Q3 2025 Mastech Digital Inc Earnings Call

Greetings and welcome to the maztech. Digital Inc, third quarter 2025 earnings conference call.

At the time, all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

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As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jennifer Lacey, Manager of Legal Affairs for Mastech Digital. Thank you. You may begin.

Thank you, operator.

Digital's third quarter, 2025 conference call.

if you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastec.com

With me on the call today, our New York Patel MasTec digital's chief executive officer, and commented on our chief financial and operations officer.

I would like to remind everyone that statements made during this call that are not historical facts. Are forward-looking statements

These forward-looking statements include our financial growth and liquidity projections as well as statements about our plans strategies and tensions and beliefs concerning the business cash, flows costs and the markets in which we operate without limiting the foregoing the words believe anticipate plans. Expect

And similar expressions are attended to identify certain forward-looking statements.

These statements are based on information currently available to us and we assume no obligation to update these these statements as circumstances change.

There are risks and uncertainties that could cause actual events to differ materially from those forward-looking statements, including those listed in the company's 2024 Andor report on form. 10K, Bob with the Securities and Exchange Commission and available on its website at www.sec.gov.

Additionally management has elected to provide certain non-gaap Financial measures to supplement our financial results presented on a gap basis.

specifically, we will provide non-gaap net income and non-gaap diluted earnings per share data, which we believe will provide greater transparency with respect to the key metrics used by management and operating the business

Reconciliations that these non-gaap Financial measures to their comparable. Gaap measures are included in our earnings analysis, which can be obtained from our website at www.mmm digital.com.

As a reminder, we will not be providing guidance. During this call nor will we provide guidance in any subsequent 1-on-1 meetings, or calls.

I will now turn the call over to your offer his comments.

Thanks Jenna. Good morning, everyone.

We appreciate you joining us for our third quarter, earnings call.

Let me Begin by reaffirming the priorities. I had set as I began my tenure, as CEO of MasTec digital earlier this year.

Our Focus remains clear, delivering long-term, sustainable growth, unlocking substantial value from our operating model and investing in building. Truly differentiated capabilities to win in the future.

A few quarters ago, we initiated a comprehensive review of our long-term strategy.

That process is now well underway and we believe it will help us sharpen our priorities while aligning our structure and Investments to accelerate our transformation agenda.

Our team is unchanged from my first remarks as CEO.

to be the trusted partner that helps Enterprises re-imagine themselves and transition into AI first organizations

the business environment continues to evolve as ongoing macroeconomic and geopolitical uncertainties drive a cautious demand environment,

even as interest in modernization and AI adoption continues to grow. We find customers. Continue to look for a more supportive Market environment before accelerating their spend decisions.

What we can and positioning the company for long-term growth.

To that end. I'm very pleased to announce the launch of our Edge program, which stands for efficiency driving growth and expansion. A structural transformation initiative aimed at optimizing our organization and operating model

Edge focuses on driving higher Revenue, quality process simplification and Automation, and discipline spend management to unlock capacity for reinvestment in strategic growth areas.

We have seen these actions already yield improved operational efficiency, and sharper resource alignment.

By channeling these gains into capability building and Market expansion, We Believe Edge will strengthen our competitive position and fuel sustainable value creation. As we become an AI first organization ourselves.

Karnan will discuss the Edge program in Greater detail in his remarks. But I'm excited by our early progress and I'm confident that we have the right strategy in place to build Upon Our already strong Foundation while unlocking New Opportunities and maintaining Mass Tech digital's position. As a leading partner to Global 20000 Enterprise customers that are transitioning into AI first organizations.

We look forward to providing further updates in the days ahead.

We are also particularly proud of the progress. We are making in attracting top leadership Talent with established track records.

These leaders bring in distinguished expertise in their fields and we are seeing that they are the right Catalyst for our growth agenda.

Just as important, we believe we are building the Leadership Foundation that company needs to scale to lead with sharper operating rigor deeper domain, and AI capabilities and a culture of accountability and customer impact.

While the quarters performance reflects a measured demand environment, a view of where the market has been. Our Focus remains firmly on the future.

She believes the steps, we are taking now, will strengthen our base, make us more competitive and set us up for sustainable growth in the years ahead.

turning now to our segment results, in Our IT staffing services, segment revenues during the quarter declined, 4.4% year-over-year,

On discipline pricing and emphasis on higher value engagements, delivered, maste, recorded, gross, margins of 24.8%.

an all-time high average bill rates for masc at 8660

Despite billable consultant, headcounts reducing by 11.6% year-over-year.

While overall client activity continues to trend below prior year levels, this is consistent with broader market conditions.

We believe our margin performance and improved, bill rates underscore the effectiveness of our execution strategy and operational rigor in a measured demand.

Our data and analytics service segment, revenues for the third quarter declined, 15.8% year-over-year reflecting a challenging comparison against strong results. In the second half of 2024.

New bookings activity during the quarter remained subdued at 6.1 million.

which was a factor of pnl pressures at some of our key accounts and delayed decision, making

We continue to focus on leveraging, our basket of offerings across our portfolio of customers.

While near-term visibility remains limited, we continue to believe that long-term demand drivers underpinning this segment remained firmly intact.

We are focused on aligning our delivery capabilities and go to market approach to capture growth opportunities as client spending patterns normalize.

We aim to continue to drive efficiency. Operate with accountability and ensure every investment and position. We take creates lasting value for our customers employees and shareholders.

With that, I will hand you over to Canon for a deeper dive into our financial performance. During the third quarter,

Thanks m.

Good morning, everyone.

I will now discuss our third quarter Financial results.

Uh, year-over-year decrease of 6.4% as compared to the prior year period.

Our IT staffing services, segment delivered revenue of 40.6 million during the third quarter.

Or a 4.4% lower than the prior year period.

New quality resulted in an all-time high bill rate for mastic and mastic record gross margins in this segment.

though, our billable consultant base declined by 124 Consultants since the third quarter of 2024

11.6 decline.

Our data and Analysis Services segment.

Reported a revenue of 7.9 million during the third quarter.

A decrease of 15.8% compared to the prior year period.

In addition, third quarter booking total 6.1 million as compared to bookings of 11.1 million in the prior year period.

Third quarter, gross profit.

13.5 million was a decrease of.

8.9%.

As compared to the prior year, period gross margins. Declined by 70 basis points. Over the third quarter of 2024, largely driven by decreases in Revenue in our data and analytics Services segment.

As needed mentioned during the third quarter.

We launched the Edge program, which stands for efficiencies driving growth and expansion.

A structured transformation initiative.

Aimed at optimizing our organization.

And operating model.

Key components of this program include.

cost Diagnostics.

Process simplification.

Operational excellence initiatives.

Vendor and contract rationalization.

Zero based budgeting and performance linked spend governance.

Our q1 initiative to transition the company's Finance and Accounting functions to India is part of this program as well.

Together, these measures are intended to drive higher revenue quality.

Process, simplification and automation.

And discipline spend management to unlock capacity for investment in strategic growth areas.

early progress under Edge, has resulted, as already resulted in greater operational efficiency,

An improved resource alignment across the organization.

this is reflected in lgna as a percentage of Revenue of 26.1% during the third quarter of 2025 at 280 basis, point decrease as compared to 28.94% during the third quarter of 2025

a 1 190 basis point increase as compared to 6.8% during the fourth quarter of 2024

importantly.

The efficiency generated through Edge is being redeployed to strengthen our leadership and talent base.

Expanded competencies and accelerate market growth initiatives.

while we expect to realize short-term benefits from these efforts,

Our near-term objective is to reinvest these gains to strengthen our competitive position.

Getting ahead of emerging opportunities.

And driving sustainable value creation for our shareholders.

Third quarter gaap. Net income was 0.9 million or 8 cents per diluted share compared to a net income of 1.9 million. 16 cents per diluted share in the prior year period.

As we had previously discussed, we expected to incur transition costs, that would impact near-term reported financials, we incurred 2 million dollars in Severance and Finance and Accounting transition costs. During the third quarter of 2025 with no comparable costs during the third quarter of 2024, which are reflected in the year-old year-over-year decline in gaap, net income.

Non-gaap. Net income was 3.5 million or 29 cents per diluted share compared to 2.8 million or 23 cents per diluted share in the prior year period.

A Gina expense items, not included. In non-gaap financial measures. Net of tax benefits are detailed in our third quarter, 2025 earnings release for all periods presented which are available on our website.

During the third quarter of 2025, our liquidity and overall financial position remained solid.

2025, we had 32.7 million cash balances on hand. No Bank debt outstanding and cash available of 20.8 million. Under our revolving credit facility

Our Day sales outstanding measurement on September 30th, 2025 total 55 days.

which is well within our target range and in line with our DSO measurement, a year ago,

finally, during the third quarter, we repurchased approximately 192,000 shares

of mastic digital common stock at an average price of 7.68 for a total investment of approximately 1.5 million.

Of the share repurchase in the third quarter.

138500 shares were purchased in a block by from a long-term investor and approximately 52,000 shares where we purchase under companies rule, 10 B, 51 plan.

At the end of third quarter, we had approximately 214,000 shares available from our board authorized program for repurchases.

We plan to remain opportunistic with our share repurchase program to return capital and drive value for our shareholders.

Operator, this concludes our prepared remarks. We will now open the line for questions.

Thank you. We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad,

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1 moment, please while we pull for questions.

Thank you. Our first question comes from the line of Lisa Thompson with Zach's investment research. Please receive with your question.

Hi, good morning or evening wherever you are.

Oh I have a few questions on things. You said first off on the buyback since we were just talking about it, are you going to increase that because you're almost done with it?

Uh, hello, Lisa, uh, this is Kan here. Um, Patrick digital will continue its buyback preference in Q4, including giving consideration to entering into another rule, 10 B, 51 plan. Uh, we continue to, uh, look into opportunities and uh, we do, uh, plan to take appropriate action as need be, uh, we still have 215,000 that is approved.

By the board. So, uh, while the plan is active, uh, we will do that which is appropriate, uh, depending on, um, you know what we feel at that point in time. But we largely believe that it is a program that is worth continuing. Uh, those Visa,

Okay. Um, talking about Consultants, you've you're getting more money per consultant. Uh, is that a plan of yours to just kind of get high paid? People are the consultant numbers going to go up or down? Going forward? Do you have an idea?

Of course it is.

Uh,

Pretty indicative, uh, of the 2 things that drove record margins. Right. 1 was, of course, the bill rate, uh, the mix and the discipline our average bill rates did go up. Uh, it was 833.6 and today it stands at 86.66 about 4% more. The focus is towards driving higher value accounts and work,

Uh, while our account makes continues to uh, shift towards complex, higher skilled roles, uh, and our operational remains in place. Uh, so the intention is to be uh, uh, at this point doing higher skill roles, uh, and shift towards more complex work, especially in the data and the AI space.

So, do you think the consultant number will be up at the end of this quarter?

It was.

Uh, available consultants in the IT staffing services which was down from 980 as of June 2025.

Right? And in Q4, is that going to go up?

As of October, we are at 933. Uh, uh, that that's the count that we are tracking towards this point in time. Uh, these are

okay, thank you.

Could you explain Edge a little bit more? I mean, I think we can all understand moving accounting and finance to India as a tangible.

Activity, can you talk about what other things you are doing? And then how much more savings can you squeeze out of the sgna line?

Which is efficiency is driving growth and expansion is focused on 1 driving higher quality of Revenue. We just spoke about that.

Process, simplification and automation.

And discipline spend management.

Where we unlock capacity to reinvest.

In our strategic growth areas. It has 2 tracks. Write 1 is the efficiency track to free up capacity.

And the other one is the growth track to reinvest.

Our efficiency, we are focused on.

Bottoms Up cost, Diagnostics process simplification, operational excellence initiatives, vendor and contract rationalization zero based budgeting

Spin governance that is linked, uh, linking itself to Performance.

and uh, on growth

It is towards enhancing talent, uh, competency build.

And, uh, market expansion. So we are seeing multiple layers playing a part in the transmission journey.

And, uh, we are, uh, really hoping that all of these changes fill in seamlessly as we look to reinvest.

And uh, reorient ourselves for growth at least.

Okay. And how much more cost savings do you think you can get like, what's your goal?

Yeah. So if you really look at our, uh, sgna at this point in time, uh, we do believe, while we are at a space where it is much lower than what we had, you know, historically incurred. You will also see a fair bit of uptick in the Investments that we are bringing to Bear to reorient ourselves from a growth standpoint. So the idea of edge is largely you know acting ahead and making sure we have the dollars for that reinvestment and reorientation to happen. We believe that that uh investment clip will start coming in from the first quarter of 2026 uh Lisa.

Great. Looks like you've made a lot of progress. Thank you. That's all my questions.

Our next question comes from the line of Mark Riddick with sidonie. Please receive with your question.

Hey, good morning.

Good morning.

So I wanted to sort of touch on, uh, with, with Edge. Can you talk a little bit about maybe sort of, uh, the, the timing as to the beginning of the, the plan? Um, maybe from the, you know, the the, the Strategic process of putting it together and then the beginning of the implementation is that something that has, uh, that that was taking place throughout the entire quarter, or or how should we think about the timing of how that sort of layered in

Uh, you, you are referring to the Edge program. Uh, there. Yes.

Yes.

Yeah, so yes, it was programmatic, right? And if you remember back in second quarter, when neither of did speak about the fact that we want to focus and develop our strategic intent and initiatives, uh, we pretty much started thinking. And, of course, the thinking on edge started in q1 when we wanted to move Finance and Accounting into India, but that was uh uh 1 part of the overall program but in Q2 we got a lot more uh, focused on making sure that we do 2 things.

Means, while on 1 end, we are looking to reorient ourselves to growth and and making sure we make uh, you know, higher Investments That is required. Uh, from meeting our strategy. The other end was to obviously optimize and use that as our source to reinvest back into our business. So uh, so

Yeah, so that that that was the thinking so it all started in Q2 the idea was to make sure that we keep this long-term edges. Not a short-term program, it is an ongoing program where we continue to be very mindful in the way we spend bringing in the appropriate spin governance and operational rigor, and making sure that we do our appropriate benchmarks, as we start rationalizing on an ongoing basis. That's the that was the thinking mark.

Excellent. And then maybe you could talk a little bit about the, um, with the, the Finance and Accounting transition, uh, expense and and and Severance that was in, uh, 3Q. Uh, I I know you, you know, guide, um, uh, but I was sort of curious as to how we should think about, uh, uh, what level we're looking at or, or additional, uh, levels of expense that would would flow into the fourth quarter or is there sort of a timing mechanism? We should be thinking about additional expenses there.

Must be a sticking to the original time.

in in about the

similar.

We do not expect it to go beyond what has already been communicated, and it's part of our 10-Q as well. From a timing standpoint, we should largely be done by Q4.

Okay. Okay, okay, great. And then maybe shifting gears over to, um, the bill rate, um, growth drivers. Uh, I was wondering, could you talk a little bit about the, the pricing Dynamic that you're seeing? I, I certainly is understandable as far as client demand levels, uh, from a macroeconomic standpoint, but maybe we could talk a little bit about, um, sort of what you're seeing is far as year-over-year, uh, pricing Trends, and to, what extent, um, you know, uh, Revenue mix shift is playing into the benefit of the bill rate.

And uh as as uh I had stated uh the average bill rate same time. Last year was 83.6 Mark and today it stands at 86.6 which is about 4% of an uplift. Um, the focus over the last 2 quarters has been towards focusing on data and analytics, specifically, high value accounts and high value, work for that matter. And and given that focus of our our account, mix continues to shift towards more complex work, higher skill, roles, and and pretty much putting that, uh, the, uh, in place. So that is going to be our Focus going forward. Our focus is going to be largely on the quality of Revenue that we want to drive and improve our margins, as you would see on the gross margin level. There is a fair uptick on the, you know, from IT staffing standpoint and that will continue to be our rigger going forward. Uh,

Okay, and then I guess last 1 for me, uh, can you talk a little bit about the, um, you touched on some with the AI driven? Uh, efforts and, and, uh, maybe you could talk a little bit about, uh, some of the, the drivers that are maybe gaining greater traction here in the near term, uh, obviously some of the other, uh, opportunities that you see, uh, in in 26 and Beyond just, just maybe sort of, um,

You know, are there any particular puts and takes or maybe even differentiation and client vertical behavior that we should be aware of? Thank you.

Sure, mark. This is uh uh, Anita here, right? Uh, let me answer that question. So first of all, you know, look, I think directionally, it's very clear. Uh, the modernization efforts across many of our organizations are continuing to, uh, accelerate and, uh, push as much as they can, uh, uh, given the, the, the software Market environments. I think, but the clients continues to be uh, we, you know, our client our existing customers continue to really have uh and and and exciting Outlook in terms of where they want to really think about their modernization from our standpoint.

You know, we think about our data and analytic Services business, right? It's focus is on, on 3 Priority areas where we think, uh, are very fundamental, uh, which, uh, uh, which will demand a significant amount of our, what I call a capability building, uh, 1 is the data modernization. You know, the clients continue to like, think about getting their data, ready for AI and and how they can really lay, what I call a strong data foundation for them to scale in the world of AI. So that's number 1. That, that priorities are very good. The second is, uh, their acceleration on data consolidation. I think that's, uh, another area that's happening because, um,

As Enterprises, uh, work, uh, on bringing various ecosystems and platforms across various, uh, uh, corporate environments together. I think that data consolidation efforts are continuing to, uh, uh, also be a second priority where I think that area is building up very nicely, and the final thing I'm going to say, is in AI transformation and Innovations.

From our, uh, uh, historical base of MDM by making sure that we are shifting left to more and more of data engineering work. Uh, and at the same time, trying to shift, right to the data science work with our existing customers. So think about it as that way, that that whole area of, uh, Ai and and where, uh, that continues to, uh, create a, a new Dynamic and a new business model that our client locations, uh, is is an effect that we will have to play into. And I think we feel, uh, pretty strong about how we are positioned ourselves between both of our talent business, uh, and our, our data analytics, uh, uh, Services business. And that partly is reflected in the fact that, uh, the talent, uh, environment also will see continued ongoing demand pickups uh from a high value Talent standpoint, which is the kind of work that is required for our clients as they think about, uh, transforming their organization.

Organizations to AI first, uh, organizations.

Right, thank you very much.

As a reminder, if you would like to ask a question, press star 1 on your telephone keypad.

One moment, please, while we repoll for any additional questions.

Mr. Patel, it appears we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Thank you, Aubrey.

Day and we look forward to sharing our fourth quarter, 2025 results with you in February.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.