Mastech Holdings reports on Q1 2015 results & acquisition
First Quarter 2015 Highlights:
• Revenues totaled $27.1 million compared to $28.7 million in the 2014 first quarter
• $0.09 diluted earnings per share (excluding severance costs) versus $0.20 per diluted share in the 2014 first quarter
• Consultants-on-Billing essentially flat during the first quarter of 2015
• Leadership changes / organizational realignments completed during the first quarter of 2015.
First Quarter Results:
Revenues for the first quarter of 2015 totaled $27.1 million compared to $28.7 million during the corresponding quarter last year. Gross profit in the first quarter of 2015 was $4.7 million compared to $5.2 million in the first quarter of 2014. Consolidated net income for the first quarter of 2015 totaled $195,000 or $0.04 per diluted share, compared to$869,000 or $0.20 per diluted share, during the same period last year. Consolidated net income in the 2015 first quarter included $305,000 of pre-tax severance costs related to a change in sales leadership, which impacted diluted earnings per share by $0.05.
Demand for the company's staffing services was solid for much of the quarter after some weakness in the first half of January. Gross margins in the first quarter of 2015 were 17.3% compared to 18.2% in the first quarter of 2014. Higher bench costs related to the start-up of our technology practice group and higher benefit costs related to the Affordable Care Act contributed to the lower margin performance in the first quarter of 2015.
Commenting on the company's first quarter 2015 performance, Kevin Horner, Mastech's chief executive officer, stated, "As we discussed in our fourth quarter 2014 earnings call, we expected our financial results for the first half of 2015 to be down as compared to 2014. Nonetheless, consultant on billing (COB) growth in the last two months of the quarter was an encouraging sign. With our leadership changes and organizational realignments in place, I am starting to see clear improvements in the business as we enter the second quarter."
Jack Cronin, Mastech's chief financial officer, stated, "Our financial position at March 31, 2015 remains strong with no outstanding debt, $2.9 million of cash balances on hand and $16.4 million of borrowing capacity available to us. During the quarter, we repurchased 20,891 shares of common stock at an average price of $9.59. At March 31, 2015we had approximately 472,000 shares available for purchase under our existing stock repurchase program."
Following Mastech's announcement that it signed a definitive asset purchase agreement to acquire Hudson Global'sU.S. IT staffing business, Kevin Horner stated, "This acquisition will provide Mastech with an impressive list of direct retail client relationships. We plan to maintain this relationship-focused business and all of its sales and recruiting staff.
"Additionally, we believe that there will be opportunities to leverage the advantages of Mastech's high-volume, low cost recruiting engine to enhance client value. I am very excited about this opportunity, which is expected to be immediately accretive to earnings and is estimated to increase Mastech's revenue run-rate by close to 30 percent." Subject to the completion of customary closing conditions, the acquisition is expected to close in the second quarter."