Mastech Digital Inc (MHH) 2009 Q3 法說會逐字稿

Greetings, and welcome to the Mastech Holdings, Incorporated Q3 2009 earnings quarterly conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

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

Thank you, Operator, and welcome to Mastech's 2009 third quarter conference call. If you have not received a copy of our earnings announcement, it can be obtained from our website at www.Mastech.com.

With me on the call today are Mr. Thomas Moran, Mastech's Chief Executive Officer, and Jack Cronin, our Chief Financial 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, intentions, and beliefs concerning our business, cash flows, costs, and the markets in which we operate.

Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify certain forward-looking statements. These statements are based on information currently available to us and we assume no obligation to update these statements as circumstances change.

There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements, including those listed in the Company's 2008 annual report on Form 10-K filed with the Securities and Exchange Commission, and available on their website at www.SEC.gov.

As a reminder, we will not be providing guidance during this call nor will we provide guidance in any subsequent one-on-one meetings or calls. Now I will turn the call over to Tom.

Thank you, Jen -- (technical difficulty).

Excuse me, Mr. Moran, this is the Operator. I just want to let you know that your line is fading in and out once again. If you could get closer to your speakerphone, that would be appreciated.

(technical difficulty) we've been quite busy (technical difficulty) well underway -- at this stage (technical difficulty).

With that said, I would like to (technical difficulty). Operator -- revenues during the third quarter declined [17.2] -- Jen, it's hard to -- dial back in with a different phone.

One moment, ladies and gentlemen. We are experiencing technical difficulties. We appreciate your patience.

Now joining, Mr. Tom Moran.

Good morning, everyone. I apologize for the technical difficulty. I'll start back from the beginning.

It's a pleasure to be hosting my first earnings call with Mastech Holdings. As you can imagine, since my appointment as CEO three months ago, we've been quite busy. My initial objective has been to fully assess Mastech's existing business structure, service offerings, and core competencies, and to formulate a strategic roadmap to take Mastech beyond a one-dimensional staffing organization.

This process is well underway, and should be completed in the coming months. At this stage, I can tell you that the Company poses many leverageable assets and attributes that we intend to capitalize on, as we take the Company into the next phase of its evolution. With that said, I would like to address our third quarter operating results.

Revenues during the third quarter of 2009 declined to $17.2 million compared to $24.1 million in the same period last year, due largely to reduced demand for our services. It is important to note that the third quarter revenues were down 2.4% sequentially from last year, as we continue to see signs of market stabilization.

Gross profit margins in the third quarter of 2009 were 18.4% compared to 18.7% achieved during the same period last year. Pricing remains very competitive despite early signs of an improving economy. We expect pricing pressures to persist in the near-term and will continue with initiatives to protect our existing margin levels.

Third quarter 2009 SG&A expenses totaled $2.5 million and represented 14.3% of total revenues, compared to $3.3 million or 13.6% of revenues in the same period of 2008. During the economic downturn and subsequent recession, the Company consistently adhered to a disciplined cost management approach. As we see more signs of economic recovery, our focus will shift towards making the necessary investments to grow our revenues and profits.

Net income for the quarter was $427,000 or $0.11 per diluted share compared to $1.2 million or $0.32 per diluted share in the corresponding period last year. It should be noted that the 2008 quarter included certain income tax benefits derived from the Company's participation in its former parents' consolidated US income tax return, which would not have been available to us as a stand-alone organization. The impact of these tax benefits on net income for the third quarter of 2008 totaled $390,000 or approximately $0.11 per diluted share.

In summary, while market conditions remain challenging, we continue to see signs of stabilization within our industry. We will complete our assessment of Mastech's strengths and weaknesses in the coming quarter, and formulate a strategy aimed at delivering long-term value to our shareholders.

I will now turn the call over to Jack for an overview of our financial position as of September 30, 2009.

Thanks, Tom, and good morning, everyone.

Again, despite the challenging economy, our balance sheet remains strong. At September 30, 2009, our cash balances increased to $7.9 million and our tangible net worth increased to $10.8 million. We ended the quarter with no outstanding long-term debt and access to $6.4 million of credit under our existing revolving loan facility. We believe that this strong balance sheet will provide us with the financial flexibility to capitalize on market opportunities as the economic recovery advances.

The quality of our trade receivables remains in pretty good shape. Our accounts receivable DSO measurement at September 30, 2009 was 45 days compared to 44 days a year ago.

Reviewing our cash flow performance, during the first nine months of 2009, the Company generated $3.7 million of operating cash flow, which compares to $3.1 million in the corresponding period last year. Net income and non-cash charges contributed $1.9 million of cash flow in 2009, with an additional $1.8 million generated from reductions in working capital levels.

During the '08 period, net income and non-cash charges generated $3.6 million, with approximately $500,000 of cash flow being used to fund working capital requirements.

Cash used in investing activities, primarily capital expenditures, totaled $116,000 during the first nine months of 2009 compared to $136,000 in the 2008 period. And for the balance of the year, we expect capital expenditures to be less than $50,000 to support our existing operations.

With that, I'll turn the call back over to Tom for Q&A.

Thank you, Jack. Operator, can we open the line up for questions, please?

(Operator Instructions). Mr. Moran, there are no questions at this time.

Okay. I would like to thank you for joining our call today, and we look forward to sharing our fourth quarter 2009 results with you in early 2010. Everybody have a good day.

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