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What changed in Mastech Digital, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Mastech Digital, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+232 added−234 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-27)

Top changes in Mastech Digital, Inc.'s 2023 10-K

232 paragraphs added · 234 removed · 193 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeRefer to Note 18 “Business Segments and Geographic Information” to our Consolidated Financial Statements included in Item 8 herein for information about our two reportable segments. 11 Table of Contents Government Regulation We recruit IT professionals on a global basis from time to time and, therefore, must comply with the immigration laws in the countries in which we operate.
Biggest changeGovernment Regulation We recruit IT professionals on a global basis from time to time and, therefore, must comply with the immigration laws in the countries in which we operate. As of December 31, 2023, approximately 37% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visa.
In addition to the above, our Partner / Alliance Relationships (such as those we have with IBM and Informatica, Oracle, among others) also provide us with a significant pipeline of opportunities and new business. Furthermore, prospective clients reach us through referrals from our existing client base, our reputation in the data & analytics domain, and through our industry partners.
In addition to the above, our Partner / Alliance Relationships (such as those we have with IBM, Informatica and Oracle, among others) also provide us with a significant pipeline of opportunities and new business. Furthermore, prospective clients reach us through referrals from our existing client base, our reputation in the data & analytics domain, and through our industry partners.
Our IT professionals help design, develop, integrate, maintain and support mainstream technologies in the following areas: • Mainframes • Open Source (JAVA) • Databases • Data Warehousing • Middleware • Microsoft (C, .NET, SQL) • Enterprise Systems • IT Administration • SoA and Web Services • IT Helpdesk and Support • Verification and Validation • Business Analysis • Project Management Digital Learning Services Our digital learning practice provides custom training programs for different organizational needs.
Our IT professionals help design, develop, integrate, maintain and support mainstream technologies in the following areas: • Mainframes • Databases • Middleware • Enterprise Systems • SoA and Web Services • Verification and Validation • Project Management • Open Source (JAVA) • Data Warehousing • Microsoft (C, .NET, SQL) • IT Administration • IT Helpdesk and Support • Business Analysis Digital Learning Services Our digital learning practice provides custom training programs for different organizational needs.
These account executives are paired with recruiters and both receive incentive compensation based on revenue generation activities using a localized sales and recruitment model. Many large end-users of IT staffing services retain a third party to provide vendor management services to centralize the consultant hiring process and reduce costs.
These account executives are generally paired with recruiters and both receive incentive compensation based on revenue generation activities using a localized sales and recruitment model. Many large end-users of IT staffing services retain a third party to provide vendor management services to centralize the consultant hiring process and reduce costs.
Sales and Marketing Sales and Marketing at our Data and Analytics Services segment is a single, integrated function spanning across four groups in multiple locations: Marketing, Inside Sales, Principals, and Client Partners. • Our Marketing team is responsible for designing outbound campaigns around data and business value, for dissemination through our omni channels and industry publications.
Sales and Marketing Sales and Marketing at our Data and Analytics Services segment is a single, integrated function spanning across four groups in multiple locations: Marketing, Inside Sales, Principals, and Client Partners. • Our Marketing team is responsible for designing inbound and outbound campaigns around data and business value, for dissemination through our omni channels and industry publications.
Such changes, if enacted, may impact the types of H1-B temporary work permits that could be granted, the number of available H1-B temporary work permits, or the required prevailing wage that we are required to pay our H1-B employees, which in turn may have a negative impact on our revenues and profits.
Such changes, if enacted, may impact the types of H1-B temporary work visas that could be granted, the number of available H1-B temporary work permits, or the required prevailing wage that we are required to pay our H1-B employees, which in turn may have a negative impact on our revenues and profits.
Our Marketing team also works with our experts and thought leaders to create and disseminate data management, data engineering and data science thought leadership articles and white papers. • Our Inside Sales team is responsible for operating integrated email outbound marketing campaigns targeted at specific industries and functional populations, on an ongoing basis. • Our onshore team of Principals and Client Partners is responsible for building buyer relationships with prospects and leads, and for converting those conversations into value-positive revenue generating engagements. • Our typical credit terms require our invoices to be paid within 45 to 60-days of receipt by the client.
Our Marketing team also works with our experts and thought leaders to create and disseminate data management, data engineering and data science thought leadership articles and white papers. • Our Inside Sales team is responsible for operating integrated email and voice-based outbound marketing campaigns targeted at specific industries and functional populations, on an ongoing basis. • Our onshore team of Principals and Client Partners is responsible for building buyer relationships with prospects and leads, and for converting those conversations into value-positive revenue generating engagements. • Our typical credit terms require our invoices to be paid within 45 to 60-days of receipt by the client.
Congress has recently considered, and may consider in the future, extensive changes to U.S. immigration laws regarding the admission of high-skilled temporary and permanent workers and increases in prevailing wage related to H1-B employees.
Congress has considered, and may consider in the future, extensive changes to U.S. immigration laws regarding the admission of high-skilled temporary and permanent workers and increases in prevailing wage related to H1-B employees.
While there continues to be large scale discussion and a lack of consensus on what constitutes Digital Transformation, there is a general view that, at the core of the (r)evolution is Data Modernization — migration from legacy platforms, processes and strategies to new, dynamic, cloud-based approaches that focus on solving business problems and driving business outcomes.
While there continues to be large scale discussion and a lack of consensus on what constitutes Digital Transformation, there is a general view that, at the core of the transformation is Data Modernization — migration from legacy platforms, processes and strategies to new, dynamic, cloud-based approaches that focus on solving business problems and driving business outcomes.
IT Staffing — Digital Technologies Recognizing that a new breed of IT professionals adept in digital technologies are in high demand, we enhanced our recruitment capabilities to focus on digital technology skill sets. Today, Mastech Digital provides its clients with the ability to secure skill sets that encompass social, mobile, analytics, cloud-based technologies and automation.
IT Staffing — Digital Technologies Recognizing that a new breed of IT professionals adept in digital technologies is in high demand, we enhanced our recruitment capabilities to focus on digital technology skill sets. Today, Mastech Digital provides its clients with the ability to secure skill sets that encompass social, mobile, analytics, cloud-based technologies and automation.
Recruiting We operate several small recruiting centers located in the U.S. and one significantly larger facility in NOIDA, India that deliver a full range of recruiting and sourcing services. Our centers employ approximately 225 recruiters and sourcers who focus on recruiting U.S.-based candidates to service a geographically diverse client base in the U.S.
Recruiting We operate several small recruiting centers located in the U.S. and one significantly larger facility in NOIDA, India, that deliver a full range of recruiting and sourcing services. Our centers employ approximately 200 recruiters and sourcers who focus on recruiting U.S.-based candidates to service a geographically diverse client base in the U.S.
ITEM 1. BUSINESS Overview Mastech Digital, Inc. (referred to in this report as “Mastech Digital”, “Mastech”, the “Company”, “us”, “our” or “we”) is a provider of Digital Transformation IT Services. The Company offers data and analytics 1 Table of Contents solutions; digital learning; and IT staffing services for both digital and mainstream technologies.
ITEM 1. BUSINESS Overview Mastech Digital, Inc. (referred to in this report as “Mastech Digital”, “Mastech”, the “Company”, “us”, “our” or “we”) is a provider of Digital Transformation IT Services. The Company offers data and analytics solutions; digital learning; and IT staffing services for both digital and mainstream technologies.
We recruit for both segments through global recruitment centers located in the U.S. and India that deliver a full range of recruiting and sourcing services. Our centers employ approximately 225 recruiters and sourcers that focus on recruiting U.S.-based candidates to service a geographically-diverse client base in the U.S.
We recruit for both segments through global recruitment centers located in the U.S. and India that deliver a full range of recruiting and sourcing services. Our centers employ approximately 200 recruiters and sourcers that focus on recruiting U.S.-based candidates to service a geographically-diverse client base in the U.S.
Sales and marketing of our services are handled by separate and distinct sales organizations within each of our two business segments. Our data and analytic services are marketed through 1) account executives who largely focus on new business development; and 2) technical relationship managers (principals) who focus on growing strong relationships within existing clients.
Sales and marketing of our services are handled by separate and distinct sales organizations within each of our two business segments. Our data and analytics services are marketed through 1) account executives who largely focus on new business development; and 2) technical relationship managers (principals) who focus on growing strong relationships within existing clients.
With our October 2020 acquisition of AmberLeaf, we gained complimentary capabilities in customer experience consulting and managed services, as well as a sizeable roster of existing clients. Today, professional service firms have increasingly focused their efforts on partnering with their clients on enterprise-wide Digital Transformation.
With our October 2020 acquisition of AmberLeaf, we gained complementary capabilities in customer experience consulting and managed services, as well as a sizeable roster of existing clients. Today, professional service firms have increasingly focused their efforts on partnering with their clients on enterprise-wide Digital Transformation.
(f/k/a Mastech Holdings, Inc.) was incorporated in Pennsylvania as a wholly-owned subsidiary of iGATE on June 6, 2008 in anticipation of our spin-off from iGATE. On September 30, 2008, we spun-off from iGATE and began operating as an independent public company.
(f/k/a Mastech Holdings, Inc.) was incorporated in Pennsylvania as a wholly-owned subsidiary of iGATE on June 6, 2008, in anticipation of our spin-off from iGATE. On September 30, 2008, the Company was spun-off from iGATE and began operating as an independent public company.
Details related to these two businesses are discussed separately below, while information about our employees, differentiators, intellectual property rights and various other aspects of our business is shown in the aggregate for Mastech Digital, Inc. Data and Analytics Services Our Data and Analytics Services segment began with the acquisition of InfoTrellis, Inc.’s service business in July 2017.
Details related to these two businesses are discussed separately below, while information about our employees, differentiators, intellectual property rights and various other aspects of our business is shown in the aggregate for Mastech Digital, Inc. 3 Table of Contents Data and Analytics Services Our Data and Analytics Services segment began with the acquisition of InfoTrellis, Inc.’s service business in July 2017.
InfoTrellis, Inc. was founded by the engineering principals behind IBM’s Master Data Management (“MDM”) products and Informatica’s Customer 360 code-base. This acquisition provided Mastech InfoTrellis 3 Table of Contents with a solid foundation upon which to build, as we acquired a business with one of the largest concentrations of technology-agnostic data management expertise in the marketplace.
InfoTrellis, Inc. was founded by the engineering principals behind IBM’s Master Data Management (“MDM”) products and Informatica’s Customer 360 code-base. This acquisition provided Mastech InfoTrellis with a solid foundation upon which to build, as we acquired a business with one of the largest concentrations of technology-agnostic data management expertise in the marketplace.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other Securities and Exchange Commission (the “SEC”) filings, including any amendments to the foregoing reports, are available free of charge by accessing the Investors page of the Company’s website as soon as reasonably practical after such reports are filed with, or furnished to, the SEC.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other Securities and Exchange Commission (the “SEC”) filings, including any amendments to the foregoing reports, are available free of charge by accessing the Investors page of the Company’s website as soon as reasonably practical after such reports are filed with, or furnished to, the SEC. 11 Table of Contents
Our Data and Analytics Services segment delivers specialized data management, data engineering, customer experience consulting, data analytics and cloud services to customers globally. Each of these services can be delivered using onsite and offshore resources. Our IT Staffing Services segment combines technical expertise with business process experience to deliver a broad range of services in digital and mainstream technologies.
Our Data and Analytics Services segment delivers specialized data management, data engineering, customer experience consulting, data analytics and cloud services to customers globally. Each of these services can be delivered using on-site and offshore resources. Our IT Staffing Services segment combines technical expertise with business process experience to deliver a broad range of services in digital and mainstream technologies.
Digital technologies include the following areas: • Social Analytics • Data Engineering • Social Blogging • Data Analytics • Social Campaign Management • Data Science • Enterprise Mobility Strategy • Cloud Strategy • Mobile Application Development • Cloud Implementation and Support • Artificial Intelligence • Machine Learning 8 Table of Contents IT Staffing — Mainstream Technologies A large part of our business today comes from IT staffing services around mainstream technologies.
Digital technologies include the following areas: • Social Analytics • Social Blogging • Social Campaign Management • Enterprise Mobility Strategy • Mobile Application Development • Artificial Intelligence • Data Engineering • Data Analytics • Data Science • Cloud Strategy • Cloud Implementation and Support • Machine Learning IT Staffing — Mainstream Technologies A large part of our business today comes from IT staffing services around mainstream technologies.
Also in 2020, we completed the acquisition of AmberLeaf Partners, Inc., (“AmberLeaf”) which enhanced our Data and Analytics Services segment’s capabilities with its expertise in customer experience consulting and managed services. In 2021, we added cloud service capabilities to our Data and Analytics Services segment and expanded our IT Staffing Services segment’s MAS-REMOTE offering to include off-shore staffing services.
Also in 2020, we completed the acquisition of AmberLeaf Partners, Inc., (“AmberLeaf”), which enhanced our Data and Analytics Services segment’s capabilities with its expertise in customer experience consulting and managed services. In 2021, we added cloud service capabilities to our Data and Analytics Services segment and expanded our IT Staffing Services segment’s MAS-REMOTE offering to include offshore staffing services.
The combination 7 Table of Contents of our offshore recruiting capabilities, investment in sourcing and recruiting processes, expanded search coverage, around-the-clock sourcing, and extensive candidate pool, gives us the ability to deliver high-quality candidates to our clients in a timely fashion. We continue to invest in leading technologies and recruitment tools to enhance efficiencies.
The combination of our offshore recruiting capabilities, investment in sourcing and recruiting processes, expanded search coverage, around-the-clock sourcing, and extensive candidate pool, gives us the ability to deliver high-quality candidates to our clients in a timely fashion. We continue to invest in leading technologies and recruitment tools to enhance efficiencies.
Therefore, our responsiveness to the needs of these professionals is an important factor in our ability to be successful. Our Strengths We believe our strengths compared to industry peers include: Established client-base Our client base consists of large, medium-sized and small companies that span across multiple industry verticals.
Therefore, our responsiveness to the needs of these professionals is an important factor in our ability to be successful. 9 Table of Contents Our Strengths We believe our strengths compared to industry peers include: Established client-base Our client base consists of large, medium-sized and small companies that span across multiple industry verticals.
The delivery teams work in an integrated manner to provide quality IT talent with a faster turnaround time than many of our competitors. We have long-standing engagements with marquee brands and other premier global enterprises across various industries.
The delivery teams work in an integrated manner to 7 Table of Contents provide quality IT talent with a faster turnaround time than many of our competitors. We have long-standing engagements with marquee brands and other premier global enterprises across various industries.
Our geographical concentration tends to track major client locations, such as California, Texas, Pennsylvania, Virginia and Massachusetts, and in large metropolitan areas such as Chicago and New York City. We provide these services across a broad spectrum of industry verticals, including: financial services, government, healthcare, manufacturing, retail, technology, telecommunications and transportation.
Our geographical concentration tends to track major client locations, such as California, Texas, Pennsylvania and Virginia, and in large metropolitan areas such as Chicago and New York City. 8 Table of Contents We provide these services across a broad spectrum of industry verticals, including: financial services, government, healthcare, manufacturing, retail, technology, telecommunications and transportation.
Intellectual Property Rights Our intellectual property consists primarily of proprietary processes; client, employee and candidate information; and proprietary rights of third parties from whom we license intellectual property. We also own 9 Table of Contents proprietary knowledge of the frameworks and products that we have built in our Mastech InfoTrellis business.
Intellectual Property Rights Our intellectual property consists primarily of proprietary processes; client, employee and candidate information; and proprietary rights of third parties from whom we license intellectual property. We also own proprietary knowledge of the frameworks and products that we have built in our Mastech InfoTrellis business.
Investments in sourcing and recruiting processes and leading technologies and recruitment tools have resulted in a highly scalable offshore recruiting model, which has delivered value to our clients. 10 Table of Contents Additionally, we employ a human resource management model, featuring portal technology as well as immigration support services, for our widely dispersed consultant base.
Investments in sourcing and recruiting processes and leading technologies and recruitment tools have resulted in a highly scalable offshore recruiting model, which has delivered value to our clients. Additionally, we employ a human resource management model, featuring portal technology as well as immigration support services, for our widely dispersed consultant base.
Our typical project size, excluding our multi-year Center of Excellence contracts, is in the $500,000 to $2.5 million range depending on the scope and duration of the engagement. Our Center of Excellence contracts generally range from $5 million to $12 million.
Our typical project size, excluding our multi-year Center of Excellence contracts, is in the $500,000 to $2.5 million range depending on the scope and duration of the engagement. Our Center of Excellence contracts generally range from $4 million to $83 million.
Headquartered near Pittsburgh, Pennsylvania, we have approximately 1,560 consultants that provide services across a broad spectrum of industry verticals.
Headquartered near Pittsburgh, Pennsylvania, we have approximately 1,300 consultants that provide services across a broad spectrum of industry verticals.
Experienced management team Business leaders of our Data and Analytics Services business were part of the original thought leaders in the Master Data Management space, which lends significant credibility to this segment’s Master Data service offerings.
Experienced management team Several senior managers of our Data and Analytics Services business were part of the original thought leaders in the Master Data Management space, which lends significant credibility to this segment’s Master Data service offerings.
In each case, a client will submit to us 6 Table of Contents positions and / or requirements that they plan on satisfying by using temporary contractors. We propose consultants to the client that we believe satisfy their needs and propose an hourly bill rate for each consultant submitted.
In each case, a client will submit to us positions and / or requirements that they plan on satisfying by using temporary contractors. We propose consultants to the client that we believe satisfy their needs and propose an hourly bill rate for each consultant submitted.
Together with our operating subsidiaries, we have over 35 years of history as a reliable provider of IT staffing services. Established in 1986, our business model focused on importing global IT talent to the U.S. to meet the growing demand for IT professionals.
Together with our operating subsidiaries, we have over 36 years of history as a reliable provider of IT staffing services. 2 Table of Contents Established in 1986, our business model focused on importing global IT talent to the U.S. to meet the growing demand for IT professionals.
Geographic and Vertical Focus Mastech InfoTrellis’ primary customer geographies are in North America; however, we have customers and prospects in Europe. Our target clients are largely corporations with revenues exceeding $1 billion and include Fortune 100 organizations.
Geographic and Vertical Focus Mastech InfoTrellis’ primary customer geographies are in North America; however, we have customers and prospects in Europe and the Asia-Pacific region. Our target clients are largely corporations with revenues exceeding $1 billion and include Fortune 500 organizations.
Below is a breakdown of customer revenue percentages for each industry vertical in 2022: Financial Services 37 % Healthcare 16 % Manufacturing 21 % Government 5 % Retail 16 % Other 5 % IT Staffing Services In our IT Staffing Services business, we typically negotiate our business relationship by using one of three methods to gain agreement on the services to be provided.
Below is a breakdown of customer revenue percentages for each industry vertical in 2023: Financial Services 35 % Retail 16 % Healthcare 22 % Government 4 % Manufacturing 18 % Other 5 % IT Staffing Services In our IT Staffing Services business, we typically negotiate our business relationship by using one of three methods to gain agreement on the services to be provided.
We work with businesses and institutions with significant IT-spend and recurring staffing needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. Additionally, we provide offshore staffing services to our U.S.-based clients and local offshore clients.
We work with businesses and institutions with significant IT-spend and recurring staffing needs. We also support smaller organizations with their “project focused” temporary IT staffing requirements. Additionally, we provide offshore staffing services to our U.S.-based clients and local offshore clients, and recently added engineering staffing services to our portfolio of service offerings.
Employees At December 31, 2022, we had 1,071 North American employees and 624 employees offshore, in addition to 324 subcontracted professionals. None of our employees are subject to collective bargaining agreements governing their employment with our Company. We employ our consultants on both an hourly and salary basis. A large portion of our salaried employees are H1-B visa holders.
Employees At December 31, 2023, we had 841 North American employees and 556 employees offshore, in addition to 251 subcontracted professionals. None of our employees are subject to collective bargaining agreements governing their employment with our Company. We employ our consultants on both an hourly and salary basis. A large portion of our salaried employees is H1-B visa holders.
Below is a breakdown of our IT Staffing billable consultant base by industries that represented at least 5% of our billable consultants as of December 31, 2022: Financial Services 53 % Technology 6 % Healthcare 9 % Retail 5 % Government 8 % Other 12 % Telecom 7 % Mastech Digital, Inc.
Below is a breakdown of our IT Staffing billable consultant base by industries that represented at least 5% of our billable consultants as of December 31, 2023: Financial Services 48 % Telecom 6 % Technology 10 % Retail 4 % Healthcare 9 % Other 15 % Government 8 % Mastech Digital, Inc.
In 2022, we established in new subsidiary in NOIDA, India to support our offshore staffing services business. Operating Segments Our revenues are generated from two business segments: Data and Analytics Services and IT Staffing Services.
In 2022, we established a new subsidiary in NOIDA, India to support our offshore staffing services business. In late 2023, we expanded our services offerings to include engineering staffing services. Operating Segments Our revenues are generated from two business segments: Data and Analytics Services and IT Staffing Services.
Most of our strategic relationships are established at the vice president / sales director level. Selling is conducted through account executives utilizing a sales model which is desirable to our clients’ needs.
In addition, we work to penetrate our existing client relationships to deeper levels. Most of our strategic relationships are established at the vice president / sales director level. 6 Table of Contents Selling is conducted through account executives utilizing a sales model which is desirable to our clients’ needs.
In the early 2000s, the demand for IT professionals declined and the supply of IT resources quickly exceeded a declining demand curve. No longer was there a need to recruit abroad 2 Table of Contents for technology talent, as supply was abundant in the U.S.
In the early 2000s, the demand for IT professionals declined, and the supply of IT resources quickly exceeded a declining demand. No longer was there a need to recruit abroad for technology talent, as supply was abundant in the U.S. Accordingly, we retooled our recruiting model to focus on the recruitment of U.S.-based IT talent.
As of December 31, 2022, approximately 27% of our workforce was working under Mastech Digital sponsored H1-B temporary work permits. Statutory law limits the number of new H1-B petitions that may be approved in a fiscal year to enter the U.S. Legislation could be enacted limiting H1-B visa holders’ employment with staffing companies.
Statutory law limits the number of new H1-B petitions that may be approved in a fiscal year to enter the U.S. Legislation could be enacted limiting H1-B visa holders’ employment with staffing companies.
We then master and manage our clients’ data and develop data products and deploy purpose-built advanced analytics, machine learning, and artificial intelligence, to deliver greater business velocity, significant cost reduction, and greater corporate resilience. 4 Table of Contents Our Practices Mastech InfoTrellis builds a strong data foundation that delivers significant business value.
Once engaged with a prospect, our approach to value-delivery starts with the definition of a discrete business problem. We then master and manage our clients’ data and develop data products and deploy purpose- 4 Table of Contents built advanced analytics, machine learning, and artificial intelligence, to deliver greater business velocity, significant cost reduction, and greater corporate resilience.
Accordingly, we retooled our recruiting model to focus on the recruitment of local U.S.-based IT talent. Given our reputation with and knowledge of H1-B visas, part of our recruiting efforts focused on attracting H1-B visa holders currently in the U.S. This approach gave us access to a larger and differentiated recruiting pool when compared to many of our competitors.
Given our extensive experience with the H1-B visa process, part of our recruiting efforts focused on attracting H1-B visa holders present in the U.S. at the time. This approach gave us access to a larger and differentiated recruiting pool when compared to many of our competitors.
Reportable Financial Segments The Company has two reportable segments in accordance with Accounting Standards Codification (“ASC”) Topic 280 “Disclosures about Segments of an Enterprise and Related Information”.
Reportable Financial Segments The Company has two reportable segments in accordance with Accounting Standards Codification (“ASC”) Topic 280 “Disclosures about Segments of an Enterprise and Related Information”. Refer to Note 16 “Business Segments and Geographic Information” to our Consolidated Financial Statements included in Item 8 herein for information about our two reportable segments.
Expertise in high-demand digital transformation IT skills In our Data and Analytics Services segment, we have strong expertise in data management, data engineering, analytics and customer experience consulting — both in North America as well as off-shore. Additionally, we have considerable industry experience by serving some of the world’s most-respected brands in financial services, manufacturing, retail and healthcare.
Expertise in high-demand Digital Transformation IT skills In our Data and Analytics Services segment, we have strong expertise in data management, data engineering, analytics and customer experience consulting — both in North America as well as offshore.
In our IT Staffing Services segment, we have substantial expertise in certain advanced technology IT skills, including: cloud, mobile, data & analytics, social media, artificial intelligence/machine learning and digital learning.
Additionally, we have considerable industry experience by serving some of the world’s most-respected brands in financial services, manufacturing, retail and healthcare. 10 Table of Contents In our IT Staffing Services segment, we have substantial expertise in certain advanced technology IT skills, including: cloud, mobile, data & analytics, social media, artificial intelligence/machine learning and digital learning.
Sales and Marketing We target much of our marketing efforts on businesses and institutions with significant budgets and recurring IT staffing and digital transformation needs. We look to develop relationships with new clients. In addition, we work to penetrate our existing client relationships to deeper levels.
In late 2023, we expanded our staffing services to include an engineering service offering. In 2023, engineering revenues were less than 1% of total revenues. Sales and Marketing We target much of our marketing efforts on businesses and institutions with significant budgets and recurring IT staffing and Digital Transformation needs. We look to develop relationships with new clients.
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Once engaged with a prospect, our approach to value-delivery starts with the definition of a discrete business problem.
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Our Practices Mastech InfoTrellis builds a strong data foundation that delivers significant business value. Our expertise and technology practice stretches across four key domain areas.
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Our expertise and technology practice stretches across five key domain areas. Data Management: Our Data Management services help enterprises identify, acquire, store, manage, and transform data to fuel impactful business insights.
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Data-in-Motion: We create connected and modern data systems with seamless data flow through: • Agile engineering: delivering efficient and scalable code through agile development practices; • Trusted data: ensuring data integrity through robust quality assurance processes; • Streamlined integration: enabling seamless data integration with a composable architecture and automation; and • Data visibility: providing comprehensive data observability for monitoring and validating data ecosystems.
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Our offerings in this practice are: • Data Advisory, where we design strategic roadmaps for clients to make informed decisions with analytics. • Data Services, which includes a set of strategy and implementation services focused on Cloud Pak for Data, Data Governance solutions, and Master Data Management. • Data Management CoE, where we partner with clients to make Data Management and Data Governance easier with a Center of Excellence (CoE) while migrating to the Cloud without business interruptions.
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Data-as-an-Asset: We bridge data acquisition and activation with better data management through MDM, Data Governance, Data Privacy, and Data Warehousing solutions. • Our approach focuses on understanding business use cases and designing technology solutions that directly address the end objectives. • We collaborate with industry-leading data-focused technology providers, offering tailored solutions for unique business and technical needs. • Our vast experience in developing MDM platforms and our partnerships with data-focused software firms provide us with a deep understanding of the technology landscape.
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Data Engineering: We establish an Enterprise Data Environment to derive insights, knowledge, and intelligence and deliver value from a modern, agile, and trusted implementation architecture.
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Data Activation: We unlock insights for better business decision-making through: • Gap-to-goal roadmaps: We help address the gaps that hinder business goals, with technology-agnostic roadmaps and guide clients toward desired outcomes. • Tailored technology solutions: With experience in over two thousand implementations, we customize solutions that blend out-of-the-box functionalities with custom features. • Seamless integrations: Our experts excel at integrating sales, service, marketing, and BI platforms, for seamless data flow and efficient operations. • Empowering expertise: Post implementation, we equip clients with skills to maintain and leverage tools, manage administration, streamline business processes.
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Our offerings fall under two broad categories: Technology • Enterprise Data Integration is a single desk for ingesting existing data while providing the capability to integrate new data sources for scale. • Enterprise Intelligence Hub (EIH) brings together a modular architecture across all the major ecosystem components to allow an enterprise to adapt and grow at a much higher velocity. • Entity Resolution creates a Record Linkage process across the Enterprise by consistently identifying existing and new entities through the data connectivity process. • Enterprise Data Bus (EDB) is a scalable, fault-tolerant ecosystem that can collect, transport, engineer, and act on data for our clients in a reliable manner.
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Analytics, AI, and Data Sciences: We drive informed decision-making with modern statistical techniques and analytics with a strong focus on: • Domain expertise: With cutting-edge techniques and industry knowledge, we derive valuable insights, predictions, and actionable strategies from client data. • Holistic data strategy: We develop data strategies that encompass governance, acquisition, quality, and integration, laying a foundation for effective data-driven decision-making. 5 Table of Contents • Scalable and efficient: Leveraging scalable technologies and architectures, we handle increasing data volumes and evolving needs while providing high-performance and timely insights. • ROI and business impact: Our data-driven strategies align with client key performance indicators and help unlock cost savings, impact revenue growth, and increase process efficiencies.
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Service • Data Engineering Advisory Services help enterprises develop a coherent data strategy to become a more data-driven enterprise by assessing the enterprise data ecosystem and determining the changes needed. • Data Engineering Managed Services is a comprehensive approach to manage and support enterprise Data Information Systems.
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Data Science: We bring our clients a rapid-learning culture, coupled with a co-creation-driven approach, to solve business problems and make smart decisions by applying Data Science powered by Machine Learning, Artificial Intelligence, and Knowledge Graphs.
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Our analytics and AI/ML solutions facilitate both culture and business transformation, leveraging domain knowledge with cognitive computing to produce unbiased learning accelerators for different parts of our client’s business.
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We offer: • Analytics Advisory — a strategic view of how analytics can drive digital transformation. 5 Table of Contents • Analytics Services — to drive excellence in reporting and modeling. • Analytics Centre of Excellence — data science expertise delivered on state-of-the-art data architecture and analytics infrastructure.
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Customer Experience Consulting: We optimize Customer Experience (“CX”) across Sales, Service, and Marketing with relevant, coordinated, consistent, and personalized experiences informed by analytics: • CX Advisory Services — we design a roadmap for Customer Experience across all enterprise functions that are fast-paced and cost-effective and provide the client with information needed to start their Customer Experience initiative. • CX Accelerators — a vertical-focused suite that uses a set of frameworks to allow clients to get a head start on their implementation instead of starting with a blank sheet of paper. • CXaaS (Customer Experience as a Service) — tailored to manage specific client needs, informed by analytics, across all aspects of Customer Experience in Sales, Marketing, and Services.
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Cloud Services: We help our clients take advantage of enterprise Cloud Infrastructure by modernizing application development and accelerate Cloud adoption: • Cloud Advisory Services — where we build our clients a Cloud journey roadmap to reduce DevOps and CloudOps challenges in Cloud adoption while supporting best-practices of agile application development. • Cloud Adoption Services — to help enterprises with Cloud adoption and deployment of both cloud-native applications and the migration of existing applications to the Cloud. • Cloud CoE — to build and manage our clients’ Cloud infrastructure and DevOps and CloudOps practices with a one-stop delivery model.
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Today, we are led by an executive team of “business transformation” veterans and data science experts, with a track record of delivering positive business outcomes for clients across industry verticals.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition to the foregoing, acquisitions may also cause us to: • use a substantial portion of our cash reserves or incur debt; • issue equity securities or grant equity incentives that dilute our current shareholders’ percentage ownership; • assume liabilities, including potentially unknown liabilities; • record goodwill and amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges; • incur amortization expenses related to certain intangible assets; • incur large and immediate write-offs and restructuring and other related expenses; and • become subject to intellectual property litigation or other litigation.
Biggest changeIn addition to the foregoing, acquisitions may also cause us to: • use a substantial portion of our cash reserves or incur debt; • issue equity securities or grant equity incentives that dilute our current shareholders’ percentage ownership; • assume liabilities, including potentially unknown liabilities; • record goodwill and amortizable intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges; • incur amortization expenses related to certain intangible assets; • incur large and immediate write-offs and restructuring and other related expenses; and • become subject to intellectual property litigation or other litigation. 14 Table of Contents Acquisitions of technology companies and assets are inherently risky and subject to many factors outside of our control, and no assurance can be given that our prior or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition.
If we are in default under our Credit Agreement due to our inability to make the required payments, or if we otherwise fail to comply with the financial and other covenants contained therein, all of our debt thereunder could be accelerated and the lenders under our Credit Agreement could be permitted to foreclose on our assets securing such debt.
If we are in default under the Credit Agreement due to our inability to make the required payments, or if we otherwise fail to comply with the financial and other covenants contained therein, all of our debt thereunder could be accelerated and the lenders under our Credit Agreement could be permitted to foreclose on our assets securing such debt.
Our revenues and operations were affected by a range of external factors related to the COVID-19 pandemic in 2020 and to a lesser extent in 2021 and 2022.
Our revenues and operations were affected by a range of external factors related to the COVID-19 pandemic in 2020 and to a lesser extent in 2021, 2022 and 2023.
Historically, we have done much of our recruiting from outside of the country where the client work is performed. Accordingly, any perception among our IT professionals, whether or not well founded, that our ability to assist them in obtaining temporary work visas and permanent residency status has been diminished, could lead to significant employee attrition.
Historically, we have done much of our recruiting from outside of the country where the client work is performed. Accordingly, any perception among our IT professionals, whether or not well founded, that our ability to assist them in obtaining temporary work visa and permanent residency status has been diminished, could lead to significant employee attrition.
Statutory law limits the number of new H1-B petitions that may be approved in a fiscal year, and if we are unable to obtain H1-B visas for our employees in sufficient quantities or at a sufficient rate for a significant period of time, our business, operating results and financial condition could be adversely affected.
Applicable law limits the number of new H1-B petitions that may be approved in a fiscal year, and if we are unable to obtain H1-B visas for our employees in sufficient quantities or at a sufficient rate for a significant period of time, our business, operating results and financial condition could be adversely affected.
Also, if the enforcement of immigration laws by governmental authorities is unjustified or discriminatory, such enforcement could have the effect of disrupting our workforce. The U.S. Congress and Biden administration may make substantial changes to fiscal, tax, and other federal policies that may adversely affect our business. In 2017, U.S.
Also, if the enforcement of immigration laws by governmental authorities is unjustified or discriminatory, such enforcement could have the effect of disrupting our workforce. The U.S. Congress, the Biden administration, or any new administration may make substantial changes to fiscal, tax, and other federal policies that may adversely affect our business. In 2017, the U.S.
The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people and goods and services worldwide in regions where we sell our services and conduct our business operations. The pandemic has resulted in a global slowdown of economic activity, including travel restrictions and prohibitions of non-essential activities in some cases.
The COVID-19 pandemic and efforts to control its spread significantly curtailed the movement of people and goods and services worldwide in regions where we sell our services and conduct our business operations. The pandemic resulted in a global slowdown of economic activity, including travel restrictions and prohibitions of non-essential activities in some cases.
Our ownership is highly concentrated in two individuals and the interests of those individual shareholders may not coincide with yours. Sunil Wadhwani and Ashok Trivedi, co-founders of the Company, beneficially own approximately 59% of Mastech Digital’s outstanding common stock as of December 31, 2022. Accordingly, Messrs.
Our ownership is highly concentrated in two individuals and the interests of those individual shareholders may not coincide with yours. Sunil Wadhwani and Ashok Trivedi, co-founders of the Company, beneficially own approximately 59% of Mastech Digital’s outstanding common stock as of December 31, 2023. Accordingly, Messrs.
S. policy have occurred and further U.S. policy changes are possible, if not likely. Changes to U.S. policy implemented by the U.S. Congress or the Biden administration may impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas.
S. policy have occurred and further U.S. policy changes are possible, if not likely. Changes to U.S. policy implemented by the U.S. Congress, the Biden administration or any new administration may impact, among other things, the U.S. and global economy, international trade relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas.
Because developments concerning the COVID-19 pandemic have been and continue to be constantly evolving, additional impacts and risks may arise that we are not aware of or that we may not be able to appropriately or timely address.
Because developments concerning the COVID-19 pandemic and the spread of COVID-19 variants have been and continue to be constantly evolving, additional impacts and risks may arise that we are not aware of or that we may not be able to appropriately or timely address.
To the extent we are unable to comply with applicable regulations related to climate change, and such failure to comply results in material increases in compliance costs or litigation expenses, those costs or expenses will have an adverse effect on our profitability. Our success depends upon retaining the services of our management team and key operating employees.
To the extent we are unable to comply with applicable regulations related to climate change, and such failure to comply results in material increases in compliance costs or litigation expenses, those costs or expenses will have an adverse effect on our profitability. 20 Table of Contents Our success depends upon retaining the services of our management team and key operating employees.
These covenants and limitations may limit our ability to, among other things: • create, incur or assume liens; • make investments and loans; • create, incur, assume or guarantee additional indebtedness; 16 Table of Contents • engage in mergers, acquisitions, consolidations, sale-leasebacks and other similar transactions; • pay dividends, or redeem or repurchase our capital stock; • alter the business that we conduct; • engage in certain transactions with officers, directors and affiliates; • prepay, redeem or purchase other indebtedness; • enter into certain agreements; and • make material changes to accounting and reporting practices.
These covenants and limitations may limit our ability to, among other things: • create, incur or assume liens; • make investments and loans; • create, incur, assume or guarantee additional indebtedness; • engage in mergers, acquisitions, consolidations, sale-leasebacks and other similar transactions; • pay dividends, or redeem or repurchase our capital stock; • alter the business that we conduct; • engage in certain transactions with officers, directors and affiliates; • prepay, redeem or purchase other indebtedness; • enter into certain agreements; and • make material changes to accounting and reporting practices.
Our level of indebtedness (which may fluctuate) could have important consequences on our future operations, including the following: • increasing the risk that we cannot satisfy our payment or other obligations under our outstanding debt, which may result in defaults; • subjecting us to increased sensitivity to interest rate increases on our outstanding indebtedness, which could cause our debt service obligations to increase significantly; • reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and general economic conditions; • placing us at a competitive disadvantage to our competitors that have less debt or are less leveraged; and • increasing our vulnerability to the impact of adverse economic and industry conditions.
Our level of indebtedness (which may increase) could have important consequences on our future operations, including the following: • increasing the risk that we cannot satisfy our payment or other obligations under our outstanding debt, which may result in defaults; • subjecting us to increased sensitivity to interest rate increases on our outstanding indebtedness, which could cause our debt service obligations to increase significantly; • reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and general economic conditions; • placing us at a competitive disadvantage to our competitors that have less debt or are less leveraged; • increasing our vulnerability to the impact of adverse economic and industry conditions; and • limiting our ability to execute on our existing share repurchase program.
Unless we are able to continue to increase the efficiency and productivity of our employees, wage increases in the long term may reduce our overall margins. Negative economic or business conditions brought on by a global health pandemic, epidemic or outbreak may adversely affect demand for our services.
Unless we are able to continue to 23 Table of Contents increase the efficiency and productivity of our employees, wage increases in the long term may reduce our overall margins. Negative economic or business conditions brought on by a global health pandemic, epidemic or outbreak may adversely affect demand for our services.
If we cannot maintain and execute adequate internal control over financial reporting or implement necessary new or improved controls that provide reasonable assurance of the reliability of our financial reporting and preparation of our financial statements for external use, we could suffer harm of our reputation, fail to meet our public reporting requirements on a timely basis, be unable to properly report our financial results, or be required to restate our financial statements, which could result in the loss of investor confidence and may adversely impact our stock price.
If we cannot maintain and execute adequate internal control over financial reporting or implement necessary new or improved controls that provide reasonable assurance of the reliability of our financial reporting and preparation of our financial statements for external use, we could suffer harm of our reputation, fail to meet our public reporting requirements on a timely basis, be unable to properly report our financial results, or be required to restate our financial statements, which could result in the loss of investor confidence and may adversely impact our stock price. 25 Table of Contents ITEM 1B.
The loss of any significant client or major project, or an unanticipated termination of a major project, could result in the loss of substantial anticipated revenues. 15 Table of Contents Our leverage could materially and adversely affect our financial condition or operating flexibility and prevent us from fulfilling our obligations under our Credit Agreement.
The loss of any significant client or major project, or an unanticipated termination of a major project, could result in the loss of substantial anticipated revenues. Our leverage could materially and adversely affect our financial condition or operating flexibility and prevent us from fulfilling our obligations under our Credit Agreement.
Significant uninsured liabilities could have a material adverse effect on our business, financial condition and results of operations. Any disruption in the supply of power, IT infrastructure and telecommunications lines to our facilities could disrupt our business process or subject us to additional costs.
Significant uninsured liabilities could have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents Any disruption in the supply of power, IT infrastructure and telecommunications lines to our facilities could disrupt our business process or subject us to additional costs.
Climate change and measures adopted to address it can affect us, our clients and suppliers in myriad ways, depending on the 20 Table of Contents nature and location of the businesses, the near-term capital expenditure needs, the regulatory environments where they operate and their strategic plans.
Climate change and measures adopted to address it can affect us, our clients and suppliers in myriad ways, depending on the nature and location of the businesses, the near-term capital expenditure needs, the regulatory environments where they operate and their strategic plans.
Although we believe the immediate impact of the COVID-19 pandemic has been assessed and largely reflected in our 2022 financial results, the long-term magnitude and duration of the disruption and resulting decline in business activity is still highly uncertain and cannot currently be predicted.
Although we believe the immediate impact of the COVID-19 pandemic has been assessed and largely reflected in our 2023 financial results, the long-term magnitude and duration of the disruption and resulting decline in business activity is still highly uncertain and cannot be predicted.
We base our estimates on historical experience and on various other assumptions that we believe are reasonable at the time they are made. These estimates and assumptions involve the use of judgment and can be subject to uncertainties, some of which are beyond our control.
We base our estimates on historical experience and on various other 22 Table of Contents assumptions that we believe are reasonable at the time they are made. These estimates and assumptions involve the use of judgment and can be subject to uncertainties, some of which are beyond our control.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any breaches of our networks We depend on the proper functioning of our information systems. We are dependent on the proper functioning of information systems in operating our business.
We maintain cyber risk insurance, but this insurance may not be sufficient to cover all of our losses from any breaches of our networks. 18 Table of Contents We depend on the proper functioning of our information systems. We are dependent on the proper functioning of information systems in operating our business.
For example, the COVID-19 pandemic and governmental actions taken to curtail the spread of the virus during 2020, 2021 and 2022 had an impact on our employees, customers and third-party providers and impacted the level of economic activity. Any such disaster or other business continuity problem could have a material adverse impact on our revenues and profitability.
For example, the COVID-19 pandemic and governmental actions taken to curtail the spread of the virus had an impact on our employees, customers and third-party providers and impacted the level of economic activity. Any such disaster or other business continuity problem could have a material adverse impact on our revenues and profitability.
Internal control over financial reporting has inherent limitations, including human error, the 25 Table of Contents possibility that controls could be circumvented or become inadequate because of changing conditions. Because of these limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changing conditions. Because of these limitations, internal control over financial reporting might not prevent or detect all misstatements or fraud.
A significant number of organizations are attempting to migrate their IT business applications to advanced technologies, such as cloud services, data scientists, mobility, and social analytics. As a result, our ability to remain competitive depends on several factors, including our ability to develop, train and hire employees with skills in advanced technologies.
A significant number of organizations is attempting to migrate their IT business applications to advanced technologies, such as artificial intelligence, cloud services, data scientists, mobility, and social analytics. As a result, our ability to remain competitive depends on several factors, including our ability to develop, train and hire employees with skills in advanced technologies.
It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or renewing work visas for our professionals. Immigration change continues to attract significant attention in the public arena and in the current U.S. administration and Congress.
It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or renewing work visas for our professionals. 21 Table of Contents Immigration change continues to attract significant attention in the public arena and in the current U.S. administration and Congress.
To the extent the COVID-19 pandemic or the efforts taken to control its spread adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this 12 Table of Contents “Risk Factors” section.
To the extent the COVID-19 pandemic or the efforts taken to control its spread or the spread of COVID-19 variants adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Wadhwani and Trivedi and their affiliates maintaining their positions as the collective majority holders of our common stock, any decrease in their collective ownership may jeopardize our status as a minority-owned business. There can be no assurance that Messrs. Wadhwani and Trivedi and their affiliates will maintain their majority position in the Company.
Wadhwani and Trivedi and their affiliates maintaining their positions as the collective majority holders of our common stock, any decrease in their collective ownership may jeopardize our status as a minority-owned business. There can be no assurance that Messrs.
Our success will depend in part on our ability to keep pace with industry developments. There can be no assurance that we will be successful in addressing these developments on a timely basis or that, if these developments are addressed, we will be successful in the marketplace.
Our success will depend in part on our ability to keep pace with industry developments. There can be no assurance that we will be successful in addressing these developments on a timely basis or that, if these developments are addressed, we 16 Table of Contents will be successful in the marketplace.
We are exposed to various possible claims relating to our business. In the ordinary course of business, we have, and in the future, may become the subject of various claims, lawsuits, and administrative proceedings seeking damages or other remedies concerning our operations, products, services, employees and other matters.
In the ordinary course of business, we have, and in the future, may become the subject of various claims, lawsuits, and administrative proceedings seeking damages or other remedies concerning our operations, products, services, employees and other matters.
Economic slowdowns, changes in law and other restrictions or factors that affect the economic health of these industries may affect our business. For the year ended December 31, 2022, approximately 53% of our revenues were derived from our top ten clients.
Economic slowdowns, changes in law and other restrictions or factors that affect the economic health of these industries may affect our business. For the year ended December 31, 2023, approximately 53% of our revenues were derived from our top ten clients and approximately 50% of revenues came from financial services clients.
Within our IT Staffing Services segment, many large users of staffing services are employing MSP’s to manage their contractor expenses in an effort to drive down overall costs. MSP clients represented approximately 35% of our overall 2022 revenues and has been largely flat in recent years.
Within our IT Staffing Services segment, many large users of staffing services are employing MSP’s to manage their contractor expenses in an effort to drive down overall costs. MSP clients represented approximately 12 Table of Contents 32% of our overall 2023 revenues and has been largely flat in recent years.
The market price of our common stock may be highly volatile and may fluctuate substantially due to many factors, including: • actual or anticipated fluctuations in our results of operations; • variance in our financial performance from the expectations of market analysts; 24 Table of Contents • conditions and trends in the end markets we serve, and changes in the estimation of the size and growth rate of these markets; • our ability to integrate acquisitions; • announcements of significant contracts by us or our competitors; • changes in our pricing policies or the pricing policies of our competitors; • restatements of historical financial results and changes in financial forecasts; • loss of one or more of our significant customers; • legislation; • changes in market valuation or earnings of our competitors; • the trading volume of our common stock; • the trading of our common stock on multiple trading markets, which takes place in different currencies and at different times; and • general economic conditions.
The market price of our common stock may be highly volatile and may fluctuate substantially due to many factors, including: • actual or anticipated fluctuations in our results of operations; • variance in our financial performance from the expectations of market analysts; • conditions and trends in the end markets we serve, and changes in the estimation of the size and growth rate of these markets; • our ability to integrate acquisitions; • announcements of significant contracts by us or our competitors; • changes in our pricing policies or the pricing policies of our competitors; • restatements of historical financial results and changes in financial forecasts; • loss of one or more of our significant customers; • legislation; • changes in market valuation or earnings of our competitors; • the trading volume of our common stock; • the trading of our common stock on multiple trading markets, which takes place in different currencies and at different times; and • general economic conditions. 24 Table of Contents Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks.
If the costs of carrying these insurance policies increase significantly, due to poor claims history or changes in market conditions, this could have an adverse impact on our profitability and financial condition. 19 Table of Contents We may not have adequate insurance for potential liabilities, including liabilities arising from litigation.
If the costs of carrying these insurance policies increase significantly, due to poor claims history or changes in market conditions, this could have an adverse impact on our profitability and financial condition. We may not have adequate insurance for potential liabilities, including liabilities arising from litigation. We are exposed to various possible claims relating to our business.
The Tax Cuts and Jobs Act of 2017 continues to require interpretation, and the Biden administration has indicated that it intends to modify key aspects of the tax code, which could materially affect our tax obligations and effective tax rate.
The Tax Cuts and Jobs Act of 2017 continues to require interpretation, and a new administration could modify key aspects of the tax code, which could materially affect our tax obligations and effective tax rate.
Our strategy of expansion through the acquisition of additional companies may not be successful and may result in slower growth of our business and reduced operating margins. We plan to gradually expand our operations through the acquisition of, or investment in, additional businesses and companies. We may be unable to identify businesses that complement our strategy for growth.
We plan to gradually expand our operations through the acquisition of, or investment in, additional businesses and companies. We may be unable to identify businesses that complement our strategy for growth.
While the roll-out of global vaccination programs is an encouraging sign for the future, the COVID-19 variants and efforts to control their spread could still continue to adversely affect our business, impact the demand for our services and alter the way we conduct our business, and we cannot predict the magnitude or duration of these effects.
Furthermore, COVID-19 variants and efforts to control their spread could still continue to adversely affect our business, impact the demand for our services and alter the way we conduct our business, and we cannot predict the magnitude or duration of these effects.
Our failure to manage growth or attract and retain personnel, or a significant interruption in our ability to transmit data and voice efficiently, could have a material adverse impact on our ability to successfully maintain and develop our global recruitment and delivery centers and could have a material adverse effect on our business, operating results and financial condition. 13 Table of Contents The Indian rupee may increase in value relative to the dollar, increasing our costs.
Our failure to manage growth or attract and retain personnel, or a significant interruption in our ability to transmit data and voice efficiently, could have a material adverse impact on our ability to successfully maintain and develop our global recruitment and delivery centers and could have a material adverse effect on our business, operating results and financial condition.
Certain institutional investors, investment funds, other influential investors, customers, suppliers and other third parties are also increasingly focused on ESG practices.
Investors, shareholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors and reporting. Certain institutional investors, investment funds, other influential investors, customers, suppliers and other third parties are also increasingly focused on ESG practices.
Although, we receive the vast majority of our revenues in U.S. dollars, we maintain a significant portion of our recruiting and delivery workforces in India, and those employees are paid in rupees.
The Indian rupee may increase in value relative to the dollar, increasing our costs. Although, we receive the vast majority of our revenues in U.S. dollars, we maintain a significant portion of our recruiting and delivery workforces in India, and those employees are paid in rupees.
As of December 31, 2022, approximately 27% of our workforce was working under Mastech Digital sponsored H1-B temporary work permits.
As of December 31, 2023, approximately 37% of our employee workforce was working under Mastech Digital sponsored H1-B temporary work visas.
At December 31, 2022, we had outstanding borrowings of $1.1 million under our Credit Agreement with PNC Bank and certain other financial institution lenders (the “Credit Agreement”), which amount consists of $1.1 million of outstanding borrowings under the term loan and no outstanding borrowings under the revolving credit facility, and unused borrowing capacity of $31.8 million under the revolving credit facility established by the Credit Agreement.
At December 31, 2023, we had no outstanding borrowings under our Credit Agreement with PNC Bank and certain other lenders (the “Credit Agreement”) and unused borrowing capacity of $22.5 million under the revolving credit facility established by the Credit Agreement.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we 15 Table of Contents may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, or restructure or refinance our indebtedness.
We provide healthcare coverage to our U.S.-based employees that are subject to the Affordable Care Act (“ACA”). Additional provisions of the ACA and the compliance of such may result in higher overall costs to the Company, which could have a negative impact on our operating results, cash flows and financial condition .
Additional provisions of the ACA and the compliance of such may result in higher overall costs to the Company, which could have a negative impact on our operating results, cash flows and financial condition .
In addition, the terms of existing or future debt agreements and other factors may restrict us from pursuing any of these alternatives.
These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements and other factors may restrict us from pursuing any of these alternatives.
We utilize individuals to provide certain services in connection with our business as qualified third-party independent contractors rather than as direct employees. As of December 31, 2022, approximately 16% of our workforce were independent contractors. Heightened state and federal scrutiny of independent contractor relationships could adversely affect us given that we utilize independent contractors to perform certain services.
As of December 31, 2023, approximately 15% of our workforce were independent contractors. Heightened state and federal scrutiny of independent contractor relationships could adversely affect us given that we utilize independent contractors to perform certain services.
This, in turn, could have a material adverse effect on our business, operating results and financial condition. Wage costs in India may increase, which may reduce our operating margins and reduce a competitive advantage of ours.
Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult. This, in turn, could have a material adverse effect on our business, operating results and financial condition. Wage costs in India may increase, which may reduce our operating margins and reduce a competitive advantage of ours.
In addition, the failure to be designated as a preferred vendor, or the loss of such status, may preclude us from providing services to existing or potential clients, except as a subcontractor, which could have a material adverse effect on the volume of business obtained from such clients. 17 Table of Contents Our success depends upon the maintenance and protection of our intellectual property rights and processes, and any substantial costs incurred protecting such rights and processes may decrease our operating margins.
In addition, the failure to be designated as a preferred vendor, or the loss of such status, may preclude us from providing services to existing or potential clients, except as a subcontractor, which could have a material adverse effect on the volume of business obtained from such clients.
While these engagements provide opportunities to partner with and deeply understand a client’s data management and analytics longer-term objectives, these contracts generally can be early terminated by the client with a short-term notice. Should a client terminate an engagement early, this termination could materially impact our backlog of orders and adversely affect our business and future revenues.
While these engagements provide opportunities to partner with and deeply understand a client’s data management and analytics longer-term objectives, these contracts generally can be early terminated by the client with a short-term notice.
Our success depends in part upon certain methodologies and tools we use in designing, developing and implementing application systems and other proprietary intellectual property rights.
Our success depends upon the maintenance and protection of our intellectual property rights and processes, and any substantial costs incurred protecting such rights and processes may decrease our operating margins. Our success depends in part upon certain methodologies and tools we use in designing, developing and implementing application systems and other proprietary intellectual property rights.
Should this shift towards moving technology-related work to offshore outsourcing centers continue, our business, operating results and financial condition could be adversely affected. We may be subject to liability to clients arising from our engagements. Many of our engagements involve projects that are critical to the operations of our clients’ businesses and provide benefits that may be difficult to quantify.
In the past years, certain of our existing and potential customers started to use low-cost offshore outsourcing centers to perform technology-related work. Should this shift towards moving technology-related work to offshore outsourcing centers continue, our business, operating results and financial condition could be adversely affected. We may be subject to liability to clients arising from our engagements.
If a new or revised H1-B visa program is implemented, there could be elements of the new/revised H1-B visa program that may not be advantageous to our business model thus adversely impacting our business, operating results or financial condition. 21 Table of Contents Reclassification of our independent contractors by tax or regulatory authorities could have a material adverse effect on our business model and/or could require us to pay significant retroactive wages, taxes and penalties.
If a new or revised H1-B visa program is implemented, there could be elements of the new/revised H1-B visa program that may not be advantageous to our business model thus adversely impacting our business, operating results or financial condition.
Although we attempt to comply with all taxing authority regulations, adverse findings or assessments made by taxing authorities as the result of an audit could have a material adverse effect on our business, results of operations and financial condition. 22 Table of Contents Requirements of the Affordable Care Act may continue to increase our employee benefits costs and could negatively affect our operating results, cash flows and financial condition if such costs aren’t recovered with increases in client bill rates.
Although we attempt to comply with all taxing authority regulations, adverse findings or assessments made by taxing authorities as the result of an audit could have a material adverse effect on our business, results of operations and financial condition.
In addition, there is a risk that clients may elect to increase their internal resources to satisfy their staffing and data and analytics needs.
In addition, there is a risk that clients may elect to increase their internal resources to satisfy their staffing and data and analytics needs. There can be no assurance that we will compete successfully with existing or new competitors in the staffing and data analytics services markets.
Existing and potential customers may consider outsourcing their IT requirements to foreign countries, which could have an adverse effect on our ability to obtain new customers or retain existing customers. In the past years, certain of our existing and potential customers started to use low-cost offshore outsourcing centers to perform technology-related work.
Wadhwani and Trivedi and their affiliates will maintain their majority position in the Company. 17 Table of Contents Existing and potential customers may consider outsourcing their IT requirements to foreign countries, which could have an adverse effect on our ability to obtain new customers or retain existing customers.
Even if we are able to complete one or more acquisitions, there can be no assurance that those completed acquisitions will result in successful growth, and the costs of completing an acquisition may reduce our margins. 14 Table of Contents We have made in the past, and may make in the future, acquisitions which could require significant management attention, disrupt our existing business, result in dilution to our shareholders, deplete our cash reserves, increase our debt levels and adversely affect our financial results.
We have made in the past, and may make in the future, acquisitions which could require significant management attention, disrupt our existing business, result in dilution to our shareholders, deplete our cash reserves, increase our debt levels and adversely affect our financial results.
South Asia has, from time to time, experienced instances of civil unrest and hostilities among neighboring countries, such as between India and Pakistan, India and China, and even within India. There have been military confrontations along the India-Pakistan and India-China borders from time to time.
Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our operations and cause our business to suffer. South Asia has, from time to time, experienced instances of civil unrest and hostilities among neighboring countries, such as between India and Pakistan, India and China, and even within India.
Despite having implemented security measures to address risks of security breaches, we experienced a cyber-security breach during the third quarter of 2022 involving a single employee email account and which indirectly impacted two Mastech InfoTrellis clients.
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Our hybrid work-from-home business model may heighten risks of security breaches. Despite having implemented security measures to address risks of security breaches, we experienced a cybersecurity breach in 2022 involving a single employee email account and which indirectly impacted two Mastech InfoTrellis clients.
The potential for hostilities between India and Pakistan is high due to past terrorist incidents in India, troop mobilizations along the border, and the geopolitical situation in the region. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications and making travel more difficult.
There have been military confrontations along the India-Pakistan and India-China borders from time to time. The potential for hostilities between India and Pakistan is high due to past terrorist incidents in India, troop mobilizations along the border, and the geopolitical situation in the region.
We accrued a pre-tax loss reserve of $450,000 in the third quarter 2022 related to this event, which reserve includes the cost of engaging external advisors and an estimate of other potential losses relating to the breach.
We incurred an expense charge of $450,000 in 2022 related to this event, which included the cost of engaging external advisors.
If we are unable to acquire and invest in attractive businesses, our strategy for growth may be impaired.
If we are unable to acquire and invest in attractive businesses, our strategy for growth may be impaired. Even if we are able to complete one or more acquisitions, there can be no assurance that those completed acquisitions will result in successful growth, and the costs of completing an acquisition may reduce our margins.
Removed
Our acquisition AmberLeaf Partners, Inc. may not provide us with the long-term business advantages that we expected, which may result in the slower growth of our business and reduced operating margins. Our October 1, 2020 acquisition of AmberLeaf Partners, Inc., and the purchase price of such acquisition, was based on a variety of assumptions and estimates.
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Should a client terminate an engagement early, this termination could materially impact our backlog of orders and adversely affect our business and future revenues. 13 Table of Contents Our strategy of expansion through the acquisition of additional companies may not be successful and may result in slower growth of our business and reduced operating margins.
Removed
Certain of these assumptions have not been realized, and there can be no assurance that our long-term expectations for this acquisition will be completely realized.
Added
Many of our engagements involve projects that are critical to the operations of our clients’ businesses and provide benefits that may be difficult to quantify.
Removed
The failure to derive the expected benefits from our acquisition of AmberLeaf Partners, Inc. could result in lower than expected revenues and profitability from our Data and Analytics Services segment and could result in a material adverse effect on our business, operating results and financial condition.
Added
We may face data protection, data security, and privacy risks in connection with privacy regulation. Strict data privacy laws regulating the collection, transmission, storage and use of employee data and consumers’ personally identifying information are evolving in the U.S. and other jurisdictions in which we operate.
Removed
Acquisitions of technology companies and assets are inherently risky and subject to many factors outside of our control, and no assurance can be given that our prior or future acquisitions will be successful and will not materially adversely affect our business, operating results, or financial condition.
Added
These laws impose compliance obligations for the collection, use, retention, security, processing, transfer and deletion of personally identifiable information of individuals and creates enhanced rights for individuals.
Removed
The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. 18 Table of Contents In response to the COVID-19 pandemic, our move to a work-from-home business model may heighten risks of security breaches.
Added
These changes in the legal and regulatory environments in the areas of customer and employee privacy, data security, and cross-border data flows could have a material adverse effect on our business, primarily through the impairment of our marketing and transaction processing activities, the limitation on the types of information that we may collect, process and retain, the resulting costs of complying with such legal and regulatory requirements and potential monetary forfeitures and penalties for noncompliance.
Removed
There can be no assurance that we will compete successfully with existing or new competitors in the staffing and data analytics services markets. 23 Table of Contents Regional conflicts in South Asia could adversely affect the Indian economy, disrupt our operations and cause our business to suffer.
Added
Reclassification of our independent contractors by tax or regulatory authorities could have a material adverse effect on our business model and/or could require us to pay significant retroactive wages, taxes and penalties. We utilize individuals to provide certain services in connection with our business as qualified third-party independent contractors rather than as direct employees.
Removed
Evolving expectations around corporate responsibility practices, specifically related to environmental, social and governance (“ESG”) matters, may expose us to reputational and other risks. Investors, shareholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors and reporting.
Added
Requirements of the Affordable Care Act may continue to increase our employee benefits costs and could negatively affect our operating results, cash flows and financial condition if such costs aren’t recovered with increases in client bill rates. We provide healthcare coverage to our U.S.-based employees that are subject to the Affordable Care Act (“ACA”).

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Information regarding the principal properties leased by us and our subsidiaries as of December 31, 2022 is set forth below: Location Principal Use Occupying Business Segment Approximate Square Footage Moon Township, Pennsylvania Corporate headquarters, executive, human resources, sales, recruiting, marketing and finance IT Staffing 11,500 Chicago, Illinois Executive, sales and recruiting IT Staffing 2,300 Atlanta, Georgia Sales and marketing Data and Analytics 2,700 Toronto, Canada Human resources, sales, marketing and delivery Data and Analytics 3,800 NOIDA, India Sales and recruiting office IT Staffing 39,900 Chennai, India Sales and delivery center Data and Analytics 35,400
Biggest changePROPERTIES Information regarding the principal properties leased by us and our subsidiaries as of December 31, 2023 is set forth below: Location Principal Use Occupying Business Segment Approximate Square Footage Moon Township, Pennsylvania Corporate headquarters, executive, human resources, sales, recruiting, marketing and finance IT Staffing 11,500 Chicago, Illinois Executive, sales and recruiting IT Staffing 2,300 Atlanta, Georgia Sales and marketing Data and Analytics 2,700 Toronto, Canada Human resources, sales, marketing and delivery Data and Analytics 3,800 NOIDA, India Sales and recruiting office IT Staffing 39,900 Chennai, India Sales and delivery center Data and Analytics 35,400

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeWhile uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe began trading “regular way” on the former American Stock Exchange (“AMEX”) on October 1, 2008. 26 Table of Contents On March 1, 2023, we had 121 registered holders of record of our common stock. This figure excludes an estimate of the indeterminate number of beneficial holders whose shares may be held by brokerage firms and clearing agencies.
Biggest changeOn March 1, 2024, we had 119 registered holders of record of our common stock. This figure excludes an estimate of the indeterminate number of beneficial holders whose shares may be held by brokerage firms and clearing agencies. We currently do not pay recurring dividends on our common stock.
Additionally, we do from time to time purchase shares to satisfy employee tax obligations related to the vesting of restricted shares, in accordance with the Company’s Stock Incentive Plan provisions. During 2022 and 2021, the Company did not purchase any shares to satisfy such employee tax obligations.
Additionally, we do, from time to time, purchase shares to enable employees to satisfy their tax obligations related to the vesting of restricted stock, in accordance with the provisions of the Company’s Stock Incentive Plan, as amended. During 2023 and 2022, the Company did not purchase any shares to satisfy such employee tax obligations.
We currently do not pay recurring dividends on our common stock. On February 8, 2023, the Company announced that the Board of Directors authorized a share repurchase program of up to 500,000 shares of the Company’s common stock over a two-year period.
On February 8, 2023, the Company announced that the Board of Directors had authorized a share repurchase program of up to 500,000 shares of the Company’s common stock over a two-year period.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE American under the symbol “MHH”.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE American under the symbol “MHH”. We began trading “regular way” on the former American Stock Exchange (“AMEX”) on October 1, 2008.
For the year ended December 31, 2022 and December 31, 2021, stock purchases under the Stock Purchase Plan totaled 23,789 and 22,687 shares at an average purchase price of $11.53 and $12.84, respectively. At December 31, 2022, there were 492,565 shares available for purchase under the Plan. ITEM 6. RESERVED
For the year ended December 31, 2023 and December 31, 2022, stock purchases under the Stock Purchase Plan totaled 25,646 and 23,789 shares at an average purchase price of $8.03 and $11.53, respectively. At December 31, 2023, there were 466,919 shares available for purchases under the Plan. 30 Table of Contents ITEM 6. RESERVED
Added
During the year ended December 31, 2023, the Company repurchased 67,699 shares of common stock at an average price of $9.10 per share under this program.
Added
A summary of our common stock repurchased during the quarter ended December 31, 2023 is set forth in the following table: Period Total Number of Shares Purchased (1) Average Price per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under this Plan or Programs (1) October 1, 2023 — October 31, 2023 — $ — — 437,639 November 1, 2023 — November 30, 2023 5,338 $ 8.49 5,338 432,301 December 1, 2023 — December 31, 2023 — $ — — 432,301 Total 5,338 $ 8.49 5,338 432,301 (1) The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2023, other than through this publicly announced repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe 2020 results of operations for our Data and Analytics Services segment include the operating results of AmberLeaf from the October 1, 2020 acquisition date through December 31, 2020. 28 Table of Contents Below is a tabular presentation of revenues and gross profit margins by segment for the periods discussed: Revenues & Gross Margin by Segment (Revenues in millions) Years Ended December 31, Revenues 2022 2021 2020 Data and Analytics Services $ 40.6 $ 38.3 $ 30.2 IT Staffing Services 201.6 183.7 163.9 Total Revenues $ 242.2 $ 222.0 $ 194.1 Gross Margin % Data and Analytics Services 41.5 % 48.4 % 50.5 % IT Staffing Services 23.0 % 22.3 % 22.1 % Total Gross Margin % 26.1 % 26.8 % 26.6 % Below is a tabular presentation of operating expenses by sales and marketing operations, amortization of acquired intangible assets, acquisition transaction expenses, revaluation of contingent consideration and general and administrative categories for the periods discussed: Selling, General & Administrative (“S,G&A”) Expense Details (Amounts in millions) Years Ended December 31, 2022 2021 2020 Data and Analytics Services Segment Sales and Marketing $ 5.9 $ 6.2 $ 4.9 Operations 2.3 2.6 1.9 Amortization of Acquired Intangible Assets 2.3 2.5 2.1 Acquisition Transaction Expenses — 0.1 0.6 Revaluation of Contingent Consideration — (2.9 ) — Cyber-security Breach 0.4 — — Severance Expense 1.0 — — General & Administrative 5.4 4.5 3.0 Subtotal Data and Analytics Services $ 17.3 $ 13.0 $ 12.5 IT Staffing Services Segment Sales and Marketing $ 9.5 $ 7.8 $ 7.1 Operations 11.0 9.1 8.1 Amortization of Acquired Intangible Assets 0.7 0.7 0.7 General & Administrative 12.5 11.2 9.7 Subtotal IT Staffing Services $ 33.7 $ 28.8 $ 25.6 Total S,G&A Expenses $ 51.0 $ 41.8 $ 38.1 29 Table of Contents 2022 Compared to 2021 Revenues Revenues for the year ended December 31, 2022 totaled $242.2 million, compared to $222.0 million for the year ended December 31, 2021.
Biggest changeBelow is a tabular presentation of revenues and gross profit margins by segment for the periods discussed: Revenues & Gross Margin by Segment (Revenues in millions) Years Ended December 31, Revenues 2023 2022 2021 Data and Analytics Services $ 34.4 $ 40.6 $ 38.3 IT Staffing Services 166.7 201.6 183.7 Total Revenues $ 201.1 $ 242.2 $ 222.0 Gross Margin % Data and Analytics Services 43.5 % 41.5 % 48.4 % IT Staffing Services 21.6 % 23.0 % 22.3 % Total Gross Margin % 25.4 % 26.1 % 26.8 % Below is a tabular presentation of operating expenses by sales and marketing, operations, general and administrative, amortization of acquired intangible assets, employment-related claim, net of recoveries, goodwill impairment, severance expense, cybersecurity breach, revaluation of contingent consideration and acquisition transaction expense categories for the periods discussed: 32 Table of Contents Selling, General & Administrative (“SG&A”) Expense Details (Amounts in millions) Years Ended December 31, 2023 2022 2021 Data and Analytics Services Segment Sales and Marketing $ 6.5 $ 5.9 $ 6.2 Operations 1.3 2.3 2.6 General & Administrative 8.9 5.4 4.5 Subtotal Data and Analytics Services $ 16.7 $ 13.6 $ 13.3 IT Staffing Services Segment Sales and Marketing $ 8.3 $ 9.5 $ 7.8 Operations 8.6 11.0 9.1 General & Administrative 13.1 12.5 11.2 Subtotal IT Staffing Services $ 30.0 $ 33.0 $ 28.1 Amortization of Acquired Intangible Assets $ 2.8 $ 3.0 $ 3.2 Employment-related Claim, net of Recoveries 3.1 — — Goodwill Impairment 5.3 — — Severance Expense 2.4 1.0 — Cybersecurity Breach — 0.4 — Revaluation of Contingent Consideration — — (2.9 ) Acquisition Transaction Expenses — — 0.1 Total SG&A Expenses $ 60.3 $ 51.0 $ 41.8 2023 Compared to 2022 Revenues Revenues for the year ended December 31, 2023 totaled $201.1 million, compared to $242.2 million for the year ended December 31, 2022.
The decrease in our gross margin percentage was entirely related to our Data and Analytics segment as gross margins declined by 690-basis points largely due to poor utilization and lower margins on several longer-term assignments related to compensation increases. Gross margins in our IT Staffing Services segment were 23.0% in 2022 compared to 22.3% in 2021.
The decrease in our gross margin percentage was entirely related to our Data and Analytics Services segment as gross margins declined by 690-basis points largely due to poor utilization and lower margins on several longer-term assignments related to compensation increases. Gross margins in our IT Staffing Services segment were 23.0% in 2022, compared to 22.3% in 2021.
Financing Activities In 2022, cash (used in) financing activities totaled ($10.4 million) and included debt repayments of ($12.0 million) partially offset by proceeds from the exercise of stock options and the issuance of common stock related to the Company’s employee stock purchase plan of $1.6 million.
In 2022, cash (used in) financing activities totaled ($10.4 million) and included debt repayments of ($12.0 million) partially offset by proceeds from the exercise of stock options and the issuance of common stock related to the Company’s employee stock purchase plan of $1.6 million.
These swap contracts, which matured on April 1, 2021, were designated as a cash flow hedging instrument and qualified as effective hedges at inception under ASC Topic 815 “Derivatives and Hedging”. These contracts are recognized on the balance sheet at fair value.
These swap contracts, which matured on April 1, 2021, were designated as a cash flow hedging instrument and qualified as effective hedges at inception under ASC Topic 815 “Derivatives and Hedging”. These contracts were recognized on the balance sheet at fair value.
This 9% increase in total revenues reflected organic revenue growth of 6% in our Data and Analytics Services segment and a 10% revenue increase in our IT Staffing Services segment. In our Data and Analytics Services segment, revenues declined in the second half of the year due to the lack of new client activity.
This 9% increase in total revenues reflected revenue growth of 6% in our Data and Analytics Services segment and a 10% revenue increase in our IT Staffing Services segment. In our Data and Analytics Services segment, revenues declined in the second half of the year due to the lack of new client activity.
If a swap contract is deemed ineffective, the change in the fair value of the derivative is recorded in the Consolidated Statement of Operations as interest expense. During the year 2022, we had no derivative instruments and hedging activities. Foreign Currency Translation The reporting currency of the Company and its subsidiaries is the U.S. dollar.
If a swap contract is deemed ineffective, the change in the fair value of the derivative is recorded in the Consolidated Statement of Operations as interest expense. During 2023 and 2022, we had no derivative instruments and hedging activities. Foreign Currency Translation The reporting currency of the Company and its subsidiaries is the U.S. dollar.
Cash provided by operating activities, our cash and cash equivalent balances on hand at December 31, 2022 and current availability under our existing credit facility are expected to be adequate to fund our business needs over the next 12 months, absent any major acquisition-related activities.
Cash provided by operating activities, our cash and cash equivalent balances on hand at December 31, 2023 and current availability under our existing credit facility are expected to be adequate to fund our business needs over the next 12 months, absent any major acquisition-related activities.
Identifiable intangible assets related to acquisitions consisted of client relationships, covenants not-to-compete, trade names and technology, which are being amortized using the straight-line method over their estimated useful lives ranging from three years to twelve years, as more fully described in Note 3 “Business Combinations” and Note 4 “Goodwill and Other Intangible Assets, net” to the Notes to the Consolidated Financial Statements.
Identifiable intangible assets related to acquisitions consisted of client relationships, covenants not-to-compete, trade names and technology, which are being amortized using the straight-line method over their estimated useful lives ranging from three years to twelve years, as more fully described in Note 3 “Goodwill and Other Intangible Assets, net” to the Notes to the Consolidated Financial Statements.
Out-of-pocket expense reimbursement amounts vary by assignment, but 35 Table of Contents historically on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.
Out-of-pocket expense reimbursement amounts vary by assignment, but historically on average represent less than 2% of the total contract revenues. Revenue is earned on a per transaction or labor hour basis, as that amount directly corresponds to the value of the Company’s performance. Revenue recognition is negatively impacted by holidays and consultant vacation and sick days.
Inflation We do not believe that inflation had a significant impact on our results of operations for the periods presented, although economic uncertainty, including the concerns of our clients and other companies with respect to inflationary conditions in North America and elsewhere, has had and may continue to have an adverse impact on the demand for our services.
Inflation We do not believe that inflation had a significant impact on our results of operations for the periods presented, although economic uncertainty, including the concerns of our clients and other companies with respect 38 Table of Contents to inflationary conditions in North America and elsewhere, has had and may continue to have an adverse impact on the demand for our services.
The 2021 increase in operating working capital reflected higher accounts receivable due to higher revenue levels and a $2.3 million repayment of the COVID-19 payroll tax deferment program.
The 2022 increase in operating capital largely reflected a $2.3 million repayment of the COVID-19 payroll tax deferment program. The 2021 increase in operating working capital reflected higher accounts receivable due to higher revenue levels and a $2.3 million repayment of the COVID-19 payroll tax deferment program.
In 2021, cash (used in) financing activities totaled ($4.1 million) and included debt repayments of ($4.4 million) and the payment of deferred financing costs of ($0.2 million) related to our credit facility amendment, partially offset by proceeds from the exercise of stock options and the issuance of common stock related to the Company’s employee stock purchase plan of $0.5 million.
In 2021, cash (used in) financing activities totaled ($4.1 million) and included debt repayments of ($4.4 million) and the payment of deferred financing costs of ($0.2 million) related to our credit facility amendment, partially offset by proceeds from the exercise of stock options and the issuance of common stock related to the Company’s employee stock purchase plan of $0.5 million. 2024 Primentor, Inc.
The credit is reflected in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations, in Item 8, herein. No contingent consideration liability remained outstanding as of December 31, 2022 and 2021.
The credit is reflected in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations, in Item 8, herein. No contingent consideration liability remained outstanding as of December 31, 2023 and 2022.
As of December 31, 2022 and 2021, the Company provided $0 for uncertain tax positions, including interest and penalties, related to various federal and state income tax matters. 38 Table of Contents Contingent Consideration Liability In connection with the AmberLeaf acquisition, the Company had an obligation to pay consideration that was contingent upon the achievement of specified revenue growth and EBITA margin objectives.
As of December 31, 2023 and 2022, the Company provided $0 for uncertain tax positions, including interest and penalties, related to various federal and state income tax matters. Contingent Consideration Liability In connection with the AmberLeaf acquisition, the Company had an obligation to pay consideration that was contingent upon the achievement of specified revenue growth and EBITA margin objectives.
In certain situations related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources’ continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied. Accounts Receivable and Allowance for Uncollectible Accounts The Company extends credit to clients based upon management’s assessment of their creditworthiness.
In certain situations related to client direct hire assignments, where the Company’s fee is contingent upon the hired resources’ continued employment with the client, revenue is not fully recognized until such employment conditions are satisfied. 39 Table of Contents Accounts Receivable and Allowance for Credit Losses The Company extends credit to clients based upon management’s assessment of their creditworthiness.
This acquisition enhances our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. 27 Table of Contents Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as our other digital transformation services.
This acquisition enhanced our capabilities in customer experience strategy and managed services offerings for a variety of Cloud-based enterprise applications across sales, marketing and customer services organizations. Our IT staffing business combines technical expertise with business process experience to deliver a broad range of staffing services in digital and mainstream technologies, as well as our other Digital Transformation services.
Grants under the Plan can be made in the form of stock options, stock 37 Table of Contents appreciation rights, performance shares or stock awards. The Plan is administered by the Compensation Committee of the Board of Directors.
Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance shares or stock awards. The Plan is administered by the Compensation Committee of the Board of Directors.
The Company records an allowance for uncollectible accounts when it is probable that the related receivable balance will not be collected based on historical collection experience, client-specific collection issues, and other matters the Company identifies in its collection monitoring.
The Company records an allowance for credit losses when it is probable that the related receivable balance will not be collected based on historical collection experience, client-specific collection issues, and other matters the Company identifies in its collection monitoring.
This 70-basis point improvement was due to better margins on new assignments and higher permanent placement revenues in 2022. Selling, General and Administrative (“S,G&A”) Expenses S,G&A expenses in 2022 totaled $51.0 million and represented 21.1% of total revenues, compared to $41.8 million or 18.8% of revenues in 2021.
This 70-basis point improvement was due to better margins on new assignments and higher permanent placement revenues in 2022. Selling, General and Administrative (“SG&A”) Expenses SG&A expenses in 2022 totaled $51.0 million and represented 21.1% of total revenues, compared to $41.8 million or 18.8% of revenues in 2021.
The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We have elected to treat the tax effect of GILTI as a current-period expense as incurred.
The Financial Accounting Standards Board (the “FASB” allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We have elected to treat the tax effect of GILTI as a current-period expense as incurred.
Below is a tabular presentation of cash flow activities for the periods discussed: Years Ended December 31, Cash Flows Activities 2022 2021 2020 (Amounts in millions) Operating activities $ 12.6 $ 5.2 $ 21.2 Investing activities (0.8 ) (2.1 ) (9.6 ) Financing activities (10.4 ) (4.1 ) (6.7 ) Operating Activities Cash provided by (used in) operating activities for the years ended December 31, 2022, 2021 and 2020 totaled $12.6 million, $5.2 million and $21.2 million, respectively.
Below is a tabular presentation of cash flow activities for the periods discussed: Years Ended December 31, Cash Flows Activities 2023 2022 2021 (Amounts in millions) Operating activities $ 16.0 $ 12.6 $ 5.2 Investing activities (0.2 ) (0.8 ) (2.1 ) Financing activities (1.6 ) (10.4 ) (4.1 ) Operating Activities Cash provided by (used in) operating activities for the years ended December 31, 2023, 2022 and 2021 totaled $16.0 million, $12.6 million and $5.2 million, respectively.
The impairment test is performed at the reporting unit (business segment) level. Determination of recoverability is based on the lowest level of identifiable estimated future discounted cash flows resulting from use of the assets and their eventual disposition. Measurement of any impairment loss is based on the excess carrying value of the reporting unit over their fair market value.
Determination of recoverability is based on the lowest level of identifiable estimated future discounted cash flows resulting from use of the assets and their eventual disposition. Measurement of any impairment loss is based on the excess carrying value of the reporting unit over their fair market value.
As of December 31, 2022 and 2021, the Company provided a valuation allowance of $559,000 and $311,000, respectively, related to the uncertainty of the realization of foreign net operating losses (“NOL”).
As of December 31, 2023 and 2022, the Company provided a valuation allowance of $628,000 and $559,000, respectively, related to the uncertainty of the realization of foreign net operating losses (“NOL”).
Foreign exchange gains and losses were not material in 2021 and 2020. 39 Table of Contents Recently Issued Accounting Standards Recent accounting pronouncements are described in Note 1 to the Consolidated Financial Statements contained in Item 8, herein.
Foreign exchange losses were not material in 2021. Recently Issued Accounting Standards Recent accounting pronouncements are described in Note 1 to the Consolidated Financial Statements contained in Item 8, herein. 43 Table of Contents
Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. Foreign exchange gains of $650,000 in 2022 were primary due to exchange rate variations between the Indian rupee and the U.S. dollar.
Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. Foreign exchange (losses) of ($0.1 million) in 2023 and $0.6 million foreign exchange gains in 2022 were primary due to exchange rate variations between the Indian rupee and the U.S. dollar.
As part of this engagement, these advisors are assisting us with a forensic analysis to determine whether any personally identifiable information (“PII”) was compromised as a result of this breach. For any such PII data determined to have been compromised, these advisors will be assisting us in determining the appropriate compliance steps required with respect to that PII data.
As part of this engagement, these advisors assisted us with a forensic analysis to determine whether any personally identifiable information (“PII”) was compromised as a result of this breach. For any such PII data determined to have been compromised, these advisors assisted us in determining the appropriate compliance steps.
We operate in two reporting segments — Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand Mastech InfoTrellis and are delivered largely on a project basis with on-site and off-shore resources.
We operate in two reporting segments — Data and Analytics Services and IT Staffing Services. Our data and analytics services are marketed on a global basis under the brand “Mastech InfoTrellis” and are delivered largely on a project basis with on-site and offshore resources.
Stock-Based Compensation Effective October 1, 2008, the Company adopted a Stock Incentive Plan (the “Plan”) which, as amended, provides that up to 4,900,000 shares of the Company’s common stock shall be allocated for issuance to directors, executive management and key personnel.
Stock-Based Compensation In 2008, the Company adopted a Stock Incentive Plan (as amended to date, the “Plan”) which, as amended, provides that up to 5,400,000 shares of the Company’s common stock shall be allocated for issuance to directors, executive management and key personnel.
In 2021, other income / (expense) consisted of interest expense of ($675,000) and foreign exchange losses of ($49,000). The decline in interest expense was largely due to lower outstanding borrowings. Net foreign exchange gains in 2022 compared to 2021 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.
The decline in interest expense was largely due to lower outstanding borrowings. Net foreign exchange gains in 2022 compared to 2021 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar.
When excluding acquisition transaction expenses; the revaluation of contingent consideration; the amortization of acquired intangible assets, cyber-security and severance reserves, the adjusted S,G&A expenses related to operations, as a percentage of revenues was 19.2% in 2022 versus 18.6% in 2021.
When excluding the amortization of acquired intangible assets, severance expense, cybersecurity breach, revaluation of contingent consideration, and acquisition transaction expenses, the adjusted SG&A expenses related to operations, as a percentage of revenues was 19.2% in 2022 versus 18.6% in 2021.
The increase in S,G&A as a percentage of revenues excluding these items was largely due to higher compensation expense and other inflationary cost increases in both of our business segments. Fluctuations within S,G&A expense components during 2022 compared to 2021 included the following: • Sales expense was $1.4 million higher in 2022 compared to the previous year.
The increase in SG&A as a percentage of revenues, excluding these items mentioned above, was largely due to higher compensation and other variable expense increases in both of our business segments. 35 Table of Contents Fluctuations within SG&A expense components during 2022 compared to 2021 included the following: • Sales expense was $1.4 million higher in 2022, compared to the previous year.
Since most of the Company’s leases do not have an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have an implicit borrowing rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
In 2022, COVID-19-related concerns seemed to subside, however, increased inflation, expanding interest rates and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of the year.
In 2022 and 2023, COVID-19-related concerns seemed to subside, however, increased inflation, 31 Table of Contents challenges in the financial sector related to increasing interest rates, and concerns about a possible recession created much uncertainty and impacted demand for our services in the second half of 2022 and the entire year of 2023.
Operations expense in our IT Staffing Services segment increased by $1.9 million in 2022, largely due to higher recruitment staff and higher compensation and other variable expenses — both reflective of higher activity levels in the first half of 2022. • Amortization of acquired intangible assets was $3.0 million in 2022 versus $3.2 million in 2021.
Operations expense in our IT Staffing Services segment increased by $1.9 million in 2022, largely due to higher recruitment staff and higher compensation and other variable expenses — both reflective of higher activity levels in the first half of 2022. • General & administrative expenses increased by $2.2 million in 2022 compared to 2021.
This bill rate decrease was due to lower rates on new assignments and was reflective of the type of skill-sets that we deployed. Permanent placement / fee revenues totaled $1.2 million in 2021, up over 60% from a year ago.
This bill rate decline was due to lower rates on new assignments and was reflective of the type of skill sets that we deployed. Permanent placement / fee revenues totaled $0.8 million in 2023 compared to $2.1 million a year ago.
On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seek to ensure that billing rates reflect increases in costs due to inflation. However, high levels of inflation may result in higher interest rates which would increase our cost of borrowings. In addition, refer to “Item 1A.
On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seek to ensure that billing rates reflect increases in costs due to inflation. In addition, refer to “Item 1A.
However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses. These supply-side challenges pressured resource costs and to some extent gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies.
These supply-side challenges pressured resource costs and to some extent gross margins. As we entered 2020, we were encouraged by continued growth in the domestic job markets and expanding U.S. and global economies.
Employment-Related Claims Against the Company As disclosed in Note 9 “Commitment and Contingencies” to the Notes to the Consolidated Financial Statements, included in Item 8 herein, a former employee who resigned has asserted various employment-related claims against the Company.
See Note 18 “Subsequent Event” to the Notes to the Consolidated Financial Statements, included in Item 8 herein. 2023 Employment-Related Claims Against the Company As disclosed in Note 8 “Commitment and Contingencies” to the Notes to the Consolidated Financial Statements, included in Item 8 herein, a former employee who resigned from his employment with the Company in November 2022 asserted various employment-related claims against the Company.
We have accrued a pre-tax loss reserve of $450,000 in the third quarter 2022 related to this event, which reserve includes the cost of engaging these external advisors and an estimate of other potential losses relating to the breach. This expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
We incurred a pre-tax charge of $450,000 in the third quarter 2022 related to this event, which includes the cost of engaging these external advisors and losses relating to the breach. This expense is included in selling, general and administrative expenses in the Consolidated Statements of Operations. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.
In 2022, cash flows from operating activities included net income of $8.7 million, non-cash charges of $6.8 million and increases in operating working capital of ($2.9 million). In 2021, cash flows from operating activities included net income of $12.2 million, non-cash charges of $4.7 million and increases in operating working capital of ($11.7 million).
In 2023, cash flows from operating activities included a net (loss) of ($7.1 million), non-cash charges of $10.6 million and decreases in operating working capital of $12.5 million. In 2022, cash flows from operating activities included net income of $8.7 million, non-cash charges of $6.8 million and increases in operating working capital or ($2.9 million).
Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. As the economy slowed in 2007 and recessionary conditions emerged in 2008 and 2009, we experienced less demand for our IT staffing services. With economic expansion in 2010 through 2019 activity levels improved.
Conversely, during periods of contracting employment and / or a slowing global economy, demand for our services tends to decline. With economic expansion in 2010 through 2019 activity levels improved. However, as economic conditions strengthened, we experienced increased tightness in the supply side (skilled IT professionals) of our businesses.
Accordingly, our trends and outlook are additionally impacted by the prospects and well-being of these specific clients. This “account concentration” factor may result in our results of operations deviating from the prevailing economic trends from time to time.
Accordingly, our trends and outlook are additionally impacted by the prospects and well-being of these specific clients. This “account concentration” factor may result in our results of operations deviating from the prevailing economic trends from time to time. Within our IT Staffing Services segment, a larger portion of our revenues has come from strategic relationships with systems integrators.
Liquidity and Capital Resources Financial Conditions and Liquidity At December 31, 2022, we had cash balances on hand, net of outstanding bank debt, of $6.0 million and approximately $32 million of borrowing capacity under our existing credit facility. In anticipation of rising interest rates, we elected to early pay term-debt in 2022.
Liquidity and Capital Resources Financial Conditions and Liquidity On December 31, 2023, we had a cash balance on hand of $21.1 million, no bank debt outstanding and approximately $22.5 million of borrowing capacity under our existing credit facility. In anticipation of rising interest rates, we elected to prepay term loans in 2022.
Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and must perform re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have all been properly valued. The AmberLeaf financial results are included in the Company’s Consolidated Financial Statements from the October 1, 2020 acquisition date.
Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and must perform re-measurements to verify that the consideration paid, assets acquired and liabilities assumed have all been properly valued.
The higher 2022 effective tax rate was due to an increase in our tax valuation allowance related to foreign net operating losses (NOL’s) in Singapore, Ireland and the UK and higher state income taxes. 2021 Compared to 2020 Revenues Revenues for the year ended December 31, 2021 totaled $222.0 million, compared to $194.1 million for the year ended December 31, 2020.
The higher 2022 effective tax rate was due to an increase in our tax valuation allowance related to foreign net operating losses (NOL’s) in Singapore, Ireland and the UK and higher state income taxes.
The Company accounts for stock-based compensation expense in accordance with ASC Topic 718 “ Share-based Payments ” which requires us to measure all share-based payments based on their estimated fair value and recognize compensation expense over the requisite service period.
The purchase price per share is 85% of the lesser of (i) the fair market value per share of common stock on the first day of the offering period, or (ii) the fair market value per share of common stock on the last day of the offering period. 41 Table of Contents The Company accounts for stock-based compensation expense in accordance with ASC Topic 718 “ Share-based Payments ” which requires us to measure all share-based payments based on their estimated fair value and recognize compensation expense over the requisite service period.
The 2021 expense was related to an acquisition opportunity that was halted by us. • The revaluation of a contingent consideration liability totaled a credit of $2.9 million in 2021 related to the AmberLeaf acquisition. No contingent consideration revaluations occurred in 2022. • Reserves for a cyber-security breach and severance expenses totaled $0.4 million and $1.0 million, respectively in 2022.
There was no expense in 2021 for this item. • The revaluation of a contingent consideration liability totaled a credit of $2.9 million in 2021 related to the AmberLeaf acquisition. No contingent consideration revaluations occurred in 2022. • Acquisition transaction expense was $0 in 2022 and $0.1 million in 2021.
If impairment is indicated, a write-down to fair value is recorded based on the excess of the carrying value of the reporting unit over its fair market value. 36 Table of Contents We review goodwill and intangible assets for impairment annually as of October 1 st or more frequently if events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
We review goodwill and intangible assets for impairment annually as of October 1 st or more frequently if events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The impairment test is performed at the reporting unit (business segment) level.
In 2021, cash (used in) investing activities consisted of ($1.9 million) of capital expenditures and ($0.2 million) of non-current deposits (office lease deposits). In 2020, cash (used in) investing activities related to the acquisition of AmberLeaf of ($9.3 million) and capital expenditures of ($0.3 million). In 2022, capital expenditures were largely related to system upgrade expenditures.
In 2023, cash (used in) investing activities consisted of ($0.3 million) of capital expenditures and a $0.1 million recovery of non-current office lease deposits. In 2022, cash (used in) investing activities consisted of ($0.8) of capital expenditures. In 2021, cash (used in) investing activities consisted of ($1.9 million) of capital expenditures and ($0.2 million) of additional non-current office lease deposits.
Historically, we have funded our business needs with cash generation from operating activities. In the data and analytics services and IT staffing services industries, investment in operating working capital levels (defined as current assets excluding cash and cash equivalents minus current liabilities, excluding short-term borrowings) is a significant use of cash.
In the data and analytics services and IT staffing services industries, investment in operating working capital levels (defined as current assets excluding cash and cash equivalents minus current liabilities, excluding short-term borrowings) is a significant use of cash. Controlling our operating working capital levels by closely managing our accounts receivable balance is an important element of cash preservation.
There were no reserves in 2021 for these items. • General & administrative expenses increased by $2.2 million in 2022 compared to 2021. Our Data and Analytics Services segment was responsible for $0.9 million of this increase due to higher executive leadership staff headcount and higher compensation expense.
Our Data and Analytics Services segment was responsible for $0.9 million of this increase due to higher executive leadership staff headcount and higher compensation expense.
The IT Staffing Services segment had higher general and administrative expenses in 2022 of $1.3 million compared to 2021 due to higher compensation expense and increases in travel and facility expenses. Other Income / (Expense) Components In 2022, other income / (expense) consisted of interest expense of ($358,000) and foreign exchange gains of $650,000.
The IT Staffing Services segment had higher general and administrative expenses in 2022 of $1.3 million compared to 2021 due to higher compensation expense and increases in travel and facility expenses. • Amortization of acquired intangible assets was $3.0 million in 2022 versus $3.2 million in 2021.
In both 2021 and 2020, we had one client that exceeded 10% of total revenues (CGI = 15.0% in both periods, respectively). Our top ten clients represented 48% of total revenues in 2021 compared to 47% of total revenues in 2020.
In both 2023 and 2022, we had one client that exceeded 10% of total revenues (CGI = 22.5% in 2023 and 22.2% in 2022, respectively). Our top ten clients represented 53% of total revenues in both 2023 and 2022.
We re-measured this liability and recorded changes in the fair value when it was more likely than not that the future payments had changed. Increases or decreases in the fair value of contingent consideration can result from changes in timing and amounts of revenue and earnings estimates. No contingent consideration revaluation was recorded in 2022 and 2020.
We re-measured this liability and recorded changes in the fair value when it was more likely than not that the future payments had changed.
Within our IT Staffing Services segment, a larger portion of our revenues has come from strategic relationships with systems integrators and other staffing organizations. Additionally, many large end users of IT staffing services are employing MSP’s to manage their contractor spending. Both of these dynamics may pressure our IT staffing gross margins in the future.
Additionally, many large end users of IT staffing services are employing MSP’s to manage their contractor spending. Both of these dynamics may pressure our IT staffing gross margins in the future. Recent growth in advanced technologies (social, cloud, analytics, mobility, automation) is providing opportunities within our IT Staffing Services segment.
The increase in S,G&A as a percentage of revenues excluding these items was largely due to investments made to our Data and Analytics Services segment. Fluctuations within S,G&A expense components during 2021 compared to 2020 included the following: • Sales expense was $2.0 million higher in 2021 compared to the previous year.
Fluctuations within SG&A expense components during 2023 compared to 2022 included the following: • Sales expense was $0.6 million lower in 2023 compared to the previous year. In the Data and Analytics Services segment, sales expense increased by $0.6 million due to an increase in sales staff and higher compensation expense in 2023.
The slight improvement in the DSO measurement in 2022 was due to a lower DSO measurement in our solution-based data and analytics business.
Our accounts receivable “days sales outstanding” measurement (“DSO”) at year-end 2023 improved to 53-days compared to 59-days at year-end 2022. The improvement in the DSO measurement in 2023 was largely due to a lower DSO measurement in our solution-based data and analytics services business.
Other Income / (Expense) Components In 2021, other income / (expense) consisted of interest expense of ($675,000) and foreign exchange losses of ($49,000). In 2020, other income / (expense) consisted of interest expense of ($866,000) and foreign exchange gains of $96,000. The decline in interest expense was largely due to lower average outstanding borrowings.
The 2021 expense was related to an acquisition opportunity that was halted by us. Other Income / (Expense) Components In 2022, other income / (expense) consisted of interest expense of ($358,000) and foreign exchange gains of $650,000. In 2021, other income / (expense) consisted of interest expense of ($675,000) and foreign exchange losses of ($49,000).
Operations expense in the IT Staffing Services segment increased by $1.0 million in 2021, largely due to higher recruitment staff headcount and other variable expenses — both reflective of higher activity levels in the current year. • Amortization of acquired intangible assets was $3.2 million in 2021 versus $2.8 million in 2020.
Operations expense in our IT Staffing Services segment decreased by $2.4 million in 2023, due to recruitment staff reductions and lower compensation and other variable expenses — both reflective of lower activity levels in 2023. • General & administrative expenses increased by $4.1 million in 2023 compared to 2022.
Results of Operations We operate in two reporting segments — Data and Analytics Services and IT Staffing Services.
However, supply side challenges have proven to be acute with respect to many of these technologies. Results of Operations We operate and report our business in two reporting segments — Data and Analytics Services and IT Staffing Services.
Selling, General and Administrative (“S,G&A”) Expenses S,G&A expenses in 2021 totaled $41.8 million and represented 18.8% of total revenues, compared to $38.1 million or 19.6% of revenues in 2020.
Selling, General and Administrative (“SG&A”) Expenses SG&A expenses in 2023 totaled $60.3 million and represented 30.0% of total revenues, compared to $51.0 million or 21.1% of revenues in 2022.
Leases Leases Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
Accordingly, this goodwill impairment charge is reflected in selling, general and administrative expenses in the Company’s Consolidated Statements of Operations in Item 8, herein. Leases Operating leases right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
Revenue growth in our IT Staffing Services segment reflected a 198-consultant increase during the year compared to a 104-consultant decline in 2020. We ended 2021 with 1,261 consultants-on-billing versus 1,063 consultants-on-billing at year-end 2020. Our average IT staffing bill rate for 2021 totaled $75.66 per hour compared to $76.60 per hour in 2020.
Accordingly, our consultants-on-billing declined by 262-consultants in 2023 compared to a 53-consultant decrease in 2022. We ended 2023 with 946 consultants-on billing versus 1,208 consultants-on-billing at year-end 2022. Our average IT staffing bill rate for 2023 totaled $78.84 per hour compared to $80.64 per hour in 2022.
When excluding acquisition transaction expenses; the revaluation of contingent consideration; and the amortization of acquired intangible assets, adjusted S,G&A expenses related to operations, as a percentage of revenues was 18.6% in 2021 versus 17.9% in 2020.
When excluding the amortization of acquired intangible assets, employment-related claim, net of recoveries, goodwill impairment and severance expenses in 2023, and the amortization of acquired intangible assets, the cybersecurity breach and severance expenses in 2022, the adjusted SG&A expenses related to operations, as a percentage of revenues was 23.2% in 2023 versus 19.2% in 2022.
Our Data and Analytics Services segment was responsible for $1.5 million of this increase due to higher executive leadership and stock-based compensation expenses, as well as the consolidation of a full year of AmberLeaf in 2021.
Our Data and Analytics Services segment was responsible for $3.5 million of this increase due to higher executive staff and professional services expense related to an employment-related claim.
The decline reflected certain intangible assets being fully amortization in 2022. 30 Table of Contents • Acquisition transaction expense was $0 in 2022 and $0.1 million in 2021.
The decline reflected certain intangible assets being fully amortized in 2022. • Severance expense totaled $1.0 million in 2022 related to our Data Analytics Services Segment. No severance expense was incurred in 2021. • Cybersecurity breach totaled $0.4 million in 2022.
Net foreign exchange losses in 2021 compared to 2020 reflected exchange rate variations between the Indian rupee and the Canadian dollar compared to the U.S. dollar. 32 Table of Contents Income Tax Expense Income tax expense for 2021 was $4.7 million and represented an effective tax rate on pre-tax income of 27.6% compared to $2.8 million in 2020, which represented an effective tax rate on pre-tax income of 21.9%.
Income Tax Expense Income tax expense (benefit) for 2023 was ($1.9 million) and represented an effective tax rate on pre-tax (loss) of (21.0%) compared to $3.8 million in 2022, which represented an effective tax rate on pre-tax income of 30.3%.
Investing Activities Cash (used in) investing activities for the years ended December 31, 2022, 2021 and 2020 totaled ($0.8 million), ($2.1million) and ($9.6 million), respectively. In 2022, cash (used in) investing activities consisted of ($0.8) of capital expenditures.
We believe DSOs are currently at the lower range of our expectations and will likely increase marginally should our data and analytics services revenues grow disproportionately to our total revenues. Investing Activities Cash (used in) investing activities for the years ended December 31, 2023, 2022 and 2021 totaled ($0.2 million), ($0.8 million) and ($2.1 million), respectively.
This 14% increase in total revenues reflected revenue growth of 27% (approximately 11% organic) in our Data and Analytics Services segment and a 12% revenue increase in our IT Staffing Services segment. In our Data and Analytics Services segment, activity levels improved from COVID-impacted market conditions in 2020.
This 17% decline in total revenues reflected a decrease in revenue of 15% in our Data and Analytics Services segment and a 17% revenue decrease in our IT Staffing Services segment. Both segments were impacted by economic uncertainty during the year.
In 2020, cash flows from operating activities included net income of $9.9 million, non-cash charges of $4.0 million and reductions in operating working capital of $7.3 million. The 2022 increase in operating working capital largely reflected a $2.3 million repayment of the COVID-19 payroll tax deferment program.
In 2021, cash flows from operating activities included net income of $12.2 million, non-cash charges of $4.7 million and increases in operating working capital of ($11.7 million). The 2023 reduction in operating working capital was due to lower accounts receivable, reflecting significant revenue declines during the year.
Accordingly, an increase in operating working capital would result in a reduction in cash generated from operating activities. We believe DSO’s will remain at current levels or increase marginally should data and analytics revenues grow disproportionately to total revenues. Additionally, the $4.6 million payroll tax deferment in 2020 has been fully paid as of December 31, 2022.
We would expect operating working capital levels to increase should revenue grow in 2024. Accordingly, an increase in operating working capital would result in a reduction in cash generated from operating activities.
Gross Margin Gross profit increased to $59.4 million in 2021 compared to $51.5 million in 2020, an increase of 15% on a year-over-basis. Gross profit as a percentage of revenue totaled 26.8% in 2021 compared to 26.6% in 2020.
Additionally, our largest industry vertical, financial services, represented approximately 50% of total revenues in 2023 and 2022. 33 Table of Contents Gross Margin Gross profit decreased to $51.0 million in 2023, compared to $63.2 million in 2022, a decrease of 19% on a year-over-basis. Gross profit as a percentage of revenue totaled 25.4% in 2023, compared to 26.1% in 2022.
Entering 2023, this economic uncertainty remains with us and it’s difficult to predict how the economy is going to unfold over the course of the year.
Entering 2024, while economic conditions in North American have shown signs of improvement, a level of uncertainty remains with respect to inflation and the potential of escalations of existing conflicts in the Middle East and Ukraine. Currently, it’s difficult to predict how market conditions are going to unfold over the course of 2024 and beyond.
Removed
Recent growth in advanced technologies (social, cloud, analytics, mobility, automation) is providing opportunities within our IT Staffing Services segment. However, supply side challenges have proven to be acute with respect to many of these technologies. We believe these challenges will remain in 2023.
Added
Our Data and Analytics Services segment’s revenue declines were largely due to client spending reductions on existing projects and assignment delays on new order bookings. Bookings in 2023 totaled $42 million, of which $19 million was secured in the fourth quarter. Order bookings in 2022 approximated $36 million.
Removed
However, in 2021 we continued to see some client reluctance to start new projects, albeit on a much smaller scale than in 2020. Bookings in 2021 approximated $55 million, a marked improvement over 2020 and pipeline opportunities were elevated from a year ago as well.
Added
With respect to 2023 bookings, several orders were multi-year assignments, which generate revenues over multiple reporting periods. Our IT Staffing Services segment’s revenue decline was due to lower demand for our services as clients took a more conservative posture on spending, largely due to economic headwinds.
Removed
The 31 Table of Contents improvement in our gross margin percentage largely reflected a favorable mix of revenues between our Data and Analytics Services and IT Staffing segments. In our Data and Analytics Services segment, gross margins declined by 210-basis points from a record 50.5% in 2020.
Added
Gross margins from our Data and Analytics Services segment were 43.5%, which was 200-basis points better than the 41.5% gross margins that we experienced in 2022. The improvement largely reflected better utilization in the 2023 period. Gross margins in our IT Staffing Services segment were 21.6% in 2023 compared to 23.0% in 2022.
Removed
This decrease in margins reflected a lower margin profile in our acquired AmberLeaf business. Gross margins in our IT Staffing Services segment were 22.3% in 2021 compared to 22.1% in 2020. This 20-basis point improvement was largely due to better margins on new assignments and higher permanent placement revenues in 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−2 removed3 unchanged
Biggest changeA hypothetical 10% increase in interest rates on our variable debt outstanding at December 31, 2022 would have an increase in our annual interest expense of approximately $10,000. As of December 31, 2022, the Company has no interest-rate hedge vehicles outstanding. LIBOR has been discontinued after 2021.
Biggest changeA hypothetical 10% increase in interest rates would have no impact on our annual interest expense. As of December 31, 2023, the Company has no interest-rate hedge vehicles outstanding. Currency Fluctuations The reporting currency of the Company and its subsidiaries is the U.S. dollar.
Currency Fluctuations The reporting currency of the Company and its subsidiaries is the U.S. dollar. The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currency of the Company’s Indian and European subsidiaries is their local currency.
The functional currency of the Company’s subsidiary in Canada is the U.S. dollar because the majority of its revenue is denominated in U.S. dollars. The functional currency of the Company’s Indian and European subsidiaries is their local currency.
Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. A hypothetical 10% increase or decrease in overall foreign currency rates in 2022 would have approximately a $65,000 impact on our consolidated financial statements.
Gains and losses resulting from foreign currency transactions are included as a component of other income (expense), net in the Consolidated Statements of Operations. A hypothetical 10% increase or decrease in overall foreign currency rates in 2023 would not have a material impact on our consolidated financial statements.
Interest Rates At December 31, 2022, we had outstanding borrowings of $1.1 million under our Credit Agreement with PNC Bank and certain other financial institution lenders (the “Credit Agreement”) — Refer to Note 6 — “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8 herein.
Interest Rates At December 31, 2023, we had no outstanding borrowings under our Credit Agreement with PNC Bank and certain other financial institution lenders (the “Credit Agreement”) — Refer to Note 5 — “Credit Facility” in the Notes to Consolidated Financial Statements, included in Item 8 herein.
As our international operations grow, we will continue to evaluate and reassess our approach to managing the risks relating to fluctuations in currency rates.
As our international operations grow, we will continue to evaluate and reassess our approach to managing the risks relating to fluctuations in currency rates. 44 Table of Contents 2P3Y2P3Y
Removed
In March 2020, the FASB issued authoritative guidance, which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference LIBOR and are affected by reference rate reform if certain criteria are met.
Removed
Entities may adopt the provisions of the new standard as of the beginning of the reporting period when the election is made between March 12, 2020 through December 31, 2022. We adopted this standard effective January 1, 2021 using the prospective method and utilized the optional expedients for cash flow hedges.

Other MHH 10-K year-over-year comparisons