Mastech Digital Inc (MHH) 2010 Q4 法說會逐字稿

Greetings and welcome to the Mastech Holdings, Inc. Q4 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, Jennifer Ford Lacey, Manager of Legal Affairs for Mastech Holdings, Inc. Thank you, Ms. Ford Lacey. You may begin.

Thank you, operator and welcome to Mastech's 2010 fourth-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 and good morning. On today's call, I will make my opening comments. Jack will then review our financial results for the fourth quarter and full year of 2010. I will rejoin the call for the Q&A.

I'm pleased to report another quarter of improving results. Market conditions remained solid during the fourth quarter considering the normal year-end trends in our industry. Internally, we continue to focus on the fundamentals of our business and ways to better service our clients. Our focus on continuous improvements throughout our organization and commitment to superior execution and rigorous accountability are clearly reflected in our 2010 financial performance.

Before Jack gets into the financial review, let me share with you some of our achievements for the fourth quarter and full year of 2010. During the fourth quarter, we grew revenues on a year-over-year basis by over 30% and reported sequential revenue growth of 7.5%. Gross margins improved by 50 basis points over fourth quarter of 2009 and 40 basis points over last quarter's results. Our healthcare operations achieved sequential revenue growth of 12% during the quarter despite challenging market conditions and we delivered our third consecutive quarter of higher earnings per share results.

For the full year of 2010, we grew our IT billable consulting base by over 20%. We achieved year-over-year growth for the first time since 2006 and we expanded our gross margins, invested in needed initiatives and put earnings per share on a positive trajectory.

In summary, I am excited about the progress that we have made during 2010 and I am even more excited about the future of Mastech. I would like to now turn the call over to Jack to review our fourth-quarter and full-year 2010 results.

Thanks, Tom and good morning, everyone. Revenues during the fourth quarter of 2010 totaled $20.3 million, which were 30.2% higher than fourth-quarter 2009 revenues and represented a 7.5% sequential improvement over last quarter's performance.

Our IT operations continued to see solid activity levels for most of the quarter and our healthcare operation is starting to see some encouraging signs of market stabilization. Gross margins in the fourth quarter of 2010 increased to 19.7% compared to 19.2% achieved during the same period last year. Our gross margin improvement reflects pricing stabilization throughout most of our sales channels and higher perm placement fees during the 2010 quarter.

Net income for fourth quarter was $304,000, or $0.08 per diluted share, compared to $219,000, or $0.06 per diluted share in the corresponding period last year. This earnings per share performance is $0.03 per share better than last quarter's results.

For the full year, revenues for 2010 totaled $71.8 million compared to $71.1 million in 2009. Gross margins for the full year of 2010 increased to 19.6% from 18.9% achieved during the previous year. Consolidated net income in 2010 totaled $653,000 or $0.18 per diluted share compared to $1.4 million or $0.38 per diluted share in 2009.

Addressing our financial position, at December 31, 2010, our balance sheet remained strong. Cash on hand totaled $6.3 million. We had no outstanding debt and access to approximately $8.1 million of credit under our existing revolving loan facility.

During 2010, our cash balances did decline by approximately $800,000. This decline reflected our $1.1 million acquisition in the healthcare space and an $800,000 investment in working capital levels in support of our 2010 revenue growth.

The quality of our trade receivables remains high. Our accounts receivable DSO measurement improved to 46 days at December 31, 2010 compared to 49 days a quarter ago. Accounts receivables aged in excess of 90 days continue to represent less than 2% of our total outstanding AR balance.

In summary, we have the financial resources necessary to support organic growth, as well as for strategic acquisitions and corporate initiatives that represent value-creation opportunities to the Company. With that, I will turn the call back over to Tom for Q&A.

Thanks, Jack. Operator, I would like to open up the call for questions now.

(Operator Instructions). Mariusz Skonieczny.

Hey, guys. Congratulations on a good quarter. Yes, obviously, you guys recently announced that you will be buying back shares over the next two years. And I was wondering if you can talk a little bit about it in more detail?

Sure, sure. What we looked at first, as a Board, we considered all the available options in looking at where our stock was and our cash position and acquisition strategies that we are looking for, what is the best for the organization. And we felt, based on our future and where our stock price was and the amount of capital we have and still looking at the investments and acquisitions down the road, we felt, as a Board, it would be -- it is the right option for us to reinvest in our own organization and to help our organization grow. We concluded by looking at all available options to us that, at this time, the share buyback program was the best option at this time for Mastech and that is the approach we took. Jack, I don't know if you want to add some comment on that as well?

I think that is correct. We looked at the tender offer route, but we felt -- the Board felt that the share buyback gave us financial flexibility, i.e., we can adjust our spending on this initiative as circumstances dictate. And the other advantage of the share buyback program was it would continue to provide a level of liquidity to our shareholders over a longer period of time than a tender offer would.

Right. And now the number of shares that you announced is 750,000 shares, which is almost 50% of the float or the shares available for public. That is huge. I mean does this mean that you guys might be taking the Company private in the future?

At this point, the answer to that is no. We put that number for approval and if you look at the press release, it is up to. So in the end, we wanted to make sure that there was enough there if we wanted to continue to buy back that number. Whether we get to that number or not is to be determined over a two-year period depending on how the stock price is and things like that, but it is an up-to number, so it is not set in stone we will buy that number back. We want the option to if we can, but at the end of the day, the answer to your question from my opinion that is not our focus is to take the Company private at this time.

Right. And when do you expect to start buying your shares because from the number of shares outstanding, I don't believe you started buying these shares yet. Am I correct?

Correct. We will start buying shares back as soon as possible. We being a publicly traded company have to wait until our quiet period is over. So we will start buying shares back sometime in the near future.

So when is the quiet period over?

Friday.

All right. I don't have any further questions. Thank you so much and I am happy to see what is going to happen in the future.

Great, thank you.

(Operator Instructions). We have no questions at this time, sir.

Great, thank you. Since there are no further questions, I would like to thank everyone for joining us on our call today. And I look forward to sharing our first-quarter 2011 results with you in early April. Have a good day.

This concludes today's teleconference. You may now disconnect your lines at this time and thank you for your participation.