenues. In addition, substantially all of our contracts are terminable by the client on short notice, with little or no termination penalties. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New bookings involve estimates and judgments. There are no third-party standards or requirements governing the calculation of bookings. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally provided in prior periods.

 

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Economic Trends and Outlook:

Generally, our business outlook is highly correlated to general North American economic conditions, particularly with respect to our IT Staffing Services segment. During periods of increasing employment and economic expansion, demand for our services tends to increase. Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. With economic expansion in 2010 through 2019 activity levels improved. However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses. These supply-side challenges pressured resource costs and, to some extent, gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies. However, with the COVID-19 pandemic surfacing in the first quarter of 2020, we realized that economic growth would quickly turn into recessionary conditions, which had a material impact on activity levels in both of our business segments. In 2021, we were encouraged by the global rollout of vaccination programs and signs of economic improvement, however, the proliferation of COVID-19 variants had caused some uncertainty and disruption in the global markets. In 2022 and 2023, COVID-19-related concerns seemed to subside; however, increased inflation, challenges in the financial sector related to increasing interest rates, and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of 2022 and for the entire year of 2023. While economic conditions in North American have shown signs of improvement during 2024, a level of uncertainty remains with respect to inflation and job growth, the potential of escalations of existing conflicts in the Middle East and Ukraine and the impacts of the U.S. presidential election. It is difficult to predict the impact or duration that these market pressures may have on our businesses and results of operations during the remainder of 2024 and beyond.

In addition to tracking general economic conditions in the markets that we service, a large portion of our revenues is generated from a limited number of clients (see Item 1A, the Risk Factor entitled “Our revenues are highly concentrated, and the loss of a significant client would adversely affect our business and revenues” in our Annual Report on Form 10-K for the year ended December 31, 2023). Accordingly, our trends and outlook are additionally impacted by the prospects and well-being of these specific clients. This “account concentration” factor may result in our results of operations deviating from the prevailing economic trends from time to time.

Within our IT Staffing Services segment, a larger portion of our revenues has come from strategic relationships with systems integrators. Additionally, many large end users of IT staffing services are employing MSPs to manage their contractor spending. Both of these dynamics may pressure our IT staffing gross margins in the future.

Recent growth in advanced technologies (social, cloud, analytics, mobility, automation) is providing opportunities within our IT Staffing Services segment. However, supply side challenges have proven to be acute with respect to many of these technologies.

Results of Operations for the Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023:

Revenues:

Revenues for the three months ended September 30, 2024 totaled $51.8 million, compared to $47.8 million for the corresponding three-month period in 2023. This 8% year-over-year revenue increase reflected 17% growth in our Data and Analytics Services segment and 7% growth in our IT Staffing Services segment. For the three months ended September 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 14.0% and Allegis = 11.7%). For the three months ended September 30, 2023, the Company had one client that had revenues in excess of 10% of total revenues (CGI = 21.1%). The Company’s top ten clients represented approximately 56% and 52% of total revenues for the three months ended September 30, 2024 and 2023, respectively.

Below is a tabular presentation of revenues by reportable segment for the three months ended September 30, 2024 and 2023, respectively:

 

Revenues (Amounts in millions)

    Three Months Ended
September 30, 2024		      Three Months 2023
September 30, 2023		  

Data and Analytics Services

    $ 9.4      $ 8.0  

IT Staffing Services

      42.4        39.8  
  

 

 

     

 

 

  

Total revenues

    $ 51.8      $ 47.8  
  

 

 

     

 

 

  

Revenues from our Data and Analytics Services segment totaled $9.4 million in the quarter ended September 30, 2024, compared to $8.0 million in the corresponding quarter last year. This 17% year-over-year increase reflected higher activity levels and new assignments from existing clients during 2024. New bookings in the third quarter of 2024 totaled $11.1 million, compared to bookings of $5.1 million in the third quarter of 2023.

 

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Revenues from our IT Staffing Services segment totaled $42.4 million in the three months ended September 30, 2024, compared to $39.8 million during the corresponding 2023 period. This 7% year-over-year increase reflected higher demand for our services in 2024 compared to the corresponding period last year. Billable consultants at September 30, 2024 totaled 1,071-consultants, compared to 992-consultants one year earlier. Our average bill rate during the third quarter of 2024 was $82.80 per hour, compared to $80.96 per hour in the third quarter of last year. This increase in average bill rate was due to higher rates on new assignments during the third quarter of 2024 and was reflective of the types of skill sets that we deployed. Permanent placements / fee revenues were approximately $0.3 million during the third quarter of 2024, compared to $0.2 million in the corresponding quarter of 2023.

Gross Margins:

Gross profits in the third quarter of 2024 totaled $14.8 million, compared to $12.6 million in the third quarter of 2023. Gross profit as a percentage of revenue was 28.5% for the three-month period ended September 30, 2024, which is a new quarterly gross margin percentage record for the Company, and compared to 26.3% during the same period of 2023. This 220-basis point increase related to higher gross margins in both of our business segments during the third quarter of 2024.

Below is a tabular presentation of gross margin by reporting segment for the three months ended September 30, 2024 and 2023, respectively:

 

Gross Margin

    Three Months Ended
September 30, 2024		     Three Months Ended
September 30, 2023		  

Data and Analytics Services

      50.7 %      45.8 % 

IT Staffing Services

      23.6       22.4  
  

 

 

    

 

 

  

Total gross margin

      28.5 %      26.3 % 
  

 

 

    

 

 

  

Gross margins from our Data and Analytics Services segment were 50.7% of revenues during the third quarter of 2024, compared to 45.8% of revenues during the third quarter of 2023. The gross margin increase reflected the continuation of strong delivery performances during 2024, which benefited project margins and our utilization rate in the third quarter of 2024 compared to the corresponding quarter of 2023.

Gross margins from our IT Staffing Services segment were 23.6% in the third quarter of 2024, compared to 22.4% during the corresponding quarter of 2023. This 120-basis point increase reflected higher margins on new contract assignments, higher permanent placement fees and lower benefit costs in the third quarter of 2024.

Selling, General and Administrative (“SG&A”) Expenses:

Below is a tabular presentation of operating expenses by expense category for the three months ended September 30, 2024 and 2023, respectively:

 

SG&A Expenses (Amounts in millions)    Three Months Ended
September 30, 2024		      Three Months Ended
September 30, 2023		  

Data and Analytics Services Segment

      

Sales and Marketing

    $ 1.7      $ 1.8  

Operations

      0.2        0.3  

General & Administrative

      1.7        2.4  
  

 

 

     

 

 

  

Subtotal Data and Analytics Services

    $ 3.6      $ 4.5  
  

 

 

     

 

 

  
SG&A Expenses (Amounts in millions)              

IT Staffing Services Segment

      

Sales and Marketing

    $ 2.3      $ 2.0  

Operations

      2.2        2.1  

General & Administrative

      3.6        3.3  
  

 

 

     

 

 

  

Subtotal IT Staffing Services

    $ 8.1      $ 7.4  
  

 

 

     

 

 

  

Amortization of Acquired Intangible Assets

    $ 0.6      $ 0.7  
  

 

 

     

 

 

  

Total SG&A Expenses

    $ 12.3      $ 12.6  
  

 

 

     

 

 

  

 

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SG&A expenses for the three months ended September 30, 2024 totaled $12.3 million or 23.8% of total revenues, compared to $12.6 million or 26.4% of total revenues for the three-months ended September 30, 2023. Excluding the amortization of acquired intangible assets in both periods, SG&A expense as a percentage of total revenues was 22.6% and 25.0%, respectively.

Fluctuations within SG&A expense components during the third quarter of 2024, compared to the third quarter of 2023, included the following:

 

  •  

Sales expenses increased by $0.2 million in the 2024 period compared to the corresponding 2023 period. Sales expenses in our Data and Analytics Services segment decreased $0.1 million due to lower staff headcount in our sales organization. Sales expenses in our IT Staffing Services segment increased by $0.3 million, largely due to higher sales commissions and other variable expenses.

 

  •  

Operations expenses were flat in the 2024 period compared to the corresponding 2023 period. Operations expenses decreased $0.1 million in our Data and Analytics Services segment due to staff reductions. In our IT Staffing Services segment, operations expenses increased by $0.1 million and reflected an increase in recruitment staff and higher commission expenses.

 

  •  

General and administrative expenses decreased $0.4 million in the 2024 period compared to the corresponding 2023 period. General and administrative expenses in our Data and Analytics Services segment decreased by $0.7 million due to executive leadership staff reductions, lower stock-based compensation expense and lower professional services fees incurred to address an employment-related claim in the 2023 period. In our IT Staffing Services segment, general and administrative expenses increased $0.3 million due to higher strategic consulting expenses associated with our consulting agreement with Primentor.

 

  •  

Amortization of acquired intangible assets was $0.6 million in the 2024 period, compared to $0.7 million in the corresponding 2023 period, as a portion of our intangible assets became fully amortized in 2024.

Other Income / (Expense) Components:

Other Income / (Expense) for the three months ended September 30, 2024 consisted of interest income of $163,000 and foreign exchange losses of ($30,000). For the three months ended September 30, 2023, Other Income / (Expense) consisted of interest income of $148,000 and foreign exchange gains of $55,000. Higher cash balances on hand were responsible for the favorable year-over-year interest income variance, which was partially offset by currency fluctuations.

Income Tax Expense (Benefit):

Income tax expense for the three months ended September 30, 2024 totaled $697,000, representing an effective tax rate on pre-tax income of 27.1%, compared to $29,000 for the three months ended September 30, 2023, which represented a 18.8% effective tax rate on pre-tax income. The higher effective tax rate in the 2024 period was due to a higher state income tax rate and excess income tax expenses related to stock option and restricted shares.

Results of Operations for the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023:

Revenues:

Revenues for the nine months ended September 30, 2024 totaled $148.2 million, compared to $155.0 million for the corresponding nine-month period in 2023. This 4% year-over-year revenue decrease reflected a 1% increase in our Data and Analytics Services segment and a 5% decrease in our IT Staffing Services segment. For the nine months ended September 30, 2024, the Company had two clients that each had revenues in excess of 10% of total revenues (CGI = 15.4% and Allegis = 10.6%). For the nine months ended September 30, 2023, the Company had one client that had revenues in excess of 10% of total revenues (CGI = 23.7%). The Company’s top ten clients represented approximately 54% and 54% of total revenues for the nine months ended September 30, 2024 and 2023, respectively.

Below is a tabular presentation of revenues by reportable segment for the nine months ended September 30, 2024 and 2023, respectively:

 

Revenues (Amounts in millions)

    Nine Months Ended
September 30, 2024		      Nine Months Ended
September 30, 2023		  

Data and Analytics Services

    $ 26.3      $ 26.2  

IT Staffing Services

      121.9        128.8  
  

 

 

     

 

 

  

Total revenues

    $ 148.2      $ 155.0  
  

 

 

     

 

 

  

 

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Revenues from our Data and Analytics Services segment totaled $26.3 million during the nine months ended September 30, 2024, which was a slight increase over the corresponding nine-month period last year. Revenues have increased on a sequential basis over the last two quarters reflecting improved activity levels and increased order bookings.

Revenues from our IT Staffing Services segment totaled $121.9 million during the nine months ended September 30, 2024, compared to $128.8 million during the corresponding 2023 period. This 5% decrease largely reflected a lower average level of billable consultants during the nine month period ended September 30, 2024. However, at September 30, 2024, our billable consultant-base was 1,071-consultants, which exceeded the 992 billable consultants at September 30, 2023.

Gross Margins:

Gross profits in the nine months ended September 30, 2024 totaled $40.9 million, compared to $39.7 million during the corresponding 2023 period. Gross profit as a percentage of revenue was 27.6% for the nine-month period ended September 30, 2024, compared to 25.6% during the same period of 2023. This 200-basis point increase reflected higher gross margins in both of our business segments.

Below is a tabular presentation of gross margin by reporting segment for the nine months ended September 30, 2024 and 2023, respectively:

 

Gross Margin

    Nine Months Ended
September 30, 2024		     Nine Months Ended
September 30, 2023		  

Data and Analytics Services

      48.9 %      43.1 % 

IT Staffing Services

      23.0 %      22.0 % 
  

 

 

    

 

 

  

Total gross margin

      27.6 %      25.6 % 
  

 

 

    

 

 

  

Gross margins from our Data and Analytics Services segment were 48.9% of revenues during the nine-month period ended September 30, 2024, compared to gross margins of 43.1% in the corresponding period of 2023. The margin increase of 580-basis points reflected higher project margins and better utilization rates during the first nine months of 2024.

Gross margins from our IT Staffing Services segment were 23.0% in the nine months ended September 30, 2024, compared to 22.0% during the corresponding period of 2023. This 100-basis point increase was largely due to higher gross margins on new assignments and favorable medical claim experience related to our self-insured healthcare program in the 2024 period compared to 2023.

Selling, General and Administrative (“SG&A”) Expenses:

Below is a tabular presentation of operating expenses by expense category for the nine months ended September 30, 2024 and 2023, respectively:

 

SG&A Expenses (Amounts in millions)    Nine Months Ended
September 30, 2024		      Nine Months Ended
September 30, 2023		  
Data and Analytics Services Segment      

Sales and Marketing

    $ 6.0      $ 5.2  

Operations

      0.5        1.1  

General & Administrative

      5.0        7.4  
  

 

 

     

 

 

  

Subtotal Data and Analytics Services

    $ 11.5      $ 13.7  
  

 

 

     

 

 

  
IT Staffing Services Segment      

Sales and Marketing

    $ 6.7      $ 6.4  

Operations

      6.4        6.7  

General & Administrative

      10.6        10.0  
  

 

 

     

 

 

  

Subtotal IT Staffing Services

    $ 23.7      $ 23.1  
  

 

 

     

 

 

  

Amortization of Acquired Intangible Assets

    $ 2.0      $ 2.1  

Employment-related Claim, net of Recoveries

      —         3.1  
  

 

 

     

 

 

  

Total SG&A Expenses

    $ 37.2      $ 42.0  
  

 

 

     

 

 

  

 

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SG&A expenses for the nine months ended September 30, 2024 totaled $37.2 million or 25.1% of total revenues, compared to $42.0 million or 27.1% of total revenues for the nine months ended September 30, 2023. Excluding the employment-related claim in 2023, and the amortization of acquired intangible assets in both periods, SG&A expense as a percentage of total revenues was 23.7% and 23.8%, respectively.

Fluctuations within SG&A expense components during the first nine months of 2024, compared to the first nine months of 2023, included the following:

 

  •  

Sales expense increased by $1.1 million in the 2024 period, compared to the corresponding 2023 period. Sales expenses in our Data and Analytics Services segment increased by $0.8 million in the 2024 period and reflected higher marketing and event costs and higher sales compensation expense. Sales expenses in our IT Staffing Services segment were higher by $0.3 million due to higher sales commissions and other variable expenses.

 

  •  

Operations expenses decreased by $0.9 million in the 2024 period, compared to the corresponding 2023 period. In our Data and Analytics Services segment, operations expenses decreased by $0.6 million due to staff reductions and lower variable compensation expenses. Operations expenses in our IT Staffing Services segment decreased by $0.3 million and largely related to recruitment staff reductions and lower other variable expenses in the first half of 2024, partially offset by higher commission expenses in the 2024 third quarter.

 

  •  

General and administrative expenses decreased by $1.8 million in the 2024 period compared to the corresponding 2023 period. General and administrative expenses in our Data and Analytics Services segment decreased by $2.4 million due to executive leadership staff reductions, lower stock-based compensation expense and higher professional services fees in 2023 of $1.2 million related to an employment claim. In our IT Staffing Services segment, general and administrative expenses increased by $0.6 million, largely due to strategic consulting expenses associated with our consulting agreement with Primentor.

 

  •  

Amortization of acquired intangible assets was $2.0 million in 2024, compared to $2.1 million in the 2023 period, as a portion of our intangible assets become fully amortized in 2024.

 

  •  

Employment-related claim reserve, net of expected recoveries, totaled $3.1 million in the 2023 period, compared to no expense in the corresponding 2024 period.

Other Income / (Expense) Components:

Other Income / (Expense) for the nine months ended September 30, 2024 consisted of interest income of $447,000 and foreign exchange losses of ($74,000). For the nine months ended September 30, 2023, Other Income / (Expense) consisted of interest income of $232,000 and foreign exchange losses of ($32,000). The higher interest income reflected higher cash balances on hand in the 2024 period was responsible for the favorable year-over-year variance in Other Income, net and was partially offset by currency fluctuations.

Income Tax Expense:

Income tax expense (benefit) for the nine months ended September 30, 2024 totaled $994,000, representing an effective tax rate on pre-tax income of 24.2% compared to an income tax benefit of ($358,000) for the nine months ended September 30, 2023, which represented a 16.7% effective tax rate on a pre-tax (loss). In 2023, foreign pre-tax income reduced the consolidated tax benefit which included a domestic pre-tax loss. The favorable effective tax rate in the 2024 period was largely due to a worthless stock deduction recognized on the dissolution of our Singapore entity, partially offset by excess tax expense related to stock options/restricted shares.

Liquidity and Capital Resources:

Financial Conditions and Liquidity:

As of September 30, 2024, we had cash balances on hand of $23.9 million, no bank debt outstanding and approximately $25 million of borrowing capacity under our existing credit facility.

Historically, we have funded our organic business needs with cash generated from operating activities. Controlling our operating working capital levels by closely managing our accounts receivable balance is an important element of cash generation. As of September 30, 2024, our accounts receivable “days sales outstanding” (“DSOs”) measurement was 55-days.

We believe that cash provided by operating activities, cash balances on hand and current availability under our credit facility will be adequate to fund our business needs and support our share repurchase program that we announced in February 2023 over the next twelve months, exclusive of any acquisition activity.

 

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Cash flows provided by (used in) operating activities:

Cash provided by operating activities for the nine months ended September 30, 2024 totaled $3.2 million compared to cash provided by operating activities of $10.5 million during the nine months ended September 30, 2023. Elements of cash flows in the 2024 period were net income of $3.1 million, non-cash charges of $4.4 million, and an increase in operating working capital levels of ($4.3 million). During the nine months ended September 30, 2023, elements of cash flows were a net loss of ($1.8 million), non-cash charges of $5.1 million and a decrease in operating working capital levels of $7.2 million. Operating working capital increased in 2024 due to higher accounts receivable balances resulting from our sequential revenue growth during the first nine months. During the 2023 period, accounts receivable balances decreased due to revenue decreases during the period.

Cash flows (used in) investing activities:

Cash (used in) investing activities for the nine months ended September 30, 2024 was ($0.8 million) compared to ($0.1 million) for the nine months ended September 30, 2023. During the nine months ended September 2024, capital expenditures totaled ($0.8 million). In the 2023 period, capital expenditures totaled ($0.2 million), partially offset by the recovery of non-current deposits of $0.1 million. The increase in capital expenditures during the 2024 period compared to the 2023 period reflected higher expenditures for laptop replacements and other technology enhancements.

Cash flows provided by (used in) financing activities:

Cash provided by financing activities for the nine months ended September 30, 2024 totaled $0.5 million and consisted of proceeds from the exercise of stock options of $440,000 and the issuance of common shares related to our Employee Stock Purchase Plan of $136,000, which was partially offset by the purchase of treasury shares of ($80,000). Cash (used in) financings activities for the nine months ended September 30, 2023, totaled ($1.5 million) and consisted of ($1.1 million) of term loan repayments and the purchase of treasury shares under our share repurchase program of ($572,000), which was partially offset by $150,000 related to proceeds from the issuance of shares of common stock under the Employee Stock Purchase Plan.

Off-Balance Sheet Arrangements:

Other than $324,000 in outstanding letters of credit issued under our Credit Agreement, we do not have any off-balance sheet arrangements. For further details about the outstanding letters of credit, refer to Note 8 — “Credit Facility” in the Notes to Condensed Consolidated Financial Statements included herein.

Inflation:

We do not believe that inflation had a significant impact on our results of operations for the periods presented, although economic uncertainty, including the concerns of our clients and other companies with respect to inflationary conditions in North America and elsewhere, has had and may continue to have an adverse impact on the demand for our services. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seek to ensure that billing rates reflect increases in costs due to inflation. However, high levels of inflation may result in higher interest rates which could increase our borrowing costs in the future if we elect to draw on our current or future credit facilities.

In addition, refer to “Item 1A. Risk factors” in our 2023 Annual Report on Form 10-K for a discussion about risks that inflation directly or indirectly may pose to our business.

Seasonality:

Our operations are generally not affected by seasonal fluctuations. However, our consultants’ billable hours are affected by national holidays and vacation policies. Accordingly, we generally have lower utilization rates and higher benefit costs during the fourth quarter. Additionally, assignment completions tend to be higher near the end of the calendar year, which largely impacts our revenue and gross profit performance during the subsequent quarter.

Recently Issued Accounting Standards:

Recent accounting pronouncements are described in Note 13 to the accompanying financial statements.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the inherent operational risks, the Company is exposed to certain market risks, primarily related to changes in interest rates and currency fluctuations.

 

26

Table of Contents

Interest Rates

As of September 30, 2024, we had no outstanding borrowings under the Credit Agreement — Refer to Note 8 — “Credit Facility” in the Notes to Condensed Consolidated Financial Statements, included herein.

Currency Fluctuations

The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currencies of the Company’s Indian and European subsidiaries are the local currency of the location of such subsidiary. The results of operations of the Company’s Indian and European subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of the Company’s Indian and European subsidiaries is translated at the current exchange rates at the end of the period, and the related translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within Shareholders’ Equity. Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Condensed Consolidated Statements of Operations, and have not been material for all periods presented. A hypothetical 10% increase or decrease in overall foreign currency rates in the first nine months of 2024 would not have had a material impact on our consolidated financial statements.

 

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of Company management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

In the ordinary course of our business, we are involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.

 

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024.

 

27

Table of Contents
ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

A summary of our Common Stock repurchased during the quarter ended September 30, 2024 is set forth in the following table:

 

Period

    Total
Number of
Shares
Purchased (1)		      Average
Price per
Share (1)		      Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)		      Maximum
Number of
Shares that May
Yet Be
Purchased
Under this Plan
or Programs (1)		  

July 1, 2024 — July 31, 2024

      —       $ —       —         423,079  

August 1, 2024 — August 31, 2024

      —       $ —       —         423,079  

September 1, 2024 — September 30, 2024

      —       $ —       —         423,079  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      —       $ —       —         423,079  

 

(1)

On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of Common Stock over a two-year period. Repurchases under the program may occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques, or by any combination of such methods, and the program may be modified, suspended or terminated at any time at the discretion of the Board of Directors. The Company did not repurchase any shares of its Common Stock during the quarter ended September 30, 2024.

 

 

28

Table of Contents
ITEM 5.
OTHER INFORMATION
Disclosure of
10b5-1
plans
During the fiscal quarter ended September 30, 2024,
none
of our directors or officers informed us of the
adoption
, modification or termination of a “Rule
10b5-1
trading arrangement” or
“non-Rule
10b5-1
trading arrangement,” as those terms are defined in Regulation
S-K,
Item 408.
 
29

Table of Contents
ITEM 6.

EXHIBITS

(a) Exhibits

 

 31.1    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith.
 31.2    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer is filed herewith.
 32.1    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Executive Officer is furnished herewith.
 32.2    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Financial Officer is furnished herewith.
101.INS    XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH    Inline XBRL Taxonomy Extension Schema Document.
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

30

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 13th day of November, 2024.

 

    MASTECH DIGITAL, INC.
November 13, 2024    

/s/ VIVEK GUPTA

   

Vivek Gupta

Chief Executive Officer

   

/s/ JOHN J. CRONIN, JR.

    John J. Cronin, Jr.
    Chief Financial Officer
    (Principal Financial Officer)

 

31

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer

I, Vivek Gupta, certify that:

 

1.

I have reviewed this report on Form 10-Q of Mastech Digital, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

        MASTECH DIGITAL, INC.
Date: November 13, 2024      

/S/ VIVEK GUPTA

      Vivek Gupta
      Chief Executive Officer

 

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer

I, John J. Cronin, Jr., certify that:

 

1.

I have reviewed this report on Form 10-Q of Mastech Digital, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

        MASTECH DIGITAL, INC.
Date: November 13, 2024      

/S/ JOHN J. CRONIN, JR.

      John J. Cronin, Jr.
      Chief Financial Officer

 

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Mastech Digital, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vivek Gupta, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/S/ VIVEK GUPTA

Vivek Gupta
Chief Executive Officer
Date: November 13, 2024

 

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Mastech Digital, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. Cronin, Jr. Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/S/ JOHN J. CRONIN, JR.

John J. Cronin, Jr.
Chief Financial Officer
Date: November 13, 2024
v3.24.3
Cover Page - shares
 9 Months Ended
Sep. 30, 2024
Oct. 31, 2024
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Amendment Flag false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Entity Registrant Name MASTECH DIGITAL, INC.  
Entity Central Index Key 0001437226  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Title of 12(b) Security Common Stock  
Trading Symbol MHH  
Security Exchange Name NYSEAMER  
Entity Address, State or Province PA  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   11,705,973
Entity File Number 001-34099  
Entity Incorporation, State or Country Code PA  
Entity Address, Address Line One 1305 Cherrington Parkway  
Entity Address, City or Town Moon Township  
Entity Address, Postal Zip Code 15108  
Entity Tax Identification Number 26-2753540  
City Area Code 412  
Local Phone Number 787-2100  
Entity Address, Address Line Two Building 210  
Entity Address, Address Line Three Suite 400  
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Revenues $ 51,839 $ 47,779 $ 148,196 $ 155,046
Cost of revenues 37,068 35,213 107,314 115,354
Gross profit 14,771 12,566 40,882 39,692
Selling, general and administrative expenses:        
Operating expenses 12,332 12,615 37,156 38,937
Employment-related claim, net of recoveries 0 0 0 3,100
Total selling, general and administrative expenses 12,332 12,615 37,156 42,037
Income (loss) from operations 2,439 (49) 3,726 (2,345)
Interest income (expense), net 163 148 447 232
Other income (expense), net (30) 55 (74) (32)
Income (loss) before income taxes 2,572 154 4,099 (2,145)
Income tax expense (benefit) 697 29 994 (358)
Net income (loss) $ 1,875 $ 125 $ 3,105 $ (1,787)
Earnings (loss) per share:        
Basic $ 0.16 $ 0.01 $ 0.27 $ (0.15)
Diluted $ 0.16 $ 0.01 $ 0.26 $ (0.15)
Weighted average common shares outstanding:        
Basic 11,695 11,597 11,654 11,618
Diluted 12,011 11,968 11,949 11,618
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Comprehensive Income [Abstract]        
Net income (loss) $ 1,875 $ 125 $ 3,105 $ (1,787)
Other comprehensive income (loss):        
Foreign currency translation adjustments (44) (88) (71) (95)
Total other comprehensive gain (loss), net of taxes (44) (88) (71) (95)
Total comprehensive income (loss) $ 1,831 $ 37 $ 3,034 $ (1,882)
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 23,885 $ 21,147
Accounts receivable, net of allowance for credit losses of $286 in 2024 and $528 in 2023 26,061 22,556
Unbilled receivables 7,993 7,259
Prepaid and other current assets 7,876 5,501
Total current assets 65,815 56,463
Equipment, enterprise software, and leasehold improvements, at cost:    
Equipment 3,631 3,012
Enterprise software 4,185 4,185
Leasehold improvements 750 753
Total equipment, enterprise software, and leasehold improvements 8,566 7,950
Less – accumulated depreciation and amortization (6,483) (6,037)
Net equipment, enterprise software, and leasehold improvements 2,083 1,913
Operating lease right-of-use assets, net 4,147 5,106
Deferred income taxes 607 793
Deferred financing costs, net 213 284
Non-current deposits 452 457
Goodwill, net of impairment 27,210 27,210
Intangible assets, net of amortization 10,958 13,001
Total assets 111,485 105,227
Current liabilities:    
Accounts payable 4,636 4,659
Accrued payroll and related costs 14,717 12,354
Current portion of operating lease liability 1,257 1,236
Other accrued liabilities 632 938
Deferred revenue 859 684
Total current liabilities 22,101 19,871
Long-term liabilities:    
Long-term operating lease liability, less current portion 2,857 3,843
Long-term accrued income taxes 0 69
Total liabilities 24,958 23,783
Commitments and contingent liabilities (Note 5)
Shareholders' equity:    
Preferred Stock, no par value; 20,000,000 shares authorized; none outstanding
Common Stock, par value $.01; 100,000,000 shares authorized and 13,429,314 shares issued as of September 30, 2024 and 13,312,568 shares issued as of December 31, 2023 134 133
Additional paid-in-capital 37,473 35,345
Retained earnings 55,520 52,415
Accumulated other comprehensive income (loss) (1,715) (1,644)
Treasury stock, at cost; 1,723,341 shares as of September 30, 2024 and 1,714,119 shares as of December 31, 2023 (4,885) (4,805)
Total shareholders' equity 86,527 81,444
Total liabilities and shareholders' equity $ 111,485 $ 105,227
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for uncollectible accounts $ 286 $ 528
Preferred Stock, par value $ 0 $ 0
Preferred Stock, shares authorized 20,000,000 20,000,000
Preferred Stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 13,429,314 13,312,568
Treasury stock, shares 1,723,341 1,714,119
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (loss) [Member]
Beginning Balances at Dec. 31, 2022 $ 86,003 $ 133 $ 32,059 $ 59,553 $ (4,187) $ (1,555)
Net income (loss) 261     261    
Other comprehensive gain (loss), net of taxes 5         5
Stock-based compensation expense 835   835      
Ending Balances at Mar. 31, 2023 87,104 133 32,894 59,814 (4,187) (1,550)
Beginning Balances at Dec. 31, 2022 86,003 133 32,059 59,553 (4,187) (1,555)
Net income (loss) (1,787)          
Other comprehensive gain (loss), net of taxes (95)          
Ending Balances at Sep. 30, 2023 86,200 133 34,710 57,766 (4,759) (1,650)
Beginning Balances at Mar. 31, 2023 87,104 133 32,894 59,814 (4,187) (1,550)
Net income (loss) (2,173)     (2,173)    
Employee common stock purchases 150   150      
Other comprehensive gain (loss), net of taxes (12)         (12)
Stock-based compensation expense 842   842      
Shares repurchased (572)       (572)  
Ending Balances at Jun. 30, 2023 85,339 133 33,886 57,641 (4,759) (1,562)
Net income (loss) 125     125    
Other comprehensive gain (loss), net of taxes (88)         (88)
Stock-based compensation expense 824   824      
Ending Balances at Sep. 30, 2023 86,200 133 34,710 57,766 (4,759) (1,650)
Beginning Balances at Dec. 31, 2023 81,444 133 35,345 52,415 (4,805) (1,644)
Net income (loss) (161)     (161)    
Other comprehensive gain (loss), net of taxes (28)         (28)
Stock-based compensation expense 550   550      
Shares repurchased (80)       (80)  
Ending Balances at Mar. 31, 2024 81,725 133 35,895 52,254 (4,885) (1,672)
Beginning Balances at Dec. 31, 2023 81,444 133 35,345 52,415 (4,805) (1,644)
Net income (loss) 3,105          
Other comprehensive gain (loss), net of taxes (71)          
Ending Balances at Sep. 30, 2024 86,527 134 37,473 55,520 (4,885) (1,715)
Beginning Balances at Mar. 31, 2024 81,725 133 35,895 52,254 (4,885) (1,672)
Net income (loss) 1,391     1,391    
Employee common stock purchases 136   136      
Other comprehensive gain (loss), net of taxes 1         1
Stock-based compensation expense 461   461      
Stock options exercised 322   321      
Ending Balances at Jun. 30, 2024 84,036 134 36,813 53,645 (4,885) (1,671)
Net income (loss) 1,875     1,875    
Other comprehensive gain (loss), net of taxes (44)         (44)
Stock-based compensation expense 542   542      
Stock options exercised 118   118      
Ending Balances at Sep. 30, 2024 $ 86,527 $ 134 $ 37,473 $ 55,520 $ (4,885) $ (1,715)
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
OPERATING ACTIVITIES:    
Net income (loss) $ 3,105 $ (1,787)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:    
Depreciation and amortization 2,670 2,943
Bad debt expense (92) 0
Interest amortization of deferred financing costs 71 55
Stock-based compensation expense 1,553 2,501
Deferred income taxes, net 185 (405)
Operating lease assets and liabilities, net 27 68
Loss on disposition of fixed assets 21 1
Long term accrued income taxes (69) (36)
Working capital items:    
Accounts receivable and unbilled receivables (4,147) 10,044
Insurance recovery 0 (2,200)
Prepaid and other current assets (2,399) (2,081)
Accounts payable (18) 370
Accrued payroll and related costs 2,377 1,192
Other accrued liabilities (305) (323)
Deferred revenue 175 203
Net cash flows provided by (used in) operating activities 3,154 10,545
INVESTING ACTIVITIES:    
Recovery of (payment for) non-current deposits 1 119
Capital expenditures (826) (213)
Net cash flows provided by (used in) investing activities (825) (94)
FINANCING ACTIVITIES:    
(Repayments) on term loan facility 0 (1,100)
Proceeds from the issuance of common shares 136 150
Purchase of treasury stock (80) (572)
Proceeds from the exercise of stock options 440 0
Net cash flows provided by (used in) financing activities 496 (1,522)
Effect of exchange rate changes on cash and cash equivalents (87) (105)
Net change in cash and cash equivalents 2,738 8,824
Cash and cash equivalents, beginning of period 21,147 7,057
Cash and cash equivalents, end of period $ 23,885 $ 15,881
v3.24.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure                
Net Income (Loss) $ 1,875 $ 1,391 $ (161) $ 125 $ (2,173) $ 261 $ 3,105 $ (1,787)
v3.24.3
Insider Trading Arrangements
 9 Months Ended
Sep. 30, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.3
Description of Business and Basis of Presentation
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Description of Business and Basis of Presentation
1.
Description of Business and Basis of Presentation:
Basis of Presentation
References in this Quarterly Report on Form
10-Q
to “we”, “our”, “Mastech Digital”, “Mastech” or “the Company” refer collectively to Mastech Digital, Inc. and its wholly owned operating subsidiaries, which are included in these Condensed Consolidated Financial Statements (the “Financial Statements”).
Description of Business
We are a provider of Digital Transformation IT Services to mostly large and
medium-sized
organizations.
Our portfolio of offerings includes data management and analytics services, digital learning services and IT staffing services.
With our 2017 acquisition of the services division of Canada-based InfoTrellis, Inc. (“InfoTrellis”), we added specialized capabilities in delivering data and analytics services to our customers, which became our Data and Analytics Services segment. This segment offers project-based consulting services in the areas of data management, data engineering and data science, with such services delivered using
on-site
and offshore resources. In October 2020, we acquired AmberLeaf Partners, Inc. (“AmberLeaf”), a Chicago-based customer experience consulting firm. This acquisition expanded our Data and Analytics Services segment’s capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise applications across sales, marketing and customer service organizations.
Our IT staffing services segment combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies. Our digital technologies include data management, analytics, cloud, mobility, social and artificial intelligence. We work with businesses and institutions with significant IT spending and recurring staffing service needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements.
The
COVID-19
pandemic had a material impact on activity levels in both of our business segments in 2020. This impact was reduced in 2021 due to the global
roll-out
of vaccination programs and signs of improving economic conditions.
COVID-19
related concerns were less impactful on our business in 2022 and 2023. Still, the proliferation of
COVID-19
variants could disrupt global markets during 2024 and beyond.
Accounting Principles
The accompanying Financial Statements have been prepared by management in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and disclosures required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and the accompanying notes. Actual results could differ from these estimates. These Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, included in our Annual Report on Form
10-K
filed with the SEC on March 15, 2024. Additionally, our operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that can be expected for the year ending December 31, 2024, or for any other period.
Principles of Consolidation
The Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.
 
Critical Accounting Policies
Please refer to Note 1 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Critical Accounting Policies and Estimates” in our Annual Report on Form
10-K
for the year ended December 31, 2023, for a more detailed discussion of our significant accounting policies and critical accounting estimates. There were no material changes to these critical accounting policies during the nine months ended September 30, 2024.
Segment Reporting
The Company has two reportable segments, in accordance with Accounting Standards Committee (“ASC”) Topic 280 “Disclosures About Segments of an Enterprise and Related Information”: Data and Analytics Services and IT Staffing Services.
v3.24.3
Revenue from Contracts with Customers
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers
2.
Revenue from Contracts with Customers
The Company recognizes revenue on
time-and-material
contracts over time as services are performed and expenses are incurred.
Time-and-material
contracts typically bill at an agreed-upon hourly rate, plus
out-of-pocket
expense reimbursement.
Out-of-pocket
expense reimbursement amounts vary by assignment, but on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.
The Company recognizes revenue on fixed price contracts over time as services are rendered and uses a cost-based input method to measure progress. Determining a measure of progress requires management to make judgments that affect the timing of revenue recognized. Under the cost-based input method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. The Company has determined that the cost-based input method provides a faithful depiction of the transfer of goods or services to the customer. Estimated losses are recognized immediately in the period in which current estimates indicate a loss. We record deferred revenues when cash payments are received or due in advance of our performance, including amounts which may be refundable.
The Company’s
time-and-material
and fixed price revenue streams are recognized over time as the customer receives and consumes the benefits of the Company’s performance as the work is performed.
In certain situations, related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied.
We do not sell, lease or otherwise market computer software or hardware, and, essentially, 100% of our revenue is derived from the sale of data and analytics, IT staffing and digital transformation services. We expense sales commissions in the same period in which revenues are realized. These costs are recorded within sales, general and administrative expenses.
Each contract the Company enters is assessed to determine the promised services to be performed and includes identification of the performance obligations required by the contract. In substantially all contracts, we have identified a single performance obligation for each contract either because the promised services are distinct, or the promised services are highly interrelated and interdependent and therefore represent a combined single performance obligation.
Our Data and Analytics Services segment provides specialized capabilities in delivering data management and analytics services to its customers globally. This business offers project-based consulting services in the areas of Master Data Management, Enterprise Data Integration, Big Data, Analytics and Digital Transformation, which can be delivered using onsite and offshore resources.
Our IT Staffing Services segment combines technical expertise with business process experience to deliver a broad range of services in digital and mainstream technologies. Our digital technology stack includes data management and analytics, cloud, mobility, social and automation. Our mainstream technologies include business intelligence / data warehousing; web services; enterprise resource planning & customer resource management; and
e-Business
solutions. We work with businesses and institutions with significant IT spend and recurring staffing needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. In late 2023, we expanded our service offerings to include engineering staffing services. Substantially all our revenue is recognized over time.
 
The following table depicts the disaggregation of our revenues by contract type and operating segment:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Data and Analytics Services Segment
                              
Time-and-material
Contracts
    $ 6,123      $ 5,888      $ 18,417      $ 19,027  
Fixed-price Contracts
      3,275        2,150        7,924        7,179  
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal Data and Analytics Services
   
$
9,398
 
   
$
8,038
 
   
$
26,341
 
   
$
26,206
 
  
 
 
     
 
 
     
 
 
     
 
 
  
IT Staffing Services Segment
                              
Time-and-material
Contracts
    $ 42,374      $ 39,741      $ 121,788      $ 128,840  
Fixed-price Contracts
      67        —         67        —   
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal IT Staffing Services
   
$
42,441
 
   
$
39,741
 
   
$
121,855
 
   
$
128,840
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total Revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
For the three months ended September 30, 2024, the Company had two clients (CGI = 14.0% and Allegis = 11.7%) that each exceeded 10% of total revenues. For the nine months ended September 30, 2024, the Company had the same two clients (CGI = 15.4% and Allegis = 10.6%) that each exceeded 10% of total revenues. For the three months ended September 30, 2023, the Company had one client (CGI = 21.1%) that exceeded 10% of total revenues. For the nine months ended September 30, 2023, the Company had the same one client (CGI = 23.7%) that exceeded 10% of total revenues.
The Company’s top ten clients represented approximately 56% and 52% of total revenues for the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the Company’s top ten clients represented approximately 54% and 54% of total revenues, respectively.
The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
v3.24.3
Goodwill and Other Intangible Assets, net
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets, net
3.
Goodwill and Other Intangible Assets, net
Goodwill of $8.4 million related to our IT Staffing Services segment resulted from the 2015 acquisition of Hudson Global Resources Management’s U.S. IT staffing business. Goodwill related to our Data and Analytics Services segment includes our 2017 acquisition of the services division of InfoTrellis, which totaled $27.4 million, and our 2020 acquisition of AmberLeaf, which totaled $6.4 million. The Company recorded a $5.3 million goodwill impairment related to the Data and Analytics Services segment in 2023 and a $9.7 million goodwill impairment in 2018. The impairments were primarily attributable to declines in revenue levels and lower future revenue projections.
 
A reconciliation of the beginning and ending amounts of goodwill by operating segment for the periods ended September 30, 2024 and December 31, 2023 is as follows:
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
IT Staffing Services:
      
Beginning balance
    $ 8,427      $ 8,427  
Goodwill recorded
      —         —   
Impairment
      —         —   
  
 
 
     
 
 
  
Ending Balance
    $ 8,427      $ 8,427  
  
 
 
     
 
 
  
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Data and Analytics Services:
      
Beginning balance
    $ 18,783      $ 24,083  
Goodwill recorded
      —         —   
Impairment
      —         (5,300 ) 
  
 
 
     
 
 
  
Ending Balance
    $ 18,783      $ 18,783  
  
 
 
     
 
 
  
The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of September 30, 2024 and December 31, 2023:
 
    
As of September 30, 2024
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 6,194      $ 1,805  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        11,003        8,638  
Covenant-not-to-compete
      5        1,201        1,113        88  
Trade name
      5        1,711        1,613        98  
Technology
      7        1,979        1,650        329  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 22,141      $ 10,958  
     
 
 
     
 
 
     
 
 
  
 
    
As of December 31, 2023
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 5,694      $ 2,305  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        9,776        9,865  
Covenant-not-to-compete
      5        1,201        1,047        154  
Trade name
      5        1,711        1,539        172  
Technology
      7        1,979        1,474        505  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 20,098      $ 13,001  
     
 
 
     
 
 
     
 
 
  
Amortization expense for the three and nine month periods ended September 30, 2024 and 2023 totaled $657,000 and $2.0 million, respectively and is included in selling, general and administrative expenses in the Consolidated Statement of Operations. For the three and nine month periods ended September 30, 2023 amortization expense was $693,000 and $2.1 million, respectively.
 
The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2024 through 2028 is as follows:
 
    
Years Ended December 31,
  
    
2024
     
2025
     
2026
     
2027
     
2028
  
    
(Amounts in thousands)
  
Amortization expense
    $ 2,693      $ 2,553      $ 2,413      $ 2,025      $ 1,637  
v3.24.3
Leases
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Leases
4.
Leases
The Company rents certain office facilities and equipment under noncancelable operating leases. As of September 30, 2024, approximately 93,000 square feet of office space is utilized for our sales and recruiting offices, delivery centers, and corporate headquarters. All of our leases are classified as operating leases. The average initial lease term is 4.4 years. Several leases have an option to renew, at our sole discretion, for an additional term. Our present lease terms range from 1.9 to 5.0 years with a weighted average of 3.3 years. Leases with an initial term of twelve months or less are not recorded on the balance sheet.
The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:
 
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Assets:
      
Long-term operating lease
right-of-use
assets
    $ 4,147      $ 5,106  
  
 
 
     
 
 
  
Liabilities:
      
Short-term operating lease liability
    $ 1,257      $ 1,236  
Long-term operating lease liability
      2,857        3,843  
  
 
 
     
 
 
  
Total liabilities
    $ 4,114      $ 5,079  
  
 
 
     
 
 
  
Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:
 
    
Amount as of
September 30, 2024
  
    
(in thousands)
  
2024 (for remainder of year)
    $ 359  
2025
      1,466  
2026
      1,464  
2027
      786  
2028
      259  
Thereafter
      196  
  
 
 
  
Total
    $ 4,530  
Less: Imputed interest
      (416 )
 
  
 
 
  
Present value of operating lease liabilities
    $ 4,114  
  
 
 
  
The weighted average discount rate used to calculate the present value of future lease payments was 5.5%.
We recognize rent expense for these leases on a straight-line basis over the lease term. Rental expense for the three and nine months ended September 30, 2024 totaled $0.4 million and $1.1 million, respectively. Rental expense for the three and nine months ended September 30, 2023 totaled $0.4 million and $1.2 million, respectively.
Total cash paid for lease liabilities for the three and nine months ended September 30, 2024 totaled $0.4 million and $1.1 million, respectively. Total cash paid for lease liabilities for the three and nine months ended September 30, 2023 totaled $0.4 million and $1.2 million,
respectively. 
There were no new leases entered into during the three and nine months ended September 30, 2024. New leases entered into during the three and nine months ended September 30, 2023 totaled $1.7 million and $1.7 million, respectively. New leases are considered
non-cash
transactions.
v3.24.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
5.
Commitments and Contingencies
In December 2022, the Company received a demand letter from the attorney of a former employee who resigned from his employment with the Company in November 2022. Among other allegations in the letter, this former employee asserted various employment-related claims against the Company, including a claim of wrongful termination. The Company settled this claim in the third quarter of 2023 and paid a $3.1 million settlement, net of recoveries. For the three and nine months ended September 30, 2023, the Company incurred $225,000 and $1.2 million, respectively, of professional service fees related to this matter which was included in Selling, General and Administrative expenses in the Consolidated Statement of Operations. There were no professional service fees related to this matter incurred in the three and nine months ended September 30, 2024.
In the ordinary course of our business, the Company is involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, the Company’s management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.
v3.24.3
Employee Benefit Plan
 9 Months Ended
Sep. 30, 2024
Retirement Benefits [Abstract]  
Employee Benefit Plan
6.
Employee Benefit Plan
The Company provides an Employee Retirement Savings Plan (the “Retirement Plan”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), that covers substantially all U.S. based salaried and
W-2
hourly employees. Employees may contribute a percentage of eligible compensation to the Retirement Plan, subject to certain limits under the Code. The Company did not provide for any matching contributions for the three and nine months ended September 30, 2024 and 2023.
 
v3.24.3
Stock-Based Compensation
 9 Months Ended
Sep. 30, 2024
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
7.
Stock-Based Compensation
In 2008, the Company adopted a Stock Incentive Plan. This Stock Incentive Plan was amended and restated effective as of May 14, 2024 (as amended from time to time, the “Plan”) and provides that up to 5,400,000 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), shall be allocated for issuance to directors, officers, employees and consultants of the Company. Grants under the Plan may be made in the form of stock options, stock appreciation rights, performance share awards, restricted stock awards shares or stock awards.
During the three months ended September 30, 2024, the Company granted 10,518 restricted share units and zero stock options under the Plan. During the three months ended September 30, 2023, the Company granted no shares under the Plan.
During the nine months ended September 30, 2024, the Company granted 40,130 restricted share units and 525,000 stock options at an average strike price of $8.41 under the Plan. During the nine months ended September 30, 2023, the Company granted 19,924 restricted share units and 125,000 stock options at an average strike price of $11.24 under the Plan. As of September 30, 2024 there were 372,000 shares of Common Stock available for grants under the Plan.
Stock-based compensation expense for the three months ended September 30, 2024 and 2023 was $542,000 and $824,000, respectively, and for the nine months ended September 30, 2024 and 2023 was $1.6 million and $2.5 million, respectively. Stock-based compensation expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
During the three and nine months ended September 30, 2024, the Company issued 17,281 and 87,924 shares, respectively, related to the grant of restricted share units and the exercise of stock options. During the three and nine months ended September 30, 2023, the Company issued zero and 17,804 shares, respectively, related to the grant of restricted share units and the exercise of stock options.
In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The Employee Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and was approved by the Company’s shareholders to be qualified. On May 15, 2019, the Company’s shareholders approved the Employee Stock Purchase Plan. Under the Employee Stock Purchase Plan, 600,000 shares of Common Stock (subject to adjustment upon certain changes in the Company’s capitalization) are available for purchase by eligible employees who become participants in the Employee Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of Common Stock on the first day of the offering period, or (ii) the fair market value per share of Common Stock on the last day of the offering period.
The Company’s eligible full-time employees are able to contribute up to 15% of their base compensation into the Employee Stock Purchase Plan, subject to an annual limit of $25,000 per person. Employees are able to purchase Company Common Stock at a 15% discount to the lower of the fair market value of the Company’s Common Stock on the initial or final trading dates of each
six-month
offering period. Offering periods begin on January 1 and July 1 of each year. The Company uses the Black-Scholes option pricing model to determine the fair value of Employee Stock Purchase Plan share-based payments. The fair value of the
six-month
“look-back” option in the Company’s Employee Stock Purchase Plan is estimated by adding the fair value of 15% of one share of stock to 85% of the fair value of an option on one share of stock. The Company utilized U.S. Treasury yields as of the grant date for its risk-free interest rate assumption, matching the Treasury yield terms to the
six-month
offering period. The Company utilized historical company data to develop its dividend yield and expected volatility assumptions.
 
During the three months ended September 30, 2024 and 2023, there were no shares issued under the Employee Stock Purchase Plan. During the nine months ended September 30, 2024 and 2023, there were 21,329 shares and 17,890 shares issued under the Employee Stock Purchase Plan at a share price of $6.38 and $8.40, respectively. Stock-based compensation expense related to the Employee Stock Purchase Plan for the three months ended September 30, 2024 and 2023 totaled $11,000 and $10,000, respectively. Stock-based compensation expense related to the Employee Stock Purchase Plan for the nine months ended September 30, 2024 and 2023 totaled $65,000 and $78,000, respectively, and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023. As of September 30, 2024, there were 445,590 shares available for purchases under the Employee Stock Purchase Plan.
 
v3.24.3
Credit Facility
 9 Months Ended
Sep. 30, 2024
Text Block [Abstract]  
Credit Facility
8.
Credit Facility
On July 13, 2017, the Company entered into a Credit Agreement (the “Credit Agreement”) with PNC Bank, as administrative agent, swing loan lender and issuing lender, PNC Capital Markets LLC, as sole lead arranger and sole book-runner, and certain financial institution parties thereto as lenders (the “Lenders”). The Credit Agreement, as amended, provides for a total aggregate commitment of $53.1 million, consisting of (i) a revolving credit facility (the “Revolver”) in an aggregate principal amount not to exceed $40 million and (ii) a $13.1 million term loan facility (the “Term Loan), as more fully described in Exhibit 10.1 to the Company’s Form
8-Ks
filed with the SEC on July 19, 2017, April 25, 2018, October 7, 2020, Exhibit 10.2 to the Form
8-K/A
filed with the SEC on January 4, 2022 and Exhibits 10.11 and 10.12 to the Company’s Form
10-K
filed with the SEC on March 15, 2024. Additionally, the facility includes an accordion feature for additional borrowing of up to $20 million upon satisfaction of certain conditions.
The Revolver expires in December 2026 and includes swing loan and letter of credit
sub-limits
in the aggregate amount not to exceed $6.0 million for swing loans and $5.0 million for letters of credit. Borrowings under the Revolver may be denominated in U.S. dollars or Canadian dollars. The maximum borrowings in U.S. dollars may not exceed the sum of 85% of eligible U.S. accounts receivable and 60% of eligible U.S. unbilled receivables, less a reserve amount established by the administrative agent. The maximum borrowings in Canadian dollars may not exceed the lesser of (i) $10.0 million; and (ii) the sum of 85% of eligible Canadian receivables, plus 60% of eligible Canadian unbilled receivables, less a reserve amount established by the administrative agent.
Amounts borrowed under the Term Loan were required to be repaid in consecutive quarterly installments of $1.1 million through and including the maturity date of October 1, 2024. In August 2022, the Company prepaid $7.6 million of the outstanding term loan with excess cash balances. The final term loan payment of $1.1 million was made on January 3, 2023, taking the outstanding balance to zero.
Borrowings under the Revolver and the Term Loan, which may be made at the Company’s election, bear interest at either (a) the higher of PNC’s prime rate or the federal funds rate plus 0.50%, plus an applicable margin determined based upon the Company’s senior leverage ratio or (b) the Secured Overnight Financing Rate (“SOFR”), plus an applicable margin determined based upon the Company’s senior leverage ratio. The applicable margin on the base rate is between 0.50% and 1.25% on Revolver borrowings and between 1.75% and 2.50% on Term Loan borrowings. The applicable margin on the SOFR is between 1.50% and 2.25% on Revolver borrowings and between 2.75% and 3.50% on Term Loan borrowings. A 20 to
30-basis
point per annum commitment fee on the unused portion of the Revolver is charged and due monthly in arrears. The applicable commitment fee is determined based upon the Company’s senior leverage ratio.
The Company pledged substantially all of its assets in support of the Credit Agreement. The Credit Agreement contains standard financial covenants, including, but not limited to, covenants related to the Company’s senior leverage ratio and fixed charge ratio (as defined under the Credit Agreement) and limitations on liens, indebtedness, guarantees, contingent liabilities, loans and investments, distributions, leases, asset sales, stock repurchases and mergers and acquisitions. As of September 30, 2024, the Company was in compliance with all applicable provisions of the Credit Agreement.
In connection with securing the commitments under the Credit Agreement and the April 20, 2018, October 1, 2020, December 29, 2021 and December 29, 2023 amendments to the Credit Agreement, the Company paid a commitment fee and incurred deferred financing costs totaling $1,039,000, which were capitalized and are being amortized as interest expense over the life of the Credit Facility. Deferred financing costs of $213,000 and $284,000 (net of amortization) as of September 30, 2024, and December 31, 2023, respectively, are presented as long-term assets in the Company’s Consolidated Balance Sheets.
As of September 30, 2024, and December 31, 2023, the Company’s outstanding borrowings under the Revolver totaled zero dollars; and unused borrowing capacity available was approximately $24.7 million and $22.5 million, respectively. There were no outstanding borrowings under the Term Loan at September 30, 2024, and December 31, 2023. On May 9, 2024, the Company issued two standby Letters of Credit for $162,000 each from PNC Bank to a Vietnam client to secure certain performance and advance payment guarantees made to the client on an existing fixed price Data and Analytics Services assignment. The letters of credit are scheduled to expire on March 21, 2026.
v3.24.3
Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
9.
Income Taxes
The components of income (loss) before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Income (loss) before income taxes:
            
Domestic
    $ 1,748      $ (211 )     $ 2,047      $ (3,205 ) 
Foreign
      824        365        2,052        1,060  
  
 
 
     
 
 
     
 
 
     
 
 
  
Income (loss) before income taxes
    $ 2,572      $ 154      $ 4,099      $ (2,145 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
The Company has foreign subsidiaries which generate revenues from
non-U.S.-based
clients. Additionally, these subsidiaries provide services to the Company’s U.S. operations. Accordingly, the Company allocates a portion of its income (loss) to these subsidiaries based on a “transfer pricing” model and reports such income (loss) as foreign in the above table.
The provision (benefit) for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Current provision (benefit):
            
Federal
    $ 351      $ (88 )     $ 227      $ (271 ) 
State
      77        (9 )       64        25  
Foreign
      216        93        517        238  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total current provision (benefit)
    $ 644      $ (4 )     $ 808      $ (8 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Deferred provision (benefit):
            
Federal
      44        25        140        (377 ) 
State
      8        7        27        (91 ) 
Foreign
      1        4        19        64  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total deferred provision (benefit)
      53        36        186        (404 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Change in valuation allowance
      —         (3 )       —         54  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total provision (benefit) for income taxes
    $ 697      $ 29      $ 994      $ (358 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes for the three and nine months ended September 30, 2024 and 2023 were as follows (amounts in thousands):
 
    
Three Months Ended
September 30, 2024
    
Three Months Ended
September 30, 2023
  
Income taxes computed at the federal statutory rate
    $ 540        21.0 %    $ 33        21.0 % 
State income taxes, net of federal tax benefit
      120        4.6       (2 )       (1.2 ) 
Excess tax expense (benefit) from stock options/restricted shares
      25        1.0       —         —   
Worthless stock deduction
      —         —        —         —   
Difference in income tax rate on foreign earnings/other
      12        0.5       1        0.9  
Change in valuation allowance
      —         —        (3 )       (1.9 ) 
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 697        27.1 %    $ 29        18.8 % 
  
 
 
     
 
 
    
 
 
     
 
 
  
 
 
  
Nine Months Ended
September 30, 2024
 
 
Nine Months Ended
September 30, 2023
 
Income taxes computed at the federal statutory rate
    $ 861        21.0 %    $ (450 )       (21.0 )% 
State income taxes, net of federal tax benefit
      101        2.5       (74 )       (3.5 ) 
Excess tax expense (benefit) from stock options/restricted shares
      156        3.8       40        1.9  
Worthless stock deduction
      (248 )       (6.1 )      —         —   
Difference in income tax rate on foreign earnings/other
      124        3.0       72        3.4  
Change in valuation allowance
      —         —        54        2.5  
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 994        24.2 %    $ (358 )       (16.7 )% 
  
 
 
     
 
 
    
 
 
     
 
 
  
We evaluate
 deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires us to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative, using a “more likely than not” standard. Our assessment considers, among other things, the nature of cumulative losses, forecast of future profitability, the duration of statutory carry-forward periods and tax planning alternatives. On September 30, 2024, our valuation allowance was comprised of net operating losses in Ireland and the United Kingdom and totaled $
466,000
. During the quarter ended March 31, 2024, we secured a worthless stock deduction for our dissolved Singapore entity, which allowed us to recognize a current tax deduction during the 2024 period and, accordingly, we reversed $
162,000
of our valuation allowance against outstan
din
g deferred tax assets. As of December 31, 2023, our valuation allowance balance totaled $
628,000
.
v3.24.3
Shareholders' Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Shareholders' Equity
10.
Shareholders’ Equity
On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of the Company’s common stock over a
two-year
period. Repurchases under the program may occur from time to time in the open market, through privately negotiated transactions, through block purchases or other purchase techniques, or by any combination of such methods, and the program may be modified, suspended or terminated at any time at the discretion of the Board of Directors. During the three months ended September 30, 2024, the Company did not purchase any shares under this program. During the nine months ended September 30, 2024, the Company repurchased 9,222 shares of common stock at an average price of $8.70 per share under this program.
Additionally, the Company makes stock purchases from time to time to satisfy employee tax obligations related to its Stock Incentive Plan. The Company did not purchase any shares to satisfy employee tax obligations during the three and nine months ended September 30, 2024 and 2023.
v3.24.3
Earnings (Loss) Per Share
 9 Months Ended
Sep. 30, 2024
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share
11.
Earnings (Loss) Per Share
The computation of basic earnings (loss) per share is based on the Company’s net income (loss) divided by the weighted average number of common shares outstanding. Diluted earnings (loss) per share reflect the potential dilution that could occur if outstanding stock options were exercised. The dilutive effect of stock options was calculated using the treasury stock method.
For the three and nine months ended September 30, 2024, there were 1,005,000 and 1,057,000 anti-dilutive stock options excluded from the computation of diluted earnings per share. For the three months ended September 30, 2023, there were 1,473,000 anti-dilutive stock options excluded from the computation of diluted earnings per share. For the nine months ended September 30, 2023, all stock options and restricted shares were anti-dilutive and excluded from the computation of diluted (loss) per share.
v3.24.3
Business Segments and Geographic Information
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
Business Segments and Geographic Information
12.
Business Segments and Geographic Information
Our reporting segments are: 1) Data and Analytics Services; and 2) IT Staffing Services.
The Data and Analytics Services segment was acquired through the July 13, 2017, acquisition of the services division of Canada-based InfoTrellis, Inc. This segment is a project-based consulting services business with specialized capabilities in data management and analytics. The business is marketed as “Mastech InfoTrellis” and utilizes a dedicated sales team with deep subject matter expertise. Mastech InfoTrellis has offices in the United States, Canada, the United Kingdom, and a global delivery center in Chennai, India. Project-based delivery reflects a combination of
on-site
resources and offshore resources. Assignments are secured on both a time and material and fixed price basis. In October 2020, we acquired AmberLeaf, a Chicago-based customer experience consulting firm. This acquisition expanded our capabilities in customer experience strategy and managed services offering for a variety of Cloud-based enterprise application across sales, marketing and customer service organizations.
 
The IT Staffing Services segment offers staffing services in digital and mainstream technologies, engineering services and uses digital methods to enhance organizational learning. These services are marketed using a common sales force and delivered via our domestic and global recruitment centers. While the vast majority of our assignments are based on time and materials, we do have the capabilities to deliver our digital transformation services on a fixed price basis.
Below are the operating results of our reporting segments.
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2024
    
2023
    
2024
    
2023
  
    
(Amounts in thousands)
    
(Amounts in thousands)
  
Revenues:
         
Data and Analytics Services
    $ 9,398     $ 8,038     $ 26,341     $ 26,206  
IT Staffing Services
      42,441       39,741       121,855       128,840  
  
 
 
    
 
 
    
 
 
    
 
 
  
Total revenues
    $ 51,839     $ 47,779     $ 148,196     $ 155,046  
  
 
 
    
 
 
    
 
 
    
 
 
  
Gross Margin %:
         
Data and Analytics Services
      50.7 %      45.8 %      48.9 %      43.1 % 
IT Staffing Services
      23.6 %      22.4 %      23.0 %      22.0 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Total gross margin %
      28.5 %      26.3 %      27.6 %      25.6 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Segment operating income (loss):
         
Data and Analytics Services
    $ 1,145     $ (832 )    $ 1,435     $ (2,393 ) 
IT Staffing Services
      1,951       1,476       4,334       5,227  
  
 
 
    
 
 
    
 
 
    
 
 
  
Subtotal
      3,096       644       5,769       2,834  
Amortization of acquired intangible assets
      (657 )      (693 )      (2,043 )      (2,079 ) 
Employment-related claim, net of recoveries
      —        —        —        (3,100 ) 
Interest income (expense), FX gains (losses) and other, net
      133       203       373       200  
  
 
 
    
 
 
    
 
 
    
 
 
  
Income (loss) before income taxes
    $ 2,572     $ 154     $ 4,099     $ (2,145 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Below is a reconciliation of segment total assets to consolidated total assets:
 
    
September 30,
2024
     
December 31,
2023
  
    
(Amounts in thousands)
  
Total assets:
      
Data and Analytics Services
    $ 45,735      $ 45,681  
IT Staffing Services
      65,750        59,546  
  
 
 
     
 
 
  
Total assets
    $ 111,485      $ 105,227  
  
 
 
     
 
 
  
Below is geographic information related to our revenues from external customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
    $ 51,839      $ 47,779      $ 148,196      $ 155,046  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
v3.24.3
Recently Issued Accounting Standards
 9 Months Ended
Sep. 30, 2024
Recently Issued Accounting Standards [Abstract]  
Recently Issued Accounting Standards
13.
Recently Issued Accounting Standards
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU
2023-07,
“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require disclosure of incremental segment information on an annual and interim basis. Additional disclosures include significant segment expenses that are part of segment profit or loss; the title and position of the chief operating decision maker; and how the chief operating decision maker uses segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments in this ASU are effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
In December 2023, the FASB issued ASU
2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU enhance the transparency and usefulness of income tax disclosures. Additional disclosures include specific rate reconciliation categories; additional disclosure for reconciling items that meet a quantitative threshold; and federal, state and foreign income taxes paid by individual jurisdiction. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setti
ng
organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s consolidated financial statements.
v3.24.3
Revenue from Contracts with Customers (Tables)
 9 Months Ended
Sep. 30, 2024
Summary of Disaggregation of Our Revenues by Contract Type and Operating Segment
The following table depicts the disaggregation of our revenues by contract type and operating segment:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Data and Analytics Services Segment
                              
Time-and-material
Contracts
    $ 6,123      $ 5,888      $ 18,417      $ 19,027  
Fixed-price Contracts
      3,275        2,150        7,924        7,179  
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal Data and Analytics Services
   
$
9,398
 
   
$
8,038
 
   
$
26,341
 
   
$
26,206
 
  
 
 
     
 
 
     
 
 
     
 
 
  
IT Staffing Services Segment
                              
Time-and-material
Contracts
    $ 42,374      $ 39,741      $ 121,788      $ 128,840  
Fixed-price Contracts
      67        —         67        —   
  
 
 
     
 
 
     
 
 
     
 
 
  
Subtotal IT Staffing Services
   
$
42,441
 
   
$
39,741
 
   
$
121,855
 
   
$
128,840
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total Revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
Summary of Revenue from External Customers
The following table presents our revenue from external customers disaggregated by geography, based on the work location of our customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
   
$
51,839
 
   
$
47,779
 
   
$
148,196
 
   
$
155,046
 
  
 
 
     
 
 
     
 
 
     
 
 
  
v3.24.3
Goodwill and Other Intangible Assets, net (Tables)
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Reconciliation of Goodwill
A reconciliation of the beginning and ending amounts of goodwill by operating segment for the periods ended September 30, 2024 and December 31, 2023 is as follows:
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
IT Staffing Services:
      
Beginning balance
    $ 8,427      $ 8,427  
Goodwill recorded
      —         —   
Impairment
      —         —   
  
 
 
     
 
 
  
Ending Balance
    $ 8,427      $ 8,427  
  
 
 
     
 
 
  
 
    
Nine Months
Ended
     
Twelve Months
Ended
  
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Data and Analytics Services:
      
Beginning balance
    $ 18,783      $ 24,083  
Goodwill recorded
      —         —   
Impairment
      —         (5,300 ) 
  
 
 
     
 
 
  
Ending Balance
    $ 18,783      $ 18,783  
  
 
 
     
 
 
  
Components of Identifiable Intangible assets
The Company is amortizing the identifiable intangible assets on a straight-line basis over estimated average lives ranging from 3 to 12 years. Identifiable intangible assets were comprised of the following as of September 30, 2024 and December 31, 2023:
 
    
As of September 30, 2024
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 6,194      $ 1,805  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        11,003        8,638  
Covenant-not-to-compete
      5        1,201        1,113        88  
Trade name
      5        1,711        1,613        98  
Technology
      7        1,979        1,650        329  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 22,141      $ 10,958  
     
 
 
     
 
 
     
 
 
  
 
    
As of December 31, 2023
  
(Amounts in thousands)
   
Amortization
Period (In Years)
     
Gross Carrying
Value
     
Accumulative
Amortization
     
Net Carrying
Value
  
IT Staffing Services:
            
Client relationships
      12      $ 7,999      $ 5,694      $ 2,305  
Covenant-not-to-compete
      5        319        319        —   
Trade name
      3        249        249        —   
Data and Analytics Services:
            
Client relationships
      12        19,641        9,776        9,865  
Covenant-not-to-compete
      5        1,201        1,047        154  
Trade name
      5        1,711        1,539        172  
Technology
      7        1,979        1,474        505  
     
 
 
     
 
 
     
 
 
  
Total Intangible Assets
       $ 33,099      $ 20,098      $ 13,001  
     
 
 
     
 
 
     
 
 
  
Schedule of Estimated Amortization Expense
The estimated aggregate amortization expense for intangible assets for the years ending December 31, 2024 through 2028 is as follows:
 
    
Years Ended December 31,
  
    
2024
     
2025
     
2026
     
2027
     
2028
  
    
(Amounts in thousands)
  
Amortization expense
    $ 2,693      $ 2,553      $ 2,413      $ 2,025      $ 1,637  
v3.24.3
Leases (Tables)
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Summary of Balance Sheet classification of lease assets and related lease liabilities
The following table summarizes the balance sheet classification of the lease assets and related lease liabilities:
 
    
September 30, 2024
     
December 31, 2023
  
    
(in thousands)
  
Assets:
      
Long-term operating lease
right-of-use
assets
    $ 4,147      $ 5,106  
  
 
 
     
 
 
  
Liabilities:
      
Short-term operating lease liability
    $ 1,257      $ 1,236  
Long-term operating lease liability
      2,857        3,843  
  
 
 
     
 
 
  
Total liabilities
    $ 4,114      $ 5,079  
  
 
 
     
 
 
  
Schedule of Minimum Future Rental Payments
Future minimum rental payments for office facilities and equipment under the Company’s noncancelable operating leases are as follows:
 
    
Amount as of
September 30, 2024
  
    
(in thousands)
  
2024 (for remainder of year)
    $ 359  
2025
      1,466  
2026
      1,464  
2027
      786  
2028
      259  
Thereafter
      196  
  
 
 
  
Total
    $ 4,530  
Less: Imputed interest
      (416 )
 
  
 
 
  
Present value of operating lease liabilities
    $ 4,114  
  
 
 
  
v3.24.3
Income Taxes (Tables)
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Components of Income (Loss) Before Income Taxes
The components of income (loss) before income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Income (loss) before income taxes:
            
Domestic
    $ 1,748      $ (211 )     $ 2,047      $ (3,205 ) 
Foreign
      824        365        2,052        1,060  
  
 
 
     
 
 
     
 
 
     
 
 
  
Income (loss) before income taxes
    $ 2,572      $ 154      $ 4,099      $ (2,145 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Provision (Benefit) for Income Taxes
The provision (benefit) for income taxes, as shown in the accompanying Financial Statements, consisted of the following for the three and nine months ended September 30, 2024 and 2023:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
Current provision (benefit):
            
Federal
    $ 351      $ (88 )     $ 227      $ (271 ) 
State
      77        (9 )       64        25  
Foreign
      216        93        517        238  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total current provision (benefit)
    $ 644      $ (4 )     $ 808      $ (8 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Deferred provision (benefit):
            
Federal
      44        25        140        (377 ) 
State
      8        7        27        (91 ) 
Foreign
      1        4        19        64  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total deferred provision (benefit)
      53        36        186        (404 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Change in valuation allowance
      —         (3 )       —         54  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total provision (benefit) for income taxes
    $ 697      $ 29      $ 994      $ (358 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Reconciliation of Income Taxes
The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for income taxes for the three and nine months ended September 30, 2024 and 2023 were as follows (amounts in thousands):
 
    
Three Months Ended
September 30, 2024
    
Three Months Ended
September 30, 2023
  
Income taxes computed at the federal statutory rate
    $ 540        21.0 %    $ 33        21.0 % 
State income taxes, net of federal tax benefit
      120        4.6       (2 )       (1.2 ) 
Excess tax expense (benefit) from stock options/restricted shares
      25        1.0       —         —   
Worthless stock deduction
      —         —        —         —   
Difference in income tax rate on foreign earnings/other
      12        0.5       1        0.9  
Change in valuation allowance
      —         —        (3 )       (1.9 ) 
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 697        27.1 %    $ 29        18.8 % 
  
 
 
     
 
 
    
 
 
     
 
 
  
 
 
  
Nine Months Ended
September 30, 2024
 
 
Nine Months Ended
September 30, 2023
 
Income taxes computed at the federal statutory rate
    $ 861        21.0 %    $ (450 )       (21.0 )% 
State income taxes, net of federal tax benefit
      101        2.5       (74 )       (3.5 ) 
Excess tax expense (benefit) from stock options/restricted shares
      156        3.8       40        1.9  
Worthless stock deduction
      (248 )       (6.1 )      —         —   
Difference in income tax rate on foreign earnings/other
      124        3.0       72        3.4  
Change in valuation allowance
      —         —        54        2.5  
  
 
 
     
 
 
    
 
 
     
 
 
  
   $ 994        24.2 %    $ (358 )       (16.7 )% 
  
 
 
     
 
 
    
 
 
     
 
 
  
v3.24.3
Business Segments and Geographic Information (Tables)
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
Summary of Operating Segments
Below are the operating results of our reporting segments.
 
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
    
2024
    
2023
    
2024
    
2023
  
    
(Amounts in thousands)
    
(Amounts in thousands)
  
Revenues:
         
Data and Analytics Services
    $ 9,398     $ 8,038     $ 26,341     $ 26,206  
IT Staffing Services
      42,441       39,741       121,855       128,840  
  
 
 
    
 
 
    
 
 
    
 
 
  
Total revenues
    $ 51,839     $ 47,779     $ 148,196     $ 155,046  
  
 
 
    
 
 
    
 
 
    
 
 
  
Gross Margin %:
         
Data and Analytics Services
      50.7 %      45.8 %      48.9 %      43.1 % 
IT Staffing Services
      23.6 %      22.4 %      23.0 %      22.0 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Total gross margin %
      28.5 %      26.3 %      27.6 %      25.6 % 
  
 
 
    
 
 
    
 
 
    
 
 
  
Segment operating income (loss):
         
Data and Analytics Services
    $ 1,145     $ (832 )    $ 1,435     $ (2,393 ) 
IT Staffing Services
      1,951       1,476       4,334       5,227  
  
 
 
    
 
 
    
 
 
    
 
 
  
Subtotal
      3,096       644       5,769       2,834  
Amortization of acquired intangible assets
      (657 )      (693 )      (2,043 )      (2,079 ) 
Employment-related claim, net of recoveries
      —        —        —        (3,100 ) 
Interest income (expense), FX gains (losses) and other, net
      133       203       373       200  
  
 
 
    
 
 
    
 
 
    
 
 
  
Income (loss) before income taxes
    $ 2,572     $ 154     $ 4,099     $ (2,145 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Summary of Assets, Depreciation and Amortization and Capital Expenditures by Segment
Below is a reconciliation of segment total assets to consolidated total assets:
 
    
September 30,
2024
     
December 31,
2023
  
    
(Amounts in thousands)
  
Total assets:
      
Data and Analytics Services
    $ 45,735      $ 45,681  
IT Staffing Services
      65,750        59,546  
  
 
 
     
 
 
  
Total assets
    $ 111,485      $ 105,227  
  
 
 
     
 
 
  
Summary of Revenue from External Customers and Long-lived Assets
Below is geographic information related to our revenues from external customers:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2024
     
2023
     
2024
     
2023
  
    
(Amounts in thousands)
     
(Amounts in thousands)
  
United States
    $ 51,043      $ 46,778      $ 145,674      $ 151,798  
Canada
      198        627        800        2,159  
India and Other
      598        374        1,722        1,089  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total revenues
    $ 51,839      $ 47,779      $ 148,196      $ 155,046  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
v3.24.3
Revenue from Contracts with Customers - Additional Information (Detail) - Agreement
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Disaggregation of Revenue [Line Items]        
Percentage of billing expense revenues     2.00%  
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | Minimum [Member]        
Disaggregation of Revenue [Line Items]        
Percentage of total accounts receivable 10.00% 10.00% 10.00% 10.00%
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | CGI [Member]        
Disaggregation of Revenue [Line Items]        
Percentage of total accounts receivable 14.00% 21.10% 15.40% 23.70%
Number of customers   1   1
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | Allergis [Member]        
Disaggregation of Revenue [Line Items]        
Percentage of total accounts receivable 11.70%   10.60%  
Sales Revenue Net [Member] | Revenue from Rights Concentration Risk [Member] | CGI And Allergis [Member]        
Disaggregation of Revenue [Line Items]        
Number of customers 2   2  
Top Ten Customers [Member]        
Disaggregation of Revenue [Line Items]        
Revenue percentage of total revenue 56.00% 52.00% 54.00% 54.00%
Data and Analytics Services [Member]        
Disaggregation of Revenue [Line Items]        
Percent of revenue from services     100.00%  
v3.24.3
Revenue from Contracts with Customers - Summary of Disaggregation of Our Revenues by Contract Type and Operating Segment (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment $ 51,839 $ 47,779 $ 148,196 $ 155,046
Data and Analytics Services [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment 9,398 8,038 26,341 26,206
Data and Analytics Services [Member] | Time-and-Material Contract [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment 6,123 5,888 18,417 19,027
Data and Analytics Services [Member] | Fixed-Price Contract [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment 3,275 2,150 7,924 7,179
IT Staffing Services [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment 42,441 39,741 121,855 128,840
IT Staffing Services [Member] | Time-and-Material Contract [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment 42,374 39,741 121,788 128,840
IT Staffing Services [Member] | Fixed-Price Contract [Member]        
Disaggregation of Revenue [Line Items]        
Revenues by contract type and operating segment $ 67 $ 0 $ 67 $ 0
v3.24.3
Revenue from Contracts with Customers - Summary of Revenue from External Customers (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue from External Customer [Line Items]        
Total $ 51,839 $ 47,779 $ 148,196 $ 155,046
United States [Member]        
Revenue from External Customer [Line Items]        
Total 51,043 46,778 145,674 151,798
Canada [Member]        
Revenue from External Customer [Line Items]        
Total 198 627 800 2,159
India and Other [Member]        
Revenue from External Customer [Line Items]        
Total $ 598 $ 374 $ 1,722 $ 1,089
v3.24.3
Goodwill and Other Intangible Assets, net - Additional Information (Detail) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Dec. 31, 2018
Dec. 31, 2022
Oct. 01, 2020
Jul. 13, 2017
Jun. 15, 2015
Goodwill and Intangible Assets [Line Items]                    
Goodwill $ 27,210,000   $ 27,210,000   $ 27,210,000          
Amortization expense 657,000 $ 693,000 2,043,000 $ 2,079,000            
Data and Analytics Services [Member]                    
Goodwill and Intangible Assets [Line Items]                    
Goodwill $ 18,783,000   18,783,000   18,783,000   $ 24,083,000      
Goodwill impairment     $ 0   $ 5,300,000          
Hudson IT [Member]                    
Goodwill and Intangible Assets [Line Items]                    
Goodwill                   $ 8,400,000
Info Trellis Inc [Member]                    
Goodwill and Intangible Assets [Line Items]                    
Goodwill                 $ 27,400,000  
Goodwill impairment           $ 9,700,000        
Amber Leaf Partners Inc [Member]                    
Goodwill and Intangible Assets [Line Items]                    
Goodwill               $ 6,400,000    
v3.24.3
Goodwill and Other Intangible Assets, net - Reconciliation of Goodwill (Detail) - USD ($)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Beginning balance $ 27,210  
Ending Balance 27,210 $ 27,210
IT Staffing Services [Member]    
Beginning balance 8,427 8,427
Goodwill recorded 0 0
Impairment 0 0
Ending Balance 8,427 8,427
Data and Analytics Services [Member]    
Beginning balance 18,783 24,083
Goodwill recorded 0 0
Impairment 0 (5,300)
Ending Balance $ 18,783 $ 18,783
v3.24.3
Goodwill and Other Intangible Assets, net - Components of Identifiable Intangible assets (Detail) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Intangible Assets, Accumulated Amortization $ 22,141 $ 20,098
Total Intangible Assets, Gross Carrying Value 33,099 33,099
Total Intangible Assets, Net Carrying Value $ 10,958 $ 13,001
Client Relationships [Member] | IT Staffing Services [Member]    
Amortization Period (In Years) 12 years 12 years
Intangible Assets, Gross Carrying Value $ 7,999 $ 7,999
Intangible Assets, Accumulated Amortization 6,194 5,694
Intangible Assets, Net Carrying Value $ 1,805 $ 2,305
Client Relationships [Member] | Data and Analytics Services [Member]    
Amortization Period (In Years) 12 years 12 years
Intangible Assets, Gross Carrying Value $ 19,641 $ 19,641
Intangible Assets, Accumulated Amortization 11,003 9,776
Intangible Assets, Net Carrying Value $ 8,638 $ 9,865
Covenant Not-to-Compete [Member] | IT Staffing Services [Member]    
Amortization Period (In Years) 5 years 5 years
Intangible Assets, Gross Carrying Value $ 319 $ 319
Intangible Assets, Accumulated Amortization 319 319
Intangible Assets, Net Carrying Value $ 0 $ 0
Covenant Not-to-Compete [Member] | Data and Analytics Services [Member]    
Amortization Period (In Years) 5 years 5 years
Intangible Assets, Gross Carrying Value $ 1,201 $ 1,201
Intangible Assets, Accumulated Amortization 1,113 1,047
Intangible Assets, Net Carrying Value $ 88 $ 154
Trade Name [Member] | IT Staffing Services [Member]    
Amortization Period (In Years) 3 years 3 years
Intangible Assets, Gross Carrying Value $ 249 $ 249
Intangible Assets, Accumulated Amortization 249 249
Intangible Assets, Net Carrying Value $ 0 $ 0
Trade Name [Member] | Data and Analytics Services [Member]    
Amortization Period (In Years) 5 years 5 years
Intangible Assets, Gross Carrying Value $ 1,711 $ 1,711
Intangible Assets, Accumulated Amortization 1,613 1,539
Intangible Assets, Net Carrying Value $ 98 $ 172
Technology [Member] | Data and Analytics Services [Member]    
Amortization Period (In Years) 7 years 7 years
Intangible Assets, Gross Carrying Value $ 1,979 $ 1,979
Intangible Assets, Accumulated Amortization 1,650 1,474
Intangible Assets, Net Carrying Value $ 329 $ 505
v3.24.3
Goodwill and Other Intangible Assets, net - Schedule of Estimated Amortization Expense (Detail)
$ in Thousands
Sep. 30, 2024
USD ($)
Intangible Liability Disclosure [Abstract]  
Estimated aggregate amortization expense for year ending 2024 $ 2,693
Estimated aggregate amortization expense for year ending 2025 2,553
Estimated aggregate amortization expense for year ending 2026 2,413
Estimated aggregate amortization expense for year ending 2027 2,025
Estimated aggregate amortization expense for year ending 2028 $ 1,637
v3.24.3
Leases - Additional Information (Detail)
$ in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2024
USD ($)
ft²
Sep. 30, 2023
USD ($)
Sep. 30, 2024
USD ($)
ft²
Sep. 30, 2023
USD ($)
Square feet of office space | ft² 93,000   93,000  
Average initial lease term 4 years 4 months 24 days   4 years 4 months 24 days  
Discount rate 5.50%   5.50%  
Operating leases, rent expense, net $ 0.4 $ 0.4 $ 1.1 $ 1.2
Total lease payments 0.4 0.4 1.1 1.2
Lease obligation incurred $ 0.0 $ 1.7 $ 0.0 $ 1.7
Minimum [Member]        
Lease term range     1 year 10 months 24 days  
Maximum [Member]        
Lease term range     5 years  
Weighted Average [Member]        
Lease term range     3 years 3 months 18 days  
v3.24.3
Leases - Summary of Balance Sheet classification of lease asset and related lease liability (Detail) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Assets:    
Long-term operating lease right-of-use assets $ 4,147 $ 5,106
Liabilities:    
Short-term operating lease liability 1,257 1,236
Long-term operating lease liability 2,857 3,843
Total liabilities $ 4,114 $ 5,079
v3.24.3
Leases - Schedule of Future Minimum Rental Payments for Operating Leases (Detail) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
2024 (for remainder of year) $ 359  
2025 1,466  
2026 1,464  
2027 786  
2028 259  
Thereafter 196  
Total 4,530  
Less: Imputed interest (416)  
Present value of operating lease liabilities $ 4,114 $ 5,079
v3.24.3
Commitments and Contingencies - Additional Information (Detail) - Former Employee Unasserted Claim [Member] - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Loss Contingencies [Line Items]        
Loss contingency accrual, provision   $ 3,100,000    
Loss contingency payment net of settlement $ 0 $ 225,000 $ 0 $ 1,200,000
v3.24.3
Employee Benefit Plan - Additional Information (Detail) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Defined Benefit Plan Disclosure [Line Items]        
Matching contributions $ 0 $ 0 $ 0 $ 0
v3.24.3
Stock-Based Compensation - Additional Information (Detail) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
May 15, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Shares allocated for issuance to directors, officers and key personnel 5,400,000   5,400,000      
Number of Options, Granted 0   525,000 125,000    
Stock-based compensation expense     $ 1,553,000 $ 2,501,000    
Strike price | $ / shares     $ 8.41 $ 11.24    
Restricted shares granted 10,518   40,130 19,924    
Employee stock purchase estimation     The fair value of the six-month “look-back” option in the Company’s Employee Stock Purchase Plan is estimated by adding the fair value of 15% of one share of stock to 85% of the fair value of an option on one share of stock.      
Common stock, par value $ 0.01   $ 0.01   $ 0.01  
Selling and Marketing Expense [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Stock-based compensation expense $ 542,000 $ 824,000 $ 1,600,000 $ 2,500,000    
Stock Options And Restricted Stock [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Number of shares issued related to employee stock purchases 17,281 0 87,924 17,804    
Employee Stock Purchase Plan [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Shares available for future grants 445,590   445,590     600,000
Stock-based compensation expense $ 11,000 $ 10,000 $ 65,000 $ 78,000    
Price per share $ 6.38 $ 8.4 $ 6.38 $ 8.4    
Number of shares issued related to employee stock purchases 0 0 21,329 17,890    
Percentage of maximum contribution of salary towards plan 15.00%   15.00%      
Maximum contribution towards plan $ 25,000   $ 25,000      
Discount on purchase of common stock     15.00%      
Stock Incentive Plan [Member]            
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]            
Shares available for future grants 372,000   372,000      
v3.24.3
Credit Facility - Additional information (Detail) - USD ($)
 1 Months Ended 9 Months Ended 12 Months Ended
May 09, 2024
Jan. 03, 2023
Jan. 04, 2022
Oct. 01, 2020
Aug. 31, 2022
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2020
Dec. 31, 2023
Jul. 13, 2017
Line of Credit Facility [Line Items]                    
Deferred financing costs           $ 213,000     $ 284,000  
Repayments of debt           0 $ 1,100,000      
Revolving Line of Credit [Member]                    
Line of Credit Facility [Line Items]                    
Percentage of eligible accounts receivable               85.00%    
Outstanding borrowings amount           0     0  
Revolving Line of Credit [Member] | United States [Member]                    
Line of Credit Facility [Line Items]                    
Percentage of eligible unbilled accounts               60.00%    
Revolving Line of Credit [Member] | Canada [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility maximum borrowing capacity           $ 10,000,000        
Percentage of eligible accounts receivable           85.00%        
Percentage of eligible unbilled accounts           60.00%        
Revolving Line of Credit [Member] | Swing Loans [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility maximum borrowing capacity               $ 6,000,000    
Revolving Line of Credit [Member] | Letter Of Credit One From PNC Bank To Vietnam Client [Member]                    
Line of Credit Facility [Line Items]                    
Letter of credit facility, outstanding amount $ 162,000                  
Letter of credit maturity date Mar. 21, 2026                  
Revolving Line of Credit [Member] | Letter Of Credit Two From PNC Bank To Vietnam Client [Member]                    
Line of Credit Facility [Line Items]                    
Letter of credit facility, outstanding amount $ 162,000                  
Letter of credit maturity date Mar. 21, 2026                  
Revolving Line of Credit [Member] | Letter of Credit [Member]                    
Line of Credit Facility [Line Items]                    
Letter of credit facility, maximum borrowing capacity               $ 5,000,000    
Federal Funds Rate [Member]                    
Line of Credit Facility [Line Items]                    
Basis spread on variable rate           0.50%        
PNC Bank, N.A. [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility maximum borrowing capacity                   $ 53,100,000
Payment of deferred financing costs           $ 1,039,000        
PNC Bank, N.A. [Member] | Term Loan Facility [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility maximum borrowing capacity           0     0 13,100,000
Credit facility, periodic payment       $ 1,100,000            
Repayments of debt         $ 7,600,000          
Line of credit facility final amount   $ 1,100,000                
PNC Bank, N.A. [Member] | Revolving Line of Credit [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility maximum borrowing capacity           $ 24,700,000     $ 22,500,000 $ 40,000,000
Maximum [Member]                    
Line of Credit Facility [Line Items]                    
Revolving credit facility percentage margin over base rate               1.25%    
Term loan percentage margin over base rate               2.50%    
Revolving credit facility percentage margin adjusted SOFR rate               2.25%    
Term loan percentage margin adjusted SOFR rate               3.50%    
Maximum [Member] | PNC Bank, N.A. [Member] | Revolving Line of Credit [Member]                    
Line of Credit Facility [Line Items]                    
Credit facility additional borrowing capacity upon certain conditions     $ 20,000,000              
Minimum [Member]                    
Line of Credit Facility [Line Items]                    
Revolving credit facility percentage margin over base rate               0.50%    
Term loan percentage margin over base rate               1.75%    
Revolving credit facility percentage margin adjusted SOFR rate               1.50%    
Term loan percentage margin adjusted SOFR rate               2.75%    
v3.24.3
Income Taxes - Components of Income (Loss) Before Income Taxes (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income (loss) before income taxes:        
Domestic $ 1,748 $ (211) $ 2,047 $ (3,205)
Foreign 824 365 2,052 1,060
Income (loss) before income taxes $ 2,572 $ 154 $ 4,099 $ (2,145)
v3.24.3
Income Taxes - Provision (Benefit) for Income Taxes (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Current provision (benefit):        
Federal $ 351 $ (88) $ 227 $ (271)
State 77 (9) 64 25
Foreign 216 93 517 238
Total current provision (benefit) 644 (4) 808 (8)
Deferred provision (benefit):        
Federal 44 25 140 (377)
State 8 7 27 (91)
Foreign 1 4 19 64
Total deferred provision (benefit) 53 36 186 (404)
Change in valuation allowance 0 (3) 0 54
Total provision (benefit) for income taxes $ 697 $ 29 $ 994 $ (358)
v3.24.3
Income Taxes - Reconciliation of Income Taxes (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Disclosure [Abstract]        
Income taxes computed at the federal statutory rate, Value $ 540 $ 33 $ 861 $ (450)
State income taxes, net of federal tax benefit, Value 120 (2) 101 (74)
Excess tax expense (benefit) from stock options/restricted shares 25 0 156 40
Worthless stock deduction 0 0 (248) 0
Difference in income tax rate on foreign earnings/other 12 1 124 72
Change in valuation allowance 0 (3) 0 54
Total provision (benefit) for income taxes $ 697 $ 29 $ 994 $ (358)
Income taxes computed at the federal statutory rate 21.00% 21.00% 21.00% (21.00%)
State income taxes, net of federal tax benefit 4.60% (1.20%) 2.50% (3.50%)
Excess tax expense (benefits) from stock options/restricted shares 1.00% 0.00% 3.80% 1.90%
Worthless stock deduction 0.00% 0.00% (6.10%) 0.00%
Difference in tax rate on foreign earnings/other 0.50% 0.90% 3.00% 3.40%
Change in valuation allowance 0.00% (1.90%) 0.00% 2.50%
Effective for income tax rate, Total 27.10% 18.80% 24.20% (16.70%)
v3.24.3
Income Taxes - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2024
Sep. 30, 2024
Dec. 31, 2023
Deferred Tax Liabilities Valuation Allowance   $ 466,000  
Deferred tax assets valuation allowance     $ 628,000
Increase (decrease) in valuation allowances deferred tax assets $ (162,000)    
v3.24.3
Shareholders' Equity - Additional Information (Detail) - $ / shares
 3 Months Ended 9 Months Ended
Feb. 08, 2023
Sep. 30, 2024
Jun. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Equity, Class of Treasury Stock [Line Items]          
Shares purchased to satisfy employee tax obligation   0 0 0 0
Common Stock [Member]          
Equity, Class of Treasury Stock [Line Items]          
Stock Repurchase Program, Number of Shares Authorized to be Repurchased 500,000        
Stock repurchase program, period in force 2 years        
Number of shares repurchased during the period       9,222  
Treasury stock average repurchase price per share       $ 8.7  
v3.24.3
Earnings (Loss) per Share - Additional Information (Detail) - shares
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Earnings Per Share [Abstract]      
Anti-dilutive securities not included in computation of earnings per share 1,005,000 1,473,000 1,057,000
v3.24.3
Business Segments and Geographic Information - Additional Information (Detail)
 9 Months Ended
Sep. 30, 2024
Segment
Segment Reporting Information [Line Items]  
Number of reportable segments 2
Data and Analytics Services [Member] | Business Combination Credit Agreement [Member]  
Segment Reporting Information [Line Items]  
Business acquisition date Jul. 13, 2017
v3.24.3
Business Segments and Geographic Information - Summary of Operating Segments (Detail) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Segment Reporting Information [Line Items]        
Revenues: $ 51,839,000 $ 47,779,000 $ 148,196,000 $ 155,046,000
Gross Margin %: 28.50% 26.30% 27.60% 25.60%
Income (loss) from operations $ 2,439,000 $ (49,000) $ 3,726,000 $ (2,345,000)
Amortization of acquired intangible assets (657,000) (693,000) (2,043,000) (2,079,000)
Employment-related claim, net of recoveries 0 0 0 (3,100,000)
Interest income (expense), FX gains (losses) and other, net 133,000 203,000 373,000 200,000
Income (loss) before income taxes 2,572,000 154,000 4,099,000 (2,145,000)
Data and Analytics Services [Member]        
Segment Reporting Information [Line Items]        
Revenues: $ 9,398,000 $ 8,038,000 $ 26,341,000 $ 26,206,000
Gross Margin %: 50.70% 45.80% 48.90% 43.10%
IT Staffing Services [Member]        
Segment Reporting Information [Line Items]        
Revenues: $ 42,441,000 $ 39,741,000 $ 121,855,000 $ 128,840,000
Gross Margin %: 23.60% 22.40% 23.00% 22.00%
Operating Segments [Member]        
Segment Reporting Information [Line Items]        
Income (loss) from operations $ 3,096,000 $ 644,000 $ 5,769,000 $ 2,834,000
Operating Segments [Member] | Data and Analytics Services [Member]        
Segment Reporting Information [Line Items]        
Income (loss) from operations 1,145,000 (832,000) 1,435,000 (2,393,000)
Operating Segments [Member] | IT Staffing Services [Member]        
Segment Reporting Information [Line Items]        
Income (loss) from operations $ 1,951,000 $ 1,476,000 $ 4,334,000 $ 5,227,000
v3.24.3
Business Segments and Geographic Information - Summary of Assets by Segment (Detail) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Segment Reporting, Asset Reconciling Item [Line Items]    
Total assets $ 111,485 $ 105,227
Data and Analytics Services [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Total assets 45,735 45,681
IT Staffing Services [Member]    
Segment Reporting, Asset Reconciling Item [Line Items]    
Total assets $ 65,750 $ 59,546
v3.24.3
Business Segments and Geographic Information - Summary of Revenue from External Customers (Detail) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Segment Reporting Information [Line Items]        
Revenues $ 51,839 $ 47,779 $ 148,196 $ 155,046
United States [Member]        
Segment Reporting Information [Line Items]        
Revenues 51,043 46,778 145,674 151,798
Canada [Member]        
Segment Reporting Information [Line Items]        
Revenues 198 627 800 2,159
India and Other [Member]        
Segment Reporting Information [Line Items]        
Revenues $ 598 $ 374 $ 1,722 $ 1,089
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