Mastech Digital Inc (MHH) 2010 Q3 法說會逐字稿

Greetings and welcome to the Mastech Holdings Incorporated Q3 2010 earnings 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. You may begin.

Thank you operator. Welcome to Mastech's 2010 third-quarter conference call.

If you have not yet 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 Tom 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 2009 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.

I will now turn the call over to Tom.

Thank you. Good morning. On today's call, I will make my opening comments. Jack will then review our financial results for the third quarter of 2010 and I'll rejoin the call for the Q&A.

I'm pleased to report that we made accelerated progress during the quarter in positioning Mastech for sustainable growth and long-term value creation. Market conditions continue to show signs of improvement. Investments that we have made over the last several quarters aimed at enhancing our business model are starting to positively impact results.

Culturally, we are truly becoming a sales-driven client-focused organization, which I believe is a fundamental key to long-term success in our industry.

With that backdrop, let me share with you some of our tangible third-quarter highlights. We achieved sequential revenue growth during Q3 of 11.5% over the previous quarter, as demand for our services continued to improve.

Additionally, we had year-over-year revenue growth during the quarter for the first time since 2006. We grew our IT billable consulting base by 16% from where we started the quarter. For the first nine months of 2010, we have grown our IT billable consulting base by over 25%.

Our healthcare operations achieved sequential revenue growth in Q3 despite very challenging marketing conditions. Overall gross margins continued to show year-over-year expansion for the third consecutive quarter. Despite making significant SG&A investments over the last nine months, we continue to grow earnings per share. These accomplishments to date underscore my belief that our long-term approach to value creation by investing in our capabilities to better serve our existing and prospective clients is the right approach for Mastech.

I will now like to turn the call over to Jack to review our third-quarter 2010 results.

Thanks Tom. Good morning everyone.

Revenues during the third quarter of 2010 totaled $18.9 million, which were 9.4% higher than third-quarter 2009 revenues and represented an 11.5% sequential improvement over last year quarter's revenue performance.

Our IT operations continued to see improvements in activity levels during the quarter. Accordingly, we achieved net growth in our billable IT consultant base for the third consecutive quarter.

Gross margins in the third quarter of 2010 increased to 19.3% compared to 18.4% achieved during the same period last year. Our gross margin improvement reflects pricing stabilization throughout most of our sales channels and a favorable channel mix of business.

SG&A expenses during the third quarter of 2010 totaled $3.3 million, which were approximately $100,000 higher than last quarter and $800,000 higher than the third quarter of 2009. As Tom pointed out, we continue to make the necessary investments in the short term to better position Mastech for sustainable growth in the longer term. It is important to note, however, that our rate of investment in SG&A as a percent of total revenues is likely to decline in future quarters.

Net income for the third quarter of 2010 was $187,000 or $0.05 cents per diluted share, compared to $427,000 or $0.11 per share in the corresponding period last year. While this EPS performance is below last year's results, it does represent a $0.02 improvement over second quarter 2010.

Addressing our financial position at September 30, 2010, our cash balances totaled $5.9 million, we had no outstanding bank debt, access to approximately $7.5 million of credit under our existing revolving loan facility, and a net worth of approximately $12 million.

During the quarter, we had a negative net cash flow of $171,000, compared to net cash generation of $1 million in the third quarter of 2009. The 2010 cash flow performance reflects a $500,000 investment in operating working capital as our Accounts Receivable balance increased by $1.5 million. This AR increase is in direct support of revenue growth during the quarter.

It's important to point out that, as we continue to grow our revenues, we would expect to make additional investments in operating working capital levels.

The quality of our trade receivables remain high. Our Accounts Receivable DSO measurement was 49 days at September 30, 2010 and Accounts Receivable aged in excess of 90 days continue to represent less than 2% of our total outstanding AR balance.

In summary, our balance sheet remains strong and we have the capital resources necessary to support future organic growth, as well as strategic acquisition opportunities that would enhance our existing business model or expand our portfolio of service offerings.

I will now turn the call back over to Tom for Q&A.

Thank you Jack. Operator, at this time, I would like to open up the call for questions.

(Operator Instructions). At this time, we have no time for questions. I'd like to turn the floor back to management for any closing comments.

Since there are no questions, I'd like to thank everyone for joining our call today. We look forward to sharing our fourth-quarter 2010 results with each of you in February. Thank you.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.