☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $.01 per share | MHH | NYSE American |
Large accelerated filer | ☐ | Accelerated filer | ||||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
Emerging growth company | ☐ |
Page | |||||||||||||
PART 1 | 3 | ||||||||||||
Item 1. | 3 | ||||||||||||
(a) | 3 | ||||||||||||
(b) | 4 | ||||||||||||
(c) | 5 | ||||||||||||
(d) | 6 | ||||||||||||
(e) | 7 | ||||||||||||
(f) | 8 | ||||||||||||
Item 2. | |||||||||||||
Item 3. | |||||||||||||
Item 4. | |||||||||||||
PART II | |||||||||||||
Item 1. | |||||||||||||
Item 1A. | |||||||||||||
Item 2. | |||||||||||||
Item 6. | |||||||||||||
ITEM 1. | FINANCIAL STATEMENTS |
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues | $ | 49,775 | $ | 50,425 | ||||
Cost of revenues | 36,971 | 37,706 | ||||||
Gross profit | 12,804 | 12,719 | ||||||
Selling, general and administrative expense | 10,935 | 10,243 | ||||||
Income from operations | 1,869 | 2,476 | ||||||
Interest income (expense), net | (195 | ) | (279 | ) | ||||
Other income (expense), net | (37 | ) | 53 | |||||
Income before income taxes | 1,637 | 2,250 | ||||||
Income tax expense | 443 | 381 | ||||||
Net income | $ | 1,194 | $ | 1,869 | ||||
Earnings Per Share: | ||||||||
Basic | $ | .10 | $ | .17 | ||||
Diluted | $ | .10 | $ | .16 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 11,415 | 11,127 | ||||||
Diluted | 11,997 | 11,675 | ||||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Revenues | $ | 59,755 | $ | 49,775 | ||||
Cost of revenues | 43,823 | 36,971 | ||||||
Gross profit | 15,932 | 12,804 | ||||||
Selling, general and administrative expenses | 12,625 | 10,935 | ||||||
Income from operations | 3,307 | 1,869 | ||||||
Interest income (expense), net | (114 | ) | (195 | ) | ||||
Other income (expense), net | 54 | (37 | ) | |||||
Income before income taxes | 3,247 | 1,637 | ||||||
Income tax expense | 915 | 443 | ||||||
Net income | $ | 2,332 | $ | 1,194 | ||||
Earnings Per Share: | ||||||||
Basic | $ | .20 | $ | .10 | ||||
Diluted | $ | .19 | $ | .10 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 11,509 | 11,415 | ||||||
Diluted | 12,035 | 11,997 | ||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net income | $ | 1,194 | $ | 1,869 | ||||
Other comprehensive income (loss): | ||||||||
Net unrealized gain (loss) on interest-rate swap contracts | 35 | (94 | ) | |||||
Foreign currency translation adjustments | (19 | ) | (267 | ) | ||||
Total pretax net unrealized gain (loss) | 16 | (361 | ) | |||||
Income tax expense (benefit) | 9 | (25 | ) | |||||
Total other comprehensive gain (loss), net of taxes | 7 | (336 | ) | |||||
Total comprehensive income | $ | 1,201 | $ | 1,533 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net income | $ | 2,332 | $ | 1,194 | ||||
Other comprehensive income (loss): | ||||||||
Net unrealized gain on interest-rate swap contracts | 0 | 35 | ||||||
Foreign currency translation adjustments | (147 | ) | (19 | ) | ||||
Total pretax net unrealized gain (loss) | (147 | ) | 16 | |||||
Income tax expense | 0 | 9 | ||||||
Total other comprehensive gain (loss), net of taxes | (147 | ) | 7 | |||||
Total comprehensive income | $ | 2,185 | $ | 1,201 | ||||
March 31, 2021 | December 31, 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 7,242 | $ | 7,677 | ||||
Accounts receivable, net of allowance for uncollectible accounts of $426 in 2021 and $413 in 2020 | 23,425 | 22,036 | ||||||
Unbilled receivables | 12,781 | 10,098 | ||||||
Prepaid and other current assets | 1,238 | 1,346 | ||||||
Total current assets | 44,686 | 41,157 | ||||||
Equipment, enterprise software, and leasehold improvements, at cost: | ||||||||
Equipment | 2,055 | 1,931 | ||||||
Enterprise software | 2,730 | 2,730 | ||||||
Leasehold improvements | 563 | 563 | ||||||
5,348 | 5,224 | |||||||
Less – accumulated depreciation and amortization | (3,453 | ) | (3,253 | ) | ||||
Net equipment, enterprise software, and leasehold improvements | 1,895 | 1,971 | ||||||
Operating lease right-of-use | 3,199 | 3,286 | ||||||
Deferred income taxes | 804 | 796 | ||||||
Non-current deposits | 459 | 396 | ||||||
Goodwill, net of impairment | 32,510 | 32,510 | ||||||
Intangible assets, net of amortization | 21,137 | 21,930 | ||||||
Total assets | $ | 104,690 | $ | 102,046 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 4,400 | $ | 4,400 | ||||
Accounts payable | 3,915 | 2,589 | ||||||
Accrued payroll and related costs | 12,882 | 12,374 | ||||||
Current portion of operating lease liability | 1,056 | 1,079 | ||||||
Other accrued liabilities | 1,166 | 1,051 | ||||||
Deferred revenue | 405 | 478 | ||||||
Total current liabilities | 23,824 | 21,971 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, less current portion, net | 11,795 | 12,875 | ||||||
Contingent consideration liability | 2,882 | 2,882 | ||||||
Long-term operating lease liability, less current portion | 2,273 | 2,325 | ||||||
Long-term accrued income taxes | 165 | 165 | ||||||
Long-term payroll tax liabilities | 2,295 | 2,295 | ||||||
Total liabilities | 43,234 | 42,513 | ||||||
Commitments and contingent liabilities (Note 6) | 0 | 0 | ||||||
Shareholders’ equity: | ||||||||
Preferred Stock, 0 par value; 20,000,000 shares authorized; NaN outstanding | 0— | 0— | ||||||
Common Stock, par value $.01; 250,000,000 shares authorized and 13,076,972 shares issued as of March 31, 2021 and 13,039,893 shares issued as of December 31, 2020 | 130 | 130 | ||||||
Additional paid-in-capital | 26,231 | 25,509 | ||||||
Retained earnings | 39,814 | 38,620 | ||||||
Accumulated other comprehensive income (loss) | (532 | ) | (539 | ) | ||||
Treasury stock, at cost; 1,646,420 shares as of March 31, 2021 and as of December 31, 2020 | (4,187 | ) | (4,187 | ) | ||||
Total shareholders’ equity | 61,456 | 59,533 | ||||||
Total liabilities and shareholders’ equity | $ | 104,690 | $ | 102,046 | ||||
March 31, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 7,185 | $ | 6,622 | ||||
Accounts receivable, net of allowance for uncollectible accounts of $375 in 2022 and $375 in 2021 | 35,137 | 34,153 | ||||||
Unbilled receivables | 11,701 | 9,240 | ||||||
Prepaid and other current assets | 3,191 | 3,890 | ||||||
Total current assets | 57,214 | 53,905 | ||||||
Equipment, enterprise software, and leasehold improvements, at cost: | ||||||||
Equipment | 2,741 | 2,356 | ||||||
Enterprise software | 4,172 | 3,753 | ||||||
Leasehold improvements | 760 | 842 | ||||||
7,673 | 6,951 | |||||||
Less – accumulated depreciation and amortization | (4,133 | ) | (3,913 | ) | ||||
Net equipment, enterprise software, and leasehold improvements | 3,540 | 3,038 | ||||||
Operating lease right-of-use | 5,033 | 4,894 | ||||||
Non-current deposits | 511 | 595 | ||||||
Goodwill, net of impairment | 32,510 | 32,510 | ||||||
Intangible assets, net of amortization | 17,968 | 18,760 | ||||||
Total assets | $ | 116,776 | $ | 113,702 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 4,400 | $ | 4,400 | ||||
Accounts payable | 6,242 | 4,954 | ||||||
Accrued payroll and related costs | 13,367 | 14,240 | ||||||
Current portion of operating lease liability | 1,571 | 1,479 | ||||||
Other accrued liabilities | 779 | 1,227 | ||||||
Deferred revenue | 443 | 544 | ||||||
Total current liabilities | 26,802 | 26,844 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, less current portion, net | 7,252 | 8,334 | ||||||
Long-term operating lease liability, less current portion | 3,677 | 3,706 | ||||||
Long-term accrued income taxes | 125 | 125 | ||||||
Deferred income taxes | 888 | 265 | ||||||
Total liabilities | 38,744 | 39,274 | ||||||
Commitments and contingent liabilities (Note 6) | 0 | 0 | ||||||
Shareholders’ equity: | ||||||||
Preferred Stock, 0 par value; 20,000,000 shares authorized; 0ne outstanding | 0— | 0— | ||||||
Common Stock, par value $.01; 250,000,000 shares authorized and 13,233,767 shares issued as of March 31, 2022 and 13,112,202 shares issued as of December 31, 2021 | 133 | 131 | ||||||
Additional paid-in-capital | 29,667 | 28,250 | ||||||
Retained earnings | 53,173 | 50,841 | ||||||
Accumulated other comprehensive income (loss) | (754 | ) | (607 | ) | ||||
Treasury stock, at cost; 1,646,420 shares as of March 31, 2022 and as of December 31, 2021 | (4,187 | ) | (4,187 | ) | ||||
Total shareholders’ equity | 78,032 | 74,428 | ||||||
Total liabilities and shareholders’ equity | $ | 116,776 | $ | 113,702 | ||||
Common Stock | Additional Paid-in Capital | Accumulated Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||
Balances, December 31, 2020 | $ | 130 | $ | 25,509 | $ | 38,620 | $ | (4,187 | ) | $ | (539 | ) | $ | 59,533 | ||||||||||
Net income | — | — | 1,194 | — | — | 1,194 | ||||||||||||||||||
Other comprehensive gain, net of taxes | — | — | — | — | 7 | 7 | ||||||||||||||||||
Stock-based compensation expense | — | 621 | — | — | — | 621 | ||||||||||||||||||
Stock options exercised | — | 101 | — | — | — | 101 | ||||||||||||||||||
Balances, March 31, 2021 | $ | 130 | $ | 26,231 | $ | 39,814 | $ | (4,187 | ) | $ | (532 | ) | $ | 61,456 | ||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||
Balances, December 31, 2019 | $ | 127 | $ | 21,939 | $ | 28,759 | $ | (4,187 | ) | $ | (358 | ) | $ | 46,280 | ||||||||||
Net income | — | — | 1,869 | — | — | 1,869 | ||||||||||||||||||
Other comprehensive (loss), net of taxes | — | — | — | — | (336 | ) | (336 | ) | ||||||||||||||||
Stock-based compensation expense | — | 456 | — | — | — | 456 | ||||||||||||||||||
Stock options exercised | 1 | 555 | — | — | — | 556 | ||||||||||||||||||
Balances, March 31, 2020 | $ | 128 | $ | 22,950 | $ | 30,628 | $ | (4,187 | ) | $ | (694 | ) | $ | 48,825 | ||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||
Balances, December 31, 2021 | $ | 131 | $ | 28,250 | $ | 50,841 | $ | (4,187 | ) | $ | (607 | ) | $ | 74,428 | ||||||||||
Net income | — | — | 2,332 | — | — | 2,332 | ||||||||||||||||||
Other comprehensive (loss), net of taxes | — | — | — | — | (147 | ) | (147 | ) | ||||||||||||||||
Stock-based compensation expense | — | 526 | — | — | — | 526 | ||||||||||||||||||
Stock options exercised | 2 | 891 | — | — | — | 893 | ||||||||||||||||||
Balances, March 31, 2022 | $ | 133 | $ | 29,667 | $ | 53,173 | $ | (4,187 | ) | $ | (754 | ) | $ | 78,032 | ||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||
Balances, December 31, 2020 | $ | 130 | $ | 25,509 | $ | 38,620 | $ | (4,187 | ) | $ | (539 | ) | $ | 59,533 | ||||||||||
Net income | — | — | 1,194 | — | — | 1,194 | ||||||||||||||||||
Other comprehensive gain, net of taxes | — | — | — | — | 7 | 7 | ||||||||||||||||||
Stock-based compensation expense | — | 621 | — | — | — | 621 | ||||||||||||||||||
Stock options exercised | — | 101 | — | — | — | 101 | ||||||||||||||||||
Balances, March 31, 2021 | $ | 130 | $ | 26,231 | $ | 39,814 | $ | (4,187 | ) | $ | (532 | ) | $ | 61,456 | ||||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 1,194 | $ | 1,869 | ||||
Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 997 | 873 | ||||||
Interest amortization of deferred financing costs | 20 | 26 | ||||||
Stock-based compensation expense | 621 | 456 | ||||||
Deferred income taxes, net | (8 | ) | (182 | ) | ||||
Operating lease assets and liabilities, net | 12 | (37 | ) | |||||
Loss on disposition of fixed assets | — | 2 | ||||||
Working capital items: | ||||||||
Accounts receivable and unbilled receivables | (4,072 | ) | (1,244 | ) | ||||
Prepaid and other current assets | 108 | 492 | ||||||
Accounts payable | 1,326 | (587 | ) | |||||
Accrued payroll and related costs | 508 | 1,554 | ||||||
Other accrued liabilities | 141 | (276 | ) | |||||
Deferred revenue | (73 | ) | (151 | ) | ||||
Net cash flows provided by operating activities | 774 | 2,795 | ||||||
INVESTING ACTIVITIES: | ||||||||
Recovery of (payment for) non-current deposits | (63 | ) | 17 | |||||
Capital expenditures | (128 | ) | (119 | ) | ||||
Net cash flows (used in) investing activities | (191 | ) | (102 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
(Repayments) borrowings on revolving credit facility, net | — | (2,244 | ) | |||||
(Repayments) on term loan facility | (1,100 | ) | (1,144 | ) | ||||
Proceeds from exercise of stock options | 101 | 556 | ||||||
Net cash flows (used in) financing activities | (999 | ) | (2,832 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (19 | ) | (267 | ) | ||||
Net change in cash and cash equivalents | (435 | ) | (406 | ) | ||||
Cash and cash equivalents, beginning of period | 7,677 | 2,981 | ||||||
Cash and cash equivalents, end of period | $ | 7,242 | $ | 2,575 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 2,332 | $ | 1,194 | ||||
Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 1,020 | 997 | ||||||
Interest amortization of deferred financing costs | 18 | 20 | ||||||
Stock-based compensation expense | 526 | 621 | ||||||
Deferred income taxes, net | 623 | (8 | ) | |||||
Operating lease assets and liabilities, net | (76 | ) | 12 | |||||
Working capital items: | ||||||||
Accounts receivable and unbilled receivables | (3,445 | ) | (4,072 | ) | ||||
Prepaid and other current assets | 699 | 108 | ||||||
Accounts payable | 1,288 | 1,326 | ||||||
Accrued payroll and related costs | (873 | ) | 508 | |||||
Other accrued liabilities | (448 | ) | 141 | |||||
Deferred revenue | (101 | ) | (73 | ) | ||||
Net cash flows provided by operating activities | 1,563 | 774 | ||||||
INVESTING ACTIVITIES: | ||||||||
Recovery of (payment for) non-current deposits | 84 | (63 | ) | |||||
Capital expenditures | (730 | ) | (128 | ) | ||||
Net cash flows (used in) investing activities | (646 | ) | (191 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
(Repayments) on term loan facility | (1,100 | ) | (1,100 | ) | ||||
Proceeds from exercise of stock options | 893 | 101 | ||||||
Net cash flows (used in) financing activities | (207 | ) | (999 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (147 | ) | (19 | ) | ||||
Net change in cash and cash equivalents | 563 | (435 | ) | |||||
Cash and cash equivalents, beginning of period | 6,622 | 7,677 | ||||||
Cash and cash equivalents, end of period | $ | 7,185 | $ | 7,242 | ||||
1. | Description of Business and Basis of Presentation: |
2. | Revenue from Contracts with Customers |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
(Amounts in thousands) | ||||||||
Data and Analytics Services Segment | ||||||||
Time-and-material | $ | 6,181 | $ | 5,854 | ||||
Fixed-price Contracts | 3,971 | 2,940 | ||||||
Subtotal Data and Analytics Services | $ | 10,152 | $ | 8,794 | ||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(Amounts in thousands) | ||||||||
Data and Analytics Services Segment | ||||||||
Time-and-material | $ | 5,854 | $ | 4,127 | ||||
Fixed-price Contracts | 2,940 | 3,233 | ||||||
Subtotal Data and Analytics Services | $ | 8,794 | $ | 7,360 | ||||
IT Staffing Services Segment | ||||||||
Time-and-material | $ | 40,981 | $ | 43,065 | ||||
Fixed-price Contracts | — | — | ||||||
Subtotal IT Staffing Services | $ | 40,981 | $ | 43,065 | ||||
Total Revenues | $ | 49,775 | $ | 50,425 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
(Amounts in thousands) | ||||||||
IT Staffing Services Segment | ||||||||
Time-and-material | $ | 49,399 | $ | 40,981 | ||||
Fixed-price Contracts | 204 | 0 | ||||||
Subtotal IT Staffing Services | $ | 49,603 | $ | 40,981 | ||||
Total Revenues | $ | 59,755 | $ | 49,775 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
(Amounts in thousands) | ||||||||
United States | $ | 58,347 | $ | 47,942 | ||||
Canada | 1,019 | 1,264 | ||||||
India and other | 389 | 569 | ||||||
Total | $ | 59,755 | $ | 49,775 | ||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(Amounts in thousands) | ||||||||
United States | $ | 47,942 | $ | 49,350 | ||||
Canada | 1,264 | 861 | ||||||
India and other | 569 | 214 | ||||||
Total | $ | 49,775 | $ | 50,425 | ||||
3. |
(in thousands) | Amounts | |||
Cash purchase price at closing | $ | 9,664 | ||
Working capital adjustments | 0— | |||
Estimated payout of contingent consideration (1) | 2,882 | |||
Total Fair Value of Consideration | $ | 12,546 | ||
(in thousands) | Amounts | |||
Cash balances on hand | $ | — | ||
Increase in term loan debt facility | 10,000 | |||
Revolving line of credit | (336 | ) | ||
Cash Paid at Closing | $ | 9,664 | ||
(in thousands) | Amounts | |||
Cash on hand | $ | 319 | ||
Working capital assets, net of liabilities | 1,153 | |||
Identifiable intangible assets: | ||||
Client relationships | 2,970 | |||
Covenant not-to-compete | 440 | |||
Trade name | 490 | |||
Technology | 770 | |||
Total identifiable intangible assets | 4,670 | |||
Goodwill | 6,404 | |||
Net Assets Acquired | $ | 12,546 | ||
Three Months Ended March 31, | ||||||||
2021 Actual | 2020 Pro Forma | |||||||
(Amounts in thousands, except per share data) | ||||||||
Revenue | $ | 49,775 | $ | 53,634 | ||||
Net income | $ | 1,194 | $ | 2,337 | ||||
Earnings per share—diluted | $ | .10 | $ | .20 |
Goodwill and Other Intangible Assets, Net |
As of March 31, 2022 | ||||||||||||||||
(Amounts in thousands) | Amortization Period (In Years) | Gross Carrying Value | Accumulative Amortization | Net Carrying Value | ||||||||||||
IT Staffing Services: | ||||||||||||||||
Client relationships | 12 | $ | 7,999 | $ | 4,528 | $ | 3,471 | |||||||||
Covenant-not-to-compete | 5 | 319 | 319 | 0 | ||||||||||||
Trade name | 3 | 249 | 249 | 0 | ||||||||||||
Data and Analytics Services: | ||||||||||||||||
Client relationships | 12 | 19,641 | 6,911 | 12,730 | ||||||||||||
Covenant-not-to-compete | 5 | 1,201 | 848 | 353 | ||||||||||||
Trade name | 5 | 1,711 | 1,297 | 414 | ||||||||||||
Technology | 7 | 1,979 | 979 | 1,000 | ||||||||||||
Total Intangible Assets | $ | 33,099 | $ | 15,131 | $ | 17,968 | ||||||||||
As of March 31, 2021 | ||||||||||||||||
(Amounts in thousands) | Amortization Period (In Years) | Gross Carrying Value | Accumulative Amortization | Net Carrying Value | ||||||||||||
IT Staffing Services: | ||||||||||||||||
Client relationships | 12 | $ | 7,999 | $ | 3,861 | $ | 4,138 | |||||||||
Covenant-not-to-compete | 5 | 319 | 319 | — | ||||||||||||
Trade name | 3 | 249 | 249 | — | ||||||||||||
Data and Analytics Services: | ||||||||||||||||
Client relationships | 12 | 19,641 | 5,274 | 14,367 | ||||||||||||
Covenant-not-to-compete | 5 | 1,201 | 608 | 593 | ||||||||||||
Trade name | 5 | 1,711 | 956 | 755 | ||||||||||||
Technology | 7 | 1,979 | 695 | 1,284 | ||||||||||||
Total Intangible Assets | $ | 33,099 | $ | 11,962 | $ | 21,137 | ||||||||||
As of December 31, 2020 | ||||||||||||||||
(Amounts in thousands) | Amortization Period (In Years) | Gross Carrying Value | Accumulative Amortization | Net Carrying Value | ||||||||||||
IT Staffing Services: | ||||||||||||||||
Client relationships | 12 | $ | 7,999 | $ | 3,694 | $ | 4,305 | |||||||||
Covenant-not-to-compete | 5 | 319 | 319 | — | ||||||||||||
Trade name | 3 | 249 | 249 | — | ||||||||||||
Data and Analytics Services: | ||||||||||||||||
Client relationships | 12 | 19,641 | 4,866 | 14,775 | ||||||||||||
Covenant-not-to-compete | 5 | 1,201 | 548 | 653 | ||||||||||||
Trade name | 5 | 1,711 | 869 | 842 | ||||||||||||
Technology | 7 | 1,979 | 624 | 1,355 | ||||||||||||
Total Intangible Assets | $ | 33,099 | $ | 11,169 | $ | 21,930 | ||||||||||
As of December 31, 2021 | ||||||||||||||||
(Amounts in thousands) | Amortization Period (In Years) | Gross Carrying Value | Accumulative Amortization | Net Carrying Value | ||||||||||||
IT Staffing Services: | ||||||||||||||||
Client relationships | 12 | $ | 7,999 | $ | 4,361 | $ | 3,638 | |||||||||
Covenant-not-to-compete | 5 | 319 | 319 | 0 | ||||||||||||
Trade name | 3 | 249 | 249 | 0 | ||||||||||||
Data and Analytics Services: | ||||||||||||||||
Client relationships | 12 | 19,641 | 6,503 | 13,138 | ||||||||||||
Covenant-not-to-compete | 5 | 1,201 | 788 | 413 | ||||||||||||
Trade name | 5 | 1,711 | 1,211 | 500 | ||||||||||||
Technology | 7 | 1,979 | 908 | 1,071 | ||||||||||||
Total Intangible Assets | $ | 33,099 | $ | 14,339 | $ | 18,760 | ||||||||||
Years Ended December 31, | ||||||||||||||||||||
2022 | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Amortization expense | $ | 2,987 | $ | 2,772 | $ | 2,693 | $ | 2,553 | $ | 2,413 |
Years Ended December 31, | ||||||||||||||||||||
2021 | 2022 | 2023 | 2024 | 2025 | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Amortization expense | $ | 3,168 | $ | 2,987 | $ | 2,772 | $ | 2,693 | $ | 2,553 |
4. Leases |
March 31, 2022 | December 31, 2021 | |||||||||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||
( in thousands) | ( in thousands) | |||||||||||||||
Assets: | Assets: | Assets: | ||||||||||||||
Long-term operating lease right-of-use | $ | 3,199 | $ | 3,286 | $ | 5,033 | $ | 4,894 | ||||||||
Liabilities: | Liabilities: | Liabilities: | ||||||||||||||
Short-term operating lease liability | $ | 1,056 | $ | 1,079 | $ | 1,571 | $ | 1,479 | ||||||||
Long-term operating lease liability | 2,273 | 2,325 | 3,677 | 3,706 | ||||||||||||
Total liabilities | $ | 3,329 | $ | 3,404 | $ | 5,248 | $ | 5,185 | ||||||||
Amount as of March 31, 2022 | ||||
(in thousands) | ||||
2022 (For remainder of year) | $ | 1,299 | ||
2023 | 1,732 | |||
2024 | 1,002 | |||
2025 | 734 | |||
2026 | 717 |
Amount as of March 31, 2021 | ||||
(in thousands) | ||||
2021 (For remainder of year) | $ | 888 | ||
2022 | 1,187 | |||
2023 | 1,139 | |||
2024 | 339 | |||
2025 | 52 | |||
Thereafter | 30 | |||
Total | 3,635 | |||
Less: Imputed interest | (306 | ) | ||
Present value of operating lease liabilities | $ | 3,329 | ||
Amount as of March 31, 2022 | ||||
(in thousands) | ||||
Thereafter | 171 | |||
Total | 5,655 | |||
Less: Imputed interest | (407 | ) | ||
Present value of operating lease liabilities | $ | 5,248 | ||
5. | Payroll Tax Liability |
6. | Commitments and Contingencies |
7. | Employee Benefit Plan |
8. | Stock-Based Compensation |
9. | Credit Facility |
10. | Income Taxes |
Three Months Ended March 31, | ||||||||||||||||
Three Months Ended March 31, | 2022 | 2021 | ||||||||||||||
2021 | 2020 | |||||||||||||||
(Amounts in thousands) | (Amounts in thousands) | |||||||||||||||
Income before income taxes: | Income before income taxes: | Income before income taxes: | ||||||||||||||
Domestic | $ | 1,881 | $ | 2,325 | $ | 3,315 | $ | 1,881 | ||||||||
Foreign | (244 | ) | (75 | ) | (68 | ) | (244 | ) | ||||||||
Income before income taxes | $ | 1,637 | $ | 2,250 | $ | 3,247 | $ | 1,637 | ||||||||
Three Months Ended March 31, | ||||||||||||||||
Three Months Ended March 31, | 2022 | 2021 | ||||||||||||||
2021 | 2020 | |||||||||||||||
(Amounts in thousands) | (Amounts in thousands) | |||||||||||||||
Current provision: | ||||||||||||||||
Federal | $ | 358 | $ | 328 | $ | 98 | $ | 358 | ||||||||
State | 93 | 100 | 25 | 93 | ||||||||||||
Foreign | 10 | 110 | 86 | 10 | ||||||||||||
Total current provision | 461 | 538 | 209 | 461 | ||||||||||||
Deferred provision (benefit): | ||||||||||||||||
Federal | (6 | ) | (104 | ) | 542 | (6 | ) | |||||||||
State | (2 | ) | (30 | ) | 137 | (2 | ) | |||||||||
Foreign | (42 | ) | (82 | ) | (56 | ) | (42 | ) | ||||||||
Total deferred provision (benefit) | (50 | ) | (216 | ) | 623 | (50 | ) | |||||||||
Change in valuation allowance | 32 | 59 | 83 | 32 | ||||||||||||
Total provision for income taxes | $ | 443 | $ | 381 | $ | 915 | $ | 443 | ||||||||
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||||||||||
Income taxes computed at the federal statutory rate | $ | 682 | 21.0 | % | $ | 344 | 21.0 | % | ||||||||
State income taxes, net of federal tax benefit | 176 | 5.4 | 104 | 6.3 | ||||||||||||
Excess tax benefits from stock options/restricted shares | (77 | ) | (2.4 | ) | (67 | ) | (4.1 | ) | ||||||||
Difference in tax rate on foreign earnings/other | 51 | 1.6 | 30 | 1.9 | ||||||||||||
Change in valuation allowance | 83 | 2.6 | 32 | 2.0 | ||||||||||||
$ | 915 | 28.2 | % | $ | 443 | 27.1 | % | |||||||||
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |||||||||||||||
Income taxes computed at the federal statutory rate | $ | 344 | 21.0 | % | $ | 473 | 21.0 | % | ||||||||
State income taxes, net of federal tax benefit | 104 | 6.3 | 136 | 6.0 | ||||||||||||
Excess tax benefits from stock options/restricted shares | (67 | ) | (4.1 | ) | (343 | ) | (15.2 | ) | ||||||||
Difference in tax rate on foreign earnings/other | 30 | 1.9 | 56 | 2.5 | ||||||||||||
Change in valuation allowance | 32 | 2.0 | 59 | 2.6 | ||||||||||||
$ | 443 | 27.1 | % | $ | 381 | 16.9 | % | |||||||||
11. | Derivative Instruments and Hedging Activities |
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships | Amount of Gain recognized in OCI on Derivatives | Location of Gain reclassified from Accumulated OCI to Income | Amount of Gain reclassified from Accumulated OCI to Income | Location of Gain reclassified in Income on Derivatives | Amount of Gain recognized in Income on Derivatives | |||||
(Effective Portion) | (Effective Portion) | (Effective Portion) | (Ineffective Portion/Amounts excluded from effectiveness testing) | |||||||
Interest-Rate Swap Contracts | $35 | Interest Expense | $34 | Interest Expense | $0 |
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships | Amount of Gain / (Loss) recognized in OCI on Derivatives | Location of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) | Amount of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) | Location of Gain / (Loss) reclassified in Income (Expense) on Derivatives | Amount of Gain / (Loss) recognized in Income (Expense) on Derivatives | |||||||||||||||
(Effective Portion) | (Effective Portion) | (Effective Portion) | (Ineffective Portion/Amounts excluded from effectiveness testing) | |||||||||||||||||
For the Three Months Ended March 31, 2021: | ||||||||||||||||||||
Interest-Rate Swap Contract | $ | 35 | Interest Expense | $ | 34 | Interest Expense | $ | 0 |
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships | Amount of Gain / (Loss) recognized in OCI on Derivatives | Location of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) | Amount of Gain / (Loss) reclassified from Accumulated OCI to Income (Expense) | Location of Gain / (Loss) reclassified in Income (Expense) on Derivatives | Amount of Gain / (Loss) recognized in Income (Expense) on Derivatives | |||||||||||||||
(Effective Portion) | (Effective Portion) | (Effective Portion) | (Ineffective Portion/Amounts excluded from effectiveness testing) | |||||||||||||||||
For the Three Months Ended March 31, 2020: | ||||||||||||||||||||
Interest-Rate Swap Contract | $ | (94 | ) | Interest Expense | $ | (8 | ) | Interest Expense | $ | 0 |
March 31, 2021 | December 31, 2020 | |||||||||||||||
Derivative Instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||||||
Interest-Rate Swap Contracts | Other Current Liabilities | $ | 0 | Other Current Liabilities | $ | 35 |
12. | Fair Value Measurements |
Fair Value as of March 31, 2021 | ||||||||||||||||
(Amounts in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest-Rate Swap Contracts | $ | — | $ | — | $ | — | $ | — | ||||||||
Contingent consideration liabilities | $ | — | $ | — | $ | (2,882 | ) | $ | (2,882 | ) | ||||||
Fair Value as of December 31, 2020 | ||||||||||||||||
(Amounts in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest-Rate Swap Contracts | $ | — | $ | (35 | ) | $ | — | $ | (35 | ) | ||||||
Contingent consideration liabilities | $ | — | $ | — | $ | (2,882 | ) | $ | (2,882 | ) | ||||||
13. | Shareholders’ Equity |
14. | Earnings Per Share |
15. | Business Segments and Geographic Information |
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
(Amounts in thousands) | (Amounts in thousands) | |||||||||||||||
Revenues: | ||||||||||||||||
Data and Analytics Services | $ | 8,794 | $ | 7,360 | $ | 10,152 | $ | 8,794 | ||||||||
IT Staffing Services | 40,981 | 43,065 | 49,603 | 40,981 | ||||||||||||
Total revenues | $ | 49,775 | $ | 50,425 | $ | 59,755 | $ | 49,775 | ||||||||
Gross Margin %: | ||||||||||||||||
Data and Analytics Services | 45.7 | % | 47.1 | % | 45.2 | % | 45.7 | % | ||||||||
IT Staffing Services | 21.4 | % | 21.5 | % | 22.9 | % | 21.4 | % | ||||||||
Total gross margin % | 25.7 | % | 25.2 | % | 26.7 | % | 25.7 | % | ||||||||
Segment operating income: | ||||||||||||||||
Data and Analytics Services | $ | 394 | $ | 909 | $ | 972 | $ | 394 | ||||||||
IT Staffing Services | 2,268 | 2,240 | 3,127 | 2,268 | ||||||||||||
Subtotal | 2,662 | 3,149 | 4,099 | 2,662 | ||||||||||||
Amortization of acquired intangible assets | (793 | ) | (673 | ) | (792 | ) | (793 | ) | ||||||||
Interest expenses and other, net | (232 | ) | (226 | ) | (60 | ) | (232 | ) | ||||||||
Income before income taxes | $ | 1,637 | $ | 2,250 | $ | 3,247 | $ | 1,637 | ||||||||
March 31, 2022 | December 31, 2021 | |||||||
(Amounts in thousands) | ||||||||
Total assets: | ||||||||
Data and Analytics Services | $ | 57,571 | $ | 56,634 | ||||
IT Staffing Services | 59,205 | 57,068 | ||||||
Total assets | $ | 116,776 | $ | 113,702 | ||||
March 31, 2021 | December 31, 2020 | |||||||
(Amounts in thousands) | ||||||||
Total assets: | ||||||||
Data and Analytics Services | $ | 54,810 | $ | 55,792 | ||||
IT Staffing Services | 49,880 | 46,254 | ||||||
Total assets | $ | 104,690 | $ | 102,046 | ||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
(Amounts in thousands) | ||||||||
United States | $ | 58,347 | $ | 47,942 | ||||
Canada | 1,019 | 1,264 | ||||||
India and Other | 389 | 569 | ||||||
Total revenues | $ | 59,755 | $ | 49,775 | ||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(Amounts in thousands) | ||||||||
United States | $ | 47,942 | $ | 49,350 | ||||
Canada | 1,264 | 861 | ||||||
India and Other | 569 | 214 | ||||||
Total revenues | $ | 49,775 | $ | 50,425 | ||||
16. | Recently Issued Accounting Standards |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Revenues (Amounts in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | ||||||
Data and Analytics Services | $ | 8,794 | $ | 7,360 | ||||
IT Staffing Services | 40,981 | 43,065 | ||||||
Total revenues | $ | 49,775 | $ | 50,425 | ||||
Revenues (Amounts in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||
Data and Analytics Services | $ | 10,152 | $ | 8,794 | ||||
IT Staffing Services | 49,603 | 40,981 | ||||||
Total revenues | $ | 59,755 | $ | 49,775 | ||||
Gross Margin | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | ||||||
Data and Analytics Services | 45.7 | % | 47.1 | % | ||||
IT Staffing Services | 21.4 | 21.5 | ||||||
Total gross margin | 25.7 | % | 25.2 | % | ||||
Gross Margin | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||
Data and Analytics Services | 45.2 | % | 45.7 | % | ||||
IT Staffing Services | 22.9 | 21.4 | ||||||
Total gross margin | 26.7 | % | 25.7 | % | ||||
S,G&A Expenses (Amounts in millions) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | ||||||
Data and Analytics Services Segment | ||||||||
Sales and Marketing | $ | 1.8 | $ | 1.3 | ||||
Operations | 0.8 | 0.4 | ||||||
Amortization of Acquired Intangible Assets | 0.6 | 0.5 | ||||||
General & Administrative | 1.0 | 0.8 | ||||||
Subtotal Data and Analytics Services | $ | 4.2 | $ | 3.0 | ||||
IT Staffing Services Segment | ||||||||
Sales and Marketing | $ | 1.8 | $ | 2.0 | ||||
Operations | 2.0 | 2.4 | ||||||
Amortization of Acquired Intangible Assets | 0.2 | 0.2 | ||||||
General & Administrative | 2.7 | 2.6 | ||||||
Subtotal IT Staffing Services | $ | 6.7 | $ | 7.2 | ||||
Total S,G&A Expenses | $ | 10.9 | $ | 10.2 | ||||
S,G&A Expenses (Amounts in millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||
Data and Analytics Services Segment | ||||||||
Sales and Marketing | $ | 1.9 | $ | 1.8 | ||||
Operations | 0.6 | 0.8 | ||||||
Amortization of Acquired Intangible Assets | 0.6 | 0.6 | ||||||
General & Administrative | 1.1 | 1.0 | ||||||
Subtotal Data and Analytics Services | $ | 4.2 | $ | 4.2 | ||||
IT Staffing Services Segment | ||||||||
Sales and Marketing | $ | 2.5 | $ | 1.8 | ||||
Operations | 2.8 | 2.0 | ||||||
Amortization of Acquired Intangible Assets | 0.2 | 0.2 | ||||||
General & Administrative | 2.9 | 2.7 | ||||||
Subtotal IT Staffing Services | $ | 8.4 | $ | 6.7 | ||||
Total S,G&A Expenses | $ | 12.6 | $ | 10.9 | ||||
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Number of Shares Purchased | Price per Share | of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Number of Shares that May Yet Be Purchased Under this Plan or Programs (1) | |||||||||||||
ITEM 6. | EXHIBITS |
(a) Exhibits |
MASTECH DIGITAL, INC. | ||||
May | /s/ VIVEK GUPTA | |||
Vivek Gupta | ||||
Chief Executive Officer | ||||
/s/ JOHN J. CRONIN, JR. | ||||
John J. Cronin, Jr. | ||||
Chief Financial Officer | ||||
(Principal Financial Officer) |