MHH: Mastech Digital Returns to Growth in Q2 2021 With Record Revenues

By Lisa Thompson

NYSE:MHH

READ THE FULL MHH RESEARCH REPORT

Both of Mastech's MHH business segments showed growth sequentially and year over year. It reached record quarterly revenues of $54 million and the company expects a strong second half fueled by high demand in both businesses. In IT staffing, the company hired 89 new billable consultants compared to 99 in Q1 and expects hiring to continue, but maybe at not such a high number as it is becoming even harder to retain consultants as they have ever increasing opportunities due to a hot labor market. Data and Analytics is seeing projects go forward and had its second best bookings at $15 million in Q2 compared to $16 million in Q1. The Q2 bookings did not have any Center of Excellence clients.

D&A expects a much better Q3 followed by a Q4 that could be similar although it is too soon to tell what projects may be extended and which will roll off. In both segments margins are expected to continue to improve even with investment in capacity and sales and marketing. After two quarters of flat SG&A we expects expenses to pick up proportionate to sales growth.

Due higher than expected revenues, lower expenses, and favorable comments on strength in the second half based on already booked business; we are raising estimates for 2021 and 2022. For 2021 we are now looking for revenues $222 million and a non-GAAP EPS of $1.22 and for 2022, $250 million and $1.59 respectively. Next quarter we are looking for not only year over year revenue growth but expect non-GAAP income and EPS will return to year over year growth. With a valuation well below its peers at 1.1 times EV to 2021 estimated revenues, this growth should propel the stock closer to parity.

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