MHH: Mastech Digital Reports Q3 Revenue Decline
NYSE:MHH
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Mastech (NYSE:MHH) reported a year-over-year revenue decline of 24% in Q3 as customers, particularly in financial services, continued to pull back due to the worsening economy, inflation woes, the continuing banking crisis, and now the Middle East worries. The good news is that business declines have lessened and started to plateau. Another bright spot was improving gross margin due to utilization. Revenues were however down sequentially for both businesses in Q3. In October D&A booked $3.5 million in contracts that slipped from Q3 and it is seeing an improving pipeline. During the quarter no stock was bought back due to the window being closed from the settlement of an employment dispute. The company expects to see reimbursement from the insurance company in the next month of $2.2 million adding to cash reserves. We expect buybacks to resume going forward.
Earnings on a non-GAAP basis came in as expected and the company offset slightly weaker revenues with cost costing. We expect further cuts particularly as the legal expense from the employment dispute has ended. This expense was approximately $200,000 in Q3.
Mastech’s enterprise value is now under $86 million-- or 0.4 times EV/2023 Estimated Sales. Its peers trade at 1.9xs. On a PE basis, the stock trades at 11.2 times 2024 non-GAAP EPS. We have lowered our 2024 outlook in consideration of the weakening global economy and world unrest impeding demand.
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