Mastech Digital Inc (MHH) 2021 Q2 法說會逐字稿

Greetings, and welcome to Mastech Digital, Inc.'s Q2 2021 Conference Call. (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 Digital, Inc. Thank you, Ms. Ford Lacey, you may begin.

Thank you, operator, and welcome to Mastech Digital's second quarter 2021 conference call. If you have not yet received a copy of your earnings announcement, they can be obtained from our website at www.mastechdigital.com. With me on the call today are Vivek Gupta, Mastech Digital's Chief Executive Officer; Paul Burton, Mastech InfoTrellis' Chief Executive; 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 the 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 2020 annual report on Form 10-K filed 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 GAAP 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 in operating the business. Reconciliations of these non-GAAP financial measures to their comparable GAAP measures are included in our earnings announcement, which can be obtained from our website at www.mastechdigital.com. 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 Jack for a review of our second quarter 2021 results.

Thanks, Jen, and good morning, everyone. Second quarter 2021 revenues totaled $53.7 million compared to $47.6 million in the second quarter of 2020. This revenue increase represented 13% growth over the second quarter of 2020 or 9% organic growth when adjusting for the AmberLeaf acquisition. Additionally, our revenue performance showed sequential growth of 8% over the first quarter of 2021. Our Data and Analytics Services segment contributed revenues of $9 million compared to $6.8 million in the second quarter of 2020. After adjusting for AmberLeaf, our organic revenue growth on a year-over-year basis was approximately 4%.

During the quarter, we continued to see further evidence that the D&A market is starting to recover. Bookings were strong for the second consecutive quarter at $15 million. Pipeline opportunities continue to show promise and customer conversations have been focused more on a need to start D&A projects rather than reasons for project delays.

Clearly, some uncertainty still remains in the marketplace with the Delta variant being a wild card. However, we feel good about the macroeconomic conditions in the D&A space as we enter the second half of 2021.

In our IT Staffing Services segment, activity levels continued to remain very strong in Q2 2021 as we grew our billable consultant base by 89 consultants, an increase of 8% from March 31, 2021 level. Furthermore, organic revenue growth was approximately 10% on a year-over-year basis and 9% on a sequential quarterly basis. Gross profit in the second quarter of 2021 totaled $14.3 million compared to $12.7 million in the second quarter 2020. Gross margins as a percent of revenue increased modestly over Q2 2020 and improved by 100 basis points over the previous quarter.

GAAP net income for Q2 2021 was $3.7 million or $0.31 per diluted share, compared to $3 million or $0.25 per diluted share in Q2 2020. The 2021 quarter did benefit by a $2 million pre-tax gain related to a reduction in a contingent consideration liability associated with the AmberLeaf application. Non-GAAP net income for Q2 of 2021 was $3.4 million or $0.29 per diluted share compared to $3.9 million or $0.33 per diluted share in the second quarter of 2020.

SG&A expense items not included in financial measure -- non-GAAP financial measures, net of tax benefit are; one, the amortization of acquired intangible assets; two, stock-based compensation; and three, the revaluation of a contingent consideration liability, and are detailed in our second quarter earnings release, which is available on our website. Addressing our financial position at June 30, 2021, we had cash balances on hand of $5.3 million, outstanding bank debt of approximately $15 million, no borrowing under our revolving credit facility, and cash availability of approximately $26 million at quarter end. Additionally, our day sales outstanding measurement improved by 2 days during the quarter from 55 days at March 31, 2021.

I'll now turn the call over to Vivek for his comments.

Good morning, everyone. Thank you, Jack, for the detailed review of our operating results for the second quarter of 2021. Let me begin by saying that I'm very pleased with our Q2 2021 financial performance. Our Data and Analytics Services segment made some nice progress during the quarter in terms of both revenue growth and sequential bottom line improvement. But more importantly, by securing strong order bookings and increasing the pipeline of opportunities to achieve a meaningful recovery during the second half of the year. Paul will have more to say about where he believes we are headed in the D&A segment.

With respect to our IT Staffing Services segment, we are performing at a very high level and are very pleased with our progress. Activity levels remained elevated in Q2, and we achieved an 8% increase in our billable consultant base during the quarter. This 8% addition is the second best increase in any given quarter after a record 9% billable headcount expansion in Q1 of 2021. In addition, revenue growth was strong on both a year-over-year basis at 10% and on a sequential quarterly basis at 8%. Gross margin increased by 30 basis points from last year's Q2 performance despite adding some low bill rate engagements. Additionally, we are effectively managing the cost side of our gross margin equation with a disciplined approach to profit content on new assignments.

IT Staffing segment operating income in Q2 2021 improved by 8% over the corresponding period last year, despite unwinding some of the austerity measures implemented during the first half of 2020. On a sequential basis, the second quarter IT staffing operating income increased by 48% when compared to the first quarter of 2021.

I will now turn the call over to Paul for his comments on our Data and Analytics Services segment.

Thank you, Vivek, and good morning, everyone. Q2 represented an inflection point as data and analytics returned to growth after 3 quarters of mostly flat performance. To be sure the effects of the pandemic continue to linger and cast a shadow on the macroeconomic environment, but it appears that our clients are adapting successfully as evidenced by the release of some suppressed demand.

Data and analytics posted strong bookings of $15 million for the second quarter, while also increasing revenue sequentially. This comes on the heels of a $15 million bookings performance in the first quarter of 2021. 2 consecutive quarters of bookings at this level signal a strong second half revenue performance. Absent adverse macroeconomic conditions tied to COVID-19 or otherwise, we anticipate sequential revenue growth in Q3 relative to Q2 as well as relative to the same quarter last year with improved margins and operating profit.

It's important to recognize, however, that as businesses release demand, the demand will go to the service providers most capable and prepared to receive it. It is this reason that we continue to invest ahead of the market in sales and delivery capability. We expect to trade some measure of operating profit for growth in the short term as we continue to expand and enhance our capabilities to address our clients' needs, especially as their needs relate to analytics, application modernization and cloud.

Over the last year, we have very consciously built capabilities that allow us to help our clients derive intelligence from their data and infuse that intelligence in the business processes that produce extraordinary outcomes. We will continue to build these capabilities organically as well as inorganically where it makes sense.

That concludes our remarks. And operator, back to you for questions.

(Operator Instructions) Our first question is from Josh Vogel with Sidoti & Company.

I guess, to start, Paul, I was taking notes, can you just reiterate what you were saying about sequential expectations in D&A for Q3?

Yes. Sure. So we had very strong bookings in Q1, better than $15 million, and we repeated the performance in Q2 with better than $15 million. So we're seeing particularly strong demand that is playing out in Q3 right now. So I am expecting a strong Q3. I don't have a specific number for you, but I do expect it to be better -- perhaps, significantly better than Q2.

Okay. And can you remind me of the seasonality in the business? And just given the circumstances where projects were delayed, but there's also that pent up demand, do you think that kind of reduces the likelihood of seasonal weakness or potential seasonal weakness over the back half of the year?

Yes. So typically, what we'd expect in this business is, we would expect a tepid Q1 because everyone's coming back from the holidays, budgets are being finalized, organizational changes are taking place in our clients', and then, things begin to heat up in March. Typically, Q2 or Q3 are strong revenue quarters and Q4 usually tails off a little bit in terms of revenue, but it's typically strong in terms of bookings because it's the end of the year with end-of-year money. I think this year, potentially, will be a little bit different because there is suppressed demand that's been bottled up because of the pandemic and because of clients just taking a wait-and-see attitude as to what's going on. So we are seeing an unusually strong Q3 so far. I suspect Q4 will be strong, I can't predict whether it will be stronger or not stronger than Q3 at this point, but I do anticipate a strong second half.

That's helpful. And I know you had some of it in your commentary, but thinking about the projects that were put on the back burner over the past 12, 18 months, how has the nature and the scope of the projects in the pipeline today change from those prior to the pandemic? I basically want to get a sense of the D&A engagements that were on the table prior to the pandemic. Are some of those services or needs obsolete today or just not part of clients' near-term digital agendas?

No. I think clients are thinking more holistically, I think they've had a chance to regroup and reevaluate things as businesses sort of got -- businesses or projects, if you will, sort of got put on hold during the pandemic. And so I think clients are thinking more holistically about things in terms of analytics and data, and cloud and bringing all of those things together into more of a solution posture as they go forward. And as I say, there is some sense out there that a year was lost with delays and project delays because of the uncertainty. And now there's a certain amount of vigor in the marketplace that we're experiencing.

So it's refreshing, but at the same time, we're not the only competitor out there chasing the spend. So it's very important that we approach the market with the right capabilities and are appropriately aggressive to meet new demands, because clients perhaps have less patience than they have had before for things that are not meeting their needs. So again, I see -- we're bullish on the second half. We see increased demand. We have no reason to be anything other than positive, but there's always a bit of trepidation because you've got to go out and prove it, you've got to go out and close the deals and deliver, and then you've got to resource everything and move things along. So there's a lot of work to be done, but these are high-quality problems.

Yes, for sure. Thank you for the insights on that. I wanted to shift gears a little bit, IT staffing, strong results there year-over-year sequentially. Thinking about billable consultants, knowing that this is a historically very tight market for those professionals, can you just talk about the supply constraints that you're seeing? Are you -- are there any notable trends that's just making it a little bit harder than usual to find the talent? And maybe an easier way of discussing it is what percentage of orders are going unfilled today because of supply constraints versus historic?

Sure, Josh. The market today is extremely hot. We haven't seen this for a couple of decades now. The demand is way more than supply. And to achieve any kind of net growth, we have to have that -- the total number of starts have to be far greater than the total number of ends to be able to achieve a decent net growth. And right now, we are seeing an unprecedented level of ends because every consultant has so many choices, better pay, better locations, better technology, better quality of projects, et cetera, et cetera, are always there and temptation. So we are seeing an unprecedented level of ends, but then we are also seeing an unprecedented level of demand. So right now, we are trying to address as many of those opportunities as possible.

Sure, there are always unfulfilled requirements, and that happens even in normal course, but we are, I guess, becoming more picky about which ones we want to go after, which ones we can fulfill, which ones can give us better gross margins. So it is a hot environment and the kind of -- the number of starts that we've been able to do in the last 2 quarters have been sort of record. And we are hoping this thing will -- the demand will continue, but then we have to keep a very careful focus on controlling the -- well, you can't really control, but minimizing the ends so that the balance stays in favor of net growth. I don't know if that answers your question.

No, that is helpful. And I was just thinking about your comments around engaging in some lower bill rate business. Was that just because you have talent available? Are you -- aggressively are targeting lower bill rate business? What does that look like going forward?

No. So we've been kind of going after that opportunistically without compromising the gross margins. So if we see an opportunity, which may be slightly lesser bill rate, but we can still get good gross margins and in some ways, they are sort of nicely packaged, and we can address that quickly, and we are sure that we will be able to win those deals, so we are going after them opportunistic. And I don't think that's really impacted our overall results. So we will continue to do that. I mean, we are not really limiting ourselves on any area. If we see the opportunity gives us that -- the decent gross margin, we'll go for it.

That's helpful. And maybe one for Jack. Lowering the contingent liability by about 70%, it gives a little bit of a read into how AmberLeaf has performed relative to expectations. I was wondering if you could just talk about that. What drove that? Knowing that we were still in the midst of the pandemic when you completed the deal, just curious what has potentially changed between October and today?

Sure. I mean, just straight up, AmberLeaf really came out of the box slow. And going in, closing the deal, we knew that there was the potential for that. And that's why you see the deal structure having $4.5 million of earn-out included in it. And so clearly, they came out of the box, their business cycle was such where they were ending certain projects and there was a lag between the ending of projects versus the restart of other projects. And again, I just want to stress that we knew that, that was a possibility at closing. And we believe we accounted for it. But there's only 2 years of earn outs, so when the first 6 months of earn-out are on the negative side, where it looks you're not -- like you're not going to make it, when you do that fair value revaluation, the numbers come down substantially, and that's what you see.

And just one last one, if I may, and I'll hop back in the queue. SG&A came in a little lower than what I was looking for. And I know, Paul, you had comments around continuing to invest in sales and delivery and D&A, but I was just wondering if there was any sort of pending or strategic M&A initiatives that were planned for Q2 that would maybe drop into the second half of the year?

Yes. I can address that in part and let Jack take the rest of it. So we continue to make -- as I said in my remarks, we continue to make very targeted, very specific investments in sales. And not sales generally, but sales with specific capabilities around cloud or analytics or customer experience. And so we continue to make those, and they continue to happen. The timing of those, when you bring people on, they don't always start at the first day of the quarter, sometimes they come in a little bit later. And so the expense may not hit fully 1 quarter or another. But we are bullish based on the demand that we're seeing. We're pretty particular about the types of business development resources we're bringing on because they need to have -- be consultative and have skills in particular areas to drive the business consistent with our strategy. So that's what's going on. There's been no change in direction, there's been no -- we're not taking our foot off the gas in any way. It's just a question of building the right resources, getting them on and then their expense will hit the full quarter as things move on.

All right. Looking forward to seeing how the business performs over the back half of the year. It looks like you got a good start there.

Our next question is from Yaron Naymark from 1 Main Capital.

Nice job, particularly on the Staffing segment, given all the demand challenges that you guys outlined on the call. So great job. The first question I have is, can you remind us from the D&A segment, how much of that is still MDM versus what other capabilities are made up -- help kind of make that revenue?

Yes. So we have 4 business lines, primarily [CX], data management, data engineering and data science. And MDM is still the majority of the business, but it's decreasing as a percentage of the overall. We're doing a tremendous amount of data engineering these days as well as some offshore application development related to cloud and related to our line of business applications. So MDM is still strong, increasing quarter-over-quarter, but it's a smaller percentage of the whole.

Got it. Okay. And then on the engagements you're taking on in MDM from the legacy InfoTrellis business, how much of the margin degradation in D&A is due to investment in sales, staff and adding capabilities? And how much of it is just from pricing pressure for winning some of those engagements?

We're not having any pricing pressure on the MGM side. Clients -- MDM is actually becoming -- or probably has been for some time, but it remains mission-critical for clients to have master data management capability to have clean data, deduplicated data to feed data upstream or downstream on the -- depending on the perspective for other uses. So we're not experiencing pricing deterioration across any elements of our business. So just to make that point pretty clearly. In terms of margin degradation or EBITDA degradation, that's primarily related to, again, investments in SG&A that we make as well as investments in a certain amount of hardware and training and other capabilities that we need to bring online to service what we perceive to be the demand going forward, particularly related to cloud, particularly related to application modernization.

And by the way, when I say these things, cloud or application modernization, I'm not saying those intending them to be discrete and independent offerings. What we're seeing in the market is all of our offerings are synergizing. And what I mean by that is data and analytics infused into application modernization, delivered in the cloud. So we're seeing a tremendous amount of -- and this is by design. We're seeing a tremendous amount of synergy between our offerings and which begs the need for more business development, more highly skilled sales and client-facing capabilities because the engagements are much more sophisticated, much more rich, if you will, much more interesting actually as well. So we're seeing the synergy of all of our offerings by design. I think, we called that one right in the marketplace, and we're making investments to capture that. And we're not seeing any pricing degradation.

Okay. That's great to hear. On the MDM side, are you guys overly leveraged the Informatica or IBM or is there any other providers of MDM solutions? Or are you guys pretty broad-based there at this point?

We're currently, today, we count them doing MDM engagements live today with 5 different MDM providers. You called out IBM and Informatica, those are certainly 2 of the 5. IBM historically has been a strong installed base for us and a strong relationship for us, and we continue to work the IBM engagements, IBM-MDM engagements. But we're not limited to IBM at all. And I would say the same thing I said earlier that IBM is becoming a smaller percentage. Even though it continues to grow, it's becoming a smaller percentage of our overall portfolio. We've had a very conscious strategy to diversify our way from just one provider or one big client or one of anything. We're trying to spread the field, so to speak, and we've been somewhat successful doing that. So we're certainly doing business with IBM, Informatica and others.

Okay. That's great to hear. And then, on the $15 million of quarterly bookings you guys have had in that segment for the last 2 quarters or greater than $15 million, what's the typical duration of those types of bookings? I mean, are they typically 12 months, 6 months, 24 months?

Yes. So the $15 million we put up in Q1 was a little bit different makeup than what we did in Q2. We actually had 2 large deals in Q1 that were multi-year deals, 3-year deals, what we would call Center of Excellence deal. That composes probably half of the $15 million. The $15 million that we put up in Q2, there were no multi-year deals in there, there were just simply large deals. The significance of that is, about the 3-year deal, the revenue is going to get spread over 3 years. And in single-year deals or less than 1-year deals, all the revenue is going to materialize fairly quickly. So we've injected a little bit of sugar into the bloodstream, which is why we feel reasonably confident that we're going to have a strong second half.

Okay. And so some were 3 years in Q1, in Q2, most of them were less than a year. On average, in any given quarter, are they mostly multi-year deals or mostly 12-month or less deals?

Yes. We'll typically do a multi-year deal every quarter. So if you look at volume of deals, most of them are 9- to 12-month deals because our engagements are complex, sophisticated, and they take a while and they're high value. They're million-dollar deals. So hopefully, that answers your question.

Yes, it does. Okay. And then last one for me. What does the operational capacity look like to absorb additional M&A beyond AmberLeaf at this point? And then, what are the key capabilities you guys are looking to acquire? And I guess, what does the pipeline look like on that front?

So I can talk about pipeline and key capabilities. I'll let Jack field the capacity question. The key capabilities we're looking for -- this market, where you move data to the cloud and you infuse into cloud-native applications, analytics and data -- for multiple applications, and you deploy applications that are rearchitected and replatformed, if you will, in containers or microservices architectures, and there's all sorts of buzzwords we can throw out there. The idea is as we -- as clients modernize their application portfolio, move it to the cloud, it is a tremendous -- it is a huge opportunity that is out there. And so we have the capabilities to service that today, but we can't meet the demand without significant hiring. Based on the demand that we're seeing, there is significant hiring that's required and the skills are scarce in the marketplace. So it's not something that you can just flip a switch and make happen, it takes a little bit of effort to go find the resources, vet the resources, bring the resources on, assimilate them to your culture, your methodology, your business practices, et cetera, et cetera.

So good news is we see a strong market. Good news is we're approaching that market and having success with it. Somewhat bad but not bad news is we've got to ramp up and we've got to add capacity to do it. One way to do that, of course, is inorganically by finding a company that brings those skills together, dovetails with our vision and can sort of plug into our operational and go-to-market model, and we're very interested in exploring possibilities as we discover them in the marketplace. And so I -- as I mentioned in my remarks, we're certainly open to the idea of inorganic growth and we do spend time looking at that. I'm not ready to make any announcements, and I don't have any predictions specifically in that regard, but we're very cognizant of what's going on in the market. We spend a lot of time looking to see what companies are out there, how they would mix and match and fit with us. And there is a focus and intensity there. Let me put it that way. With respect to capacity, I'll let Jack answer that one.

Okay. Could you just repeat the question that you want me to answer?

Yes. It was just how much operational and financial capacity do you think you have on the M&A front?

Well, I mean, if we -- if second quarter is what we believe second quarter is going to be from a revenue perspective -- or excuse me, the second half, obviously, we're going to have to leverage up staff. Do we have some capacity that exists right now at the Q2 levels? Absolutely. But we are going to have to add staff to the equation to meet the increase in demand. From an infrastructure standpoint, I mean, we clearly -- we just entered into a new office spacing or delivery center in Chennai, India. It materially increases the office space and the quality of the office space. So from an infrastructure perspective, I think we're planning for those staff increases.

Jack, can you also talk about the borrowing capacity or the capacity for acquisition?

Sure. I mean, in the prepared remarks, we have a $30 million revolver -- revolving credit line that we haven't used at all. It's based on availability with respect to your receivables. So the unused line is $26 million. In addition to that, we have a strong relationship with PNC Bank. Clearly, we believe that if we did a meaningful acquisition, we would be able to materially increase our term loan facility. And we believe that we have considerable purchasing power, if you will, to do another acquisition if one materializes that we think is worth it.

Our next question is from Lisa Thompson with Zacks Investment Research.

So Paul, back to what you were talking about margins. First off, have you -- do you feel that you totally gotten everything you're going to get out of AmberLeaf as far as synergies and cost improvements at this point?

No, not at all, actually. And not to put too fine a point on it, but I -- Jack's characterized correctly when you said AmberLeaf came out of the blocks slow after the acquisition. But that was then and this is now, and we continue to open up new AmberLeaf clients, significant new AmberLeaf clients every month. We are currently increasing staffing in our CX line of business, otherwise known as AmberLeaf. And we're actually doing business development hiring in that line of business as well. So we're bullish on that segment of business. We did get off to a slow start, not to put -- we don't want to ignore that fact. But we're anticipating strong growth in AmberLeaf or in the CX line of business going forward.

And #1, with respect to margins, yes, there were some adjustments that need to be made in the cost structure of AmberLeaf, which are, for the most part, done. And so I'm anticipating improved operating margins going forward across the entire business, but specifically, across our CX line of business. So I'm bullish on that segment of business, there's no doubt about that. And it does dovetail quite nicely with the data and analytics capabilities that we have historically, as well as the work that we're doing as we move and work with clients to move into the cloud. There's a tremendous amount of CX opportunity in the cloud, especially with cloud-native applications and replatforming legacy applications in the cloud. So AmberLeaf fits very nicely into our portfolio. It was a slow start, we're beyond that now, and we're accelerating.

Okay. And just to clarify what you said in your comments, I didn't quite catch what you said or meant. So it's something about, I don't know, sacrificing margin and investing now. So does that mean that you expect your gross or operating margins to decline going forward? Or are you kind of where you're going to be?

No, I expect our operating margins to increase going forward, but they're not going to increase as much as they could, were we to not make -- because we're making investments in sales and delivery, right? So because we're make -- in other words, we're changing the tires on the cars that rolls down the road, right? We're going to increase margins, no doubt about it, but we're not going to increase them as much as we could because we're making investments, some in SG&A and others in infrastructure and deliveries.

Okay. I didn't quite catch what that meant. That helps. So -- and as far as IT staffing, the last couple of quarters, you hired 90 to 100 more consultants. Do you see that number being the same for the next couple of quarters?

Lisa, that's always difficult to say, how the next 2 quarters will pan out. But today, as we stand at the end of July, the demand seems to be at the same level. And as I said, the ends are also much higher. I do expect it to slow down a little bit in terms of not the demand, but in terms of the net growth because we do see maybe a little bit more of the ends to happen. Some of the engagements that we started in the beginning of the year may come for either renewal or the end. And that will require a lot of work to kind of replace them or renew them as well. So we do expect positive trends to continue, but I can't quantify it.

Okay. Good. That helps. And Jack, just as far as operating expenses go, I know that you said in the first quarter, you pulled expenses forward, which kind of explains like why Q1 and Q2 were kind of flat. So does it start ticking back up again in Q3 because of that?

As far as -- when you say, starting to tick back up, are you talking about...

SG&A.

SG&A spend?

Yes.

Well, yes, it's going to be -- the second half of the year is going to tick back up somewhat. In staffing, it's going to be -- it's going to tick back up just because of the demand and some of the variable expenses associated with that demand. And then, in D&A, the first half of the year, even though it was a flat revenue quarter, we did make some material investments in D&As and SG&A. And that's Paul's comment on giving up some operating margin to position yourself for growth. So I think, in the second half, we're going to have some increases in SG&A, but maybe not as great as the first quarter will tell us. For the first half of the year, we do.

Okay. All right. And my final question, Paul, I forgot to ask you. You said that you -- Q4 might not be as strong as Q3 because you don't know yet. How is that possible when your contracts are long enough term that they've got to be more than 3 months, so you know what's tailing off and what's staying. Where's the variability in there?

Well, there's always some variability. I mean, we're -- every quarter, we have contracts that start and contracts that end. And it's -- 3 or 4 weeks since the quarter, it's a little bit difficult to predict what's going to end or what's going to get extended through Q4. Oftentimes, we have changes that are done to contracts to extend them further into the future. Hard to say what's going to happen with respect to Q4 right now. I don't expect Q4 to be -- I can't say with certainty or specificity what Q4 is going to be, higher or lower. I don't expect it to be substantially different than Q3. I just can't predict anything further than that right now based on uncertainty whether what contracts are going to be extended and what we're going to be closing here in the next couple of weeks.

Okay. Great. That helps...

Yes. I think when you look at our business, the D&A business, historically, there's not a lot of volatility into it -- in it. We haven't had significant drops in revenue even during the pandemic. We were mostly flat, and now we're starting to climb back up again as the environment improves, and I expect that to continue.

(Operator Instructions) There are no further questions at this time. I would like to turn the call back to Vivek Gupta for closing remarks.

Thank you, operator. So if there are no further questions, I'd like to thank you for joining our call today, and we look forward to sharing our third quarter 2021 results with you in late October. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation. Have a great day.